Centerspace (CSR) 2017 Q1 法說會逐字稿

Good morning and welcome to the Investors Real Estate Trust first-quarter 2017 earnings conference call. All participants will be in 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 Steve Swett. Please go ahead.

Thank you and good morning. IRET's Form 10-Q was filed with the Securities and Exchange Commission yesterday after the close. Additionally, our earnings release and supplemental disclosure package have been posted on our website at www.iret.com and filed yesterday on Form 8-K.

Before we begin our remarks this morning, I want to remind you that during the call we will be making forward-looking statements about future events based on current expectations and assumptions. These statements are subject to risks and uncertainties due to factors discussed in yesterday's Form 10-Ql, during this conference call and in the risk factors section of our end of report and other filings with the SEC. Actual results may differ materially and we do not undertake any duty to update any forward-looking statements.

Please note that our conference call today will contain references to financial measures such as funds from operations, or FFO, net operating income, or NOI, that are non-GAAP measures. Reconciliations of non-GAAP financial measures are contained in yesterday's press release and definitions of such non-GAAP financial measures can be found in our most recent supplemental operating and financial data, both of which are available in the investor relations section on our website at www.iret.com.

With me today from management are Tim Mihalick, IRET's Chief Executive Officer, Mark Decker, Jr., President and Chief Investment Officer, and Ted Holmes, Executive Vice President and Chief Financial Officer.

I will now turn the call over to Tim.

Thank you, Steve, and good morning, everyone. Welcome to our fiscal first quarter 2017 conference call. I will begin with a quick update and overview of our recent accomplishments. I will then introduce Mark Decker Jr., our new President and Chief Investment Officer, to discuss his role and some of our goals moving forward. And then Ted will discuss our quarterly results, update you on our balance sheet and review our guidance for 2017. We will then open the call for questions from our analysts.

Let me begin by reminding everyone that IRET is in the midst of a large strategic transition that is challenging to accomplish smoothly as a public Company. Results may be lumpy for the foreseeable future. We appreciate your support and I want to thank the entire IRET team for their continued hard work and dedication.

I have never been more excited about our Company, our team and our future.

The strategic changes we are executing began almost two years ago and we have made significant progress in focusing and improving the quality and long-term earnings power of our portfolio while enhancing our operating platform. Earlier this year we announced the next step in our evolution to transform IRET into a best-in-class multifamily REIT. We believe we can extend our presence as a leading owner-operator in our Midwest markets and provide an attractive investment alternative as we focus on one line of business and rigorously apply three principles in every decision we make.

Number one, does this advance our goals of operating excellence? Number two, does this improve our overall asset quality and drive long-term cash flow growth? And number three, does this improve our balance sheet flexibility and strength? These tenets will drive IRET as we move ahead.

Now let me address the Williston impairment head on. We are recognizing a $54 million impairment. This is significant and something that we take very seriously. We are subject to GAAP accounting rules and have incorporated this impairment as required. We believe the Williston apartment market is bottoming and this impairment reflects a clear-eyed assessment at this time.

However, while this impairment is not a positive, we are a different Company today and we have implemented several changes which will drive capital allocation decisions going forward.

First, we have essentially completed our development pipeline and moving forward we will focus primarily on acquisitions. Also as part of our transition to multifamily, we are targeting investments in larger assets within select markets that have multiple demand drivers. We have also further strengthened controls and procedures around our capital allocation decisions.

Second, we have strengthened our Board with recent additions who bring deep REIT management and REIT capital market knowledge -- and REIT capital markets knowledge. Their input and guidance has already proved invaluable.

Third, we have added Mark Decker Jr. as our new President and CIO. Mark brings significant transactional and capital markets experience which we believe will significantly enhance our strategic transformation efforts. As an organization, we have worked with Mark for over a decade. And I am already enjoying working with him as a partner as he focuses on her operations, capital allocation strategy and balance sheet enhancement.

Mark will lead our capital allocation efforts focusing on larger investments in larger markets with a concentration on high-quality multifamily assets which will provide a path for consistent earnings growth.

Moving on, we had a great summer. We continue to complete our remaining developments and lease up continues as our portfolio grows for the future. During the first quarter, we delivered 71 France, a 241-unit Class A multifamily community located in affluent Edina, Minnesota just outside of Minneapolis.

In the past 27 months, we have completed more than $336 million of multifamily developments and we will benefit as these properties are added to our same-store pool in the coming years.

Subsequent to quarter end, we executed contracts to sell one multifamily property and 26 of our senior housing properties for a total expected proceeds of approximately $236 million. These sales are in addition to our previously announced pending disposition of our eight Idaho senior housing properties. Once these transactions close, we will have completed our exit from the senior housing sector. And on a pro forma basis, approximately 70% of our portfolio's NOI will be from multifamily properties. The balance is comprised primarily of a Class A on-campus MOB portfolio.

We will continue to execute on our plan to sell non-core properties, to further our strategic objective, to build a best-in-class multifamily company.

I will close by stating that we believe IRET presents a unique investment opportunity for investors today. IRET is the only publicly traded multifamily focused REIT in the vibrant Midwest markets. We have the size, portfolio, operating platform and balance sheet to achieve a durable competitive advantage within our markets. We are building a best-in-class Company and we believe we have made significant progress down this path.

As we move forward and demonstrate stronger and more stable performance, we expect to achieve better valuation and drive performance for all shareholders.

I would now like to turn the call over to Mark Decker Jr., IRET's President and Chief Investment Officer.

Thank you, Tim, and good morning, everyone. Though I joined IRET just one month ago, this is a Company and a team I know well and have worked with for many years. I am honored to join such a high caliber, high integrity group and we are excited about where IRET is today and where we are going. I joined this team because we have a unique opportunity to build something substantial and relevant to our four key constituencies, our residents, our associates, our investors and the markets where we operate today and expect to operate in the future.

A lot of people have asked how I plan to spend my time initially at IRET and in brief, I will be leading our team in the pursuit of high-quality investments and multifamily in my capacity as Chief Investment Officer. And as President, I will be working with Tim and the team on broader strategy and capital management as well as leading our outreach to investors with Ted's help.

As Tim mentioned, IRET had a great summer and we continue to take steps toward simplifying our Company and honing our focus. Over the coming months we have a few critical items that will occupy our time. We have announced a pending sale of our senior housing portfolio and we will work hard to close the transactions on time as agreed. We will continue to refine our portfolio with an eye towards efficiency, quality and balance sheet strength. This means continuing to evaluate legacy multifamily assets as well as our medical office properties.

Potential dispositions may result in near-term variability and results quarter to quarter but we believe our strategic transformation will drive better growth and a better business.

Turning to our balance sheet, we are working to simplify our capital structure, increase our financial flexibility and lower our weighted average cost of capital. To that end, earlier this month we announced our intention to redeem our 8.25 Series A cumulative redeemable preferred shares. Additionally, our goal is to obtain a larger and more flexible credit facility and we are in discussions on that effort as we speak.

Our goal is to have something in place in early 2017 and we will keep you up to speed on our progress.

Finally, I would like to take a moment to discuss our dividend. Our asset sales have improved the quality of our cash flows but at the cost of near-term reduction in NOI. Though the Board has thus far elected to maintain the $0.13 per share quarterly dividend, we recognize that going forward our dividend may not be covered by operating income. Our longer-term objective is to operate with a dividend that is covered out of cash flow from operations.

While there may be gains to consider in the current tax and fiscal year, the Board will continue to evaluate our dividend rate relative to operating cash flow as we move forward. And as with all of our efforts, we will update you as and when these events occur.

I would now like to turn it over to Ted who will discuss our quarterly results and balance sheet.

Thank you, Mark, and good morning, everyone. Yesterday we reported net loss available to shareholders of $24.5 million for the first quarter ended July 31, 2016, as compared to net income of $1.7 million for the same period of the prior year. The decrease was primarily due to an impairment expense of $54 million related to our Williston assets recognized in the first quarter of fiscal 2017.

We reported funds from operations, or FFO, of $15.9 million or $0.12 per share and unit for the first quarter ended July 31, 2016 as compared to $22 million or $0.16 per share and unit for the prior year. The decrease in FFO per share was primarily due to a decrease in property NOI due to the dispositions completed in the last 18 months partially offset by NOI from the acquisitions made and developments completed.

Total revenue increased by $4.6 million or 10.1% for the three months ended July 31, 2016, compared to the same period of the prior year. This can be attributed to development deliveries and acquisitions in our portfolio and offset by revenues related to dispositions completed during the prior year.

Turning to our multifamily same-store performance. Excluding the results of our energy impacted markets of Minot and Williston, our first-quarter same-store multifamily revenue increased by 1.1% year over year driven by a 3.1% increase in average rental rates which was offset by a 2% decrease in occupancy.

Occupancy was off in several of our markets as we are experiencing the effects of additional supply in certain areas. We continue to focus on controlling costs where we can and operating expenses were up just 1.1% resulting in a 1.1% increase in same-store multifamily NOI in the first quarter.

While our same-store performance is important, much of our growth going forward will be driven by our non-same-store investments and our strategic efforts to continue to grow the Company. We continue to make progress with our value add program and during the first quarter of 2017, we spent approximately $4.6 million on this program bringing our total for fiscal 2016 and year to date fiscal 2017 to $7.7 million with 724 units being completed and leased with an average return on investment of 13.4%.

During fiscal 2017, we are committed to spending approximately $3.5 million per quarter completing 300 to 400 units per quarter.

Turning to our development activity, we continue to strengthen our portfolio as we near completion of our development pipeline. During the first quarter, we delivered one multifamily property, 71 France in Edina, Minnesota, for a total cost of $72.2 million. Please remember that as we deliver development properties we will experience near-term earnings drag as capitalized interest is replaced with interest expense.

Looking ahead, we have one property remaining in our development pipeline, Monticello Crossings, in the Minneapolis-St. Paul MSA, which is 54% preleased as of today and which we expect to deliver in stages this fall in our second and third quarters of fiscal 2017.

Also as previously mentioned, in accordance with GAAP accounting requirements, we recognized a $54 million impairment related to our investments and developments in Williston, North Dakota.

With regards to our balance sheet, as of July 31, 2016, our leverage as reflected by net debt to trailing 12 month EBITDA was 7.25 times and our upcoming maturity schedule is manageable with $120 million and $43 million of debt maturing in the remainder of fiscal 2017 and 2018 respectively.

Over the long term, we have committed to increasing our percentage of unencumbered assets with the goal of eventually obtaining an unsecured line of credit.

Moving on, on September 1 our Board of Trustees declared a regular quarterly distribution of $0.13 per share and unit payable on October 3, 2016 to common shareholders and unitholders of record at the close of business on September 15, 2016. This will be IRET's 182nd consecutive quarterly distribution.

Before we move to questions, I would like to briefly touch on our guidance. Last quarter we introduced FFO guidance for the fiscal year ending April 30, 2017 in the range of $0.48 to $0.54 per share and unit and we are reaffirming that guidance at this time. Please note that this guidance reflects our view of current market conditions and does not incorporate the impact of any acquisition, development, disposition or capital markets activity including potential transactions discussed as part of the Company's strategic initiatives.

With that, I will turn the call back to Tim.

Thanks, Ted. As an organization, we continue to focus on the acceleration of our strategic transformation into a multifamily REIT focused in vibrant and growing Midwest markets. By doing so, we hope to drive consistent and growing cash flow. Though this process will not come without some near-term earnings impact, over the long term we believe we will be able to create value through our decades of deep experience and knowledge and relationships in the Midwest.

With that, I would now like to open the call for questions. Operator?

(Operator Instructions). Rob Stevenson, Janney.

Good morning, guys. Can you talk a little bit in more detail on the senior housing sale in terms of what the expected cap rate is on that and sort of how you see the redeployment of that proceeds going? I mean does the delay in total 2017 largely give yourself room to find 1031 assets or are the gains there not sizable enough in some cases where you need to do that? Can you sort of help us understand that sort of whole process?

Rob, I will have Mark speak to that for you.

Yes, good morning, Rob. The cap rate you should think of is kind of plus or minus 8. And from a redeployment perspective, capital is capital and we are going to try to allocate our capital as best as possible. But our focus is certainly to replace that NOI with high-quality multifamily assets. The timing is driven by a couple of factors, some tax. I mean we would like to have more taxes in the next year, we have had some gains already this year.

So it is not all of that but it is partially that. It is also the timeline that we could get to with the buyer, the buyer is a long-term partner customer and the operator of those assets. So we are pleased to see him buy these assets. It is someone we know well. We have confidence he will close on time and as agreed. So that is really what is driving the timing.

Is there hard money up on that now?

Rob, this is Ted. There is earnest money up right now and they are in due diligence currently, which will expire roughly 45 days out and they will begin to go hard after that on earnest money.

Okay. And then, Mark, how should I be thinking about the value of the remaining non-core assets? Is it -- you guys talked about on-campus medical office and then there is some residuals in the industrial office retail portfolio that is sort of sitting around. I mean 280 for senior housing, ballpark -- I mean I know you probably don't want to get in -- ratchet down to the exact specifics but help me understand what we should be thinking about in terms of and how you are thinking about it as just coming in of the value of the remaining non-core assets.

Yes. So at a high level the way we are thinking about it is these are outstanding assets. I mean it is I believe the largest medical office portfolio in the Twin Cities if not all in the Twin Cities. But you should think about that as roughly 1.5 million square feet of majority on-campus high-quality medical office buildings, which are very high quality cash flows to own and very desirable to a number of potential buyers.

So the high-level thought -- and we have a low basis in those assets with some gains. So our thoughts are simple, at a high level which is we love those assets but we are no longer in that business so we would like to sell those as soon as possible.

Having said that, we need to do what is right and we need to find a good use for those dollars on the other side. So those are cash flows we are very happy to own today while we evaluate lots of different alternatives. And it is an opportunity I think to sell A and buy A, you know so A quality and by A quality, which is easier to do than selling lower quality and trying to reinvest in higher quality.

So we like where we sit there. We are committed to being a multifamily company and that means not having a large portion of NOI from medical office. The balance, we have a couple of industrial, a little bit of retail. I mean those are small in the grand scheme of things I would say roughly $60 million to $120 million of value to put a huge range on it. But those are smaller items.

Okay. And then how wide are you guys expect to cast your net on the apartment acquisition front in order to redeploy a lot of those proceeds? I mean is the markets that you are in today and that you want to add more exposure to deep enough to redeploy these proceeds or is it going to drive you into peripheral markets to your existing footprint ala Denver, more into KC, maybe suburban Chicago and Milwaukee and things of that nature? Can you talk a little bit about that?

Sure, Rob, this is Tim. I will start and then I will defer to Mark for his thoughts. Again, we have talked a lot in the past about the Midwest being our footprint. And I think I have obviously touched on in previous calls about the Milwaukees, as you touched on the Kansas City, the Omahas, and broadening our geographic footprint just to enhance our ability to find good investments. And I think we will continue to stick with that.

Mark has got some ideas, which I will let him touch on as we look forward. But there is some opportunity out there. And again, Minneapolis is a fantastic place so we would like to increase our holdings.

And with that, I will let Mark add to that.

Yes, so sort of going back to the tenets that Tim laid out, which I wholeheartedly agree with which is we are really focused on operating excellence, asset quality improvement, and balance sheet strength and flex. So set against that screen, I would say I am not prepared to give you our full acquisition criteria but I can give you pieces of it as we are putting it together, which is you should expect to see us buy larger assets so we are focused on 200+ units. We are focused on assets that have pricing power, they are well constructed, they are in growth markets with good underlying fundamentals and markets I would say that are easier for folks like yourselves and the broader investment community to understand. With the end goal being having a growing NOI.

When I look at our multifamily peers, there is a lot of excellence around the room when you look at those companies. And you look at a Company like Mid-America, I mean they have been able to demonstrate that you can grow off the coast and I think it is incumbent on us to endeavor to do that as well. While staying out of their way.

All right and then just one last one for me. I mean you guys have been more active on the revenue management system front lately. Was that one of the things -- I mean in the quarter if I look at the non-Minot, Williston assets, you had rental rate up 310 basis points but occupancy basically down in nine of the 10 markets. Was that a conscious move that the Revenue Management System drove or was that just where the maximization of revenue sort of fell in the quarter? Or is it just trying to understand your role out of revenue management and whether or not that is sort of changing anything that you are doing operationally at the property level?

Rob, this is Ted. The rent optimization of software rollout just literally hit the entire portfolio in July. So we are really early in that process for our staff and for people to really harness the full benefits of that. And I think what we saw this quarter was that program trying to figure out the pulse and the actual balance of where rents should be on the entire rent structure for each market. And by all means we believe that that put pressure on occupancy down as we drove revenues up across all of our markets essentially outside of energy. But for a couple that we think there is this some supply pressure that is affecting us in Bismarck and Grand Forks.

So we think our program over time will smooth out and really be a benefit to drive earnings power at these properties. But by all means that was pressure on occupancy.

But we are still overall feeling comfortable that 93%, not bad. And we are going to optimize back to 95% as we look ahead in future quarters.

Okay, guys, thanks.

Drew Babin, Robert W. Baird.

Looking at the 2% to 4% NOI guidance for the year, which I believe that includes the energy market. Can you talk a little more about the specific assumptions underlying that guidance range for the second half of the year? Is it just comps getting dramatically easier or do you expect some genuine reacceleration in some of your markets?

Drew, this is Ted. Yes, we expect that the comparable periods to smooth out of course going forward. We also know that this is annual guidance, we are one quarter in and the earnings strength of the Company is really, really being driven by non same store properties, which we think will accelerate and continue as our development pipeline continues to lease up and finish.

And we went through a tough quarter over a good leasing period typically during this time of the year in the Midwest in the summer months. But we think that that will accelerate on the revenue side as LRO is implemented, our RUBS program is continuing to be implemented across the portfolio which still hasn't hit all of the properties that we think that could be implemented on.

So we are early in this guidance period. So at this time there weren't events during the quarter that we felt compelled to revise guidance.

And just to add to that, I think it is worth pointing out that our calculation of same store is evolving. I mean this is a Company that was focused in multiple segments until today. And as we look at how others calculate same store versus how we do, I will tell you I don't think we have it perfectly today. I don't want to alarm you but I mean the fact is it will be a bit of an evolution and our goal is to get to best practices.

But the same-store numbers we are reporting today I think will be a little bit different a year from now.

I also have to point out -- sorry to interrupt you -- that the same-store portfolio is not the game here. I mean the portfolio of the future of this Company is what is coming out of the ground today and a decent portion of that same-store portfolio but there is a number of assets in there that are small, inefficient, etc. that are all going to be carefully reviewed as we look at the three priorities we have talked about a lot, which is how do we be a great operator? How do we have great asset quality and how do we have a great balance sheet?

Okay, so in other words the same-store pool as the year goes on, that will include some of the benefit of recent development deliveries and other things that are happening kind of outside of the traditional same-store pool so to speak? Is that correct?

Drew, this is Ted. No, we add same-store assets at the beginning of a fiscal year because we need two fiscal years to have some comparable periods. So there won't be any additional non-same-store assets added during this fiscal year. But I think what Mark's point is, the same-store pool that we have today, the 11,000 units that are same-store, there is a portion of that going forward that won't be part of same-store because we are going to look at smaller assets that are inefficient in markets that we don't necessarily think we can grow in and potentially remove those from same-store.

Removing them from the portfolio.

Correct.

Drew, I am making a higher level point which is this is not a 20-year curated multifamily portfolio where same-store is the game as I suspect it is for a lot of your other coverage [lists]. So I think we are a difficult animal to cover right now and we are grateful that you are doing it. And it is hard for us to model as well.

But the point I was trying to make was just more, you should measure us on same-store because you should. But I am just saying as we look at the future of the Company, the 10,000 plus units that comprise our same-store portfolio that we are talking about right now is important but it is not the focus of the Company. So we are focused on getting the best same-store growth possible but we are focused on these assets that are coming on and we are focused on having a portfolio that comprises a number of those assets but not all of those assets.

The last thing I would say on that, Drew, is we believe in management, we met expectations with respect to the quarter. And that led us to leave our guidance and reaffirm it for the time being. And as events unfold during the year, we will re-evaluate that. But from an FFO standpoint, we met expectations consensus and what we thought we would perform at.

Okay, understood. And one more question just going to page 13 on the supplemental which breaks out NOI by property type. The corporate and other column at $1.8 million of expenses, how much of that should be kind of distributed to property level in terms of the NOI calculation? And how much of that is truly kind of corporate overhead? Does it apply to [any fee] calculations, etc.?

Drew, this is Ted. To answer the question, the reason we carved it out is we don't on a property NOI basis, we don't believe that those costs are applicable to really how we look at comparability going forward on our assets on the ground NOI, property level NOI. For what it is worth, roughly $600,000 of that $1.8 million during the quarter was insurance deductible relating to insurance losses which were very significant in several of our markets due to weather, hail storms. That $600,000 we hit our max. So that number won't to be reoccurring this quarter.

And the balance of that is really this overhead off-site expenses that are not related to on the ground operations. We wanted to get down and boil down to property NOI and this is how we did it. And I think this is consistent with how other companies look at their multifamily assets operations.

Okay, that is helpful. And then I guess one last one as you talk about redeployment of capital into A assets, which I assume will obviously -- will all be apartment assets. What types of cap rates are you seeing in the market right now in the types of markets that you are looking at?

Drew, my quick response before I turn it over to Mark is truly we are focused on multifamily as you just reference. That is where we are headed. And he can give you an update on what we are seeing out there.

Yes, it is a very competitive market driven by a very vibrant capital market and a low rate environment with people looking for yield. So I don't think anything would surprise you. But 4 to 6 would be sort of I think where high-quality assets trade and in the larger markets I don't think there is a 6 in front of it.

Right, okay. Understood. Thank you.

Jim Lykins, D.A. Davidson.

So could you talk a little bit more about the Bakken Shale? I am wondering if there is more pain to come or maybe if you think you have seen that bottom out, how have things been trending since quarter end? And what kinds of rent concessions you may be making right now in the Bakken?

Jim, this is Ted. We believe that we have generally hit bottom in that market. And as we looked at this market this spring a quarter ago, we were very optimistic at the time given traffic at the properties, given getting into the spring-summer leasing season, we were firm believers that we could get some momentum on leasing in this marketplace. That didn't happen. And that was disappointing.

But we are going to move on and we are going to do what we can to lease these properties up over time. But moving from the end of the fiscal year to now, there was quite a re-trench in rents. Occupancies didn't move, corporate tenants moved out which was a sign that the fracking activity just is not going to occur anytime soon. That was a tail to us.

We are doing one month free literally out there at each property on a 12-month lease. That is the concession right now. If that increases or goes down, we will update you over time. But now we are in a point where we are moving into the fall-winter where you are not going to see a lot of traffic. It is going to be very quiet up there. But we think we have hit bottom.

Jim, I will follow up a little bit on that just a couple of things that need to happen obviously. The price of oil and I think I touched on it in the last call, everything that we hear and the people that I talk to in North Dakota, if we can get oil at $60 a barrel for 90 days, that will accelerate again. They did decide to close the man camps in Williston. I don't know if that is a huge impact on us. But you also have to remember that West North Dakota has almost 1200 idle wells that are sitting there and another 1000 that are uncompleted and drilled. And then 25 to 30 active wells drilling at any given month. And under normal production, there is no wells sitting idle.

And so when you think about that, you think about the size and the ability of West North Dakota as talked about potentially the second largest producer of domestic oil in the world or in the US, I mean that production can come back and ramp up rather quickly. And so that $60 oil for 90 days really could have an impact if we see some recovery there.

Okay, so when you guys say you think you have hit bottom, would it be fair then to say that rents have stabilized or are you concerned that rents could still potentially trend downward?

I think in our eyes we have done a pretty clear assessment and we feel that we have hit bottom. Without additional lease up, we feel like that is where we are at in the Bakken.

Okay. Switching gears a little bit, you talked about being near the completion of your development program. Could you just talk a little bit about your appetite for additional development projects especially how your potential asset sales may impact that?

Jim, this is Mark, good morning. I think you will see us where ever possible seek to find ways to acquire new assets at wholesale or development type returns as opposed to buying stabilized assets but in a different way. So rather than have money out for 24 months earning nothing, we will try to find ways to partner with structure or with operating partners who can better meet our needs of producing cash flows.

I mean we have a couple of things we are focused on, getting high-quality assets at good prices, getting assets that can provide us with growth and being smart with how we use our capital and try not to take full balance sheet development risk. And I think if you look at where the banks are pulling back, I mean who knows where we are in the world but there could be opportunities there for us we think having the capital base we have is a real weapon.

All right, thanks, guys.

Carol Kemple, Hilliard Lyons.

Can you give any updates or progress on the medical office building? Are those being actively marketed at this point?

Good morning, Carol, this is Mark. No, they are not being actively marketed at this point. We are, as I said earlier, looking to sell those as thoughtfully and opportunistically as we can.

Would it make sense to say you likely wouldn't market those until the senior housing property sell and you all redeploy the capital so you are not sitting on a huge pile of capital or would you look to deploy them before that -- I mean sell those before that?

Well I think you are asking a modeling question. If you are asking a modeling question, I would say yes. If you are asking a theoretical question, I would still probably say yes.

Okay.

We need to find the other side of the trade for us which is high-quality multifamily asset that fit the criteria. Some of the criteria I have talked about and some that we will unveil as soon as possible.

Okay, that makes sense. Thank you.

This concludes our question-and-answer session and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.