American Assets Trust Inc (AAT) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2015 American Assets Trust, Incorporated, earnings conference call. My name is Tony, and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

As a reminder, this conference call is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Adam Wyll, Senior Vice President and General Counsel. Please proceed.

Good morning. I'd like to thank everyone for joining us today for American Assets Trust 2015 first-quarter earnings conference call. Joining me on the call are Ernest Rady, John Chamberlain, and Bob Barton. These and other members of our management team are available to take your questions at the conclusion of our prepared remarks.

Our 2015 first-quarter supplemental disclosure package provides a significant amount of valuable information with respect to the Company's operating and financial performance. The document is currently available on our website.

Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, our future operations and our actual performance may differ materially from the information contained in our forward-looking statements, and we can give no assurance that these expectations will be attained.

Risks inherent in these assumptions include, but are not limited to, future economic conditions, including interest rates, real estate conditions, and the risks and costs of construction.

The earnings release and supplemental reporting package that we issued yesterday and our annual report filed on Form 10-K, and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial conditions and results of operations.

Additionally, this call will contain non-GAAP financial information, including funds from operations or FFO, earnings before interest, taxes, depreciation and amortization or EBITDA, and net operating income or NOI. American Assets is providing this information as a supplement to information prepared in accordance with generally accepted accounting principles. Explanations of such non-GAAP items and reconciliations to net income are contained in the Company's supplemental operating and financial data for the first quarter of 2015, furnished to the Securities and Exchange Commission, and this information is available on the Company's website at www.AmericanAssetsTrust.com.

I'll now turn the call over to our Executive Chairman, Ernest Rady, to begin our discussion of first-quarter results. Ernest.

Thanks, Adam, and good morning, everyone. Thank you for joining American Assets Trust first quarter 2015 earnings call.

The performance of our premier portfolio of retail office and multifamily assets continue to provide excellent and growing returns for our shareholders. Our FFO per share increased 10%, and same-store NOI increased 7.5% year over year for the three months ended March 31st, 2015. And Bob will cover this in more detail.

Our strategy and portfolio continue to produce a continuous growing stream of predictable and consistent cash flows. Our strategy starts with a focus on accretive net asset value, or NAV, and shareholder returns. If it isn't an additive to existing net asset value, we aren't interested.

It has taken us over 48 years to produce this very, very high-quality assets that comprise our coastal West Coast portfolio today. Approximately 50% of the portfolio was developed by us and the remainder was accumulated through accretive acquisitions and tax-deferred exchanges over several decades. And we're not stopping here.

We're not seeking to be the biggest, just continue to be the best. Our high-quality, multi-asset strategy continues to demonstrate that high-quality diversity is additive to our ability to provide consistent growth, strong returns, and value creation.

It is with great enthusiasm that we look forward to the groundbreaking of Torrey Point in June, formerly referred to as Sorrento Pointe, a project that has taken us more than 17 years to solidify the necessary entitlements and permits to construct.

And this is one of the reasons that that project will be accretive to NAV. We believe the office product that we will be developing will be the best office space in San Diego, with commanding views of the Pacific Ocean, overlooking the nature preserve, and adjoining the major freeway in San Diego.

Exceeding that level of excitement is to the nearing of our completion of our Hassalo on Eight project in Portland, Oregon. Almost two years in the making, we anticipate a very successful grand opening toward the end of the third quarter.

We have scheduled an investor tour dates of our Portland assets showcasing this new development at Hassalo on Eighth, on Thursday, September 4th, 2015. We hope you can join us. More information will be sent out towards the end of the second quarter.

Again, on behalf of all of us at American Assets Trust, we thank you for your confidence in allowing us to manage your company, and we look forward to your continued support.

I'd now like to turn it over to our President and CEO, John Chamberlain. John, would you please take it from here?

Good morning, and thank you, Ernest. One quick correction on your preceding statement. The investor tour is Thursday, September 24th, 2015, and we look forward to seeing all of you there.

What'd I say?

You said 4th.

Okay. Sorry.

Overall conditions in our core markets, Seattle, Portland, San Francisco, San Diego, and Oahu, continue to show significant signs of strength in all three of our asset classes. We expect this to continue into the foreseeable future.

In addition to the comments on performance Ernest just mentioned, funds from operations increased 10% year over year, to $0.43 per diluted share, and net income available to common stockholders increased 74% to $8 million for the three months ended March 31, 2015, compared to the same period in 2014.

Approximately 90,000 square feet of office space and 39,000 square feet of retail space were leased in the quarter.

As for our multifamily portfolio, as of March 31, the average monthly base rent per leased unit was $1,515, compared to an average monthly base rent per leased unit of $1,445 as of March 31, 2014, an increase of 4.8%. Bob will provide more details on our FFO and same-store NOI shortly.

In San Diego, construction is complete on the five-building, 80,000-square-foot expansion of the Torrey Reserve. Lease up is well underway, and we expect that effort to be complete by year end.

As previously mentioned, our original development pro forma estimated a stabilized yield of 8.6%. Based on what we know as of today, it appears that that estimate is very close to reality. We believe that upon stabilization, the development will add approximately $1 in value to our net asset value.

Additionally, Sorrento Pointe, now officially renamed Torrey Point, is expected to break ground on June 15th. This two-building, approximately 90,000-square-foot project is expected to take 18 months to complete.

In Portland, Oregon, our Hassalo on Eighth project commenced its pre-leasing efforts on April 15th. As the project is still under construction, physical tours of the units are still not allowed. Yet, even so, we've already leased 20 units thanks to our top-notch Portland in-house management and leasing team.

These three city blocks are anticipated to be brought online, the first, Velomor, in July, followed by the Elwood and Aster Tower in September. We remain on budget and on schedule.

The apartment vacancy for the Lloyd District is holding steady, hovering at about 3%, the best in the Portland MSA and one of the best in the nation.

As you know, each of these potential development and redevelopment opportunities are subject to market conditions and may not ultimately come to fruition. We will certainly keep you informed.

In Hawaii, our Beach Walk project continues to post impressive results. As of March 31st, the property was 100% leased. In March, our Embassy Suites, the number one ranked Embassy Suites in North America, as reported by Hilton Hotels, once again exceeded its competition in occupancy, ADR, and rev par for the month. According to the Smith Travel Research Report for the month of March, in comparison to our competitive set, the property achieved an occupancy index of 102.4%, ADR index of 130%, and a rev par index of 133.2%.

Our acquisition and venture efforts remain in full swing. However the pricing of assets equal to or greater in quality than our existing portfolio provide returns of unacceptably low levels.

Disciplined investing is a core metric at AAT. Nonetheless, we continue to evaluate growth opportunities and the recycling of capital where the probability to increase internal growth exists.

I'd now like to turn the presentation over to our Chief Financial Officer, Bob Barton. Bob.

Thank you, John, and good morning, everyone. Last night we reported first quarter 2015 FFO of $0.43 per share. Net income attributable to common stockholders was $0.18 per share for the first quarter.

The Company's Board of Directors has declared a dividend on its common stock of $0.2325 per share for the quarterly period ending June 30th, 2015.

American Assets had a solid first-quarter performance. Our high-quality coastal West Coast diversified strategy continues to have stellar performance. Our retail portfolio ended the quarter with 98.5% occupancy, combined with the highest annualized base rents amongst our peers.

On a year-over-year basis, our retail occupancy is up 170 basis points, leaving approximately 45,000 square feet vacant in our 3 million square-foot retail portfolio.

Our retail cash leasing spreads signed during the quarter were up 4.1% and are up 10.4% over the last four trailing quarters.

It was a relatively quiet quarter on the leasing front for the retail portfolio, as we executed 11 leases for approximately 26,000 square feet, which is less than 1% of our total retail portfolio.

Our office portfolio ended the quarter at approximately 92.7% occupancy, up 320 basis points on a year-over-year basis. The increase and net absorption for the office portfolio was due to leasing a top floor at One Beach Street in San Francisco and six smaller leases signed at our Torrey Reserve office campus.

Our same-store office portfolio is 96% leased. We continue to see significant market rent growth across our office portfolio in all our core markets.

Current in-place office rents are still approximately 19.2% below market, indicating we still have significant internal growth in our office portfolio. We expect strong same-store growth in our office portfolio for the next several quarters.

Our office cash, re-leasing spreads during the quarter were up 3.7% and are up 9.7% over the last four trailing quarters. The velocity of the office activity in our office portfolio is having a positive effect on our 2015 financial results.

We have increased both our same-store forecast and our 2015 guidance range, which I will discuss in more detail later in the call.

Let's talk about same-store NOI for a moment.

Same-store retail cash NOI significantly increased in the first quarter to 7.4%. The increase was mostly attributable to a full quarter of rents from Saks OFF 5th Avenue and Carmel Mountain Plaza in San Diego, Petco Unleased and the UFC Gym in our Waikele Regional Retail Center on the island of Oahu in Hawaii. HomeGoods also began paying rent in February at our Lomas Santa Fe Shopping Center in San Diego.

Our retail portfolio remains 98.5% leased, which ranks number one amongst our peers. It's also important to point out that we have approximately 67,000 square feet of retail expiring in 2015, assuming all remaining lease options have been exercised at a time when our in-place retail rents are approximately 10% below market on a cash basis.

The retail portfolio is expected to have excellent same-store growth in 2015. We are reaffirming our same-store guidance of 5% for 2015.

Same-store office cash NOI was up 12.2% in the first quarter. Same-store office growth in the first quarter was due to a new lease set with VMware at City Center Bellevue and significant contractual rent bumps at both our City Center Bellevue building in Bellevue, Washington, and our Landmark building in San Francisco.

Our office portfolio continues to outperform, and we have increased our 2015 same-store growth forecast to 8% for the office portfolio, from the previously disclosed 6% for the office portfolio.

Same-store multifamily NOI, which comprises approximately 7% of our total NOI, was up 4.6% on a cash basis for the first quarter. Higher rents are the main drivers of the same-store growth for the multifamily portfolio.

Average monthly rents on a year-over-year basis are up 7% at Loma Palisades, our largest multifamily property in San Diego.

We continue to be pleased with the execution and direction of our multifamily portfolio. We have maintained our 2015 same-store growth forecast of 3% for the multifamily portfolio.

Waikiki Beach Walk, our mixed use property, which represents approximately 13% of our NOI, reported same-store cash NOI growth of 0.7% for the first quarter.

We are maintaining our previously issued 2015 same-store guidance of approximately 7.7% for our mixed-use asset. We expect the same-store comparables for the second and fourth quarter of 2015 to be significantly higher, as those quarters were impacted by the room refresh in 2015, which took approximately 14,000 room nights offline in 2014.

Turning to our results, first-quarter FFO increased to $0.43 per FFO share, due mostly to the following two items. One is the Embassy Suites operating results increased FFO in the current quarter by approximately $0.016 cents of FFO, due to both the seasonality of the hotel and last quarter's FFO being negatively impacted by the room refresh, which accounted for approximately 6,700 lost room nights during the fourth quarter.

And secondly, interest expenses reduced in the current quarter, increasing FFO by approximately $0.013. The decrease in interest expense was due to lower cost of debt from the private placement notes, which refinanced the higher rate CBVS debt for both Dell Monte Center and the Shops at Kalakaua, which matured in the first quarter.

Now, as we look at our balance sheet and liquidity at the end of the first quarter, we had approximately $285 million in liquidity, comprised of $55 million of cash and cash equivalents, and $230 million of availability on our line of credit.

Our leverage at the end of Q1, remains low at 28.9%, total debt to total capitalization, and a net debt to EBITDA of 6.7 times, which we would like to see reduced to a five handle over time.

Our interest coverage and fixed charge coverage ratio ended the quarter at 3.0 times.

And lastly, we have increased our 2015 full-year guidance range to $1.70 to $1.75 with a midpoint of $1.7250 cents from the previously issued guidance range of $1.67 to a $1.73 with a midpoint of $1.70.

The increase in guidance range is due to both the leases signed in the office portfolio during the first quarter and from better-than-expected operating results in Q1. For a comparability, our 2015 guidance midpoint of $1.725 is up $0.105 over our 2014 FFO per share of $1.62, representing an increase in FFO of approximately 6.5%, excluding the $0.03 of nonrecurring termination fees received in 2014, the 2015 FFO growth per share is up approximately 8.3% on a more comparable basis.

We are well prepared with a strong balance sheet to capitalize and execute on the opportunities that we believe will present themselves over the coming quarters.

Operator, I'll now turn the call over to you for questions.

(Operator Instructions) Paul Morgan of MLV Company.

This is [Joe] here for Paul. Same-store NOI growth for mixed-use was somewhat [muted] at 0.7%. Could you give us more details on that? Was it related to the demand side [tourism] impacts from the strong dollar? Thanks.

Yes. Good morning, Joe. This is Bob. Yes, you're right, on a year-over-year basis, Q1 2015 compared to Q1 2014 for mixed use is down somewhat in the hotel. But both ADR and rev par are up. And occupancy is down by approximately 120 basis points year over year to 89%.

There's nothing unusual regarding Asia going on. When more seats are added in one location, other seats are decreased. So there's nothing really happening with the arrivals. And it's not really impacted by the dollar so much, from what we're seeing.

The primary reason that it is down this quarter on a year-over-year basis is due to the Pro Bowl not being in Hawaii this year, as it was played in Phoenix Stadium in Arizona in January 2015. And the history of the Pro Bowl is that it has been played at Aloha Stadium in Halawa, Hawaii for 30 straight seasons from 1980 to 2009, then it was in Arizona. And for the last four years, it's been in Hawaii.

So this one year that it hasn't been there has actually -- we saw a slight decrease in our occupancy at the hotel, and that's what's driving it.

Okay. Thanks a lot.

Todd Thomas of KeyBank Capital Markets.

This is Grant Keeney on for Todd. Sounds like the pre-leasing at Hassalo's going very well. I know it just started recently. But I was curious how rental rates and the initial reception has been versus your initial expectations.

I would say we're meeting our expectations. Rel rates are in line with our original projections. Our focus now is filling the project as quickly as possible. And we'll focus on pushing rents after we hit a 60%, 70% occupancy level.

But at the moment, the focus is fill it up. The reception in the community has been incredibly positive, and we are doing everything we can to capitalize on that momentum at the moment.

Okay. And then, I know you mentioned that acquisitions, the cap rates are very low returns, can't be justified right now. But I was just curious if there is anything that you guys have in the pipeline or if you're getting out bid or you're not -- just give me that [front to] due diligence. Like how would you kind of characterize the environment there?

I think what we're looking at is the prices for acquisition, as John and you have both stated, are daunting. The only opportunity that we see is to trade, [and] the property we have with an exorbitantly low cap rate for another property which, unfortunately, will also have a low cap rate.

But we hope the property we trade, if we're successful in affecting that trade, we trade for, will have a better future than the one we have. And that's what we're looking at. We're looking at can we do a trade which, perhaps at the moment is not cause for applause, but that a couple years from now, through the management of the property, improving the quality of the property, will have a better future than what we have.

That's our opportunity now, and that's kind of the, generally speaking, that's the only opportunity we see.

Is that any --

Just to add to that, the -- it's not necessarily an arbitrage on cap rates. We're not finding that. But we are looking for opportunities that provide better internal growth and a flight to quality. So if we can match those two metrics up with a potential acquisition, we will execute.

Are you focusing on any specific property type?

No. We're looking at -- well, we're looking primarily at retail and multifamily assets, not necessarily office assets.

Okay. And then I just want to touch on the M&A environment. It sounds like -- or not sounds like, but it is picking up a bit in the space. And I was just curious how you view M&A in the space and what role AAT may play, if any.

Well, we have such a high quality portfolio that to find an M&A opportunity would be diluting the quality of the portfolio we have, because there are no other portfolio I know that has the quality assets that we have. So it's a very difficult assignment.

We have always felt and continue to express the confidence in the portfolio we have over the next decade. There may be a quarter here or quarter there where we're not as successful as we have been or as expected. But over the next decade, this portfolio will produce elegant returns, I think comparable with anything available in the marketplace, and not only REIT space, but throughout the investment opportunities available.

Okay. Thank you very much.

Blaine Heck of Wells Fargo.

Has there been any more discussion on the different options at Oregon Square? I think last quarter you guys were contemplating either the headquarters of an energy company, senior housing and/or multifamily units. Can you just give an update on maybe which way it looks to be leaning?

We continue to evaluate those three options. We are going through the design review process currently. It's somewhat of a plug-and-play scenario. So the ultimate mix of what will be built in Oregon Square is still undetermined because it doesn't have to be determined yet.

That decision will come sometime as we near the stabilization of the first phase, Hassalo on Eighth, before we begin the Oregon Square project. So we have, our runway leading up to Oregon Square at the moment is probably a 12-month period. So time's on our side.

Okay. And given that I know it's early on in the process, but is there any color you can give on maybe the possible scope of that and maybe the cost for that phase of development?

Not at all.

Okay.

We're at a very preliminary design phase.

Okay.

But it's a great site, a great piece of land, the equivalent of four city blocks sitting in the heart of a very economically vibrant area. And we're really excited about the opportunity.

We're just not sure which of all the opportunities available to us will be the most compelling. And that's what we have to continue to look for, what's really best for the Company in the long run. And we're fortunate in having all these opportunities to assess and decide which one to avail ourselves on.

And whatever we do, on a risk-adjusted basis, it's going to be accretive to our shareholders. I mean, I look at it as well that the land, the way I look at it is, the land is free and we have cash flow during whatever that development ends up being from the existing site. So it's going to be accretive any which way we look at it.

Sure. That's helpful. Bob, it looks like there's about $30 million left to spend on the first phase of the Hassalo. You're expecting to start Torrey Point this quarter, which has roughly $40 million of spend in the next 18 months. We know you're expecting to fund $30 million of the spend with the balance of your ATM and you have $55 million of cash. So it looks like your sources of funds are there.

But should we also expect any further issuance to EIC, given that you want to continue to de-lever?

In, I think in the near term, no. I don't think there'll be any additional private placements to a Ernest-affiliated company.

In one of the footnotes that we've put in, it was either the supplemental or the Q, which will be released this Friday, is that if you look at the private placements that we have done with Ernest-related companies, they've always been approved by the Board, approved by legal counsel, and approved by the New York Stock Exchange.

And additionally, at the end of the day, his ownership is less now than it was at the IPO. So all he's trying to do is maintain his position, not increase his position from where he was at the IPO.

So to answer your question, yes, we'll use the rest of the ATM. I don't anticipate anything, any additional private placements to a Ernest Rady-affiliated company through the rest of this year.

And I think -- does that answer your question? Ernest, do you want to say anything?

Well, in my own defense, I have to tell you that through the issuance of this ATM, my interest has declined somewhat. And I value our interest in these properties to such a great extent, if I had my way, I would like to at least maintain my share. That has not been possible under the circumstances that existed.

But going forward, the advantage of being public is we have every opportunity available to us to finance our growth. And that's really the strength of the Company. The quality of the portfolio, the access to capital, and management, if I may say so with all due immodesty, that I think has proven that it's amongst the best. So that's where we are. And thank you.

Sure. Completely understandable. Maybe one for Jim, if he's there. I'm not sure if he is. But can you just give an update on the lease up of the remainder of the space at First and Main?

Well, the First and Main piece, as you probably know, is comprised of one 21,000-square-foot floor and then another 4,700-foot piece, and that's all that's left out of 350,000 square feet.

I have quite a bit of activity on the space. As you probably also know, Blaine, the market in Portland has tightened up measurably in the last six to nine months. And where we probably are priced at the top of the market, the market is coming towards us, and I think that gives us a much larger potential base of being able to fill that.

I also wouldn't preclude the possibility of maybe some existing tenants expanding over the next couple of years as well. So looking very positive.

Great. I'll let someone else have a turn. Thanks.

(Operator Instructions) Haendel St. Juste of Morgan Stanley.

Couple of quick ones from me here. So I guess first, curious on your multifamily strategy during the seasonally slower first-quarter period. It looks like you gave up a bit of occupancy, 70 Bps or so, but gained, it looks like 5% or so on rent.

What were you seeing during the quarter? Was there stronger traffic demand than you expected? Or was the thinking there just that you were operating from a position of strength, being 97% occupied and just wanted to be a bit more aggressive?

Russell Rodriquez, who handles that portfolio for us, would like to answer that question. So, Russell, would you be kind enough?

Thanks, Ernest. Hi, Haendel. You're exactly correct. We have maintained over the past four quarters an occupancy at 98% plus. And our rent growth was trending along those same lines. However, now we are pushing our rent growth and our asking prices as we go into our busy lease season, at the top of the market, as much as we can handle.

So with that, yes, our occupancy has stabilized and trended down maybe less than 1%. But at the same time, the fundamentals are there for an unprecedented leasing season this spring and summer. That's the -- you're right on, Haendel, and thank you for noticing.

Do you, by the way, have a breakout between what was, perhaps, new or renewal lease growth for your multifamily segment?

Absolutely. We're, right now realizing a greater than 50% renewals in our portfolio. We're finding that after our existing residents go and test the market and quality of product that we're offering, they're choosing to stay, even as we increase their rents greater than ever.

Do you have the breakdown of what that rent growth is in terms of what is sort of new, tenant versus renewal rate growth?

We push our renewal rates the highest we can, which is 9% for a renewal with a 30-day notice, and greater than 9% with a 60-day notice. If we get the unit back and it's a candidate for a renovation, we're seeing a greater than 20% renewal to market rates, and we're getting it.

Okay.

And, Haendel, this is Bob. We do that comparability, noncomparable and comparable for office and retail, but we haven't done that for multifamily. But Russell shared the information with you. It's something that we might consider going forward.

Certainly, I'd appreciate it. The apartment REITs do it. So some comparability, that would be appreciated.

While I have you, too, Bob, on the retail leasing side, you mentioned in your numbers that the leasing activity was a bit below prior quarters, but the spreads, they were pretty consistent.

Was the slowdown the function of space availability or perhaps an intentional strategic decision type to retaining pricing power? And then how should we think about leasing spread growth for your retail over the coming quarters, especially in light of your comments that you said that you expected your portfolio to have excellent growth in 2015?

Yes. For our guidance, we still have 5%, I think it was for the retail. Yes, 5% is our guidance for that. And if you look at where our in-place rates are compared to market, we're still -- our in-place is still 10% below market.

So, I mean, I think it's on a tenant-by-tenant basis. The only thing I can tell you is that we're going to get the maximum rents at every opportunity. And I think that you'll see the strength.

For instance, HomeGoods opened up at Lomas Santa Fe Plaza in San Diego. And they started paying rent in February this year. So you'll see the growth in that.

And Caramel Mountain Plaza, we're repositioning the western end of that where we used to have the Reading theater, and that tenant is upgrading that to the -- what's the name of the new --

Angelika.

-- Angelika Cinema and trying to add some retail and restaurant space around that. So what we have is so special in San Diego, where the entitlements are very hard to get, and it's just, the demand for the space just gets greater and greater.

So we'll capitalize on every opportunity we have. If the tenant falls out, it's always an opportunity to raise rents with a better and stronger tenant.

They call that pickup business.

And the slowdown in overall volume, though, [for] the quarter compared to prior quarters, was that tied to, perhaps, you trying to leverage pricing power or perhaps [certain] occupancy?

Yes. I think that the velocity is down just because we're at 98% occupied. So there's not that much space to lease.

Appreciate it, guys. Thank you.

Yes. A terrible problem, isn't it?

Indeed.

So enjoy dealing with that problem. Thank you for the good question.

Rich Moore of RBC Capital Markets.

This is James (inaudible - multiple speakers) on the line with Rich. I was hoping that you guys could give me an outlook for the different property types on the West Coast.

Outlook in terms of what? In terms of the markets? The same-store?

So in terms of tenant demand and then investment availability.

Yes, let me color that question a little bit before we try and answer it. First of all, we're not typical West Coast. We're coastal West Coast. If you go inland 30, 40 miles, we don't consider that West Coast. Our West Coast properties are coastal West Coast.

And I think that we've proved over the last four years and the last decades and we think we will prove over the coming decade that coastal West Coast is a very, very, very special strategy and one difficult to create as far as demand for properties on the West Coast in its entirety.

John, do you care to answer that or do you have an answer?

I think that's absolutely correct. In terms of investment, it's a very difficult market. There are plenty of institutional office properties that continue to come to market. There are very few retail properties. And the cap rates at which multifamily is selling in, as Ernest says, the coastal West Coast markets, the cap rates are so low it would be dilutive for us to pursue an acquisition.

So it's a very difficult investment environment. It's a very positive rental environment. And we're focused on continuing to manage what we own and improve the properties, all three asset classes' performance to the best of our ability.

All right. Thanks. And then have any of your markets seen a meaningful impact from the decline in oil, either from a consumer demand standpoint or from tenants related to oil industries?

You kind of faded out there. Would you be kind enough to repeat that question? We missed a couple of key words.

Yes, of course.

Please.

So in your markets, have you seen meaningful impact from the decline in oil, either from consumer demand standpoint or from tenants related to the oil industries?

Not that I know of. Chris, have you seen any?

Gas went back up to four bucks today, so nobody's getting a discount at the wallet.

The only place where we saw an impact was at the Embassy Hotel in Waikiki. We saw that our utility costs came down due to the lower cost of oil. And we saw that down by just around $100,000 or less.

The freeways are busier, I'll tell you that. There's more cars on the freeway and they're driving faster if they can. That's about the only thing I can quantify.

All right thanks, guys. That's all for me.

We're starting to look like New York City.

We will now turn the call over to our Executive Chairman, Mr. Ernest Rady, for closing remarks. And thank you for your participation in the question-and-answer session.

On prior occasions, I've told you how grateful we are for your interest in the Company. At this time, I'd like to express our pride in having such a distinguished shareholder group and our appreciation for you giving us the opportunity to manage your investments. So thank you, thank you, thank you for your participation and thank you for your confidence. And we hope to continue to earn it for many, many years to come. Thanks for joining us.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect, and everyone have a great day.