Centerspace (CSR) 2011 Q2 法說會逐字稿

Good day, and welcome to the Investors Real Estate Trust second quarter fiscal 2011 earnings conference call and webcast. All participants will be in a listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). Please note, this event is being recorded.

I would now like to turn the conference over to Michelle Saari, Vice President of Marketing and Communications. Ms. Saari, the floor is yours, ma'am.

Thank you. Good morning, everyone, and welcome to Investors Real Estate Trust second quarter fiscal 2011 earnings conference call. IRET's quarterly report on Form 10-Q for the quarter was filed Friday, December 10, and our earnings release and supplemental disclosure package were posted to our website, and also furnished on Form 8-K on December 10, as well. In the 10-Q 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 the requirements set forth in Regulation G. If you have not received a copy, these documents are available on IRET's website at 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 Friday's earnings release, and from time to time in Investors Real Estate Trust's filings with the SEC. Investors Real Estate Trust does not undertake a duty to update any forward-looking statements.

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

Thank you, Michelle, and good morning. About a year ago to the day, it was my pleasure to speak to you about my role as President of IRET, and to lay out a number of goals that we had hoped to accomplish. At that time, we had just completed a capital raise that diluted our existing shareholder base in light of the uncertain debt markets presented to IRET. We were in the middle of negotiations to complete a transition of bringing the balance of our portfolio under in-house property management.

We were committed to condense our geographic footprint by selling our apartment portfolios in Texas and Colorado. We also told you about the purchase of a portfolio of senior housing in Wyoming, and the expected impact of those assets on our income statement. On top of all that, we decided to accomplish all this in the middle of the worst economic crisis seen since the depression. That is where we were.

So, how did we do, and where are we at? First of all, I would like to comment on the uniqueness of our debt portfolio. Although we have been repeatedly questioned about our use of debt, our 40-year history of debt management has allowed us to survive these challenging economic times by continuing to place new mortgages, and to reduce our overall interest costs. This disciplined philosophy is one of the core principles at the heart of IRET.

Next, the transition to in-house property management is substantially complete. We are happy with the results we have experienced to date. With the exception of the property management expenses attributed to the medical properties in Wyoming, we have seen a decline in those expenses on our stabilized portfolio. We expect those trends to continue as we work out the completion of the transition.

As noted in our recent 10-Q filing during the second quarter of this fiscal year, we finally completed the sale of the Dakota Hill Apartments located in Irving, Texas, completing a much discussed disposition. Subsequent to the end of the quarter, we also closed on our three apartment properties in Colorado, another much discussed disposition. The completion of these sales is evidence of our commitment to shrink our footprint, and to employ those sales proceeds to newer and more strategically located assets. Additionally, since the end of the quarter, we have added additional properties, which will be discussed later in the call.

In addition to the acquisition activity, and an indication that the energy activity in western North Dakota is moving east to Minot, we have executed a lease with Hess Corporation to occupy approximately 48,500 square feet of space on a 15-year, triple net lease in the IRET Corporate Plaza. As part of that transaction, we are able to relocate Trinity Medical Group to a 22,000 square foot out-lot building also located on the property of IRET Corporate Plaza to a 15-year lease. The exciting part of these transactions is that we are able to put our cash to work, but unfortunately we will suffer some lease drag as we complete some of these transactions I just mentioned.

As I stated three months ago, I believe we are 12 to 18 months from recovery of any substance, and in that light, we will continue to work to position IRET to take advantage of opportunities that may arise. We will look hard at building into markets which we feel are underserved, in the belief that our on-the-ground knowledge in some of these second tier markets will give us a competitive edge.

As we observed last quarter, vacancy continues to affect our overall results, with occupancy levels below those in the same quarter in the prior fiscal year in all segments expect commercial medical. However, we have seen meaningful improvement in occupancy in our multi-family residential segment, in particular in the second quarter of fiscal year 2011 compared to the immediately preceding quarter of fiscal year 2011. While identifying appropriately priced accretive acquisitions is still a challenge in our markets, we believe the pending acquisitions I mentioned earlier are a good indication of opportunities to come.

And finally, as you are aware, we have maintained our dividend at the same rate that we paid on October 1. I will again emphasize, we will continue to examine our operations on a quarterly basis, and make our dividend declaration based on those in anticipated financial results. As I stated before, IRET shareholders have built this Company into what it is today, and fully believe that unless there are debt issues to handle, a need to buy back IRET stock, or to fund an acquisition with substantial impact on IRET's income statement, that the dividend should be paid out to shareholders.

Before I ask Diane to present financial results, I leave you with the assurance that management continues to remain focused on expense management, operations, and debt refinancing, all of which are providing favorable results to the bottom line. Thank you.

And I will now turn the call over to Diane Bryantt, our Senior Vice President and CFO.

Thank you, Tim. And good morning, everyone. This morning I will discuss the highlights and financial results of the operations for the second quarter, and for the first six months of fiscal year 2011, and the comparative periods.

Our balance sheet continues to show liquidity, with cash on hand of $43.7 million, as compared to a year-end available cash of $54.7 million. No acquisitions closed in the second quarter, however, funds spent in the second quarter for development projects were $2.2 million, capital improvements were $3.2 million, and $2.9 million for tenant improvements and leasing commissions, for a total of $8.3 million in our real estate portfolio.

Financing activity in the quarter resulted in a closing of one commercial property with a five-year term and an interest rate of 6%, one multi-family loan with a five-year term and an interest rate of 5.25% resulting in a modest cash out of approximately $250,000. We successfully closed on our secured line of credit on August 13, with an initial commitment capacity of $39 million. As of today, the total commitment is $50 million. It is important to note that in early December, subsequent to our quarter-end, we were able to close on the refinance of a phase of our Southdale Medical Facility in Edina, Minnesota, for a new loan of $32 million, a 10-year term and interest rate of 5.2%. Approximate cash out was $10.5 million.

During the quarter, we sold a small retail property in Ladysmith, Wisconsin, a patio home in Fargo, North Dakota, and most significantly the Dakota Hill Apartments in Irving, Texas, for a total sales price of $36.8 million, with approximate net cash proceeds of $13 million. In accordance with Generally Accepted Accounting Principles, revenues and expenses associated have been classified as discontinued operations for all periods presented in the 10-Q for the quarter, and detail can be found in note seven.

Subsequent to quarter-end, we also executed the sale of an industrial property in Waconia, Minnesota, and three multi-family apartment complexes in Colorado. These two sales provided approximately $14.9 million of cash to IRET. The net cash proceeds from these property sales of $27.9 million was applied subsequent to quarter-end by a $19.1 million pay down of the secured line of credit to the $10 million minimum balance requirement. Funds will further be invested in $18.5 million in income producing properties in Omaha, Nebraska, Sioux Falls, South Dakota, and Minot, North Dakota, that are under contract to close, the development of a $6.2 million medical clinic as described in note two of the recent 10-Q, and the remaining applied to other development projects under way.

As a reminder, during the first quarter we sold approximately 1.8 million common shares under our on-demand continuous offering program, for net proceeds of approximately $15 million. The proceeds from this offering were applied in early August to pay off an $8.1 million existing mortgage on a commercial medical facility that carried an interest rate of 9.75%. And the remaining funds were designated for the $2.6 million development of our Edgewood Vista facility in Spearfish, South Dakota, and our completed acquisition of the Edgewood Vista facility in Minot, North Dakota. Although we have fully committed all funds generated in the first and second quarter, either from the sale of investment property or sale of equity we have invested in income-producing assets, we will see some short-term drag on earnings as we acquire investment property, or leases commence on these development properties.

Moving on to the income statement and results for second quarter. Real estate revenues for the quarter increased 4% to $60.5 million. And year-to-date revenues increased 3.1% to $121.3 million, as compared to the prior periods in fiscal 2010. For the six month comparative period, the increase in revenues due to recent acquisitions and properties placed in service was approximately $6.2 million. However, as we saw in the first quarter, our stabilized properties continue to decrease in revenues, due to vacancy and concessions. We did see positive momentum in the second quarter, as occupancy numbers improved in the multi-family segment, and are stabilizing somewhat in the commercial segment.

Total expenses in the quarter were $783,000 higher than in the comparative second quarter. And for the six months, expenses were $2.9 million higher than the comparative prior period. The increase in expense in the second quarter was primarily due to the increase in total property management expense of $768,000. Factors for the increase in property management expenses were primarily a result of the operations within our Wyoming assisted living facility, which is offset by the increase in revenue generated from these same properties. The internal property management transition was basically complete at the end of the first quarter. And as we discussed in prior conference calls, we have determined that the overall non-reoccurring cost to execute the plan was $1.7 million, with $362,000 expensed in the first quarter of 2011.

We are achieving success in lowering our interest rate expense, due either to financing at lower rates or paying off mortgages using available cash. The payoff of two loans in the second quarter, with corresponding prepayment penalty expenses of $340,000, resulted in a net increase for the quarter. However, interest expense on real estate decreased by $271,000 for the first six months of fiscal year 2011, as compared to the same comparative period.

Total funds from operations for both the first and second quarter was $0.17, providing for year-to-date of $0.34 FFO per share in units. Although in the aggregate, absolute FFO has increased. A delay in deployment of funds raised with the issuance of shares in income producing properties, has caused dilution of our FFO earnings per share. On October 1, we paid a regular quarterly distribution of $0.1715 per common share and unit, and subsequent to quarter-end, the Board of Trustees declared a regular quarterly distribution consistent with the prior distribution of $0.1715 per common share and unit, to be paid on January 14, 2011. The January distribution will be IRET's 159th consecutive quarterly distribution at equal or increasing rates.

Now I'll turn the discussion over to Tom Wentz Jr, Senior Vice President and Chief Operating Officer.

Thank you, Diane. Consistent with my past presentations, this morning I will provide a general overview of the recently completed second quarter, and the first six months of fiscal year 2011. Then, I will cover the credit market outlook as applicable to IRET, and conclude with an overview of IRET's property level operations, as well as pending acquisitions, as well as developments, and discuss the recently completed dispositions.

From an operations perspective, this past quarter saw no material positive change to overall occupancy, with commercial office and industrial experiencing further tenant loss and contraction. However, we did see improvement in occupancy in the multi-family segment, compared to the first quarter of fiscal 2011. With the completion of our residential internal property management program, we were finally able to devote a majority of our management attention to improving occupancy and scheduled rents. Medical office continued to slowly improve, as the uncertainty of healthcare reform has given away to implementation. Commercial retail is actually holding steady, as this segment experienced a very significant and rapid decline immediately after the financial downturn several years ago.

We remain focused on tenant retention, and attention to credit quality on the residential side, as well as operating efficiencies. Consistent with the first quarter, we have been able to remain relatively steady in the areas of expense control, while making good improvements in overall free cash flow and reduced debt expense. With cost control now being critical as we anticipate revenue pressures to continue, our plan is to use our internal management platform to drive more and efficient controlled operations.

IRET's Chief Financial Officer provided the details on recently closed debt, and with each quarter we continue to see more favorable terms, rates and leverage levels. We have successfully dealt with our maturing debt over the last three years, with the outcome in large measure much better than we had expected at the start of the credit crisis. We are now entering a period of approximately three years with lower levels of maturing debt, as measured against prior years, as well as against overall assets. This, combined with the fact that we have higher rate fixed debt maturing over the coming 12 to 18 months, should allow us to continue the trend of reducing our overall cost of borrowing, while maintaining our target leverage levels of 60% to 65%. Of course, this assumes rates continue to remain at current low levels.

We further expect that given the current interest rate environment, we will be able to secure replacement debt at levels below our current weighted overall rate of 6.14%, generating further interest rate expense reductions going forward. We have been actively focused on early debt refinance, extending amortization periods to increase cash flow, and increasing leverage back to our target levels. We expect these efforts to result in additional interest expense reductions, and improved overall cash flow. We are not projecting any increase in leverage going forward to increase our debt expense, as our overall debt as measured against our portfolio cost has declined over the last several years, primarily due to changes in the lending environment. Combined with increased amortization length, and lower interest levels, the net result is still an improvement to interest expense and cash flow.

Our approach to leverage is consistent with our primary focus over the past three years of protecting our balance sheet, and providing operating flexibility. Our commitment is to remain positioned for future growth when our markets recover. Similar to the first quarter, we saw no change, than that we continue to experience negative pressure on operations as confirmed by the supplemental information provided in the 8-K furnished last Friday.

Even though most of our markets are now seeing some modest job growth, we still have a long way to go before the current level of job growth creates meaningful demand for real estate. As a result, absent the appearance of sufficient accretive acquisition opportunities, our best option remains to offset the revenue decline as best as possible with cost control and improved operating efficiencies. While we continue to see some new leasing and renewal leasing activity in the commercial segment that exceeds, on a square foot basis, our expiring leases, this past quarter saw the expiration of two leases covering our Crosstown Center building in Eden Prairie, Minnesota, as well as a full building user at the Gateway Corporate Center in Woodbury, Minnesota. While significant, these two events are unique, and at this point we do not believe they signal a trend of accelerating commercial office vacancy throughout our entire portfolio.

We did retenant a majority of the Crosstown space with existing subtenants. However, we do not expect much improvement in commercial occupancy over the coming quarter, as the third quarter is generally slower due to winter weather issues, as well as the holidays. I would note that this leasing does include early renewals of leases that would have otherwise expired in future periods.

As expected, we experienced a rebound in residential occupancy, as this past quarter's operations were almost entirely under our internal management program. We expect stable to slightly increasing occupancy in the residential portfolio, for the same reasons we don't see as much commercial activity during the third quarter. These factors, such as the holidays and winter weather, tend to keep people in their apartments until the spring season.

Before moving to property operations, I will briefly discuss sales plans, as well as acquisition and development activities. As reported, we closed on the senior housing complex located in Minot, North Dakota, for approximately $15.2 million. Subsequent to quarter-end, we did close on two commercial buildings for approximately $16.6 million located in Minot, North Dakota, and Omaha, Nebraska. We also have a 44-unit apartment complex located in Sioux Falls, South Dakota, and a 24-unit project located in Bismarck, North Dakota, under contract, and still in due diligence.

We have also broken ground on a build-to-suit medical clinic located in Minot, North Dakota, on land we currently own. The project is expected to be completed summer 2011, at a projected cost of $6.2 million, subject to final tenant improvement level and building size. The previously disclosed pending sales have all been completed. We are currently evaluating other assets for possible sale, with the proceeds to be used for reduction of higher interest rate debt or acquisitions, or even possible additional developments.

Now moving on to operating activities. Earlier this year, we experienced a drop in our multi-family portfolio occupancy across most of our markets. As previously discussed, we experienced a slight recovery later in the first quarter than we had expected, and then very good lease-up during the second quarter. While we are not where we want to be on residential occupancy, we are in a reasonable position going into the third quarter, so we expect to build on this trend using our internal management platform. We have been able to grow average rents despite the occupancy decline, and expect that with the removal of the uncertainty created by the transition from our long-time third party property managers to our internal management operation, our residential portfolio will see continued occupancy improvement during the coming quarters.

We are implementing additional measures to move our costs, as a percentage of revenue, back down toward our target range as the one-time and duplicative costs of our move to internal management dissipate. However, as discussed during prior calls, without strong and consistent job growth, IRET sees no significant improvement to any of its real estate segments. As a result, our approach has not changed, in that absent top line growth, we are focused on securing the tenants we have, and reducing expenses in such a manner that will not impair our buildings' competitive abilities or long-term physical condition.

As noted on the medical side, we continue to see overall positive trends, even though they are small, for our on-campus portfolio as healthcare reform is starting to be implemented. We are unsure if medical costs will actually go down, but it is clear more people will certainly be accessing the healthcare system. On the senior housing side, we continue to see a number of the negative pressures we have discussed in our previous call of slow job growth, and especially weak housing market. We did see positive occupancy trends this past quarter, as well as revenue improvements by our third party operator at most of our senior housing portfolio. There is very little competitive building planned for most of our markets, and many medical tenants and senior residents have fewer alternatives.

The demographics remain good in all of our markets. We expect continued improvement in both medical office and senior housing. Our expansion of the Spearfish, South Dakota, senior housing facility, as well as the conversion of some existing assisted living units to memory care units in the Wyoming market, are expected to come online early next fiscal year. Neither are large projects, but we have more expansion planned for the Wyoming market, as we have previously discussed, involving both additional memory care units and assisted living units.

Overall, operations remain challenging, but again, we continue to make improvements in the areas of cash flow, expense reduction, and some limited gains in occupancy in certain segments. These have all worked to lessen the impact of declining top line revenue.

Thank you, and I will now turn the call over to the moderator for questions.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) We will pause momentarily to assemble our roster. The first question we have comes from Jim Deitzer of RBC Capital Markets. Please go ahead.

Hi, good morning, everyone.

Good morning, Jim.

Just had a question here about the multi-family occupancy. That was obviously a nice pick-up in the quarter. If I think back to last quarter, there was a one-time drop in occupancy of 270 basis points. So, it looks like you made up all of that and then some. Is that correct?

This is Tom. That would be correct. And during the prior conference call I indicated that some of the leasing activity we deferred from the transition to a period where it was completely under our management. So, there was probably a little leasing that should have occurred in the last quarter of the prior fiscal year and even in our first quarter that we did push forward, and that just really had to do with us getting our full management platform in place and our system in place.

Okay. Right. But looked like there was a little bit of additional demand above that just sort of pulled forward this quarter.

That's correct. I think we got it all back and then some.

Okay. Good. On the schedule you provide there in the supplement of the 10 largest commercial tenants, just wanted to ask about a couple of changes we saw there. Looked like there might have been a couple move-outs. I wanted to know if that was related to the industrial ones that you mentioned and even looked like there was a move in of some significance, maybe.

Well I think the biggest change would have been Best Buy and that was after lease at the Crosstown Plaza that I discussed.

That was the one at Crosstown?

177,000 square feet. Now we do have some other Best Buy retail locations, but that was the primary reason why they were in the top 10 of the tenant list.

The other one that was in the top 10, USG, was that related to the other asset you mentioned?

No. There was a name change. The affiliates of Siemens.

Oh, sure. Okay.

USG. I'll clarify that. There was a name change. Primarily the only change was the Crosstown removal with the Best Buy master lease expiration.

Right. And this is Tom again. I think the other change that will be showing up is the Minot, Edgewood Vista is going to be added to the Edgewood affiliate so that will grow temporarily, but that will show up in future quarters.

Okay. Thanks. And then -- was there anything going on with -- the one division that had sort of the sharp occupancy drop was industrial. I was trying to get at what maybe was causing that.

Again, this is Tom. That was confined to one property in Des Moines, Iowa. It's a tenant that has come and gone in one of the warehouses in the Dixon complex. They still occupy a large portion and they have some surrounding buildings. So, it's not unusual for them to move out and then move back in, which is what we're hoping. But that is really the single driver on the industrial side would be a tenant in Des Moines. Even though it's significant on a square footage basis, that's cold storage space and so on a revenue basis, I think you'll see it's not going to translate into as big of a move revenue-wise as it is on a square footage basis. They're a big user, but it's a lower lease rate given the building situation.

Okay. That helps a lot. Thank you very much.

The next question we have comes from Chris Lucas with Robert Baird.

Good morning everyone.

Good morning, Chris.

Good morning.

Tom, just on the -- can you maybe give us a sense as to how rents are trending in each of your product types and then do that sort of on a -- maybe a year-over-year or sequential quarter basis and then sort of what your thoughts are as it relates to the lease expiration mark-to-market might be?

Well, I think our 8-K has a lot of the detailed information, so I'm a little hesitant to go off of memory on it. But overall, the trend I would say in all segments, on all commercial segments with the exception of medical, has been down. There's really no question as those tenants come up for renewal or early renewal, there is a significant pressure on commercial rents and I really don't see that changing.

The one thing I would note that seems to be supported by our 8-K and the overall market is that expenses, whether they're broker commissions or tenant improvements, have also declined as most landlords, including us, are more willing to trade lower rent than we are to invest additional dollars into tenant spaces. So, I really don't see that trend changing until there's demand that returns to the market.

Medical has really been a little bit of a different story and I think that's probably more to the uniqueness of our portfolio that we had some rents that were probably below market and I think we've been successful as those tenants have rolled to move those markets up and again, that really is the on-campus strategy. We've seen a nice reversal in the trend of physician groups moving off-campus and becoming building owners themselves, to realizing the need that they need to be back next to the drivers of their practice.

And then on residential, that I think, again, now with our move to internal management, again, I think we've been successful in slowly trending that rent growth up over the last few years. Prior to that period, there was certainly pressure on residential rental rates and that was just primarily due to competition from single family homes, condos and additional development. And really, that's gone away for the most part, especially the single family home and condo townhome as an option. And then senior housing, again, I think even though we have that in a lease structure from our review of the underlying operations, I mean, there's been modest to strong rent growth, depending on the market in the senior housing. So, very long answer, but I think the overall trend is not good on the commercial side and okay medically and I think we're going to be good on residential.

Okay. And then -- go ahead.

Chris, Tim Mihalick, just a quick add-on. I was actually down in Bismarck, North Dakota where we hold a considerable number of units and you talk about the residential side. I met with our on-site people. It's been a long time since I've had them ask me when we were going to build more buildings into the market, more units. So, we're starting to see that trend somewhat in this part of the country, so that's certainly a positive.

When are you going to start building new units in Bismarck?

We're looking within the next 12 months, possibly, we'll consider that.

Is there any other markets that you would be looking to add new units to on the apartment side?

I think the upper Midwest is our target, as I mentioned. I think there's some opportunities out there and we'll continue to explore that and take a look. But to get closer to home is the key.

And then I just want to understand sort of how some of the unit works. You had a bunch of multi-family asset sales, some that occurred during the quarter, some that were subsequent. When we talk about the occupancy pick-up, would the numbers have been that much different excluding -- I'm not sure how those units factor into your reported results for occupancy and things like that.

Well, I think just -- Diane probably can answer the impact on how it would reflect in our reported occupancy percentages, but just at the time of sale all four of those assets were basically in the low 90% range and that's where they really had been over the last year. There really wasn't a meaningful change. Texas was heavily concessioned. That market. So, that was a big driver from that and that was a very large complex at 504 units.

Okay. And then --

As you know, in disc ops, there's all those numbers and financial statement effects have been pulled for those sold properties in all the comparative periods as well.

Okay. And then just on the dispositions, what sort of a cap rate application should we be thinking about on those assets that you sold so we can figure out the modeling impact?

Well, we didn't look at them from a -- internally from a cap rate standpoint. We didn't factor in, obviously, CapEx or other costs that the buyer may have. But I think those markets we were in line. I mean, that Texas market was probably trading for B plus, A minus assets in that 6.25 cap range and I think that Colorado market was in the mid-seven range. I think we're comfortable saying that our prices were at market or maybe even slightly above market cap rates to our benefit.

Okay. And then my last question has to do with acquisition disposition market, which is it -- can you describe -- you were able to sell a handful of assets, some of which had been sort of on the list for a while, so it sounds like maybe the market's a little more liquid now. Is that also the case in terms of the opportunities you're seeing?

I would think, Chris, this is Tim speaking, we are starting to see some activity and I've mentioned this. I mentioned it in prior calls, maybe say it all too often that the activity tends to feel better than the last quarter. But in this one, we're starting to see some of the institutional, that being the banks and the lenders in the markets that we participate in coming and bringing assets to markets that may be before they were previously kicking down the road and so there's some opportunities out there. We'll continue to see everything in our markets, investigate them. But getting ourselves, getting out on the ground is crucial to it. That's what we're doing.

And then just a follow-up on that. How much sort of acquisition capacity do you feel like you have right now without having to go back to the equity markets?

Probably quite a bit. I don't know if I can -- with what we've gone on our line of credit and cash in the bank, we've probably got $40 million, $50 million, $60 million in money to leverage off of there. So, using our typical model, that takes us out to probably 150, thereabouts. Before a need to access the capital markets.

Okay. Thank you.

The next question we have comes from Carol Kemple of Hilliard Lyons.

Good morning.

Good morning, Carol.

Good morning, Carol.

Do you all plan to sell any more shares under your continuous equity offering in the remainder of the year?

Not at this point.

Okay. And compared to last quarter, do you all feel more comfortable with the current dividend level or less or about the same?

We still feel comfortable with where we're at. So, still the same.

Okay. Thank you.

The next question we have comes from Andrew DiZio of Janney.

Hi, good morning.

Good morning, Andrew.

Hello.

Hi. Just to go back to something Diane mentioned in her prepared comments, did you say that you repaid the line of credit back down to the $10 million minimum balance?

That is correct.

Okay. And so if I think about it, that was essentially done with the cash out proceeds on the medical refinancing and post quarter sale of the Colorado apartments? Is that kind of how that math works?

Right, that was the use of the funds and making it work to the best during our time right now, but we have committed those proceeds for future acquisitions at our either close or pending close.

That was before the Omaha office and the Minot office retail closed?

Correct.

Right.

Just want to make sure I had that straight. And then just thinking about the recent weather that kind of swept through your area over this past weekend, did you sustain any damage at any of your properties or anything that you're aware of right now?

Andrew, real quick, no. I did do a check with our asset manager down in the Twin Cities and to add a little humor there, I will guarantee that although we own a lot of real estate in the Twin Cities, we don't own the Metrodome so we don't have to worry about the roof collapse. But as of yesterday afternoon, with some evaluation to be done this morning, we were in pretty good shape, so --

That's good to hear. Thank you.

Yes.

Then just one last question. When you look at your expirations that you have coming up, specifically with the office side through the remainder of 2011, can you describe where those are geographically, if we're talking about North Dakota, or Minnesota, or Omaha or anywhere else?

Over the -- this is Tom. Over the coming quarters on the commercial lease expiration, the commercial office?

Yes, the commercial office for the rest of fiscal 2011.

That's going to be primarily Minnesota, just given -- there really isn't anything large or unique. I did pull out those two buildings, the Gateway and the Crosstown, but going forward we really don't have anything of that scope or magnitude. So, I would say just without digging into it with any detail, it probably tracks our portfolio pretty closely on a percentage ownership basis.

Okay. Great. That's helpful.

Heavily Minnesota weighted.

Okay. Thank you.

(Operator Instructions) Showing no further questions at this time, we will go ahead and conclude our question-and-answer session. I would now like to turn the conference back over to Tim Mihalick for any closing remarks. Mr. Mihalick?

Thank you. Again, we appreciate your interest in IRET and your participation in this morning's call. And from the north, where the snow all comes from, we wish you a Merry Christmas and Happy New Year. Thank you.

We thank you, management, for your time and you also have a good holiday season. At this time, you may disconnect your lines and again, we thank you for joining today's conference call.