Brandywine Realty Trust (BDN) 2004 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to Brandywine Realty Trust's conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. And instructions will follow at the time. As a reminder, this conference call is being recorded. Prior to turn the call over to Mr. Jerry 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 Report on Form 10-K for the year ended December 31st, 2003 and any subsequent filing, 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 of the disclaimer statement in our press release.

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

Elsie, thank you very much. Good morning everybody, and thank you for joining us for Brandywine's fourth-quarter earnings call and a wrap-up of 2004 activity. Today, the agenda will be a brief overview of market conditions, financial review of our fourth-quarter and year-end results, and an outlook of how we view things in 2005. Participating with me in today's call are Chris Marr, our Chief Financial Officer; Tim Martin, our Chief Accounting Officer; and Jim Seiber, our Corporate Controller.

The fourth quarter was a strong end to what was clearly an outstanding year for Brandywine. Despite a continuation of challenging operating environments, we posted good core operating results and saw positive trends in most of our operating metrics. The year was extraordinary in and of itself and by any measure. We accomplished and in fact exceeded many of our business plan objectives.

Of particular note for the year are the following -- our balance sheet strengthening program achievement of the investment-grade ratings, our debut offering in unsecured debt market, a series of equity issuances -- have created a very strong financial platform for our Company that will serve us very well, as we look into 2005 and beyond. We increased our annual revenue run rate by approximately 24 percent through our acquisition program. In addition to that, we increased our square footage as a company by about 3.7 million square feet or an increase of over 20 percent. Furthermore, we added approximately 50 key operating and management personnel to our team. And as a consequence, our internal infrastructure, which is a key driver for our growth going forward, was significantly strengthened.

Our market consolidation efforts continued through the year through the acquisition of both existing assets and key land parcels. In addition to Rubenstein in mid-rise 5, we purchased land in Bucks County that can accommodate 400,000 square feet of development. We were awarded the development rights for our Eagle Pointe Project in Philadelphia, which can accommodate up to 1 million square feet of additional office space. And the Christina Gateway Project in Wilmington that can accommodate up to an additional 700,000 square feet. We also sold several land parcels as part of our recycling program.

From an investment standpoint, our financial capacity puts as an extraordinarily strong position to evaluate acquisition opportunities for the remainder of 2005 and beyond. We also continued to make significant progress on several of our high-profile undertakings. In particular, Cira Centre, our 730,000 square foot building currently under construction in University City, Philadelphia, continues to make great progress. As we announced in our press release, we are in the very advanced stages of final negotiations with five new tenants. And we are confident that we will bring Cira to 75-percent leased by the end of the first-quarter 2005. Even more encouraging than that, the deal pipeline for the project continues to grow. And we are well ahead of our long ago established pre-leasing targets. Yields and capital costs continue to hold in line with our original forecast. From a construction standpoint, the building is progressing slightly ahead of schedule. Our construction costs are totally fixed, and we expect building delivery on schedule in October of 2005.

Radnor Financial Center is another high-profile undertaking we commenced in the -- late in the year in 2004. Our leasing team continues to do a very good job in generating additional pipeline activity. Pipeline today currently stands at over 600,000 square feet, a large increase over where we were last quarter. More importantly, at Radnor Financial Center, in just our first several months of ownership, we have already executed new leases for approximately 100,000 square feet. As is the case with Cira, on this project, our yields, capital costs and rent are holding in line with our original forecast. In addition, at Radnor Corporate Center, we have also experienced significant progress through the renewal of approximately 213,000 square feet of tenancies, further validating the strength of both our leasing team and the pre-eminent location that Radnor enjoys in the western suburbs of Philadelphia.

Doing a bit of a retrospective on our 2004 operating performance, several key items warrant mention. For the fourth quarter, tenant retention rate was slightly north of 85 percent. And for the year, we end it with a tenant retention rate of 79 percent. This exceeded our 5-year historical average and is a true tribute to our market presence and the entrepreneurial approach that our tenant service team takes. We also ended the year with a portfolio at 91.8 percent occupied and 92.7 percent leased. This is an increase of 110-basis points over 2003 and reflects a continuation of our plan to return our portfolio to occupancy levels in the mid-90 percent range. It is also a tribute to the quality of our properties, leasing staff and operating personnel.

Leasing activity during the fourth quarter continued to be very strong. During the quarter, we renewed or signed new leases for 1.3 million square feet. And year to date, we signed over 4.4 million square feet of leases. So for the first time since 2002, our portfolio had positive net absorption, which we think is a delightful result.

Quarterly economic data on rents continues to be somewhat symptomatic of deals done in the quarter. For the fourth quarter, we showed a decline in both capped and new lease rental rates. But we also during the quarter -- it should be mentioned. We leased a lot of space that had been vacant for up to 2 years. So the rent roll downs we believe are more reflective of the specific spaces that were leased as opposed to any break in the positive trend line that we have been seeing over the last couple of quarters. In addition, our capital costs for the quarter were slightly above our average for the year. But again, that was primarily driven by one large long-term lease in Bala Cynwyd. That lease frankly was also the major driver in our rent roll down because that lease -- that space had previously not been occupied about 2 years ago. But if you exclude that transaction, I think, as we look at the detail, our run rate for capital costs for the quarter was very much in line with our projections.

Chris will speak in more detail about our debut bond offering. But it's fair to say that we were delighted with executing the strategy. Our team did an excellent job. And we were able to upsize the offering to further reduce the earnings stream variability due to reliance on floating rate debt.

As we stand at the end of 2004, Brandywine has tremendous financial capacity under our line of credit. Our unsecured debt is 60 percent of our total debt at this point. But more importantly, our reliance on floating rate debt has been reduced to just 13 percent of our total debt base.

As we talked about on the last call, the decision to upsize this bond offering clearly had an impact on short-term earnings growth. But strategically, we are even more convinced today in this kind of rate environment that it was the correct move.

I would like to take a few moments to discuss the marketing conditions in our earnings outlook. Market conditions continued to improve, but competitive conditions continue. There's a wide dispersion of activity and strength in the various sub-markets in which they operate. Generally speaking however, we continued to see a slowly emerging trend towards equilibrium and positive absorption. As I said in what seems to be the last 5 or 6 quarterly calls, the improvement in these conditions is occurring. But it is occurring at a slow pace.

Each transaction is still being hotly contested among various landlords. And in some sub-markets, there is continuing pressure on economic packages being offered to tenants. With overall market vacancy rates where they are -- and they range from the mid-teens to high-single digits in the Class A inventory class. There's clearly going to remain pressure on rents until absorption pace brings the market vacancy rates down into the 5 to 10-percent range.

Several items to note as you look at the markets in which we operate. Activity through our portfolio continued to pick up through the fourth quarter. And our conversion rate continues to improve. While this is reflective of our continued aggressive leasing stance, there clearly has been a change in buyers' psychology that recognizes that the market is more likely to get stronger rather than weaker. This is an important shift since the beginning of 2004.

Many sub-markets have posted positive net absorption for the first time since 2001. For instance, in the western suburban market, depending on whichever brokerage firm you use and our own statistics, that sub-market posted a positive absorption of between 300,000 to 1 million square feet. While this is significantly below our historical run rate, which is north of 1.3 million square feet, it is reflective of the emerging trend towards more office space consumption supported by a more positive general economic outlook and business growth prospects.

In terms of our activity for the quarter, we had net absorption of 309,000 square feet versus a negative absorption of 34,000 square feet in the quarter -- so again, a very positive development. One of the interesting trends we continued to see during 2004 has been a clear desire on the part of tenants for a flight to quality that has historically been a harbinger of a market recovery. We have seen good activity and higher leasing levels in King of Prussia, Northern 202, Conshohocken, and Plymouth Meeting. Those markets are traditionally viewed to be the top-tier markets in the Philadelphia suburbs. Certainly, tenants use this market softness to continue to upgrade the quality of their space and lower their overall occupancy costs. But the movement toward higher quality space we think will continue. And we also believe that positions our inventory very well as market conditions continue to improve.

In addition, large blocks of space continued to be absorbed. Looking at 2005 over 2004, we think the outlook for the Philadelphia suburban market is that one -- vacancy rates will continue to decline. Two, average rental rates will remain flat. Three, there will be positive net absorption and minimal new construction. From a new construction standpoint in the Pennsylvania suburbs, rental rates still remain below those needed to support general levels of new construction. So other than build the suits or spot market opportunities, we're confident there will not be a lot of news speculative construction coming online throughout the market.

The Delaware market experienced another successful year of activity. Our portfolio down there is in the mid-90 percent leased. The market itself had an increase in average rental rates, an increase in net absorption and a decline of vacancy with little construction coming online. As we look at 2005 in the Delaware market, vacancy rates should continue to trend down, while average rates trend up with the market continuing to be highlighted by positive absorption. A word of caution on Delaware; however, there are several projects in the downtown area that have been post on the drawing boards to start that could have an impact on shorter term rates. That is and certainly will remain a key factor in our evaluation of the timeliness to start on our Christina Gateway Project.

Southern New Jersey should see a very marginal increase in vacancy, flat rates and break-even absorption for the balance of the year. And really without overwhelming you with more stats, some key trend line points would be -- that during 2004, King of Prussia Carter had about a 400-basis point decline in occupancy, Plymouth Meeting about 200-basis point decline, Bucks County 400-basis points. In the Malvern, Exton carter (ph), vacancies are down to about 15 percent, which is a decline of about 200-basis points.

So generally, as we look at the marketplace, it's fair to observe that for 2005, vacancy rate should continue to decline, absorption will continue to move in a positive direction, and an increasing girth of large blocks of space will create the opportunity for some heavy pre-leasing or build-a-suit activities.

There will however continue to be price competitive for smaller tenancies until vacancy rates generally firm out in the 8 to 10-percent range. There also remains continued variability of space absorption between key sub-markets. As you know, the majority of our portfolio is in what we call "Class A" in field markets like Plymouth Meeting, King of Prussia, Conshohocken, as well as the 3M carter in southern New Jersey, Princeton, and Delaware. We expect that in general, these markets will continue to lead the market recovery and increasingly generate more solid economic returns.

We are not kidding ourselves; however, the uptick in market activity is a far cry from us being able to influence rental rate levels. As we have said many times before, we approached the market with the understanding that we can have a an influence on our occupancy levels but not necessarily our short-term returns.

As we look at 2005, several key themes for Brandywine -- first, we plan on continuing our strong market out performance from both a leasing, occupancy and expense control standpoint. Second, we plan on investing significantly in the infrastructure of our buildings -- both roofs, HVAC systems, parking lots, lobbies, elevators that all may have a short-term impact on our CAD payout ratio but will certainly better position our inventory in the long-term. Third and most importantly, we're well-positioned to grow the Company into 2006 and 2007. We really do stand here at the beginning of 2005 with good growth rates built in for 2006 and 2007 that can be achieved by bringing Cira Centre online, the increasing lease up of the Radnor Financial Center, and strong general portfolio performance as the market recovers. Balance sheet capacity has never been stronger. And our market position is also in excellent position. And our infrastructure is the deepest it has been in the history of the Company.

Chris will provide more statistics. But as I look at our earnings forecasts for '05 -- several observations. First, while I know it may be frustrating to some folks, our earnings projections continued to be driven by an overall realistic cautionary outlook on the market. Like it or not, we're in a climate of compressed rental rates. We are also in a climate of compressed or increased operating costs, such as real estate taxes, insurance, janitorial, maintenance, all the items involved in running an office building are on the rise. In addition, increased regulatory and benefits costs create an even greater margin squeeze on anyone involved in any sector of the real estate business today.

All that being said, as we look at '05, you will note that we have increased the bottom of our earnings forecasts from 245 to 248 per share. This is primarily driven by a large lease termination fee that we achieved subsequent to year-end. That termination fee occurred in our new town square office park, where we were well into the mid-90 percent leased range. Upon accepting the termination feel, we immediately released about 76 percent of that space on good economic returns and created a small block of inventory in that marketplace for us. A good business deal, but as we mentioned in our last call, termination fees were not included in our forecasts.

So, to reflect this, we are moving up the bottom end of our range to 248 to the range we're looking at for '05 -- is 248 and 255 per share. As I said on last quarter's call, we're most comfortable at the low end of that range. And Chris will provide some additional color. At this point, Chris, I'd like to turn the call over to you for a review of our fourth-quarter and year-end results.

Okay. Thanks, Jerry. Just to reiterate, the fourth quarter was a very strong one for Brandywine on several fronts. From the balance sheet perspective, we did complete our debut bond offering in closing on the 275 million of 5-year notes and 250 million of 10-year unsecured notes. And we're very committed to the fixed income investor base that we have now established. We did complete the permanent financing on the Rubenstein acquisition with $113 million 4-year unsecured note offering to a group of institutional investors. Our remaining holder of convertible preferred shares converted such shares into 1.3 million common shares. As such, you will see in our capital structure at the end of the year, we no longer have any convertible preferred stock in our capital structure.

We have leveraged levels at the end of the year at 44 percent and an interest cover ratio for the quarter of 3.19 exclusive of the write-off of the deferred financing fees. We had positive same-store and NOI growth, excluding termination fees of approximately 1 percent for the fourth quarter, positive absorption of over 300,000 square feet in the portfolio, and very positive momentum in our assets in Radnor's Financial Center and at Cira Centre.

Reviewing our guidance expectations, we had expected full-year 2004 FFO to be $2.58 to $2.59. And we exceeded that expectation by $0.02 and First Call consensus by $0.03. Our fourth-quarter FFO per share was impacted by approximately $0.05, resulting from the write-off of the financing fees related to the 2007 and 2008 term loans that had been put in place in the third quarter. We subsequently paid these loans off in full in the fourth quarter. And this write-off was articulated when we provided fourth-quarter guidance back in November -- the charges included in the interest expense line on our P&L.

Our fourth-quarter guidance was either $0.61 per share with the charge or $0.66 per share without the charge. So our FFO per share for the fourth quarter was $0.02 above our range either way you look at it and above the cell side estimates on an apples-to-apples basis. This $0.02 was primarily related to other income.

We had a 347,000 termination fee in the fourth quarter from a tenet in our northern suburbs in a space that we immediately released. We had good results leasing space in our managed portfolio, generating some nice fees well above our expectations. And we also had a few other small items in the other income line in the quarter that made up the majority of the $0.02 exceeding expectations. The remaining portion of our results, the $0.02 in the fourth quarter, was primarily due to the timing and execution on the debt financings versus our expectation and core portfolio results being slightly better than our forecasts.

As we look at 2005, we are in traffic shape from a funding perspective with ample room under our credit facility to complete our committed development projects and to execute on all capital projects that are in line at this point.

As noted in the guidance portion of our release and as Jerry noted, we have received a termination fee in the first quarter of 2005 that will positively impact our forecast. As such, they are introducing for the first time, first-quarter 2005 FFO guidance at $0.63 to $0.64 per share. This includes the impact of the termination fee, and we revised upward the low end of our previous 2005 full-year guidance to $2.48 per share. It is very early in the year. However, we have seen indications, as Jerry mentioned, that our property tax estimates in our original forecasts may prove to be a bit too low based on the calendar year assessments we have received so far. And in addition, while we assumed increases in short-term rates in our forecast, the feds (ph) seems to be willing to move at a faster pace than we had estimated.

So the net of these items and the termination fee results in our upward revision of $0.03 per share. Just to say it again, we're very comfortable at the low end of our guidance. We stated on the third-quarter call, we were comfortable at $2.45. And we're now stating, we're very comfortable at 2.48. As you look at the core first-quarter expectations, exclusive of the termination fee of $0.59 per share, that represents a good run rate as you look ahead to the second quarter 2005 FFO per share expectations.

Our last topic is the status of our efforts related to Sarbanes-Oxley. We continue our efforts in wrapping up our 10-K and intend to file it along with our report on internal controls in early March. Recognizing that there are processes related to the K left to be done, we continue to believe our internal controls are approximately designed and operating effectively.

At this point, I will turn things back over to Jerry.

Well Chris, thank you. I'd like to spend a few moments on our 2005 business plan. First and foremost -- and has been the case for every quarter that we speak to the community -- primary attention is, folks, on the leasing operating side of our business. I think we're very happy with how we outperformed in 2004 and outperformed in the context of a lot of other things going on at the Company relative to the balance sheet program and some major acquisition activity. But we are determined to continue our aggressive leasing program, move this portfolio back to its historical 94, 95-percent occupancy level, continue to focus on controllable expenses, and also continue to invest capital in our portfolio to really ensure that we are able to maintain the high tenant satisfaction level, which is clearly being translated -- as we view it -- one the industry-leading retention statistics. It is the high 70-percent range.

Another area key focus for us as we look at the balance of 2005 is our rollover. We have 15 percent of the portfolio rolling. As you've seen in the supplemental package, that is down from where it was last quarter. And as each quarter -- that keeps coming down as we renew leases. What I can tell you is that we in active discussions with all of the tenants who have renewals coming up in '05 and into early '06. Many are in the process of renewing. We do have some known move outs but no real surprises, as we sit here today in the middle of February.

We are projecting about a 10-percent cash decline. And that is billed in, as Chris outlined in our last call, in our forecast. And we're also projecting a retention rate that is slightly lower than where we are historically, so retention rate in the 60 to 65 percent range for the year.

As far as Radnor goes and Cira again, they are two very high-profile undertakings the Company has. We're just delighted with that. We have progressed in 2004. But we're not turning down the heat at all. We have great activity at Cira. Yields are holding, as I mentioned. We have an excellent pipeline at Radnor. And we have a very good team of people working on that. We did program a 3-year lease up -- so to have -- be in a position where we have already booked 100,000 square feet of leases at Radnor Financial, I think, to us is encouraging. It is also encouraging to us that the pipeline continues to grow. And it is further encouraging that the rental rates and capital costs are very much in line with what we had projected.

From an investment standpoint, we have an active pipeline of potential acquisitions. We are however being cautious. We continued to see a high level of low-return capital chasing after stabilized propertied. When we bid, our focus quite frankly is on short-term rollover, rolled down exposure, and the price to replacement cost -- the same items that we looked at as far as our acquisitions in 2004.

We have not and will not acquire properties where we expect significant rolled downs, unless there is a corresponding offset in price per square foot. To the extent that we can identify acquisitions that provide that type of entry pricing at or below replacement costs, we will proceed as we have during 2004. Certainly, given the acquisition environment and our desire to grow at the highest possible equity rate of returns, we do continue to explore investment strategies, such as properties, specific joint ventures, broader-based joint venture structures, the creation of a general fund that would enable us to establish a quality co-investment vehicle. But frankly, all those avenues are being evaluated in the context of our current financial capacity -- our balance sheet -- our goal for balance sheet simplicity and the risk-adjusted returns that we would realize on any invested dollars.

We do see, as we look at 2005, the market being primed for more development opportunities. As you know, our land inventory can accommodate over 3 million square feet of additional development without giving it effect to some of those transactions I alluded to earlier. All of this square footage is either fully approved and entitled or in the latter stages of the process. If market conditions continue to improve, we do anticipate starting several developments in '05 that would be delivered in '06. Conditions precedent to these starts include a level of pre-leasing combined with our underlying confidence in the strength of our existing portfolio in that sub-market. Most likely, starts for us in '05 will be a building in Princeton Pike up in the Princeton/Mercer County market, a building in Bucks County, and possibly a building in Metroplex if marketing conditions continue to warrant.

Given the strength of the invest market, we'll also continue to evaluate selective asset sales. Those sales are certainly being evaluated in the context of whether they are in optimal return right now and whether we can improve our competitive market position and redeploy those funds elsewhere into our core properties.

2004 was truly a great year for the Company. We would always have liked to have done better. But in the context of a difficult operating environment, we maintained well above market operating performance. We grew the asset and revenue base for the Company. We effectively managed our land inventory and advanced approvals in the design process across the board. We completed our balance sheet strategy by expanding our equity base, accessing the investment gray unsecured market and significantly reducing our reliance on floating rate debt as a primary financing tool. We further consolidated our market position through a series of very good acquisitions. And more importantly, and the last point is we built in significant growth opportunities for our Company through the developments coming online at Cira, the lease up at the Rubenstein Company and the general overall improvement in the operating performance of our core portfolio. In summary, we believe we are well-positioned to move the Company forward, particularly through an improved operating climate.

I like to thank you for taking the time to listen to our comments. And Elsie, at this point, we would be happy to answer any questions.

(OPERATOR INSTRUCTIONS). Ross Nussbaum, Banc of America Securities.

Thank you. It is John Kim with Ross. Regarding the times that you were in discussions with -- at Cira Centre that are relocating into downtown Philadelphia -- can you provide some more color on what industries these companies are in and where they are relocating from?

They are relocating from the tri-state area. And they range from money management firms to financial service firm, a law firm, and a couple other professional service firms -- so pretty much professional service.

Is the 75-percent pre-lease figure by March represent all the potential tenants you are in discussions with?

They would represent the six -- correct.

And what are you hearing about interest levels at Comcast Center as it relates to Cira Centre?

I think -- not really hearing much of anything to tell you the truth. We don't really track it. It is coming online 3 years from now. So it's really outside the competitive fray that we are involved in with Cira Centre right now, particularly with these five tenancies that were on the office side and one retailer we are going to bring across the finish line. We have very small contiguous blocks of space available at Cira. So the tenant-size market that we're competing at right now would be at a much smaller level than any new development like at Comcast Power would or frankly any of the existing large blocks of vacancy in downtown CBD like those found at One/Two Liberty Place.

Chris, can you discuss your ability to pay down additional mortgage step this year with unsecured debt on a cost-effective basis after prepayment penalties?

Sure. We actually have no mortgages. We have no debt at all that matures in 2005. We just have principal payments that need to be made on existing indebtedness. And then in 2006, it is only about $10 million of mortgages that mature. And that number doesn't grow much beyond that in 2007. So we constantly look at where yield maintenance is. And we will address our ability to pay off early both the fixed and floating rate mortgages that we have. And certainly -- would do so when it makes economic sense.

So, it sounds like there is not going to be any activity this year. Is that correct?

It's hard to say depending on where rates go. But at the moment, I would say nothing significant.

And then final question, I just wanted to clarify -- did the TI costs at the Radnor leasing that you had -- are reflected in your numbers this quarter?

Yes, the amount of leasing that we did both the renewals and the new leases that were signed in the fourth quarter would be reflected in the capital number. But as Jerry said, they were very consistent with what our historic levels of capital would have been. So the slight upward tick in overall capital in Q4 was unrelated to Radnor. It was really related primarily to the lease in Bala Cynwyd and some of the other larger leases that we did.

Andrew Calderwood, Smith Barney.

Hi, this is Andrew Calderwood with John Litt and John Stewart. Jerry, just very quickly on the Radnor Center and particularly the financial center -- you said 100,000 square feet of new leases. Just further prospects and, I think, where does occupancy currently stand on the financial center? And what are prospects looking like over the next quarter?

Well in the financial, we actually have that on page --

It is on page 20. Radnor Financial is 11 percent occupied as of December 31st and 19 percent leased as of December 31st.

And prospects at the moment?

Well, as I mentioned, our pipeline deal right now -- our pipeline of -- and I will put that where -- define that by deals where we have been requested to and have issued an RFP, where we have lease negotiations or space planning considerations underway. That is about 600,000 square feet.

Okay.

Which we are pretty pleased with actually -- I mean the tenancy sizes range from fairly small, in the several thousand square foot range up to well over 100,000 square feet.

David Fick, Legg Mason.

A follow-up to that question -- what are you assuming about in your guidance about the lease up of that phase (ph) unless you previously said you were assuming no income in '05.

No, we actually, David -- you are talking about for Radnor Financial?

Yes, the old Wyatt space.

We had actually assumed that that was going to lease up over a 3-year period. So we did assume in our projections some level of income coming in during '05. And I think where we stand today, we're slightly ahead of the market on where we thought we would be.

Okay, well, then I'm going to roll it back into the earnings question that you know is coming. When we look at a major acquisition in the third quarter, the Rubenstein acquisition, potentially leasing some of the Wyatt space ahead of expectations, Cira Centre not coming online until '06, and obviously some capital invested there that's not providing a return -- but net absorption in the fourth quarter ahead of target, which has to translate into some earnings this year that were not in this year's previous targets. I am still confused that -- you guys being the only REIT we cover with declining year-over-year guidance in the FFO numbers. I cannot make my model do it without assuming that you are putting a huge amount of new G&A online or that your recovery of operating expenses is dramatically lower.

David, this is Chris. And I'm not obviously familiar with the intimate ins and outs of the model. But the overall outlook has not changed from the way we described it at the end of Q3 when we first introduced the 245 to 255. Essentially, you've got a $0.11 to $0.12 impact from fixing 6, $700 million worth of debt in 2004 -- its impact on 2005. So we continue to start with a run rate on the core portfolio in the low 2 to high 230's, low to 240's. And then you have the impact of some additional costs as we talked about, a penny or two a share, from G&A related to Sarbanes-Oxley benefits costs, etc. -- relatively flat same-store performance on an NOI perspective. And then you have the benefit of Rubenstein, which we are continuing to hold to the estimates that we had in the fourth quarter. Recognizing that so far, we have hit the ground running particularly on the renewals but also on some of the new leases in a very positive direction.

So wish that I could tell you, we thought it was going to be better and wish that we could make it so by wishing it. But I think we are very comfortable at 248. And we think that we are very comfortable where we introduced first-quarter numbers.

Okay. I hear all of that. You didn't move the upper end of the range up, even though you had the -- essentially the one-time termination fees. But you are ahead of where you that you were going to be on Rubenstein. I am sure you do not want to predict how those fees are going to come out at this point, but I'm still a bit confused. Because you have all of this positive news on the leasing and absorption side that is beyond what you had said in your third-quarter call in terms of guidance. And I'm still having a hard reconciling those. But I guess we'll have to see how it plays out.

Can you comment, Jerry, about the Comcast situation one more time and what that might mean in terms of your other buildings in the downtown area?

Certainly, I think as we look at that development coming online and certainly the vacancy as it stands say in some of the other trophy class inventory in the city -- One and Two Liberty. Two Liberty has essentially about 800,000 square feet vacant. 1717 Arch, which is known as the Verizon Bell Atlantic Tower, has about 600,000 square feet. I mean there's a number of existing vacancy issues in downtown. That, you know, depending upon what happens in the market in the next few years could be exasperated when the vacancy at the Comcast building comes online.

As we looked at our analysis from both Cira -- but more to your point David, the acquisition of One and Two Logan. We have operated -- we've always operated on the premise that that building was going to go. We operate on that premise when we commenced construction on Cira Centre, and we operated on that premise when we bought One and Two Logan.

One of the reasons why we thought One and Two Logan was insulated from that is because there's really very minimal rollover in that building through the year 2012. There's one tenancy coming up in 2008, but we feel that we're in a very good position to renew that firm. So from, I think -- as we analyze our real estate holdings, we feel we're in a very good position. Certainly from a neighborhood improvement standpoint, we've decided 17th and JFK being built and accommodating or becoming the world headquarters of a very large growing organization -- along with money being invested for public improvement, such as the redesigned -- the entrance for Suburban Station. We think long term that further validates the primacy of the locations of One and Two Logan. So that building when it is done -- stabilized, I think will be a valuable tool in increasing the value of One and Two Logan -- certainly to the extent that the investment based in that building is going to be well above our investment base in One and Two Logan. We feel again that provides some insulation for us from an investment standpoint.

What should we assume -- you had previously said that Cira Centre would be coming online late '06. In terms of when we should model in that investment kicking into an operating property mode, what should we do with that?

The first tenant will start to move in the fourth quarter of 2005. I think as we look at when the building will be substantially in service, I think we'd always looked at the latter part of 2006. And I think where we are today, that is still where we are comfortable. We will see how these transactions progress over the next couple of months.

A lot of these tenants, David, are scheduled to move in late first, early second quarter of '06.

Okay. And you are still consistent on your 9-percent sort of stabilized deal target there?

Right.

In terms of making decisions about these new perspective development deals, have you changed -- based on current cap rate trends in the market -- have you in any way changed your hurdles as to what it might take to get those preleased?

That's a great question, David, and it is very much on point. Certainly as we look at the investment market here in Philadelphia, the average cap rate for office space in '04 -- at least through the end of the third quarter of '04 -- was just north of 8 percent. We have traditionally tried to achieve an 11-percent return on our development deals. I think what we are seeing right now -- based upon two things actually -- with the depression or compression of cap rates as a backdrop.

Clearly, construction costs have gone up. And rents have not gone up -- but for certainly larger tenants where build-to-suits are kind of holding firm, we're looking for an overall development yield on our new projects around 10 percent. So our targets probably come down about 100-basis points realistically from a year or so ago. But given our financial capacity where we see rates -- cap rates going -- and the premium being paid in our markets for properties that are well in excess -- pricing well above the replacement costs. We think that is a pretty good risk-adjusted rate of returns for our development program.

I think that is completely logical. Thanks a lot; I appreciate it.

Rich Anderson, Maxcor Financial.

First question is -- when will you stop capitalizing interest at Cira Centre?

It would be seize when we place the building in service. But again, that's proportional to the occupancy. So 1 year after the building is placed in service or 95 percent. But again that's on a proportionate basis. So for example, if the building was 90 percent occupied, we would have a minor bit of capitalized interest on the vacant space. But --

When the first tenant takes space, you will see capitalizing interest on that pro rata portion of that space?

That's correct.

Turning to Radnor Financial, of the 600,000 square feet pipeline, how much of that is more in the advanced stages of lease negotiations at this point?

Probably about 100,000 -- in that range. I am only hesitating because it is a -- depends on what theory you apply to advanced lease negotiations in Cira --

As opposed just to the RFP point.

Yes, I would say that that probably 100,000 square feet -- a little bit more is a good number.

With regard to guidance for '05, I guess when you look at it on an apples-to-apples basis, you shaved off 2 pennies after you give effect to the lease termination fees. Is that entirely -- if I read you right -- entirely associated with property taxes being maybe slightly higher than you originally projected?

Yes, it is a combination of property taxes and interest expense, more so taxes and interest rate. But those 2 pennies are sort of embedded in our analysis of -- here we are in February 25th, we look at what we know is a good guide for the termination fees. We kind of look at what has happened in the last 2 months in terms of our expectations. And those two items appear to be moving in a more negative direction than our original forecast. So, the net of the two is our essential $0.03 increase in the bottom end.

Okay. And then when you mentioned, Jerry, the 60 to 65 percent retention expectation for 2005, you know for Brandywine, that's a low number. Are you seeing that type of retention in the activity that you have already sort of moved on for 2005? Or do you think that that 60 to 65 percent range is sort of a measure of conservatism?

I think it is a little bit conservative. This question came up in a different form on last quarter's call. And we were talking about the forecast for '05. If you look at every year when we go through the budgeting cycle, we are asking our leasing agents, our regional heads to protect out a "yay" or "nay" on whether tenants will renew or not renew. A lot of those tenancies do not roll until the third, fourth quarter.

So what you basically do is part of the budgeting process. You take a best guess on whether they are going to renew or not. Now, historically, that process has resulted in retention projections in the literally 40 to 60-percent range. That typically tends to get better as the year goes on. But as we sit here right now looking at our forecast for second, third and fourth-quarter renewals, we still think that is the range that's reflected in the data we have. Now, that could increase, as we hoped. And that's certainly been our track record over the last 6 or 7 years. Because tenants who may be on the fence may ultimately make a decision to stay based on a variety of factors as that expiration date approaches.

But for right now, I think we're looking at a retention rate in that range, which frankly we still think -- if I compare that to our peers is still extraordinarily good. We have just done, I think, our team almost an unbelievable job in the last 3 or 4 years of keeping our retention rates so high. And as we have talked before on calls -- and I think a lot of that is due to the fact that we literally have such a large asset-base in so many of the key submarkets that we give tenants a lot of comfort -- that if their business circumstances change, we can address those changes by essentially being a very good vendor to them for their real estate requirements.

But for right now, to answer your question on point, I still think we are looking in that 60-percent range. Our hope would be that would migrate up the year as the year goes on. But some of these negotiations for renewals are underway for protracted periods of time before the tenants actually make a decision.

And the last question is on the topic of reinvesting into your portfolio. You mentioned in your comments and the press release, your capital costs were down 18 percent. I assume based on your comments today that that won't be the case in 2005. First question -- is that correct?

And second, how does an increased sort of reinvestment strategy play into what might happen to rents -- trading rents for TI's?

Let me answer those separately. One, the capital cost number that I was referring to in the press release related more to tenant specific cost, so the cost for TI and brokerage commissions. What I was referring to in the reinvestment part of my comments earlier related to infrastructure improvements in the building. What we try and do -- and we argue about this metric all the time in our Company and I am sure the other office companies do, which is -- what is the payback compared to what is the incremental rent you can collect or garner from putting a state-of-the-art energy management HVAC system. Our belief is that while at some time that relationship is not intuitively linear short-term. That over time, it creates a much better building that will in good times and bad times maintain a higher level of occupancy.

So we look at it from a standpoint of -- if we investing that kind of money in our buildings, it is going to keep our occupancy levels higher. If the general overlay of the market combined with our tenant service program creates a positive dynamic, we do believe we can get incrementally higher rents. But we're not foolish enough to believe that if the market is not performing well generally -- that even if we have a very good infrastructure in the building that we won't need to reduce our rates to meet the market.

How many dollars are we talking about in terms of the infrastructure expenditures? And what are your sort of target rates of return on those expenses?

I think we're looking at -- in the range of 8 to $12 million in total for the portfolio. And that would include all types of roof, HVAC, parking lots, security systems, energy management systems, some lobby renovation, some laboratory upgrades. And again, I think the rate of return on those is hard to project only because it is really on a case-by-case basis. It is hard to quantify for example the benefit you get in rent by completely redoing a security system in a building. We just think it is -- our objective is to remain top-of-the-line quality inventory in every sub-market we are in -- and to do that sometimes requires an investment capital.

Seth Fingerman (ph), GEM Realities.

Hi Jerry, you spoke earlier about the frothy investment environment in cap rate compression. Can you comment on your thoughts as it relates to the EOP portfolio sale in Philadelphia relative to Brandywine's portfolio. Because I understand the collective quality of the properties may be different, but I thought it might provide a good mark for transactions in the marketplace.

When we looked at the EOP suburban portfolio, which we did. And we evaluated. We had some concerns about -- and again, every buyer has a different set of glasses on, so I never make any comments on what someone else does or opposite (ph) their investment decisions. The reason the EOP suburban portfolio did not work for us was as follows. One is we looked at the portfolio with its existing rent roll. We felt that the rents were significantly above existing market. And we looked at over 50 percent of the space rolling in the next 24 to 30 months. I can't remember which one it was -- fairly short-term rollover. So we were looking at a rollover and a rolldown as well as some fairly significant tenant-specific capital. But also given the age in the quality of those buildings -- a fair amount of significant capital investment to maintain the infrastructure. So as we looked at it, we didn't really view that we were -- that we needed those buildings to improve our competitive position. The pricing and the yield that was being paid for those properties -- I mean quite frankly, we would rather build.

That makes sense. To me, it's a reflection of your assets and where pricing is on the market relative to their portfolio. Additionally, I just want -- I appreciate the further clarification on the tenant retention. I thought that was helpful -- a couple of calls earlier.

Chris Haley, Wachovia.

Congratulations to your leasing team on an excellent job. I have got one follow-up question. My notes suggest that you had targeted 10 to 10.5 percent tax yields on your Cira Centre project.

Yes, Craig, we did.

That is correct. I think we may have either answered the wrong question before or misspoke. But our expectations remain at stabilized yield at Cira -- is 10 to 10.5 percent.

On a cash basis?

Yes, that is correct.

I think we were thinking that we're answering a question -- was more the stage in of the lease up of that property.

It is right now at 75-percent leased. Do you think you will return to 9?

When it starts to stage in through the latter part of 06, yes.

The law firm that moves out of Two Logan -- what is the name of that law firm?

Nobody is moving out.

Oh, excuse me. That lease is expiring.

The one that has the lease expiring? That would be Blank Room (ph).

Could you go into the -- again not a specific deal -- was the Clear Channel deal on Bala Cynwyd -- could you go into the decision to go ahead with that lease and the cost of that lease versus letting them go?

Certainly -- very good. That building, you may recall, was occupied almost in its entirety by a company called American Business Financial Systems, which left Bala Cynwyd and moved into downtown Philadelphia. That company was paying a rent level in the $30 range. And they occupied the bulk of the building. After they left, we really took a look at that building. And we have invested a significant amount of money in the project both in terms of a new roof, some new window lines, redid the lobbies, redid the elevators, redid the corridors, the lavatories -- had the structured parking decks, so we redid some of the parking. We really wound up investing a fair amount of money in the property to reposition it. Clear Channel approached us. They are obviously a very good credit tenant with some good growth prospects. And they have taken about 65,000 square feet. The rent that ABFS was paying several years ago was actually -- I misspoke -- was actually about $28. And Clear Channel is coming in around 22.50.

That's the gross number, Jerry?

I am sorry, Chris. The number that they are paying is about 22.50.

That is a gross number?

Yes, oh well plus electric -- right but gross. That's a pretty big rent rolldown. If you look at how that could skew our numbers that is 20 some percent right there -- 22.3 percent. So from our standpoint, you know, we met the marketing on a good deal, good credit. Our hope is they have good growth prospects. And it really fit well into our redevelopment plan for the building because when they completely phase in their occupancy -- they are in there now. They're staging it up. They're going to have a lot more people, a lot more activity through that building. And we think it will really add in leasing up the balance of the space, which frankly we made some very good progress on. (multiple speakers)

I think if your question is on mark-to-market thing, I think we do look at that in the context of -- what was the last day that Ken (ph) was paying rent? I mean certainly over 2 years ago in Bala Cynwyd -- that market has changed. Remember ABFS was paying really the highest point of rent in their long-term lease when they vacated. So you are going from a high point, i.e. the terminal point, of the ABFS lease to a different market and a different price point upon a new lease execution.

Can you determine that deal? Is this building now for sale -- a possible sale candidate?

The term of that least is 120-months, so it will be 10 years. And we are tangoing what to do that building. Let me put it that way.

On the Radnor Financial deals, Jerry, what was roughly the duration of the leases signed? Were you getting reasonable duration and obviously the capital costs were in line but --

The capital costs were in-line -- and I think we are going to find that right in a second for you, Chris. I think they were 5 to 7-year deals (multiple speakers).

The average deals in Radnor were about 6.7 years. So that was a blend of 5-year, 7-year and 10-year deals.

Okay now, also recollection was a lease up. It's not a ratable lease up over the 3-year period. You are assuming it's more back-end weighed. Could you share with us what your year-end '05 lease assumptions were and year-end '06 lease percentage assumptions were for the Radnor?

We have never publicly said exactly where we thought we would be on the remaining 800,000 square feet of vacancy. I think we have always that it's a 3-year plan, not pro rata -- a little bit more activity expected in '06 and '07 and then '05.

And we are on target for right now.

Right. The last question is on -- you are talking about '05 starts in Bucks County in Metroplex. Granted those two markets or those two nodes are quite different than what you have at Radnor. But what type of tenant might be in interested -- or what type of rent terms might be available for Bucks County Metroplex versus what you're charging at Radnor? And just trying to understand -- why you might start two new buildings in those markets given the amount of vacancy you have concentrated in Radnor?

Yes, good question, Chris. Let me approach each one separately. Bucks County -- a tenant, who would be looking at Bucks County, would not really be considering a Radnor location or a Metroplex location. I mean typically the tenancy that we're seeing competing up in the Bucks County market are really tenants that are looking between Princeton, New Jersey and the Newtown/Yardley area of Bucks County -- completely different tenant pool. Every once in a while, if the tenant has a major requirement, i.e. a couple 100,000 square feet, they will do a marketwide search. But they will quickly migrate to the sub-market where they want to be. So there's really no competition per se between a Metroplex and a Radnor along with Bucks County.

Now, you will note that two of the starts that we're thinking about, not committing to but thinking about, are up in that Bucks County, Princeton Pike carter (ph). Our Princeton Pike development right now is in the mid-90 percent leased. We literally have no expansion space for existing tenants. We can do four buildings in that market that range in size from 75,000 square feet to 120,000 square feet. So our team is aggressively looking at the market and fully talking -- talking to our existing tenant base and looking at new prospects to see which of those prospects might be amenable to Princeton Pike, which might be amenable to Bucks County.

Bucks County for example the buildings that we have up there are close to 100-percent leased. So we have no inventory in that market, particularly in the locations directly adjoining Interstate 95 so that will be a market call for us. That project, you may remember, is taking us well over 3 years to get through the approval process. So it is very hard to get the approvals perfected. And as a result, we think that there is a good opportunity to get very good rents in that market.

Metroplex is purely a market call based upon some existing tenant expansions we are evaluating. The likelihood of us doing -- continuing to do well at Radnor and what we see happening with the rest of our Plymouth Meeting tenant base. Remember our Plymouth Meeting asset-base is again mid-90 percent leased with no expansion. We have the ability to do basically three buildings at Metroplex. What we are thinking about right now is either one of the smaller buildings, so either 100,000 or 125,000 square foot building.

But that is a market that we would certainly evaluate in the context of what we are seeing in both Radnor, King of Prussia, and even frankly in Conshohocken.

Last just observation -- you mentioned that you expected to do some additional improvements in your buildings, so base building improvements. But in your disclosures, you do not break out your base building costs versus your second-generation costs. That would be helpful to disclose that in the future. Because you are saying -- this year in '05, you're looking at 8 to 12 million of expenditures on base building. It would be good to know what you're comp is versus '04.

We read with interest your capital report and are working on improving in-line with your direction.

Chris, thanks a lot. Keep up the great work.

Thanks, we seek to serve.

Frank Greywitt, Keybanc Capital.

I guess -- could you disclose what the total portfolio occupancy is including Rubinstein?

Share, at the end of September, the total portfolio occupancy with all of the Rubinstein assets was 86.4 percent. And at the end of December 2004, that occupancy was 87.7 percent. So it was a 1.3 percent increase over 9/30 results.

And in your guidance, where do you see that moving -- 87.7 to -- is that -- where do you see that going?

We really focus on the same-store portfolio, which is roughly 80 percent of the entire when we look at occupancy as a net. Same-store portfolio we essentially reiterated kind of flat, maybe 50-basis points up, 50-basis points down.

Okay. I guess moving then -- just kind of looking at the Radnor market -- you said that you have some big deals. I guess two questions -- first, how is the Radnor marketed? Is that something where larger tenants would locate?

And secondly, can you talk about some other big blocks of space that might compete with vacancy there?

Sure. Well, first of all, Radnor is a very strong market in of itself for tenancies of any size, which I think the best evidence we can give you on that is the wonderful result of having renewed over 200,000 square feet of Radnor Corporate Center, a lot of them small tenants. So I do not think it's a marketplace that is characterized just by large tenants hunting for a deal. I do think some of the larger tenants we are seeing at Radnor are strong evidence of the viability of the location but also reflects what I was talking about earlier -- which is there really are an increasing shortage of larger blocks of space.

So if you are a 5,000 square foot tenant looking in most of our sub-markets, you could spend all day looking at office space. If you are a larger tenant, you have only got a very limited handful of options.

Radnor is -- we are aggressively marketing Radnor throughout the region, both being done by our existing leasing team at Radnor but also done by our other executives who are in other geographic areas. It is clearly a priority for us to lease that up. As a result, given our brokerage relationships and deal flow, we have been able to get Radnor in the RFP process for a number of larger tenants. We do have large contiguous blocks of space available at Radnor, which is an increasing rarity in the marketplace.

The markets where -- the other sub-markets where there are larger blocks of space are in Conshohocken where you have a tower bridge, which has several 100,000 square feet of vacant space. You have a fewer larger blocks of space in King of Prussia. But when you get into some of the other real key markets like Northern 202 or Plymouth Meeting, there's really just not that level of existing inventory available.

To get as large a block of space that we have in Radnor that is existing and vacant, you would have to go off all the way to the Southern 202 carter, which is a location which a lot of the Class A tenants view as secondary. And it just simply too far for them to access in terms of their existing labor pool. So Radnor competes primarily with King of Prussia, Conshohocken, Plymouth Meeting, the other small mainline sub-markets. And then again, depending upon the size of the tenant looking at it -- could compete better regionally. And what we've seen is that given its proximity to the Schuylkill Expressway, Interstate 476, high-end executive housing along the mainline as well as good access to some of the lower-priced white-collar housing, Radnor really is a very, very good location.

It wouldn't be too surprising to see a fairly large tenant, significantly lease up some of that vacancy then?

Well, kwanda (ph) that is the hope. We've got again a good team in place. We are not letting any grass grow under their feet. They are aggressively pursuing every deal that comes across the transom. And if we can knock down a big block of space for the large tenant, it is perfect. If we need to chip away through a series of smaller tenants, that is also a very good result for us too.

I guess in the western Philly suburbs -- I was out there a couple of months ago. And sublease states were still pretty competitive. Are you still seeing that? Or is that drying up?

It is drying up a lot. I think in the marketplace, you had a large block of space that was available for sublease. It was frankly in one of the buildings we are a joint venture partner in -- 1000 Chesterbrook. That's space -- about 90,000 square feet was taken completely by a company called TruePosition. Some of the larger blocks of space in the northern 202 carter were absorbed by Shire Pharmaceuticals.

There are a couple of other sublease blocks of space available. But they're not really not of the size or of the convertibility that is enjoyed by Radnor Corporate Center.

Moving on to bits of the balance sheet, you have 3 million shares of equity that you can issue kind of in a dribble program. Can you kind of indicate how you plan on using this? Will it be help to fund developments? Will it be to do acquisitions? Is it something where you might roll it out over time that could potentially stunt growth or put a cap on your stock? I am just interested in how you plan on using that?

In terms of the program that we have put in place and that is on the shelf has not been executed as of yet. We viewed it simply another potential tool we could use to help us preserve very strong balance sheet metrics, as we move forth our growth program. It was not set up, nor would it be used for specifically any target you have submitted. We're going to look at our development activities, our acquisition activities in concert with what else we are doing at the Company before we decide whether to use that program at all. And if we do use it, it would certainly be done in the context of what that additional issuance would do to both our growth rate and the cost of that additional equity issuance.

I guess just a couple of line items. What would other income be kind of on a stable run rate basis, excluding any of the lease terminations? I think I ask this all of the time. I just want to make sure that it's specific.

And we give you the same answer every time? When you look at a run rate on other income, I think if you were to take the last 2 quarters and carve out 3 to $500,000 of things that happened that would be considered non-recurring, I think you get down to a pretty good run rate.

Okay, great. And on a G&A run rate, it was for one. Is that pretty stable? You said, you beefed up some of your managers and what not? Is 4.1 stable?

Yes, I think 4 million, 4.1 million is in the range of what a good run rate is.

And I guess just one final thing on the developments in your Bucks County start -- is that a Newtown start? Is that a Byberry? Or maybe it is Eagle Pointe now -- a start there? What market is it in?

I'm sorry, Frank. Newtown -- when we say Newtown, that's Bucks County. That's our set up there. It can accommodate 400,000 square feet. Eagle Pointe is Byberry. And when we were looking at starts for 2005, potentially that would be Newton, Bucks County not Eagle Pointe.

At the Newtown -- can you talk a little bit about what you're seeing with the local township and some discussions or some objections they have over the bridge that you're looking to build?

The township has expressed some concern about us potentially raising the water table through wetlands area by about an inch based upon a 100-year flood. So what we're doing is working very closely with our environmental and structural engineers to expand the length of the bridge so that it is removed from any area that could under any definition, in any language, be deemed a wetland. So we're confident that once we get that done that we will get the appropriate level of support to move forward on it.

It has been a long process. But I've got to tell you something. I tell this to our development guys. The fact that it takes so long and the bar is so high for getting approvals, I think is one of the most intrinsically valuable things about a company like Brandywine. It takes a long time to get sites approved for the type of quality and density that make up real estate development on the office site economically feasible.

So from a developer's standpoint, we get frustrated with things like that. I understand it, but we do get frustrated. From an investment standpoint, we walk away from some of those meetings maybe a little bit stung by the commentary that we here but with a bit of a smile saying, this is the way you create value. So we will get it done. And we will get that project off the ground.

Would you start the development before you had the approval for the bridge?

Most likely not -- we have some options to provide good access to the site other than the bridge. But the optimal access point is over the bridge. So I don't want to rule that out entirely, Frank, but our optimal situation would involve getting the approval for the bridge.

Thank you. There are no further questions at this time. I'll turn the floor back over to you for any further closing remarks.

Great. Thank you all so much for participating in the call. Again, where we think -- we're in a very, very good position for 2005 and look forward to updating you on our successful activities at the end of the first quarter. Thank you.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. And have a wonderful day.