Centerspace (CSR) 2010 Q1 法說會逐字稿

Hello, and we will to the Investors Real Estate Trust first quarter fiscal 2010 evenings conference call. All participants will be in listen only mode for this event. (Operator Instructions). After today's presentation, there will be an opportunity for you to ask questions. (Operator Instructions). Please note this event is being recorded. Now, I'd like to turn the call over to Mr. Tim Mihalick, please go ahead, sir.

Good morning, and welcome to Investors Real Estate Trust first quarter fiscal 2010 earnings conference call. IRET earnings and supplemental dis closure package were posted to our website and also furnished on form 8-K on Wednesday, September 9th. In the earnings release and supplemental disclosure package, Investors Real Estate Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with requirements set forth in regulation G. If you've not received a copy, these documents are available on our IRET's website at with www.iret.com in the investor relations section. Additionally, a webcast and transcript of this call will be archived on the IRET website for one year.

At this time, management would like to inform you that certain statements made during this call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Investors Real Estate Trust believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, Investors Real Estate Trust can give no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in Wednesday's earning's release and from time to time in Investors Real Estate Trust's filings with the SEC. Investors Real Estate Trust is not undertake a duty to update any forward-looking statements.

With me today from management are Thomas Wentz, Sr., President and Chief Executive Officer, Diane Bryantt, Senior Vice President and Chief Financial Officer, and Tom Wentz, Jr., Senior Vice President of Asset Management and Finance. At this time, I would like to turn the call over to Tom Wentz, Sr. for his opening remarks.

Thank you, Tim. We're pleased to report the financial results for the first quarter of our 2010 fiscal year, which ended on July 31st. Our fiscal year 2010, which began on May 1st of this year, will be IRET's 40th year in business.

In addition to summarizing our first quarter financial results, we will discuss our balance sheet including cash on hand, credit lines, and maturing mortgages, our real estate portfolio, including current occupancy levels, leasing activity, acquisition and disposition plans, and our impairment testing procedures and policies. We'll also discuss our dividend policy, our acquisition and disposition pipeline, our plans and goals for fiscal 2010, and future years, and of course, we will welcome your questions and do our very best to answer them. Diane Bryantt will review IRET's first quarter financial results in more detail, but I will mention a few highlights. Real estate revenues for the quarter increased to $60.8 million from $58.8 million in the prior year, an increase of 3.4%.

Real estate operating expenses increased 2.6%, from $23.8 million to $24.4 million. Resulting in a small increase in net operating income, generated by our real estate portfolio. This small increase in net operating income was offset by a 3% increase in interest expense, as well as increased corporate administrative expenses. Thus, funds from operations for the quarter at $0.20 per share in unit was unchanged from the first quarter of our prior fiscal year. Total FFO for the quarter did increase to $16.5 million from the year earlier amount of $16.1 million. But shares and units outstanding during the quarter were also higher than a year ago, leaving the per share FFO figures unchanged.

Turning now to IRET's balance sheet. At quarter end, on July 31st, 2009, cash on hand totaled $43.9 million. Compared to $33.2 million on hand at the beginning of the quarter, another $24.5 million remains available under our unsecured credit lines. Of continuing concern to everyone owning commercial real estate is the lack of financing available to this industry. While the situation has improved slightly since our last earnings call, one might characterize it as going from totally impossible to extremely difficult, it does remain difficult to place financing for commercial property. Our recently filed 8-K describes each of our mortgages that will mature through our fiscal year 2013. All of our real estate debt is in the form of individual mortgages with latter maturities.

Our CFO, Diane Bryantt, will give more detail on our financing activity in the first quarter. With respect to our real estate portfolio, I will offer a brief overview. We have several possible acquisitions in the pipeline. We are seeing more attractive pricing, which in our judgment will make acquisitions more compelling in the months ahead. However, until financing for commercial real estate again becomes readily available, acquisitions will be very carefully pursued. We are, however, continuing to aggressively seek appropriate acquisitions with assumable financing in place.

We are also working on some dispositions, such as Texas, markets that we plan to exit as we move forward with internalizing all property management. We continue to focus on operating our existing portfolio more efficiently and continuing our program of internalizing property management of all of our properties. Occupancy levels during the first quarter continue to trend down. Details of our occupancy levels, leasing experience, and lease maturities will be given later in this call, and are set forth in detail in our recently filed 8-K.

As we mentioned in our last earnings call, a concern to IRET and all real estate owners is the issue impairment. We read much in the business press about a possible collapse in commercial property values. While prices have certainly retreated from their peak, we have seen no evidence in our markets of a price collapse. IRET has and will continue to work closely with our Board and Audit Committee and independent auditors to carefully apply appropriate industry-standard impairment testing procedures and policies.

Turning now to our dividends policy. On October 1st, IRET will pay to its share and unit owners its 154th consecutive cash distribution. This will continue IRET's 39-year history of never omitting or delaying a quarterly cash distribution to its owners. We remain committed to extending this record. IRET continues to have significant cash on hand, unused credit lines, manageable debt maturities and a satisfactory performing real estate portfolio. Thus barring a multi-year extended and deepening economic crisis, IRET fully expects to keep on paying its dividends on time and in cash.

Will IRET do more follow-on public offerings of common stock? We may. If market conditions allow, and most importantly we feel that we can invest the proceeds in an accretive matter that will enhance the value of IRET to its shareholders. IRET's plans for the future? As we've been saying over the past year, we will continue to be very cautious in deploying our cash. We we will continue to focus on our operations, and especially on internalizing property management. We have been and will continue to hire new people and invest in accounting software and hardware with the expectation of continued growth in the years ahead.

Diane Bryantt, our Chief Financial Officer, will now review our fiscal 2010 first quarter financial results in more detail.

Thank you, Tom. This morning I will give a brief overview of our first quarter results, and provide some details regarding mortgage debt activity and refinancing plans.

Results for the first quarter of fiscal year 2010 showed a 3.4% increase in revenue. Even though we had a decrease in occupancy levels in all property segments, in comparison so the first quarter of the prior year. The increase in revenue was primarily due to stabilization of our prior year acquisitions, and to a lesser extent, rental income increases on stabilized properties and lease termination fees, compared to the same period in the prior fiscal year.

Our expenses increased 4%, most notably in real estate taxes, interest expense and depreciation amortization expense. While our asset management team is working hard to maintain and renew tenants, management is also continuing its focused efforts to offset the trend of reduced revenue stream by decreasing expenses. As stated before, one major area we are focusing onto enhance our bottom line is our previously discussed internal property management initiative. We are well underway within our commercial segments in bringing property management in house and the processes is started in our multi-family residential segment.

Our goals are to reduce expenses by centralizing and therefore maximizing our purchasing power, better controlling disbursements and better ensuring the application of efficient and consistent operations at all our properties. Of much concern and focus for our Company is the management of our maturing debt. During the quarter, we closed on two multi-family refinanced loans. With approximately $213,000 cash out, with interest rates ranging from 6.41, to 6.53%.

Subsequent to the quarter end, we have also closed on three additional multi-family loans for approximately cash out of $8.2 million, with interest rate ranges of 5.69 to 5.97. These multi-family loans were funded with Freddie Mac or Fannie Mae. Also subsequent to quarter end, we closed on a financing of a five building building portfolio of commercial office buildings in Mendota Heights, Minnesota. This was a $28 million new loan, with approximate cash out of $559,000, at a fixed rate of 7.3%. Although we're able to secure financing on this commercial portfolio, we chose not to proceed with the refinancing at this time on two commercial properties; one office property in Bloomington Minnesota and a retail shopping center in Rochester Minnesota. These loans were paid at full at maturity for approximately $7.5 million in cash with the source being proceeds from the common offering completed in June of 2009.

So what is ahead for the remainder of fiscal year 2010? We have approximately $99.1 million of mortgage debt maturing and we have either closed or have commitments on $54.1 million or 55% of that $99 million. We will continue to monitor our refinancing strategy and pending maturities in order to protect our shareholders as a credit markets work through this economic cycle. In July in this first quarter we paid a regular quarterly distribution of $0.1705 cents per common share unit. Subsequent to our quarter end the board of trustees declared a regular quarterly distribution of $0.1710 per common share and unit to be paid on October 1st, 2009. Again, this October distribution will be IRET's 154th consecutive quarterly distribution at equal or increasing rates. Now, I'll turn the discussion over to Tom Wentz, Jr., Senior Vice President of Asset Management and Finance.

Thank you, Diane. Overall, a very routine and quiet quarter for IRET's property operations, as confirmed by the supplemental information provided in the 8-K filed earlier this week. I will confine my comments to the overall status of the credit markets as applicable to IRET, and then a summary overview of IRET's property operations by segment and market. It is certainly the same story line on the debt side in that that the vast majority of lenders are not reliably active in IRET's markets, with the exception of the three agency lenders. Freddie Mac, Fannie Mae and FHA or HUD on the apartment side and senior side only.

Bank lending has remained an option for IRET and one we will ultimately be required to implement if the traditional longer term lenders such as the life companies and the Wall Street CMBS market remain out of the debt markets for another 18 to 24 months. The issue with banks becoming the main source of leverage for IRET will require a modification of IRET's leverage strategy as bank lending is traditionally shorter fixed terms, shorter amortization periods of 20 to 25 years, and at least for now, in contrast to lending practices earlier this decade, much lower leverage of 60 to 65% of appraised value using actual operating history, rather than pro forma numbers and with higher level of recourse. Current lending terms will limit IRET's ability to pull cash from its commercial portfolio at the time of refinance to the extent bank debt is used.

Each of these requirements do not match up well with IRET strategy of long term fixed debt, longer amortizations to maximize cash flow as well as the positive impacts of inflation and rent growth over the term of the loan and of course, the protection afforded by non-recourse debt as it pertains to the balance of the portfolio. While this won't change IRET's debt structure overnight due to IRET's staggered debt schedule, as each quarter goes by, and existing long-term commercial debt rolls, it's generally being replaced with bank debt or IRET is using cash out for multi-family debt to payoff maturing commercial debt or cash from other sources. The end result is a deleveraging of the portfolio and a reduction of IRET's target leverage levels. IRET is still of the opinion that most of our underlying markets are performing better than the majority of the country. However, lending practices are being applied uniformly, regardless of market conditions.

In response, we have modified our debt strategy slightly to account for the decline in commercial lending by increasing leverage on our multi-family portfolio in order to maintain our overall leverage targets. We're doing this carefully and to a level that is still well within what our multi-family portfolio can handle from a coverage stand point. We are confident that this modification will lead IRET well positioned in the economy recovers. We still believe that the proper long-term business model for real estate in general and IRET specifically requires long-term fixed leverage at 55 to 65% of our investment to real estate. To the extent possible, IRET's debt strategy will remain unchanged.

We continue to seek to place long-term debt tied to individual or groups of assets with staggered maturities by product type, even though increasing our multi-family debt levels to offset a reduction in commercial leverage levels, we expect it will be difficult to maintain our desired leverage levels in the current market. Some commercial loans will be paid off and others will be refinanced at levels below the maturing debt, which will require the allocation of more equity. We expect that over time, the market should account for this reality through higher rents. IRET provides a detailed debt maturity schedule each quarter as part of its 8-K filings, so I won't spend anytime discussing specific assets or loans.

Despite the challenges prevented by the current credit markets that first appeared almost 18 months ago, we still don't see any material liquidity or refinancing risk to IRET in the next 12 months for the same reasoning previously dis closed. Diane provided details on recently closed loans. Currently, IRET has pending loan applications or commitments covering 13 properties, including four commercial locations and three senior housing locations with projected cash out proceeds of $24 million. At interest rates ranging from approximately 6% to 7.25%. Whether there's no guarantee any or all of these pending loans will close, we are very confident that they will.

Before moving to the property operations I will briefly discuss sales plans and activities. Consistent with our prior quarter disclosures, IRET has no active plans to sell assets, except perhaps to those markets where we have a limited presence. IRET does have a number of smaller properties for sale in various locations, but the only significant asset for sale currently is a 504-unit apartment complex located in Irving Texas for sale at an asking price of $38 million, with current debt of $22.5 million maturing on February 1st, 2010. Based on offers received to date, it's unlikely IRET will complete a sale of this asset at an acceptable price.

Since there is no pressure to sell, we have also started the process to place new debt. If we finance we'll projecting a new loan in the amount of $25.5 million to $27 million. Of course, as an apartment complex, both Freddie, Fannie and HUD financing are an option and we are actively reviewing this asset. We provided detailed information in the 8-K and occupancy, new and renewal rental rates and expiring leases, so I'm not going to discuss any particular buildings or transactions in detail.

IRET does not let this information out by market at this point, so I will spend some time this morning discussing each of IRET's commercial markets. Each market has certainly experienced an increase in unemployment and contraction of business activity. This is led to a reduction in commercial space demand across the board. And by all segments. As previously stated, this downtrend will not reverse until job growth returns. Unlike almost all other products, real estate is one asset where price reductions don't increase demand.

Businesses either need commercial space, or they don't. Even though most news continues to to be negative, the past quarter was relatively uneventful, and we saw little change in the underlying flat to slowing declining economic conditions in most of our markets. We remain very cautious with our cash, and with our capital focused on tenant retention in the areas of one time and ongoing cost reduction projects, capital improvements and moving to a fully internal management structure on both commercial and residential operations, as a means to improve operating results and capture what is currently a revenue stream going to outside developeders.

Taking a look at the Minnesota market, which is by far IRET's largest commercial investment. IRET carefully tracked each markets overall occupancy rates and other commercial leasing terms through a use of internal as well as third party sources, while these third party information sources are deemed reliable, it is not possible to accurately pinpoint total market vacancy and overall average lease terms precisely. In this area, all commercial segments continue to experience an overall reduction in demand from new and renewing tenants, with the commercial direct vacancy rate during the first half of 2009 increasing to 14.2% in Minnesota, and further increasing to 16.3% when available sublease space is taken into consideration. These are our highest levels in the last five years in the Minnesota market.

However certain segments of the market are even lagging this overall commercial bench mark. Commercial office vacancy for example increased to 17.9% of direct space, and almost 21% with sublease availability. Industrial rose to 15.1% direct, and 17.2% when sublease space is factored in. While medical office, the best performing of these segments still grew to 12.7% direct, and 13.2% on sub lease space is considered. While retail vacancy is less than the overall average of 10.3%, this level represents the highest vacancy rate for this commercial category in over ten years.

Meanwhile, the Minneapolis IRET portfolio is in generally good condition with the portfolio as a whole at least equal to or exceeding the market. Likewise, IRET's Minnesota medical office portfolio is outperforming the market. The overall vacancy rate is 9% compared to the Minnesota market average of 12.7%. The majority of IRET's medical vacancy is combined to three assets. The short and long-term range, outlook for the Minnesota medical portfolio is stable.

The industrial portfolio including all industrial type buildings, exclusive of any triple net or single users is performing in an average manner compared to the overall market with a 79% weighted average occupancy rate. This rate is somewhat skewed by the large vacancy remaining at the former site of Wilson leather distribution facility. The property was converted to a multiple tenant usage and slightly less than 50% has been leased thus far. If this property was removed from the equation, the new weighted average occupancy for the IRET portfolio would rise to almost 89%, well ahead of the remainder of the industrial market as a whole.

The retail portion of IRET's portfolio is facing a number of challenges. Competition for the retail tenant is becoming increasingly intense, having the effect of lowering rents, increasing incentives and concessions, and increasing vacancy market time. All market segments in which IRET has a presence retail as whole, both in Minneapolis and the remainder of the nationwide markets will present the biggest challenge in the next two years, until consumer confidence returns to the marketplace, retailers will continue to contract and remain static with very little absorption taking place. The out state Minnesota properties, located in St. Cloud, Duluth, and Rochester, are all performing well, with the exception of the retail locations in St. Cloud and Rochester for many of the same reasons as noted above.

Now moving to the Omaha market, which is currently in better condition than much of the rest of the nation, with an unemployment rate of only 4.7% compared with a national average of 9.7%. However, some core signs of problems may be coming are manifest by the amount of sub lease space being put on the market by some of the larger tenants in the Omaha market. Sublease availability in the second quarter of 2009, reached a highest level since 2001. With further sublease space being marketed in the next several months. Current total direct vacancy in the Omaha market is 16.8%, an increase to 18.4% with sub lease space considered. This is just short of the that in Minneapolis.

In contrast, the IRET Omaha office portfolio is doing relatively well. It consists of 555,000 square feet of space with an weighted average stabilized occupancy level of 97.13%. With a little significant lease roll through 2010. The remainder of the commercial holdings in the Omaha market are industrial projects. These property are doing very well in another difficult market with an average occupancy of slightly over 91%.

Moving to St. Louis, which is similar in many regards to Minneapolis in terms of size, population and amount of space in the class A and B office market universe, yet has a significantly lower overall vacancy rate of 12.55% on average. Inclusive of sub lease space. This figure is likely to change in the short-term as major employers and users of space such as Anheuser-Busch and Chrysler Corporation either sublease large blocks of space currently under lease to them, or abandon this space, as the leases expire.

IRET's St. Louis portfolio consisted of approximately 250,000 square feet of commercial space contained in three properties, with a current average vacancy rate of 91.25%, lower than the market average. Kansas City portrays many of the same characteristics as found in the other Midwestern cities, growing unemployment. Negative absorption the overall office market and an overall market-wide vacancy of 16.1%. IRET's presence in this market is limited with our main commercial asset currently 79% occupied, compared with the sub market occupancy for that building of 77.6%.

The last market is Denver. Which again, has a very limited presence by IRET, with a total building size of 152,000 square feet. Job growth during the first six months of 2009 was negative 3.6%, increasing the overall Denver metro area unemployment rate to 7.8%. The Denver commercial market has an overall vacancy rate of 23% including sub lease availability. IRET's commercial properties currently have a vacancy rate of 13%.

I believe our strong cash position will prove to be an advantage in retaining commercial tenants. I expect the pressure to continue until unemployment bottoms out and consumer spending rebounds. We still see no better alternative at this point to our strategy of focusing our capital on retaining current tenants and securing new tenants provided the credit is acceptable. Longer term, I see no material issues with our portfolio, nor any lasting impact for scaling back certain capital expenditures, as we have adequate cash to always do live, health, safety as well as maintain the appearance and functionality of our assets to a level appropriate to their position in the market.

Now, moving to the apartment segment, which account for about one-third of IRET's total portfolio. Our apartments continue to perform well in most markets, with the exception that job loss has now started to impact our Minnesota and Texas operations. Additionally the first time home buyer credit also placed pressure on certain markets and renter classes; however, this credit now appears to run its course even though we expect to experience a spike in activity late this fall, as buyers seek to get in before year end. The growth in rent appears to have peaked. Even though we are clearly not experiencing the same conditions as many other parts of the country, we continue to position ourselves for what may come while still enjoying the current relatively good economic conditions in most of our apartment markets. Employment in IRET's apartment markets is the number one driver of occupancy. Until the unemployment situation stabilizes and improves, IRET's focus will be on improved management and cost control as a way to maintain or improve the bottom line.

Thank you, and I will now turn the call back over to the call operator for any questions. Thank you.

Thank you. We will now begin the question and answer session. (Operator Instructions). We will pause momentarily to assemble our roster. Our first question comes from Carol Kemple of Hilliard Lyons, please go ahead.

Good morning. In your 10-Q you talk about a recent acquisition of a warehouse property. What attracted you all to that acquisition?

That was an up-REIT transaction that was, accretive and required no cash to acquire.

Okay.

That's part of our continuing focus on deploying our cash carefully so we are progressively seeking up-REIT transactions that are accretive and that was one of those.

Okay. And what caused the rise in administrative expenses throughout the quarter?

Well, I think as we indicated before, we are anticipating growth and we have been incurring some software and personnel costs in anticipation of that growth afternoon we are internalizing property management, and so the expenses as we gear up to do that have caused administrative expenses to increase, but as we go forward, we will be harvesting the revenues that formerly we've retained to third party vendors, so.

Okay. Thank you, you.

Thank you. Our next question comes from Chris Lucas of Robert W Baird.

Good morning, everyone.

Good morning.

Tom, just, you made some mention of recourse on, on loans. Can you describe the level of recourse on the mortgage loans?

This is Tom Junior. I guess to answer that question, Chris, what we're seeing on the bank financing side to the extent we're exploring that as an occupation is a request for full recourse or substantial portion of the loan bringing the loan to value non-recourse portion down to maybe 50% or less. And that seems to really be a standard request out in the bank lending world. To the extent life companies are active in the market and are quoting IRET commercial projects, there has been some request for limited recourse, but again it's generally to cover the loan amount above a certain percentage level. 60 or 65%.

So in exchange for higher proceeds, you would be providing some recourse? .

Well I think the answer on the bank side, in exchange for any proceeds you're going to be providing recourse. On the life company, I think for higher leverage it's clear if it's available the life companies are going to expect some level of recourse, whether it's 10% or 15% of the loan amount, but at least at this point with the bank lenders that IRET has been working with, it's pretty much a universal request for total or near total recourse.

What's the appetite and mindset been of the bank's over the last six months? How has that changed?

I think on the financing side, what we've seen is certainly a number of mid to smaller banks, relatively active in the market, primarily in Minnesota, so I would say there's certainly capital for projects in the $10 million or below range and I think there's a reasonable amount of competition from that stand point. The larger lenders either the super regionals or the major banks clearly are not active in the retail, or in the commercial real estate space. In our markets and for our product type and for the type of debt we're looking for.

Okay. and then just on the acquisitions front if you could just sort of talk about maybe where you think cap rates have moved and how much further your hoping to see them move?

I think they've moved for commercial property, apartments, of course, where financing is still available, cap rates have obviously moved there as well, but not to the same degree, commercial properties certainly are in the eights or, really compelling acquisition, I think still the first number's going to be an eight, and distressed properties, obviously they're nines and tens, and, depending on the degree of disarray of the particular property. I think that's one thing we, as I eluded to earlier, as we read about all of the maturing debt and all of the compelling acquisition opportunities that are going to be available, and I believe that's probably correct, but I would say that at this point, the current owners are not as yet willing to really sell at a fire sale price, so there's much more product available at much more reasonable pricing, and certainly nine caps, may soon be the rule for commercial property. They're probably not quite at that level yet for most, for the seller who has a luxury of waiting.

Okay. Great. Thank a lot, guys.

(Operator Instructions). We have a question from James Bellessa of DA Davidson, please go ahead.

Good morning.

Good morning.

You indicated that you may have total possible transactions in the pipeline, and you also mentioned more follow-on offerings a possibility. Do you pre-fund your acquisitions and transactions or do you --

Yes. I guess, a cardinal rule in this company for its entire history is that we have the equity capital necessary to make an acquisition before we seriously negotiate to, to do so and that remains unchanged. What's different in this situation, while we still have sufficient equity capital, we are mindful of the maturing commercial mortgages that are two years or 3 years out, and we are continue to be very careful, but also lacking is reliable debt for commercial property, so we will continue to be careful until we have both the equity piece and the debt piece lined up. While we are negotiating on lots of properties, we want to be sure that both our equity capital and realistic long-term debt is available, so I think we're going to see some acquisitions where we didn't have any in this past quarter, we will, it will continue to be limited until the credit debt markets return to somewhere closer to normal.

You indicated or Diane, went some recently closed loans, were those since the end of the quarter?

Not all, but the large one, the, we did the Mendota Heights office park refinancing, that was after the quarter.

The $28 million loan.

Correct.

And when I read the subsequent events I don't see it listed as something itemized there. It's not, is it not required to be aligned in that subsequent event portion of your 10-Q?

I'm not sure. I think we described it, I thought we had described it in there. I'll have to check.

It's not in the subsequent events as it's normal course of business, but it's detailed in the 8K in the debt maturing schedule, I believe on page 12, where you'll see the Mendota is listed there, but there is a footnote with it saying that it was refinanced and closed on August 3rd.

Thank you, very much.

Our next question is from [John Heights of Schroeders], please go ahead.

Hi, guys. I have a quick question. On the future potential acquisitions of properties, do you see those as more up-REIT structure or cash or mixture, and then if it was a semi distress situation, is that lending itself well to an up REIT.

We've always been, since 1997 when we converted to the up-REIT structure we have pursued up-REIT acquisitions quite aggressively and have done a lot and we continue to negotiate on several at this point, that is obviously attractive to us because little it any cash is required to compete that acquisition, and as far as acquisition of distressed properties, we have always focused very carefully on being able to pay our dividend, and so we, over our nearly 40-year history have not done any speculative construction, nor have we acquired properties that are vacant or under severe stress on the theory that some day somehow you will return that asset to an income producing property.

That doesn't fit our model of paying consistent dividend. So we've focused on acquiring properties that generate the income necessary to pay our dividend, so we, as a simple analysis that each property we acquire should immediately be able to fund its portion of the dividend on the equity capital that we've used to acquire that asset. You miss some great opportunities doing that, but on the other happened, as our record shows, you also miss the devastation of having a lot of assets that are not producing income, so I don't think we're going to be active in acquiring vacant properties.

Okay. Sounds good. I like that.

Thank you. At this time, we have no further questions. I would like to ask management if they have any closing remarks?

Yes this is Tom senior, I just want to thank everyone for, for participating in our earning's call. This will be my last, as the Chief Executive Officer, and I intend certainly to continue with this company. I've enjoyed the nearly 40-year ride that we have enjoyed, and I think I can safely say that we intend to implement the very same business plan that we've used consistently throughout this period of time, we're going to stay the course with the conservative approach that we have had, and focus on our shareholders, and on continuing to deliver a, a dividend and, and to pay that dividend in cash and having focused open this obligation for nearly 40 years has served all of us well shall and expecting that we'll continue to do that for many years to come. Thank you all for participating.

This concludes today's conference, thank you for attending and you may now disconnect.