Acadia Realty Trust (AKR) 2005 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the Acadia Realty Trust second-quarter 2005 earning's release conference call. My name is Anne Marie, and I will be your coordinator for today. At this time, all participants under listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. [Operator Instructions] The Company would like to inform its listeners, that in addition to historical information, this conference call contains forward-looking statements under the Federal Securities Law.

These statements are based on current expectations, estimates and projections from the industry and market in which Acadia operates. And management beliefs and assumptions. Forward-looking statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties as discussed from time to time in the Companies filings with the SEC. These factors can cause actual results to differ materially from those expressed or implied by such forward-looking statements.

During this call, management may refer to certain non-GAAP financial measures, including funds from operations, and net operating income, which they believe to be meaningful and helpful to investors when discussing results in the REIT industry.

Please see Acadia's financial and operating reporting supplement posted on its website, for a reconciliation of these non-GAAP financial measures with the most direct comparable financial measure calculated and presented in accordance with GAAP.

Following management's discussions, there will be an opportunity for all participants to ask questions. At this time, I would like to turn the call over to Ken Bernstein, Acadia's President and Chief Executive Officer.

Thank you. Good afternoon. Jon, Mike, and I are going to review our second-quarter results, as well as discuss our acquisition and re-development pipeline. We're quite pleased with our results both in terms of our portfolio performance, and our external growth initiative. Today in reviewing our results, we will walk through the three key components of our business plan. First, portfolio performance. As you can see from our strong stance in ROI growth, occupancy gains, leasing strad's, our portfolio in the second quarter remain strong. This strength has been further enhanced with the sale of a non-core asset, and its replacement with a property in Staten Island. We will discuss this asset recycling, as well as other leasing matters later in the call.

Second, in terms of our balance sheet in the second quarter, we continue to maintain very strong ratios. Additionally, we believe that any time the ten-year treasury drops below 4%, it's a wonderful gift to our shareholders and while the longevity of the bond market value is anyone's best guess, we will continue to make sure that we are going to take advantage of the flat and low-yield curve while it's here. Mike will walk through the balance sheet, the ratios and the most recent fixed-rate refinancing.

Finally, our external growth program. in the second quarter, we continued to add to our two main growth initiatives, our New York Urban-Infill re-development platform and our RCP venture. After Mike and Jon discuss our financial performance and our guidance, I will update the status of our external growth initiative. I will also briefly discuss the status of our fund's performance and with that, I will turn the call over to Mike.

Thanks, Ken. Good afternoon. Jon will first discuss the Company's results of operations for the quarter in the six months ended June 30th, 2005.

I will briefly summarize our results for the quarter, six months ended June 30, '05. With respect to our press release that we issued yesterday for a full detail of those results. Our discussion will include per share amounts on a fully diluted basis.

FFO for the second quarter 2005 was $.26 per share. It's important to note that this result includes $770,000 for approximately $.02 non-cash impairment charge, relating to the sale of our Berlin Shopping Center. Excluding this charge, 2005 second-quarter FFO was $.28 cents per share, which represents an 8% increase over second quarter 2004. Year-to-date FFO excluding this charge was $.55 cents, which represents a 10% increase over 20004. Earnings per share from continuing operations for the second quarter 2005 was $.16, which is up 23% over second quarter 2004, and $.29 year-to-date 2005, which is up 21% over it 2004.

Same-store net operating income for the retail portfolio increased 3.9% for the six months ended June 30, 2005, over 2004, and 6.3% for the quarter ended June 30, 2005, over the same quarter, 2004. This increase is primarily the result of increased rents and occupancy gains and our core portfolio from our leasing activities.

To summarize the results of operations for the quarter and year-to-date, our earnings growth in 2005 resulted primarily from three areas; One, same-store NOI growth, as I just discussed. Two, earnings and our preferred equity investment in the Levitz portfolio. Three, an increase in our fee income, which was partially offset by increased general and administrative expenses, which are a direct result of expanding the Company's infrastructure to support this increased level of activity. Mike?

Thanks, Jon. Our financial ratios continue to track strong for the second quarter, as evident by the following ratios, all of which include the Company's pro rata share of our joint venture debt and interest expense. Debt-to-market capitalization of 30%. FFO and AFFO payout ratios were 65% and 66%, respectively. Fixed charge coverage ratio of 3.8 times and 78% fixed rate debt with an all-end cost of 5.7%.

We are completing a $17.6 million, 10-year fixed rate mortgage loan at an all end rate of 4.98%, which we expect to close during the third quarter. Following this refinancing, our portfolio mortgage debt will be 85% fixed rate. Our fixed charge coverage ratio will continue at a very healthy 3.7 times, and our availability under existing lines of credit will be approximately $57 million. This availability is more than sufficient to fund our remaining committed capital requirements for Fund 2.

Now I would like to discuss our 2005 earnings guidance. As mentioned in our press release, we have increased the lower end of our earnings guidance, from $1.01 to $1.06, excluding the $.02 non-cash impairment charge that Jon previously discussed. As such, our revised guidance range is now $1.06 to $1.09 for 2005. Again, excluding that $.02 impairment charge.

While we believe that the second quarter results represent stable quarterly earnings, the second half of the year could be impacted by unidentified credit issues, as well as the timing of fee income. During the first six months, we continue to experience low credit tenant losses in the portfolio. While we can't predict what the future will bring in terms of tenant bankruptcies, we feel it appropriate to provide a more conservative reserve for potential leasing and credit issues of up to $.02 for the remainder of the year.

Additionally, while our fee income stream remains strong and sustainable, certain factors could affect the timing of the recognition of certain fees. Accordingly, we think it prudent to anticipate a contingency for possible delays in the recognition of such fees in the second half of the year of up to $.02. Ken will now continue our discussion.

Thanks, Mike. Thanks, Jon.

First, we'll review our portfolio performance as Mike and Jon discussed. Our strong same-store NOI growth within the portfolio continues to be driven by strong and broad leasing and occupancy gains. Our portfolio occupancy increased to 93.3%. The most significant contributors were new and renewal leases totaling approximately 230,000 square feet, with average rent spreads of approximately 13% on a cash basis.

Additionally, the sale of our non-core Berlin asset also drove occupancy. That even after pulling our Berlin, our occupancy still increased by 30-basis points on a same-store basis. In terms of tenant exposures, as we discussed numerous times, one of the key variables in our 2005 guidance is the amount of our internal tenant reserves that are actually utilized. There continues to remain little on our radar screen to cause us specific concern and thus some of the narrowing in our guidance is associated with this strong credit performance.

In terms of actual tenant credit and vacancy exposures on our radar screens for 2005, most have been profitably resolved. For example, at our Greenwich Avenue Redevelopment, Chico's vacated our property in the first quarter. We successfully retenant the store with Coach at a positively spread of approximately 25% with minimum downtime in retenanting cost.

Further enhancing our quality of our portfolio, we sold our Berlin, New Jersey Shopping Center and recycled the capital into our acquisition of an Amboy Road Shopping Center in Staten Island. We sold Berlin to an affiliate of Armstrong Capital for a sale price of $4 million. This non-core property, once of the remaining Mark Centers assets is anchored by a K-Mart and a vacant former Acme supermarket. Over the past several years, we either redeveloped or sold off the majority of our MCT properties, and since this property was likely to require redevelopment into a primarily non-retail use, we elected to sell it.

Proceeds from the sale were recycled into our purchase into our purchase of Amboy Road Center in Staten Island, New York, eliminating the dilution from the sale and providing us with higher quality long-term growth. Amboy property is a 60,000 square foot neighborhood shopping center, anchored by a strong performing Wallbound Supermarket, and a drug store. The property which has expansion potential is subject to a 23-year grounding.

Amboy was acquired for $16.8 million, including transaction cost, and represents a midcap rate, based on current NOI, which we believe we can grow over the next several years. Along with offsetting approximately a half penny of dilution from the sale of Berlin, this acquisition should contribute in excess of one penny of net accretion in 2006.

This acquisition was made in connection with Armstrong Capital, who was the purchaser of Berlin, and will receive OP units in Acadia for its minority interest in the acquisition. Since this was an asset recycling and included OP units, this acquisition was not done through the fund structure but directly by Acadia.

Like our other acquisitions in the five boroughs of New York, the demographics and extremely high barrier to entry of Staten Island makes this an ideal asset recycling opportunity for us. Whether it is through our redevelopments or asset recycling, is one of the key goals for us is to consistently improve the quality of our portfolio, while maintaining, solid earnings growth.

Turning to our external growth, along with our purchase of Amboy in the second quarter, we continued to build on the acquisition platforms that we put in place in 2004 with the accretion of our two key value added areas. First, our New York Urban-Infill Redevelopment Program, and secondly, our RCP venture. With respect to our Urban-Infill Program, we are continuing to see interesting opportunities in the mid-size urban-retail redevelopment arena.

In the case of our three previously announced Urban-Infill redevelopments, all are proceeding according to plan, with tenant interest and timing remaining consistent with our previous discussions.

As I have noted in the past, from a short-term earnings prospective, the three redevelopments will most likely provide little short-term accretion. But upon stabilization, these three projects totaling between 100 and $150 million should start contributing in excess of $.05 of FFO and start helping us build a nice pipeline for the future.

In terms of additional Urban-Infill transactions to remain on track, to add our previously discussed Brooklyn redevelopment this year. We have not yet formally announced the Brooklyn transaction because the existing owner is going to remain in the transaction as a minority partner, and we will wait until the documentation is complete to give further details.

That being said, pre-leasing on the project has been very strong, and the redevelopment timing is not driven so much by the documentation, as much as the usual developmental approval timeline, which is already proceeding.

Additionally, as noted in our press release, we anticipate closing this year on another redevelopment opportunity in the Bronx in the $50 million range. This transaction, while still a value-added redevelopment, will have more of its income in place at closing, which will be nice for a change.

In all of these urban redevelopments, we are taking on a certain amount of redevelopment risk, and we are also generally taking on a vertical or mixed-use component. Where the mixed-use component adds risks that we're not comfortable with, such as the residential condo development component of our Broadway and Sherman redevelopment. We'll generally mitigate that by selling off or bringing in a partner for that component. But our view is that even taking into account these risks, we continue to believe that the prospect of creating 10% plus unleveraged yield in these high entry, under-retail market is very compelling on a risk adjusted basis, relative to the pricing for more plain vanilla or non-value-added opportunity.

Turning to the second component of our external growth strategy, our RCP venture, as we dicussed last year, we launched a second component, our retailer-controlled property or RCP, with the Klaff Organization, and its long-term partner Lou Bradler (ph), the focus of RCP is to acquire retailer-controlled real estate. In the fourth quarter of last year, we commenced the venture with our investment in Mervyns, while still an early stage investment, Mervyns is proceeding at or ahead of our projections, and we anticipate this to be a very profitable investment. In the first quarter of this year, we made a $20 million deferred equity investment in the real estate underneath 2.5 million square feet of current or former Levitz furniture stores.

Our partners in our RCP venture are the majority owners of the Levitz transaction. Recently, through our fund too, we added to our Levitz investment with the acquisition of the 50% common equity investment in the Rockville, Maryland, Levitz leasehold. The property is 150,000 square foot store, that is part of the Montrose Crossing Shopping Center. Current tenants at the shopping center include Giant supermarket, Barnes and Noble, Marshalls, Sports Authority, Old Navy. The property is located on Rockville Pike, the dominant retail corridor between the cities of Rockville and Bethesda, Maryland which are suburbs of Washington, D.C.

Tenant demand for this area is strong and the redevelopment potential, while complicated, could be significant. Although the remaining term of the leasehold is approximately 17 years and the timing and the scope of the redevelopment is not clear, we are excited by the potential redevelopment opportunities that appear to exist within the property. Our initial investment in this project is not significant, and until we can provide better visibility, it would be premature to describe any material accretion from this redevelopment.

That being said, we will keep you posted as to this project as it progresses and Rockville is another proprietary or fruit-from-the-tree opportunity from the RCP venture and we hope more will follow.

Turning to our investment funds, one of the key benefits of utilizing the discretionary investment fund structure that we have is the additional 20% profit participation or promote that Acadia can receive, if a fund is successfully invested. While we are reluctant to"count our chickens before they have hatched", there have been inquiries as to the status of our first fund, AKR Fund One, and so here's a quick overview and update.

We have included additional information on page 29 of our quarterly supplement regarding this analysis. AKR Fund One is a $90 million equity fund. The investment phase ended approximately a year ago. The fund's equity was invested roughly as follows. $45 million of equity or approximately 50% of the fund was committed to our 1 million square foot Wilmington, Delaware project. The properties include tenants Target, Lowe's, Dick's, Bed, Bath and Beyond, and it is nearing stabilization. .

We acquired the property approximtely a 9.5 cap. The current un-leveraged yield has grown to an excess of 11% with the leveraged yield now in the mid to upper teens. We invested 11.3 million of equity or 13% of the fund in our Safeway portfolio. That 1 million square foot portfolio was acquired at under $50 a square foot. It's performing consistent with our projections. It will most likely be harvested upon the debt maturity in 2009.

We are collecting a mid-teens leveraged return after the self-amortization of the debt and we anticipate the residual to be worth at least our initial equity investment, probably more.

We have invested $8.5 million of equity or 9% of the fund in our Ohio portfolio. Three properties. Two of the three are fully stabilized supermarket anchor centers. The third is in the process of being re-anchored and leased out.

He acquired that portfolio at north of the 10 cap and the NOI upon stabilization will remain north of the 10% yield. We invested in four additional redevelopments, which upon stabilization will require 13.5 million of equity and represents 15% of the fund. Usual developments Harry Town, Heygood, Sterling, and Aiken are in various stages of redevelopment and should stabilize in 2006, 2007, 2008.

Finally, Fund One invested $12 million or 13% of its fund into our Mervyns investment. I discussed Mervyns performance previously.

In our supplement, we provided analysis of the potential values if we are able to modify or stabilize assets in the 6.5 cap to 8 cap range. Valuing our Mervyns nonstabilizing redevelopment at a range of 100%, to 200% of equity or cost, and valuing our Kroger Safeway conservatively ranging from our initially equity investment down to zero. While Fund One was relatively small and it's still early, you can see in the supplement the potential additional NAB contribution.

In terms of Fund Two, our current investment vehicle is $300 million of equity. With completed our first year of investment and are about one-third invested or committed. While we are very excited with the Urban-Infill and the RCP investments that we have made in this fund, it is definitely too early for us to start counting these chickens.

To conclude, we continue to be pleased with our business model. All three components of our business plan are on track. Our core portfolio performance remains strong as evidence by our occupancy gain, leasing, and NOI growth.

We will continue to strength strengthen our portfolio by opportunistically cycling out of weaker assets and into solid high dollar entry property such as Amboy Road. . Our balance sheet and financial ratios are solid, and we further strengthened our position by limiting our exposure to rising interest rates and by extending maturities. Our dividend pay-out is one of the strongest in our sector, and this puts us in a position to provide our shareholders with not only a safe dividend, but also one that can grow as our earnings growth continue.

Third, finally, our acquisition initiative, are laying the foundation for strong future growth, both our New York Urban-Infill platform and RPC venture are continuing to provide us with exciting investment opportunities this time and even the most secondary shopping centers are trading at unprecedented cap rates.

Our size, strong balance sheet, accretive acquisition structure continues to enable us to be selective as to the opportunities we choose to pursue and still drive strong rational growth. I would like to thank the members of our Acadia team for their strong efforts in the second quarter and, at this point, we would be happy to take any questions.

And your first question will come from David Ronko with RBC Capital Markets. Please proceed.

Hi, guys, I'm here with Jay. How are you doing?

Great. How are you.

Great. Ken, I wonder if you could look at the same-store NOI growth, that was particularly strong.. You talked about the increase in occupancy and why that happened.

Can you talk a little bit about the spread and the cash rents that were really high? And then also talk about the decline in same-store expenses year-over-year and what would have driven those?

Yes, as we look through the portfolio to see if there were any significant key drivers, it was more broadbased than in other quarters where we've had similar growth. The 6.9 did seem high but even if you look on the year-to-date basis, the 4%, it was for the most part in terms of the rental growth spread amongst all the regions and a wide variety of assets with no one asset contributing significantly more than the others. The Midwest, we've had some very nice lease up, which was nice to see. But other than that, it was very broadbased. Jon, in terms of expenses?

The expenses there's really no -- the same phenomenon. There's really no one advantage on any one property that really impacted, you know, the overall expenses. It's really broadbased and it was just -- just a decline in several locations. But on to the other part of your question, as far as the -- the rent spreads, the new lease rent spreads were 13%.

Really where we experienced very strong growth, this quarter was in the renewal leases, where it was 23%. And that was really driven by our experience at two or three locations. You know, so even on a -- on a regular basis, we'd expect, you know, low teens growth, but second quarter was very strong in terms of -- in terms renewal leases.

Okay. And did you guys look at upcoming expirations and new leases that you are anticipating you will sign on a mark-to-market there, would you expect these -- these spreads to remain pretty firm?

We try not to give too much guidance and predict the future, because we are relatively small, any one new lease can actually make a material difference, one way or the other.

So far, because the age of our centers, because for the most part our leases, older leases, tend to be below market, given how strong just the economy and retailing has been. Generally, we have been able to drive very strong same-store growth through that, but I don't want to give any specific projection in terms of leasing spreads.

Okay. Second question is just, you talked at length, Ken, about a number of upcoming investments. Just wondered if you could kind of summarize what the total dollar investment will be, both you and your partners in those? Then, also, Acadia's equity interest in those investments, as well?

All right. So let me -- well, what we talked about primarily was our New York Urban-Infill components. Is that the piece you are talking about?

Right. Along with, I guess, would you have the $17 million you invested in the -- in the other center, right.

Amboy was acquired by Acadia Reality Trust. Essentially all of the equity came from Acadia, and it varied talented tenacious group at Armstrong identified the transaction and are taking OP units for their share. That was part of our Berlin sales, as well. That was factored in. Not a significant amount of OP units.

In terms of our New York Urban-Infill, again, to take a step back, we have $300 million of fund equity, of which Acadia is 20%. We are the vast majority of the equity that goes into all of these urban transactions, Although, our very talented partners at PA Associates do have a part of it.

Of that 300 million of equity, right now, we said we have invested or committed approximately a third or $100 million to various transactions ranging from our RCP transaction, but probably of a 100, so far, I think, we have identified and we will put about $75 million of that to work in our New York Urban-Infill. That 75 then gets leveraged on approximately a two-thirds basis. Does that answer your question?

It does.

Okay.

Thanks a lot.

Good talking to you.

And your next question come will come from Michael Bilerman with Smith Barney. Please proceed.

Good afternoon. Just getting back to the same-store NOI. Last year, in the second quarter are of '04 your expenses have risen 10%. So is it possible that there was a significant rise last year that it was partially mitigated this year, and led to a significant increase in same-store NOI?

If you look at the drivers of same-store NOI, it's overwhelmingly driven by revenues. If you look at the details as it's listed in the supplement.

In terms of the expenses last year being higher than normal, it is possible that they are a little bit higher. But, again, revenue is the primary driver when you look at same-store NOI growth for the current year.

And then turning to the new detail that you provided, on one promote, how would you recognize earnings currently? Do you sort of mark-to-market the portfolio, in which case you get a marked-up interest based on the value you promote?

No. What we -- we recognize our pro rata share of property operations through those funds. We don't -- we have -- we do not report or recognize any of this increase until such time as it's realized.

And then how --

It's mark-to-market.

Right, so you don't recognize -- you own 22%, you don't recognize 24%?

No, absolutely not. We recognize that 22%, with 20% share.

And then how should we think about the promoted income? Ken, I hear you on the asset value, but how do we think about the promoted income that may come in, in the future then when these investments do get sold in relation to this page? How should I read it?

Well, I guess there's two ways. First of all, while there seems to be some debate in ---- what you are essentially doing is having gain on sale -- that probably does not constitute FFO. It's good and very profitable cash and we're thrilled to take it. It's in my view NAD but not FFO. The other way though, is if investors receive a full return of their capital from the sale of what they want of the assets or recapitalization. Then, our cash flow in the remaining assets would step up from, say, 22% to just under 40%. That cash flow then would be legitimate FFO.

I'm not saying it will go one way or the other. I'm not even saying that the profit will be there. We're just showing what we have achieved to date.

We're quite pleased with the assets we bought, but we also remind ourselves, hey guys we bought assets from 2001 and 2003 and it was a great time to buy real estate. So now things are looking good. Until we harvest it, I can't tell you if it will be FFO or just cash. And until we harvest it, it's premature to count the chickens.

That helpful. Can we just spend some time on the G&A and trying to understand what is going to be ongoing, and what is one time?

I guess I could just use the second quarter as an example. You have $3.7 million of total G&A and you recognized about 2.9 million. So help me understand what is going to be recurring, but what may have been one-time for both of those items.

Jon, maybe you can walk through some of the specifics. First of all, while there's a high -- I should caution, while there's a high correlation between our building our infrastructure, and G&A increases, and fee income. Tthey are not necessarily connected. There will be times when our G&A goes up if the income is not there. And, hopefully, there will be times when the income rises and our G&A growth is flat. In terms of what is recurring and not recurring, Jon will give some color on that.

If you look at the second quarter, of the $2.9 million, about half a million dollars is what I would describe as potentially lumpy in nature, and that it all depends on the underlying transactions, be it leasing transactions or even just dispositions transactions in the Klaff portfolio.

At any given quarter, the number could vary by that half a million dollars, either up or down. In terms of looking at the growth and the fee income and the growth in G&A, if you look at the six months 2005, versus six months 2004, you had about $3.3 million growth in fees over the corresponding $1.9 million growth in G&A.

So certainly, it's on a net basis a very positive spread. So we think on a recurring basis, you know, it's a good spread, and, again, it could vary by as much as half a million dollars in any given quarter. But on the long run, we think it's -- we think it's a good net spread.

Also, from a G&A perspective, Mike, we watch a Company of our size, we watch very carefully how we spend our money. We have the benefit of the asset management fees that come in and now they are slightly over $4 million annualized, which are fully recurring and help us build a very strong and talented infrastructure. But, again, a Company of our size, we have to watch every penny.

We still make sure that we will continue to fly Jet Blue and not get carried away and allow the G&A to outstrip the benefits of these different forms of revenue.

And so currently you would expect a $3.7 million to continue, to be about a $15 million annual G&A number? Is that --

I hope -- there is some nonrecurring in that G&A number. So we are hoping to see that -- less than that.

It will come down to $3 million? I mean, how much of it was non-occuring?

On -- nonrecurring. On an annual basis, a $14 million G&A number -- number might be a good ballpark guess.

And then about the fees, that there was about 500,000 being lumpy from quarter to quarter. Is there any? What's the potential above this? I think Mike referenced in his remarks something about $.02 reserve on fees. Is that in addition to something like this $500,000 occurring?

No, I think that they happen to correlate. In other words, we made $500,000 less the last two quarters. That may not be there the next two, so that correlates without..

So the $3 million that you saw in the second quarter, could conceivably be $2.5 million, if the stars are on the line.

And could good -- go the other way.

Right.

And how much is on contention on the service merchandise portfolio, the Klaff, still has a right to sell?

Right now -- we are not factoring the timing of that in, and if and when that occurs, that's additional gravy. Again, we'll try to break out so everyone understands. We are not focused on the fee business. We are focused on the value-added business.

I'm much more interested in our 20% back-end profit, than on our property management leasing fees. We are happy to take these fees, but we are not going to pretend that the income of that sort of transactional nature is the same as the value-added components. We will continue to break those out and say, look we got lucky.

And then can you give us a breakout between cash and stock on the asset with Armstrong?

It was substantially all cash. It was just a few hundred thousand dollars of OP units.

Okay. And in terms of the three developments $50 million, the new project, how is it going in price, I assume, so how much is the redevelopment budget on top of that?

We haven't given much color on that. The majority of that transaction will be the initial going in price, but you will have to wait until we talk about it in further detail.

Great. Thank you so much.

All right. Good talking to you.

[Operator Instructions] And your next question will come from Michael Muller with J. P. Morgan. Please proceed.

Hi, Joe Tazio here with Mike.

Hi, how are you.

On the CapEx side, can you -- [ Inaudible ]

I'm having trouble hearing you. I think --

Is this better?

Hello?

Hello, is this any better?

Yes. Thank you.

Sorry about that. On the CapEx side -- [ Inaudible ]

Joe, You cut out again, but I think your question is you are looking at second quarter CapEx versus first quarter and you are noticing a reduction; is that correct?

Relative to last year's level.

Right. First of all, last year was above normal in terms of CapEx. We did some work at a couple of properties that involve facade renovation, that really drove that number up. In terms of comparing it to first quarter, it's fairly comparable.

We are talking relatively low dollars here. So that, you know on a percentage basis, it looks large, but in terms of absolute dollars, you are really looking at CapEx of maybe, I don't know, $1 million, versus $750,000. So it's really not that dramatic. Okay. And what about -- [ Inaudible ] Again, you are cutting out, but was the question regarding straight line rent.?

Yes.

Straight line rent -- you are looking for a run rate?

Yes.

Straight line rent for the quarter was about maybe $100,000 on a run rate -- I mean that's probably indicative of -- yes. Yes. The wholly owned. The number in the supplement, if you look at page 9 -- I'm sorry, it's about $160,000. That's a good run rate number.

160?

Yes.

Okay. And then last question -- [ Inaudible ] Where are you this year with respect to your -- [ Inaudible ]

It's funny, as soon as you ask the question, then you disappear. So we get to make up the question. If the question was deal flow, are we on track?

Yes. Well, first of all, where are you with respect to -- [ Inaudible ]

Yeah -- I don't know if everyone else is having this cut up, but -- As I said before, we -- we announced our funds about a year ago, last July, $300 million fund. Our goal is to invest $100 million a year.

We said it might even be somewhat more back ended. Coincidentally or not, it appears as though one year into it, we have identified transactions that will take about $100 million of equity. So we are on track.

What I say, and it should be no surprise to the investment community in general, these transactions are more back ended in terms of when we get to a 10% unleveraged deal, then in the good old days of 2001, 2002, when we could buy existing cash flow in the 9 to 10 cap range. We are on track. We think our returns are going to be consistent with the goals we set forth a year ago. We are very excited by this transaction .

All right. That's all I have. Thank you.

Great. Thank you.

And there are no further questions at this time. I would like to turn the presentation back to Mr. Bernstein for any closing remarks.

I thank everyone for listening and please enjoy your summer.

Thank you.

Ladies and gentlemen, thank you so much for your participation in today's conference. This does conclude the presentation. You may now disconnect. Have a great day.