Cousins Properties Inc (CUZ) 2007 Q1 法說會逐字稿

Good day, everyone, and welcome to this Cousins Properties, Inc.

first-quarter 2007 conference call.

Today's call is being recorded.

At this time, for opening remarks and introductions, I'd like to turn the call over to the President and Chief Executive Officer, Mr.

Tom Bell.

Please go ahead, Sir.

Good morning, everyone.

I'm Tom Bell, Chairman and CEO of Cousins Properties.

With me today are Dan DuPree, our President and Chief Operating Officer, Jim Fleming, our CFO, and Craig Jones, our Chief Investment Officer.

I'd like to welcome you to our first-quarter conference call.

At this time, I will ask Jim to review the financial results for the quarter.

Jim?

Thanks, Tom.

Good morning, everybody.

Thanks for your interest in Cousins Properties.

Certain matters we will be discussing today are forward-looking statements within the meaning of federal Securities laws.

Actual results may differ materially from these statements.

Please refer to our filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2006, for a discussion of the factors that may cause such material differences.

Also, certain items we may refer to today are considered non-GAAP financial measures within the meaning of Regulation G as promulgated by the SEC.

For these items, the comparable GAAP measures and related reconciliations may be found through the quarterly disclosures and supplemental SEC information links on the Investor Relations page of our Web site at www.CousinsProperties.com.

This quarter, we reported FFO of $0.46 per share.

There were two significant transactions this quarter that impacted our results, the sale of the remaining five ground leased retail outparcels at North Point and the sale of a tract of land adjacent to the Avenue Carriage Crossing.

Last fall, we put 12 of our North Point outparcels under contract, and we closed the sale of 7 of them in the fourth quarter of 2006.

The sale of the remaining five this quarter generated proceeds of $10.1 million and FFO of $8.2 million.

The 6% cap rate we received on the sale of these outparcels generated aggregate gains of just over $20 million on an original cost basis of slightly less than $6 million.

When we acquired the land for the Avenue Carriage Crossing in suburban Memphis, we purchased an additional 41 acres of strategically located land just across the street.

At the time, we felt the land could be suitable for future development.

Our joint venture partner in the project approached us with an offer to purchase this tract at an attractive price for a complementary retail development.

This sale generated FFO of $4.4 million.

The FFO generated from these sales offset a decrease in profits from lot sales.

Our residential land business saw a significant slowdown in the first quarter.

We sold 96 lots in the quarter, compared to 454 lots in the fourth quarter of 2006.

After taking a close look at what we expect for the rest of the year, we believe the pace of lot sales will recover somewhat, but we are now projecting 2007 lot sales will be about 30% lower than 2006.

This quarter's decrease in lot sales had the effect of lowering our taxable income at our taxable subsidiary, Cousins Real Estate Corporation.

As a result, we recorded a tax benefit in our income statement of $1 million this quarter.

We expect Cousins Real Estate Corporation to be profitable for the year, though, so we do anticipate net income tax expense for 2007.

On our same-property schedule in the supplemental package, office same-property results were negative as we anticipated, as a result of the expiration of the 188,000 square foot IBM lease at 3100 Windy Hill Road last November, which had a partial effect in the fourth quarter and a full effect in the first quarter.

Despite this, we're making good progress in leasing the vacant space in our office portfolio.

Tom will talk about that in a few minutes.

Retail same-property results increased in both periods as a result of the lease-up of the Avenue Viera and Viera Market Center.

On our income statement, once again we had no interest expense.

This occurred because the majority of our additional borrowings this quarter were used to fund development projects on which we capitalized interest.

However, we do expect to have net interest expense in the second through fourth quarters this year because we will cease capitalization of interest on some of our projects as they become operational.

I'd now like to discuss the components of FFO in more detail by describing the changes between the fourth world of 2006 and the first quarter of 2007.

You can follow my discussion beginning on Page 8 of our supplemental package.

I will begin with the Office division, where rental property revenues less rental property operating expenses increased 239,000 between quarters.

The increase is a result of changes in the following properties -- an increase of 637,000 at One Ninety One Peachtree due to increased occupancy; a decrease of 760,000 at 3100 Windy Hill Road as a result of the expiration of the IBM lease; a decrease of 429,000 at Inforum as a result of a property tax true-up in the fourth quarter of '06; and small increases at most of our other properties due to improved leasing.

For the Retail division, overall FFO generated from rental operations increased $399,000 during the quarter.

This increase is attributable to continued lease-up of our three recently completed development projects -- the Avenue [Web Gym] San Jose Market Center, and the Avenue Carriage Crossing.

Industrial division FFO from rental operations increased $148,000 as a result as a result of the King Mill project.

FFO from tract sales increased $630,000 as a result of the sale of our land adjacent to the Avenue Carriage Crossing.

Lot sales profits decreased this quarter by $2.3 million as a result of the decrease in lots sold.

Other investment property sales represent a gain on the sale of the five ground-leased outparcels at North Point.

Multi-Family profits decreased $578,000 based on our percentage of completion accounting as we near completion of the 50 Biscayne project.

Development fees decreased 662,000, primarily as a result of a decrease in fees recognized on residential projects.

Management fees decreased $857,000, primarily as a result of higher reimbursement revenue in the fourth quarter from third-party managed properties related to year-end bonus true-ups.

Leasing fees decreased $2.4 million following a strong fourth quarter of leasing activity.

Termination fees increased by $3.6 million as a result of the partial termination of BellSouth's lease at Inforum.

This space was released to the American Cancer Society, and we also incurred approximately 6.4 million in tenant improvement costs for the American Cancer Society's space in the first quarter as reflected in our second generation TI and leasing costs shown on Page 7.

Total G&A expenses decreased $3.9 million, primarily as a result of fourth-quarter true-ups for bonuses and stock-based compensation.

Other expenses decreased $1.1 million as a result of a non-recurring fee paid in the fourth quarter to structure a transaction that will reduce our property taxes on Terminus.

The income tax benefit increased $900,000 as a result of the decrease in lot sales I mentioned earlier.

Finally, joint venture FFO decreased $1.1 million as a result of a scheduled increase in Prudential's ownership percentage in CP Venture Five, which owns the properties we contributed to the Avenue fund the last year.

We have one loan maturing this year, which is held by Northwestern Mutual on the 100 and 200 North Point Center East office buildings.

This loan has a current balance of $22.2 million and an interest rate of 7.86%.

We are in the process of renewing this loan with Northwestern for $25 million with a 5.39% interest rate and a five-year term.

We expect to close on the renewal loan this quarter.

I want to finish with a comment on our quarterly FFO.

We've had fairly high levels of FFO for the past two quarters because of some of the lumpy items we see from time to time in our business, including the North Point outparcels sales, the Carriage Crossing land sale, and the BellSouth lease termination fee.

Although the timing of these lumpy items is very difficult to predict, we don't currently anticipate that these items, such as tract sales, condominium profits and lease termination fees, will contribute significantly to our FFO in the second quarter.

As we've said many times, these short-term fluctuations are not a meaningful indicator of our financial performance, so they don't give us much concern from a management perspective, but I wanted to let you know what we are expecting as you think about our FFO going forward.

With that, I will close my remarks and turn it back over to Tom.

Thanks, Jim.

Well, consistent with the performance of most of the residential markets around the country, our lot sales business has slowed down substantially.

As Jim mentioned, in the first quarter, we sold 96 lots versus a business plan of over 200.

Clearly, lot and home sales are stagnant even in the states of Georgia and Texas.

We see this as generally as the result of a perception of a declining housing market nationally.

As a result of these first-quarter results, we've taken a look at our projected lot sales for the rest of the year and at present, we expect to sell about 1000 lots.

This would reduce our 2007 FFO from lot sales by $0.02 to $0.04 after taxes.

Given the volatility of the residential sector, this number could change before the end of the year.

We will update you at the next conference call.

As long as the market recovers over the next couple of years, we don't think the slowdown will have any material effect on the value of our single-family lot developments, or on our long-term returns from this business.

Fortunately, important demographic trends, like job growth, population growth and household formation, continue to be quite favorable in our major markets of Atlanta, Dallas, Fort Worth and Houston.

So our approach will be to continue to control our lot inventory while we wait for the market to return, which we don't really expect to see before the first half of 2008.

Outside of our single-family residential business, however, things look pretty good.

We continue to grow our pipeline of active development projects.

We now have three in industrial, four in retail, and five in our Office/Multi-Family division.

These active projects will total about 5.6 million square feet when completed.

Cousins' investment in these projects through Q1 stands at 542 million and our total investment will be just under 1 billion when these projects are finished.

This is in line with our expectations and objectives.

Value creation from development continues to be a key driver of our long-term profitability.

Our Industrial division continues to advance our projects in Atlanta and Dallas.

This quarter, we completed our 749,000 square foot first building at Lakeside Ranch near the Dallas-Fort Worth airport, and Home Depot Supply took occupancy of 355,000 square feet in that building.

We completed the shell of our 459,000 square foot first building at Jefferson Mill and we finished grading the next two sites at King's Mill to allow us to move quickly on future buildings as new opportunities arise.

At this point, we're focusing our efforts on leasing the space we have available.

There was a bit of a pause in leasing activity in our industrial markets during the first quarter, but leasing interest seems to have picked up recently.

Our markets did very well in '06 as Atlanta and Dallas each had over 13 million square feet of net absorption, while in the first quarter this year, the Dallas market absorbed over 2 million square feet, and the Atlanta market absorbed about 4 million square feet.

The Retail division continues to make good progress on the four projects they have in the works.

At the Avenue [Web Gym] in suburban Atlanta, the DSW store in the north side of the center is now under construction and scheduled to open in December along with Kirkland's.

This, along with a bank and five additional restaurants, will make the north side an increasingly attractive retail venue.

Sales continue to be very strong and although we still have some space to lease, thus far we've exceeded our projections on rental rates.

At this point, the retail space at [Web Gym] is 84% leased overall.

The Avenue in Murfreesboro in suburban Nashville is a hybrid lifestyle and power center.

Phases I and II will open in October with 691,000 square feet and the retail spaces are currently 57% leased and 77% committed.

Signed tenants include Belk, Dick's Sporting Goods, Barnes & Noble, Chico's, Talbot's, Linens-n-Things, Best Buy, Cost Plus, Ann Taylor Loft, Joseph Banks, White House/Black Market, and Coldwater Creek.

Five of the nine outparcels are also committed and the users will include Long Horn, Macaroni Grill and Mimi's Cafe.

This project is well positioned to take advantage of the strong demographics and we're very excited about entering the Nashville retail market.

Last month, we began our latest Avenue project, the Avenue Forsyth in Atlanta's northern suburbs.

Rough grading work has now been completed, underground utilities are in place and several building pads have been delivered.

At the current time, we are 50% committed on the 527,000 square foot first phase of retail with Barnes & Noble and AMC committed along with 30 other retailers.

We are on track to complete construction in the second quarter of next year.

As we mentioned last quarter, we expect to begin development on a market center in Kansas City this June or July.

This project is progressing well and committed retailers include Home Depot, Target, J.C.

Penney, PetsMart, Best Buy.

Currently, the center is 83% committed and on track for development to start on schedule.

I'm enthusiastic about the volume of predevelopment activity taking place in a number of different markets.

The Retail division is presently pursuing additional power center, lifestyle and mixed-use projects in attractive markets in the states of Texas, the Carolinas, Tennessee, Florida, northern Virginia and of course our home state of Georgia.

We also have a lot of positive activity in the Office and Multi-Family division.

Our Terminus project is doing quite well.

The first building, Terminus 100, is now 81% leased and almost 90% committed.

Our first tenant, Synovus, took occupancy April 23 and they will be joined by two other tenants during the month of May.

We also began development on the first residential building at Terminus late last month.

This will be a 32-story, 142-unit condominium that will sit on top of the parking structure adjacent to Terminus 100, and residents will be able to take advantage of restaurants and retail shops at Terminus as well as the other amenities close to the Peachtree/Piedmont intersection.

Although we don't plan to begin full marketing -- our full marketing campaign for the condominiums until fall when Terminus 100 and the Cafe Street restaurants and retail areas are fully opened, we already have 22 units under contract, and we are continuing to talk to interested buyers.

Given the success of Terminus 100, we are now committed to starting construction of Terminus 200 later this quarter and have just received our permit.

This 564,000 square foot building will follow on the heels of the 656,000 Terminus 100 with a scheduled delivery in 2009 that will fit well with the anticipated lease rollovers in the Buckhead submarket.

Last month, we moved our company's headquarters to our new One Ninety One Peachtree building in downtown Atlanta.

We are continuing to focus our efforts on leasing this building.

We are now in discussions with potential tenants for a significant portion of the vacant space at One Ninety One and we expect to beat our lease-up pro forma by a good margin.

Yesterday, we closed on the purchase of a 766-space parking deck about a block from One Ninety One, which will give us additional competitive advantage when leasing this Class A asset.

Things in downtown continue to improve dramatically with the World of Coke opening this month and the new, 2300-bed Georgia State dorms just down the street opening in the fall of 2007.

Also in Atlanta, we are working with Emory University on a plan to develop a mixed-use project on Clifton Road adjacent to their campus.

This development would be built and two phrases and it would include street-level retail, for-sale residential and for-rent multi-family units, all supported by deck parking.

We're moving carefully with our partners, Emory, conducting neighborhood meetings and entitlement works to determine the feasibility and parameters of the project, but it could ultimately include 800 to 900 residential units and 100,000 square feet of retail shops.

This is just another example of an urban mixed-use project where our expertise and multiple product types position us well for success.

We began our Palisades development in suburban Austin in the first quarter and we expect to complete this 360,000 square foot development in the second quarter of next year.

The larger of the two buildings is fully leased to Dimensional Fund Advisors, and the second, 150,000 square foot building is seeing a lot of activity.

This Austin submarket is very healthy with only 6% Class A vacancies.

One of our primary tasks today is to continue to lease the vacant space in our office portfolio.

Between 2004 and 2006, we sold 23 office buildings representing over 60% of our 2004 office portfolio, and most of the sales were a fully leased building.

We're left with several buildings where we had an opportunity to create additional value through leasing, including our two Birmingham buildings, the four North Point buildings, one Georgia Center Inforum and the two buildings at Wildwood.

We made good progress, leasing over 900,000 square feet in these buildings and bringing the two Birmingham buildings, the four North Point buildings and Inforum to over 95% leased on a combined basis.

We continue to work hard on One Georgia Center and the two Wildwood buildings, and we have some very good prospects for the majority of the vacant space.

We will keep you posted on our progress as we reach the point where we are able to talk about these deals.

Over the years, we've discussed our strategy of focusing on Sunbelt markets, and as I said before, we like to develop in places where the sun shines and the population grows.

Last month, the U.S.

Census Bureau published population growth data for U.S.

metropolitan areas from 2000 to 2006.

Metro Atlanta had the highest growth of all metropolitan areas in the country, adding 890,000 people.

Dallas-Fort Worth and Houston were second and third with population increases of over 800,000 each.

Based on the census projections through 2030, these trends should continue throughout the Sunbelt.

This growth has definitely helped fuel our retail, residential and industrial businesses and is beginning to have some positive effect on the Sunbelt office market.

It's nice to see this objective data and it confirms the momentum we're seeing across our markets.

I am confident our strategy of being a diversified developer in Sunbelt markets will continue to pay dividends well into the future.

With that, I will close my remarks and turn the floor over to any questions, if you have any questions for us this morning.

Thank you.

Today's question-and-answer session will be conducted electronically.

(OPERATOR INSTRUCTIONS) Cedrik Lachance, Green Street Advisors.

Thank you.

Tom, can you talk a little bit about your profit margin expectations at 10 Terminus?

Well, at 10 Terminus, the margins in that condominium project are generally -- excuse me, I've got to be careful on how I say this.

On all our multi-family products, we generally underwrite at about a 25% margin, and so you should expect that any project that we embark on in the for-sale, multi-family sector would be at a 25% or better margin.

That's on (inaudible) basis?

That is a pre-tax basis.

Pretax, okay.

In terms of the sister building to 100 Terminus that you're expecting to start, how do you feel the Buckhead market will support yet another development there?

Well, there's only one building under construction right now in Buckhead.

It's a 400,000 -- it's a combination office and condominium building; it has 400,000 feet of office space.

We understand about 100,000 feet of that space is leased with another 100,000 feet being under LOI.

We will be first out.

We will probably been six months ahead of our next competitor if there is one.

There's significant roll-over in '09, '10 and '11 in the Buckhead market for Class A space.

Class A tenants in Buckhead generally like to stay in Buckhead and they generally move after their ten-year leases are up.

We've discovered that with our development at 100.

We have one floor left in 100 to lease and quite a few prospects, so there's a lot of leasing momentum in the market.

So while it's unusual for us to start a building like this without a specific lease, we have done it in the past -- the Pinnacle building in Buckhead for instance, which turned out to be very successful for us.

Some of our North Point buildings we started without leasing.

So you know, there's some risk involved but we feel pretty good about it.

I think it's going to work out real well.

Okay.

You have two lab space buildings leased to [Therogenics] and [Hibitek].

Both companies have had some challenges in recent months.

Can you describe a little bit where the credit quality of these tenants stand, and how deep is the lab space market in Atlanta?

Good question.

I think the credit quality is obviously declining.

Both of those entities still have quite a bit of cash.

I know [Astrogenics] is reactive in the partnering and joint venture markets right now.

The lab space demand is pretty good.

There are quite a bit of incubator companies coming out of Georgia Tech and Emory and the Georgia Tech/Emory combination; Georgia State and University of Georgia also have programs underway.

I think that we could probably lease that space without too much struggle if we get it back, but it's obviously something we're paying a lot of attention to.

Okay.

Final question, on the retail front, have you seen any movement in land prices for future retail development?

Not yet.

We expect to.

I mean, the land markets are definitely softer.

You know, landowners are very inclined to want to get $1 more than their neighbor got, no matter what.

It takes awhile for them to get over that.

But I think Dan's view is that we are beginning to see a little bit of softness and we would expect that to accelerate over the next several months.

Okay, thank you.

David Cohen, Morgan Stanley.

Good morning.

Just starting out with 10 Terminus Place, I mean there's a lot of competition I guess and a lot of different projects on the market.

I was just curious as to why you have gone ahead without a significant level of pre-leasing.

I mean, what made you feel comfortable doing that at this point?

If you can give us some color in terms of the deposits that are required and how you are protecting yourself from cancellations, it would be helpful.

I assume you mean pre-sales?

Yes.

Well, if you look at the Buckhead market, there are a lot of high-end units on the market -- I mean starting at 1.5 million and going up to $8 million.

There are some low-end units on the market, you know, starter units, though that's largely lease.

There is nothing really on the market directly competitive with the -- or very little on the market that's directly competitive with our product, which is in the $450,000 to $800,000 range.

Now, we have a few units that are more than that, but that's the sort of prime two-bedroom, two-bedroom/study unit.

We've really not marketed this yet because we feel like pricing will get better as Terminus matures, so we haven't been in a rush.

But we sold 22 of these at either 10% or 5% deposits, depending on the size of the unit.

You know, I think that it's just got a really good niche.

The it's by far the best-located of the condominium projects.

You can walk within a couple of blocks to 23 different restaurants, some of the best shopping in the Southeast.

Some people say the best shopping in the Southeast is a short walk away.

The Marta station is right down the street.

If we are successful at getting our Peachtree streetcar built, it will stop right in front of Terminus.

So we just think it has a lot going for it, and that's the reason we decided to go ahead.

Okay.

On 3100 Windy Hill, can you just give us some update on the progress of re-leasing that?

Is that going to be out of service for awhile?

Is that going to be a training facility still?

Yes, it's going to be out of service for awhile.

I will let Dan speak to the pre-leasing efforts.

Dave, this is Dan DuPree.

Going back to your question on 10 Terminus, I wanted to make the point that Atlanta is really not a pre-sale market and never has been.

There are competitors in the market that are -- that look at us with great admiration that we have 22 units sold at this point, so it's sort of a question of this a glass half empty or half full?

As it relates to 3100, while we had a considerable amount of advanced notice that we were likely to get that building back, there were reasons that really prevented us from actively pre-leasing or leasing that building well in advance like we are accustomed to doing.

So we reiterate Tom's point, we have set up a market to target users because of the specific advantages of that building.

It is a training center and would have I think special cachet not only to continue as a training center but also for educational facilities.

We are very focused on that.

So how long do you think the leasing efforts might take?

I think we expect the building to be empty through the year.

Okay.

In terms of One Ninety One Peachtree, you said you are kind of way ahead of your leasing, your expectations.

Can you just discuss what can you realistically lease by year-end?

Well, we've leased about 160,000 feet since we've owned the building.

We have LOIs on another 123,000 feet.

We are seeing a lot of traffic.

We had two people tour the building yesterday, I noticed because they always come up and look at our new offices.

So let's see.

That's about 300.

I wouldn't be at all surprised to see us have signed leases for 400,000, 500,000 feet by year-end.

You know, 400 to 500.

Okay.

There's no change in Wachovia's expectations to leave in '08?

Right.

I mean, they've left.

They have some presence in the building, not much; they've subleased a little bit of that space through December of '08.

We are actively marketing their space to a couple of potential users.

But no, I don't think Wachovia is coming back.

You know, you never say never, but they have made their move in Atlanta.

Okay.

Just a final question -- just on operating margins, which seem to decrease a lot, is that strictly because of 3100 or are there other operating expenses that are (multiple speakers)?

No, you've got it right.

I mean, there's -- we took some space back from BellSouth for the American Cancer Society Center -- yes, lease, so we're having to probably pay the operating costs on that for six months or so.

It's all transactionally oriented and temporary.

There's been no significant changes in operating expense.

Thanks a lot.

David Toti, Lehman Brothers.

Did you guys mention what your same-store office performance would have been if you had held 3100 Windy Hill out of the pool?

David, this is Jim.

We haven't calculated it that way, but it would have been a positive number.

That 3100 is what has affected us for the last two quarters.

Okay, so it would have been modestly positive or --?

Well, you can do (multiple speakers) --.

150,000 feet?

187,000 feet -- we will run that number for you and e-mail it to you, but yes, I mean it would make a significant difference.

If you want to look at it building by building, you can do that.

Sure.

Most of my questions have been answered, but just some details -- what's your cost per square foot at Terminus 100, in terms of construction costs?

You can get that if -- and I don't have that number in front of me either, but you can get it.

If you look at our schedule, you'll see Terminus 100, 655,000 square feet.

But that's inclusive of soft costs as well, right?

Oh, you just want the construction dollars and not the --.

Right.

-- (multiple speakers) costs or soft costs?

Right.

80% of that total number?

I can get it for you, but we're going to have to do the math.

Because we (multiple speakers).

(multiple speakers).

Just lastly, perhaps I missed this, but could you talk about the timing of the profits you're going to be booking from the new residential project?

Well, we wouldn't start closing the Terminus 10 until the third quarter of '08, yes, second or third quarter of '08.

Are we going to be on a percentage of completion?

You know, they are changing the accounting rules so I'm not sure (multiple speakers).

David, starting in January of '08, the accounting rules will change on percentage of completion accounting for condominiums.

I would say it's unlikely that, on any of those units, we would recognize profits before we actually close the sale of the unit.

So that would be much more back-end loaded than what you have seen on our (multiple speakers).

Than what we've seen in the past, right?

Right.

Okay, thank you very much.

Chris Haley, Wachovia.

Good morning.

I'm sure that Scott Rees and Walter were ready to choke you as you were going 400,000 to 500,000, (LAUGHTER).

No, they were saying "more!

More!"

(LAUGHTER) I noticed that a few of your phases, your expansions on your retail projects, were pushed out in terms of your operational dates.

Is that project-specific or are you guys making some assertions about your confidence in where the consumer might be a year or two out?

No, because once you start them, you've got to finish them (LAUGHTER) so it's pretty much entitlement issues may drag on for a month, permitting might drag on for a month, some retailers who in one segment who were supposed to have finished their plans in such and such a time, they lagged by a month and that puts it in the next quarter.

It's really -- you know, somewhat asked us that question after we put out the releases, the package yesterday and we looked into it.

There's really no meaningful trend there.

We've moved one up; we've moved a couple back.

Okay, so you wouldn't characterize this as the development phase, development cycle or competitive development sites around your Avenues projects are causing greater caution internally regarding lease-up times?

No.

Okay.

Regarding the condominiums, you know, the variability between the two prior condominiums that you had booked substantial profits on, Jim, could you -- I do not fully understand this, the percentage of completion changes for 2008.

Could you give us a quick snapshot of this?

Should we just follow this as kind of a upon-closing is recognition, and that becomes prorated over whatever time period those closings occur?

Yes, Chris, the way I would look at it is there are new rules that come into effect January 1 of '08, so that's what we will be following for the 10 Terminus and future condo projects.

Essentially in a nutshell, unless you have extremely high levels of deposit, which would be unusually high levels of deposits, you're going to recognize the profits when you sell the units.

(multiple speakers)

(multiple speakers) say 10 to 20% down, or 20% close, 20% to close?

For example, so you convert from an escrow and then you go to a -- either you ask for a second deposit, or is it the second deposit to closing?

No, you would not recognize the profits and you would not recognize the profits typically on any of our deals until you get to the actual closing of the condominium unit, where you collect the full purchase price.

Okay.

Could you maybe give us a quick number or range?

What do you think the return on cost was for the condominium developments on an aggregate basis, not just your share but the two, one in Atlanta and one in Miami that you did?

Return on cost before tax?

Yes, sir.

You know, 25% to 30%.

The Miami deal was -- margins were bigger in that deal.

That's where the market was then, so they were probably almost 35%.

Okay, great.

Thanks a bunch.

At this time, we have no further questions.

But I would like to provide everyone one final chance to signal for questions.

(OPERATOR INSTRUCTIONS).

David Cohen, Morgan Stanley.

Just a quick question on cap rates -- are you seeing any change in the investment market, especially in Atlanta right now?

No, we really haven't and not any change on any transactions that have taken place.

Now, we are beginning to hear that lower-quality suburban buildings, cap rates are moving up a little bit but we've not actually seen that in any transactions to date.

All right, thanks very much.

Well, thanks, everyone, for joining us this morning.

You know, as always, we are always available to you.

We're just a phone call away.

We will be talking to you next quarter if not before then.

That does conclude today's conference.

Again, thank you for your participation.