Brandywine Realty Trust (BDN) 2003 Q3 法說會逐字稿

Welcome to Brandywine Realty Trust's 2003 third quarter earnings release conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded. Prior to turning the call over to Mr. Gerry Sweeney, please let me read the following disclaimer on behalf of the Company.

The information to be discussed on this earnings conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, these statements are not guarantees of results and no assurance can be given that the expected results will be delivered. Such forward-looking statements, and all other statements that are made on this earnings conference call that are not historical facts, are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those expected. Among these risks are the risks that we have identified in our annual our annual report on Form 10-K for the year ended December 31, 2002, and any subsequent filings, a copy of which are all on file with the Securities and Exchange Commission. For further information on factors that could impact us, please reference our additional filings with the SEC. We are subject to the reporting requirements of the Securities and Exchange Commission, and undertake no responsibility to update or supplement information discussed on this conference call. Also reference the disclaimer statement in our earnings press release.

Thank you. I would now like to introduce your host for today's conference, Mr. Gerry Sweeney, President and CEO of Brandywine Realty Trust. Mr. Sweeney, you may begin.

Thank you very much, and thank you all for joining us for the call today. During today's call, we'll provide some comments on market conditions, a financial update of our third quarter results and an overview of our business plan. Participating with me in today's call are Chris Marr, Chief Financial Officer; Jeff DeVuono and George Sowa, two of our Senior Vice Presidents; Brad Harris, our Chief Accounting Officer; Dan Palazzo, our Corporate Controller; and Tim Martin, our director of Financial Reporting. Jeff and George will be available to answer any questions that may pertain to market conditions at the end of our prepared remarks.

We are extremely pleased with our third quarter results. From a tenant retention, operating metric and occupancy perspective, I think we're very pleased with the way the quarter came in. As we have indicated on previous calls, we had anticipated that the third quarter would be our most challenging one of the year due to some known rollouts. So for the Company to post close to a 91 percent occupancy, close to 92 percent leased, a retention rate north of 82 percent and year-to-date GAAP rental declines of approximately 2 percent, we think is a very good result, given the difficult market conditions. Our exceeding First Call estimates was driven by what we view to be a purely non-recurring event, but even factoring in that impact, we exceeded First Call by a couple of cents. More importantly, and I think the most important takeaway, is that we wound up very much in line with our business plan, both for the quarter and year to date, as well as with our projected leasing and operating targets.

A few words on the market. Make no mistake, despite the slight rebound and economic outlook, and we see a general change in the psychology relating to economic prospects, real estate market conditions at very much the grass-roots level remain challenging, and most sub markets continue to experience significant rental pressure. As we have in the past, we continued to maintain a very aggressive leasing stance to ensure that we achieve all of our leasing and capital expenditure targets. We are pleased with the progress for our first three quarters of 2003, in that our leasing performance has been consistent with the business plan, as we announced at the end up 2002. Our focus remains in delivering the best net effective rents possible in this type of difficult market. From an overall standpoint, we're beginning to see some anecdotal signs of her recovery; however, as we formulated our 2004 projections, we believe we that the time frame for economic recovery to impact the real estate markets remains uncertain, and as such, we remain very cautious in our outlook for the balance of 2003 and for 2004 -- particularly in the first half of next year. The bottom line is we continue to operate the business on the premise that real estate market conditions will remain challenging, and as identified in prior quarters, our key areas of focus remain -- first, maintaining and hopefully improving our occupancy levels. As I mentioned a moment ago, we're delighted that we've been able to stay on track with our business plan and keeping our occupancy and leasing levels above 90 percent; second priority we've talked about on previous calls is that we want to control, to the extent possible, our operating and administrative expenses. This challenge has become increasingly difficult due to continued upward pressure on real estate taxes, utilities and insurance costs. But our team has done a great job this year by reducing our controllable expenses in line with our 10 percent target of reduction, through solid hands-on property management work and excellent vendor relations; the third objective is to continue to deploy our market penetration strategy and to continue to improve our balance sheet. Our investment program this year has been exceptionally well executed, and we continue to strengthen our balance sheet, which Chris will address in more detail during his comments.

Our overriding goal bar none is to continue improving our operating metrics. In pursuit of this, we're delighted that the third quarter remained very much in line with our high expectation that we put on our property management and leasing teams. From a leasing velocity standpoint, statistics are still moving in a positive direction; however, contrary to our performance last quarter, this quarter we actually had negative absorption of portfolio of approximately 100,000 square feet, due to anticipated move outs that we announced before (inaudible) several large tenants. Based on that, as you remember, during last quarter's call we had actually anticipated a lower occupancy rate throughout the portfolio. But we were able to make some significant headway in some other areas to improve our occupancy statistics. There continues to be rental rate pressure across the board, as evidenced by the rental rate reductions this quarter, both on a cash and GAAP basis. We are, however, pleased with these expectations (technical difficulty) if these reductions are in line with our expectations. We're also pleased that our capital costs have been reduced from last quarter to approximately $1.36 per square foot this quarter. For new leases, that was slightly more than $2 per square foot, which was our lowest amount since the first quarter of 2002; and on renewals it was roughly $1 a square foot, which was will be lower last quarter and in line with our historical averages.

We also continue to aggressively pursue deals on a direct basis through our in-house leasing staff, and our percentage of deals done directly this quarter was close to 60 percent, which certainly helps to minimize our ongoing capital costs. The important point to note, and one clearly reflected in our financial results, is that we have not seen anything thus far this year in our portfolio, either from a rental or expense perspective, that was not in line with our budget expectations when we first announced our 2003 guidance this time last year. We're also very proud of our continued success on tenant retention. Tenant retention for the quarter wound up slightly north of 82 percent, and for the year stands at a year-to-date statistic of 81 percent, slightly above our 75 percent five year average. We are certainly mindful, as I've talked on other calls, about how this statistic can be affected by individual quarterly activity. But I really do think it sends a very clear signal that our property management, tenant service, administrative support and leasing teams are doing an excellent job of presenting a differentiated service level to our tenant base.

Other points of note on recent activity -- as we have previously disclosed, we recently announced an equity transaction where we raised approximately $64 million. These proceeds will be used to redeploy into an end-market asset that will close very shortly, with the balance being used to retire debt. It's important that you view this equity issuance in the context of our previously announced strategy of continuing to strengthen our balance sheet. We've made significant strides in this endeavor over the last year. Looking at our debt profile, we believe we have the best opportunity that we've had in the past five years to change the composition of our balance sheet, and we plan to take full advantage of it. In addition, our disposition program has also served to strengthen our balance sheet and further enhance the overall quality of our portfolio.

Our paramount objectives remain to continue to keep our balance sheet in very good shape, creating additional capacity for the execution of our 2004 business plan, and over time, mitigate our exposure to floating-rate and secured debt. At this point, Chris will walk you through our third quarter results, expectations for the balance of 2003 and introduce our 2004 estimates.

Thanks Gerry. FFO in the third quarter at 71 cents per share; that's exceeding the First Call mean of 66 cents per share and our guidance of 66 to 67 cents per share. The primary drivers find us beating the numbers are as follows -- first, we had about five cents of FFO per share, which is reflected in the other income line in our income statement, resulting primarily from bankruptcy settlements we received from two former tenants -- Comdisco (ph), a tenant in our King of Prussia portfolio who filed for bankruptcy in 2002; and Vlassic, who filed for bankruptcy in 2001. Offsetting that was a 2 cent reduction in FFO as a result of the write-down of an investment in a potential joint venture development, that we concluded during the quarter is no longer probable. That write-down is reflected in our income statement in the joint equity and income and joint ventures line item. So if you exclude those 2 nonrecurring items, on a more normalized FFO per share basis for the third quarter, we were at 68 cents per share, 2 cents above where First Call was and won cent above the high end of our estimates.

I went back to the transcript from our second quarter call, and reiterating what Gerry had said, at that point we articulated our expectation that our same-store occupancy in the third quarter would be at or below the 91.2 percent average occupancy we experienced during the second quarter, and that overall occupancy would dip from Q2 but recover to Q2 levels by year-end. We attribute exceeding the high end of our range and First Call by two cents and one cent, respectively, primarily to our same-store asset average occupancy being higher, at 92.2 percent versus the 91.2 at the end of the second quarter and 91.1 for the same quarter of 2002. We also had same-store NOI of a positive 3.1 percent, which exceeded our guidance. We are very comfortable with our fourth quarter and full year guidance of 66 to 67 cents of FFO per share for the fourth quarter and 2.68 to 2.69 for the full year. And we see very little downside risk to these estimates. There were no material changes in our balance sheet from the second quarter, other than the previously disclosed payoff in July of 56.5 million of mortgage debt. No material changes in our operating margins. We did see a slight increase in real estate taxes, primarily as a result of an increase in school tax assessments for the July 2003 through June 2004 billing cycle.

I would like to draw your attention to the credit enhancements and balance sheet strengthening that has been achieved over the last nine months. Our debt to market cap has improved to 43.1 percent at September 30, versus almost 50 percent at 12/31/02. Our interest coverage ratio at 3.28, as compared to 2.9 at the end of December and a (technical difficulty) 2.28 at September 30 versus 2.06 at year-end. Total portfolio debt has been reduced by 60 million from the start of the year. We now only have one material secured debt maturity remaining until 2010. These improvements in fixed charge and interest coverage ratio (technical difficulty) primarily by lower debt levels, and to a lesser extent, a slightly lower rate environment. We expect our thought process related to the 53.1 million of secured debt bearing interest at 7.18 percent that matures in February of 2004, to be much more publicly visible over the next 30 to 45 days. Our intention is to re-do our line of credit early in the first quarter of 2004, extending the term and bringing our pricing and covenant package in line with our improved credit fundamentals, and sizing the line correctly for our business plan over the next three years. Our intention is to gradually reduce our floating-rate exposure in 2004 from our current levels to levels more reflective of our rated peers, through a combination of hedging strategies and the replacement of short-term floating-rate (technical difficulty) with the issuance of longer-term fixed-rate debt.

Our 2004 guidance is very specifically articulated in our earnings release. Some brief commentary. After giving effect to a onetime impact of three cents per share this quarter and our guidance for the fourth quarter, and more normalized FFO per share for 2003 as a starting point for looking at next year (technical difficulty) is 2.65 to 2.66 per share. If we operate from the low-end of that range the impact of our year-to-date 2003 activity of approximately 41 million of dispositions; the issuance of 4.5 million common shares, raising proceeds of 111 million; the pending acquisition that Gerry discussed, for approximately 47 million; and the overall debt reduction of 60 million from year-end 2002 -- combined with some assumed increases in short-term rates in '04, all result -- all of that activity, which resulted in the improved credit profile I just articulated along with the completion of our objectives for the last two months of the year, result in roughly 11 cents per share reduction in our 2004 FFO per share. So if you now are operating from the 2.65 less the 11 cents, or $2.54, we add roughly six cents per share from our same-store results to get to the low-end of our expected range for 2004 of $2.60. Our same-store revenue assumptions include cash rent declines versus expiring cash rents along the lines of those experienced in 2003, and expenses growing roughly at the pace of inflation. Our same-store average occupancy we expect to increase over 2003 average levels. If you add in our assumption of 50 to 75 million of unencumbered speculative acquisitions, with going in yields ranging from 9 to 10 percent weighted toward the latter half of 2004, that activity is additive roughly five cents to our guidance. The positive impact of lower than budgeted interest rates, onetime sources of revenue, such as termination fees, and accelerated timing of acquisitions could add as much as an additional five cents per, resulting in the higher end of our range of $2.70 of FFO. Our goal is to provide guidance that is prudently cautious and grounded in fact. We believe we have and will achieve that goal in 2003. Our guidance issued one year ago at this time has been consistently affirmed throughout the year. We believe that the mid to high (indiscernible) range of estimates poses some risk, given its reliance on external growth opportunities, interest rate forecasts and nonrecurring revenue sources. As such, we are much more comfortable at the lower end of our guidance. At this point I would like to turn it back to Gerry to wrap up the comments.

I'd like to spend a few moments talking about our business plan for the remainder of 2003, but more importantly, add some color to the numbers for 2004. Just as we've done for the first nine months of this year, and certainly for the balance, the major priority really remains our leasing targets and making sure that the entire focus of the organization is using our market platform to create a competitive advantage. From a rollover standpoint, I think we are pretty pleased with how we've done this year. We had approximately 2.5 million square feet rolling. As we talked about earlier, the retention rate is above our five year average of 75 percent, and all the rollovers that we (indiscernible) thought we were going to have were well anticipated and factored into our forecast and our marketing strategy. We certainly believe we are in excellent shape on the balance of our 2003 existing rollovers.

At this point, our attention clearly is turned to 2004. For 2004 we've actually made some pretty good progress. This supplemental package indicates about 2 million square feet. That's actually indicated down from what we had indicated several quarters ago, because we have been able to already lease close to 450,000 square feet of that on a renewal basis. We're breaking that down by about 40 percent of our roll over in 2004 is in Pennsylvania. About 29 percent in New Jersey, with the balance in our Richmond market. Our early renewal program has been affected thus far, and is gearing up significantly as we move into the last quarter of '03. Interesting point is that our average expiring rent in 2004 is very much (technical difficulty) rent in 2003. So we believe that we'll be able to continue the same type of trendlines we have been saying this year, in terms of renewal and lease rates.

As Chris walked through, and as the press release articulated, we provided a range of guidance along with some supporting thoughts for 2004. We'll tell you that our financial outlook continues to be driven by a strict overabundance of caution. The overriding construct as we're working through the guidance is that there is simply too much uncertainty in anticipating the timing of a recovery impact in the real estate business. As such, we continue to be very conservative and are focused on maintaining our financial performance in 2004, generally in line with what we experienced during 2003. Looking at '04 though, we are beginning to see some positive trends. We are, in fact, anticipating a better investment climate. We're beginning to see more transactions that could create some additional opportunities for the Company, and whereas we have been a net seller of properties for the last several years, we do anticipate in 2004 being a net acquirer. A key component of this evaluation is that our team has done an extraordinarily good job through a difficult market cycle, in managing our existing portfolio and as such, from a risk profile perspective we are in an excellent position to be more aggressive in pursuing acquisitions. From a portfolio management standpoint, we plan on continuing our process of having our land approval programs becoming full funding. And we are well on our way to accomplishing that goal. In addition, during '03, we've undertaken 4 renovation projects. The supplemental package speaks to four of those -- 1000 Lenox Drive in central New Jersey, a project in Allentown and 2 buildings in Pennsylvania. We are also looking at several additional projects that will commence renovation early in 2004. This program will perfectly reposition well located assets in our core markets into state of the art buildings that will enable us to achieve higher rental rates, as the market recovery progresses. During 2004, we will absolutely continue to proceed with our balance sheet program, encompassing culling out additional properties wherever we feel there is no longer an opportunity to create significant upside, as well as looking at the debt profile of the overall company. On (indiscernible) Center, the land we have under option in University City, our marketing campaign is moving forward. The response continues to be positive. We have, however, nothing substantive to disclose at this point in time. Our current investment base is very much in line with what we have indicated previously, of just around $4 million. And we have this quarter, as we have done in previous quarters, taken certain charges relating to the marketing costs relating to that project.

Looking at 2004 and our financial projections, we also remain extremely comfortable with our dividend safety margin. Along those lines, we're certainly pleased this quarter. We had a return to normalcy on our caps. And as we have indicated on previous calls, our occupancy levels would have to drop significantly until we reached a 100 percent payout ratio, and we are in very, very good shape as far as providing dividend safety. This quarter, our FFO and (indiscernible) payout ratios were 63.2 percent and 83.5 percent, respectively, which is below our 65 percent and 85 percent respective targets. So for 2004, we believe we are in an excellent position to turn the corner and start generating positive same store growth. That will be accomplished by a slight uptick in occupancy, as well as full execution of our expense control programs. Finally, from an external growth standpoint as Chris mentioned, we remain very well positioned in the market. The number of opportunities that we are seeing is increasing and we believe that the use of our market position, excellent deal flow and control of tenancies will continue to create significant value. We enjoy solid relationships throughout our core markets, and from our perspective, that puts us in an excellent position to (indiscernible) opportunities. Our team continues to do an outstanding job and the level amortization throughout the organization is extremely high. We have the right business platforms, the right asset base and the right team to continue to significantly outperform markets. As market psychology begins to turn to a positive in 2004, we believe that this backdrop positions us extremely well to continue generating significant value.

Thank you very much for taking the time to listen to our prepared comments. At this point, we would be happy to open the floor up to any questions.

(OPERATOR INSTRUCTIONS). Rich Anderson, Maxx Financial.

With regard to the 450,000 square feet that you were able to get in front of from the 2004 roll, what did you sort of give up in order to get that stuff done early?

I don't think we gave up anything, in terms of what it was not consistent with what we have experienced in 2003. I think the game plan has been to approach a number of tenants early, get longer-term extensions on a renewal basis. In some cases, we've had to reduce current rents, but certainly picked that up on rent (indiscernible) through the balance of the term. And I think the renewal trend that we saw on those was very consistent with what we've typically seen, which is a much lower rate of capital cost yielding a higher net effective rent

I might have missed this, but did you talk about what the 2 cent write-down was, what project that was in reference to?

Chris had talked about it relating to a development joint venture. It was one of our poor marks with a joint venture partner. We were proceeding on a potential development opportunity that involved a condemnation. The condemnation was overturned by a higher court, and given the likelihood of that being a protracted litigious situation, we concluded that on the short-term horizon, that development was not probable. And I think in concert with good financial reporting practice, we decided to take a write-down in this current quarter.

Anatole Pevnev, McDonald Investments.

This is actually Frank Greenwood (ph). Getting back to your balance sheet and your plans for refinancing, when do you expect the probable timing of the transaction to occur?

I think we have a couple of things that we are looking at. First off, we have that maturity in February. And as I articulated in the prepared remarks, we would expect to have visibility to how we are going to address that over the next 30 to 45 days. Then what's left, really, in terms of maturities in the near-term -- near-term being between now and (technical difficulty) -- is the line of credit. And as I said there, we would anticipate redoing the line and closing in the first quarter, extending that term out three years, hopefully tightening spreads and tightening our covenant package. As to then the move towards a lower reliance on variable-rate debt, and then in general just a lower reliance on short-term debt, I think that's an evolving process. We would hope to have better visibility to how we expect to enact those transactions between now and, let's just call it the end of the second quarter of next year.

Last quarter you indicated that you expected tenant retention to be in the 60 to 65 percent range. It was better than that. Was that just the higher level of renewals at the 450,000 square feet in '04?

I think exactly. As we go through and take a look at every tenant in our portfolio that has an expiration coming up, we -- do the best you can in terms of handicapping whether they will renew, not renew, not sure, we are sure. I think as we looked at last quarter when we projected the lower retention rate, we actually got some positive surprises by some tenants who opted to stay. I think it's no more complicated than that. As we look at the business plan for '03, we really did view the few third quarter as our more challenging one from that operating metric standpoint. And I think in no small measure due to some great work by the property management, maintenance and leasing teams, they were able to persuade folks to stay where they were.

Finally, on the acquisition environment. You indicated that you had prepared your company for external growth. How do you see the market? Are there significant changes in cap rates and deal flow?

We're certainly seeing an increase in deal flow. We've seen, as I mentioned on the call, I think the last two calls when we have talked about this topic, we've seen cap rates migrate to a level in the mid-nines as a benchmark. Obviously, given the specifics of any one particular property we are looking at, is kind of within the range where it would be an attractive target for us. So I think we're seeing on both fronts, we are seeing more velocity of deals and we are seeing pricing being more rational right now than it was five or six quarters ago. So I think as we look at 2004, we do see ourselves migrating from, as I mentioned, a net seller to a net buyer.

Greg Carrandi, Wachovia. Mr. Carrandi, your line is live in a conference.

Gary Bostin, Smith Barney.

Gerry, I don't know if I missed this, but I was wondering if you could give us an update on any leasing activity at 935 First Avenue? I think you guys put that into the portfolio this quarter, or the beginning of the quarter?

We actually put it into operation this quarter. We have no signed transactions that we can speak to. We continue to actively market the project. We're having a much higher level of activity than we've had in the last couple of quarters. I wish I could give you more positive news, but we are still looking at that building being leasing challenged.

I know during the quarter you registered some shares; I think that relates to the five arrows preferred. Just wanted to see if there was any discussions going on regarding potential redemption of those preferreds, or a conversion into common?

The registration statement was part of our original obligation with both Rothschild and Lazard to register those shares. We had a period of time to do that. We did it at the last window, and it really doesn't signal anything other than just us fulfilling our obligations that we committed to as part of those original preferred structures. There are certainly no discussions on the horizon. I think both companies continue to look at what their alternatives are, as does Brandywine as an organization.

On the pending acquisition, with as much detail as you are comfortable with since it has not been announced, but maybe give us some idea of the leasing profile of the asset growth prospects, etc.?

(indiscernible) leasing profile, it's just about 95 percent leased. Very little rollover for the next several years, which was one of the attributes that we liked about the project in terms of it adding some additional stability to our core market portfolio. The going in yield is slightly north of 10 percent. And we would anticipate that transaction closing in the next week.

With that kind of yield going in, does that imply that the rents are above market?

No, actually the rents are pretty much in line with market. The average there is just around 20, in the mid-20s. Which is very consistent with the level of transactions that we are doing.

Ken Weinberg, Legg Mason.

Gerry, in the past you provided some -- at least quoted some statistics on the level of inspections, and I guess the level of the leasing pipeline. Could you quantify where you would say you are at today versus where you were at the beginning of the year?

I did do that, but everybody told me that it was really boring to do that (multiple speakers) so we stopped doing it. We were talking -- going through the numbers the last few days. We are pretty much right in line with the level of activity year to date that we saw in 2002, and have actually moved up our conversion rate by almost five percentage points. So year-over-year, the list of prospects to inspect our spaces is very very constant. But I think we feel pretty good about the conversion rate moving up from the high teens to the low 20s. Jeff, or George do you have any comments on that?

Yes, no. We hit the same number, literally, within a few companies' year to date third quarter '03 versus year to date third quarter '02. And as Gerry indicated, the ability to close on those deals has increased year-over-year since 01, since we started tracking the stuff.

Any trends there you could read into, the size of the tenants or industries or particular markets, anything?

(multiple speakers) -- a few years ago, and the information, if we start to collect it going forward, may be telling. But it's pretty cyclical, and it can be influenced by a lot of different reasons.

One of the things we have experienced on the New Jersey side, actually had some nice absorption by the law firm. This seems like they're either pure growth or acquisitions and a combination thereof. We have actually had some nice pure net absorption from the law firms within the portfolio.

What and where are the assets held for sale? I guess they have closed now.

We've sold -- we had 7 properties in held for sale as of 9/30, and we subsequently in October sold 6 of them. And they are basically in (indiscernible), New Jersey and Lehigh Valley.

Can you put any kind of a cap rate on those?

The ones that we sold actually this quarter, we did exceptionally well on the cap rate side. It's actually about 6.5 percent. Part of that is driven by user purchases of some. Others were actually investors. But weighted average on the dispositions for this quarter actually came in around 6.5. That's an abnormally low cap rates for what we are selling, but it was a great opportunity to prune the portfolio and really focus our efforts on some of the other core assets that we had. So if you look at the things that we did sell, generally smaller buildings -- and again, in some cases, 2 users. We have seen that as a bit of a trend, where some of the tenants actually are looking to acquire the building. Again, the buildings that we sold in each case really were non-core, either within our geographic area or outside of our geographic core areas.

Bill Quarr (ph), Raymond James.

Most of my questions have been answered. I guess, following up on the acquisition question earlier -- if you are projecting a slight increase in your interest rates, or your cost of capital next year, that would imply that maybe yields will rise a little bit, as well? And I am just questioning whether you're not maybe too conservative on your outlook for acquisition activity next year? Can you comment on that?

The comment I will give you is I think that the overlay on all of our projections right now, I think, are pretty conservative. I think -- we are very mindful of the positive impact that acquisitions can have on our earnings target for next year. So as we sat down and introspectively evaluated what we saw happening in the market next year, you could clearly make a case that the acquisition volume would be higher than we are targeting. But, those acquisition targets are purely speculative, in terms of what will actually be achieved. As opposed to us talking about a larger target, I think we feel comfortable in the range that we have identified, in that we don't really ever want to be in a position of compromising quality of the purchase for quantity of the volume. But we certainly see the market returning to a more favorable acquisition climate that we haven't seen for a number of years.

And the dispositions next year, are you going to be looking to make some trades, or are you set with your existing portfolio?

We are always looking to make trades, and we are going through the final end of our annual process of looking at all of our assets. And just as we did last year, we will complete that list this year shortly. That will identify the assets where we think that we really have either maximized value, we have rollover risk that we don't particularly care for. We have capital obligations, whatever it might be. But go through a criteria that will identify properties that we are targeting for sale. We will undergo a marketing programs on those projects, and if the pricing is right, like George outlined on some of these other projects, then we will clearly be a seller. Our practice has been to actively manage every asset in the portfolio, and we certainly look at 2004, being as I mentioned, a better acquisition climate, which I think puts a greater burden on us to make sure that we are very aggressive in calling out what properties we don't think we get any value from.

(OPERATOR INSTRUCTIONS). Greg Carrandi, Wachovia. Mr. Carrandi, your line is live in the conference. Do you have a question?

There appear to be no further questions. I will turn the floor back over to you for any further remarks.

Thank you very much. We really have no further prepared comments. Thank you all for joining us for this call, and we look forward to updating you on our business plans shortly after the first of the year on the next quarterly call. Thank you.

This does conclude today's teleconference.