Equity Commonwealth (EQC) 2013 Q3 法說會逐字稿

Ladies and gentlemen, good day and welcome to the CommonWealth REIT third-quarter financial results conference call. This call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to the Vice President of Investor Relations, Mr. Tim Bonang. Please go ahead, sir.

Thank you and good afternoon. Joining me on today's call are Adam Portnoy, President and Managing Trustee, and John Popeo, Treasurer and Chief Financial Officer.

Before I begin today's call, I would like to read our Safe Harbor statement. Today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on CommonWealth's present beliefs and expectations as of today, November 6, 2013.

Forward-looking statements are not guaranteed to occur. Actual results may differ materially from those projected or implied by any forward-looking statements.

Information concerning factors that could cause those differences is contained in our annual report on form 10-K, our first- and second-quarter quarterly reports on form 10-Q, and our current reports on form 8-K filed with the Securities and Exchange Commission, or SEC; our third-quarter quarterly report on form 10-Q, which we expect to file with the SEC later this week and in our Q3 supplemental operating and financial data package, which can be found in the investor relations section of our website at www.cwhreit.com.

Any matters described in forward-looking statements are not guaranteed to occur. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call as a result of new information, future events or otherwise. Investors are cautioned not to place undue reliance upon any forward-looking statements.

In addition, this call may contain non-GAAP numbers including property net operating income, or NOI; cash basis NOI; earnings before interest, taxes, depreciation, and amortization, or EBITDA; adjusted EBITDA; funds from operations, or FFO; normalized FFO; normalized FFO available for common shareholders and cash available for distribution, or CAD.

A definition of each of these non-GAAP measures and a reconciliation of each of them to net income is available in our Q3 supplemental operating and financial data package which is available at our website. I would also note that the recording, transcription and retransmission of today's conference call are strictly prohibited without the prior written consent of the Company. Now I would like to turn the call over to Adam.

Thank you, Tim. Before reviewing our third-quarter results, I want to remind everyone that the Company, its manager and its trustees are still involved in various lawsuits and arbitrations. Except for a status update that I will provide in a moment, during today's call we will only be discussing matters relating to the Company's results of operations and we will not be commenting on or answering questions regarding the pending litigation or arbitrations, the purported consent solicitation by Corvex Management and Related Fund Management or any purported offer to acquire the Company by Corvex and related.

The purpose of today's call is to discuss the Company's third-quarter results. When we open up the call for Q&A, I ask that you please focus your questions on the Company's results of operations.

The one comment I will make regarding pending litigation is that the legal disputes with Corvex and Related are being resolved through arbitration as provided in the Company's bylaws. A hearing regarding matters in dispute with Corvex/Related was held in October, and we currently expect to receive a ruling from the arbitration panel on these matters sometime between now and year end.

Also, before focusing on third-quarter results of operations, I want to point out that we have made several changes to our financial statements and reporting this quarter. Some of these changes are the result of accounting rules and some of these changes were made to enhance our public disclosures for investors.

In July, Select Income REIT, or SIR, completed a common share offering which resulted in CommonWealth's ownership of SIR declining to below 50%. As a result, this is the first quarter we have deconsolidated SIR's results of operations from CommonWealth's financial statements and we now account for the Company's ownership in SIR under the equity method pursuant to GAAP accounting rules.

Also, in September the Board of Trustees decided to move forward with the sale of CommonWealth's remaining non-core properties which resulted in an additional 45 properties with 110 buildings in a combined 8.4 million square feet that are principally located in suburban markets being removed from CommonWealth's continuing operations and reclassified to discontinued operations.

As a result of these events, we believe that it is easier this quarter for investors to understand the financial results of our core business of owning and operating office properties that are principally located in central business districts, or CBDs. For example, our balance sheet no longer includes the consolidation of SIR and the book value per common share is now easier to calculate at $23.56 as of September 30.

Furthermore, to help investors better understand our results of operations and because SIR's operating results are no longer consolidated into CommonWealth's financial statements, we have simplified our reporting into only two operating segments, CBD properties and suburban properties. We have also eliminated reporting by geographic market area and replaced it with a list of properties which individually represent 1% or more of either NOI or cash basis NOI.

If you look at page 30 of our Q3 supplemental financial and operating data package, you'll see a new schedule which indicates that 33 individual properties collectively generated 75% of our third-quarter cash basis NOI. A large majority of these 33 properties were acquired since 2008 and there are CBD locations in major metropolitan markets such as Chicago, Philadelphia, Denver and Austin.

Finally, we have simplified how we count our properties so that multiple buildings located at the same location are counted as one property instead of multiple properties. Consequently, as of September 30, our continuing operations now reflect 128 properties, which include 235 buildings. As a result of these changes to our financial statements reporting this quarter, we hope that investors may be able to better evaluate our result of operations and better understand CommonWealth's portfolio of properties.

Turning now for our results of operations. During the third quarter, we signed 87 individual leases for approximately 1.5 million square feet with 78% of these square feet representing renewals and 22% representing new leases. The average term for the leases entered into or renewed during the quarter was 8.9 years. And the weighted average cash renter rates declined by 4.3% from prior rents for the same space.

Capital cost commitments associated with leasing activity this quarter were $30.33 per square foot, or about $3.41 per square foot per lease year. Although cash rental rates declined 4.3% this quarter, GAAP rental rates were actually positive 1%, largely because of 3% GAAP rental rate increases from leases signed in our CBD properties.

Generally, we continue to see stronger leasing activity in our CBD properties versus our suburban properties. Of the 1.5 million square feet of leasing activity during the third quarter, 65%, or 1 million square feet, involve CBD properties which has contributed to longer lease terms and higher leasing capital commitments we have reported during the last couple of quarters.

Consolidated occupancy during the third quarter declined 40 basis points from 89% at June 30 to 88.6% as of September 30 largely because of the decline in occupancy at our suburban properties. Although occupancy increased 30 basis points to 88.4% at our CBD properties, occupancy declined 130 basis points to 88.8% in our suburban properties sequentially between June 30 and September 30.

Our current expectation is that our occupancy rate will remain largely unchanged at the end of the fourth quarter of 2013 compared to the end of the third quarter at around 88.6%. Through year end 2014, we have 2.9 million square feet of leases scheduled to expire, which represents about 7.8% of our annualized rental income as of September 30. Almost 60% of the annualized rental income scheduled to expire through year end 2014 is located in our CBD properties. We are hopeful that we will be able to renew or lease the space in these CBD locations at rental rates that are on average equal to or higher than current in-place rents.

Finally, for the last several years we have been focused on executing our business plan, which includes repositioning the Company's portfolio into high-value office properties located in CBD locations and away from properties located in suburban markets. During the last year as the market for the purchase and sale of office properties has evolved, CommonWealth has shifted its focus from buying CBD properties to selling non-core suburban properties. Since the middle of 2012, the Company has not entered any agreements to purchase properties.

Furthermore, since the beginning of 2013 the Company has completed the sale of 38 properties with 92 buildings and a combined 6.6 million square feet, plus two land parcels for a total of $158.1 million. In addition, as of today we have 47 properties with 112 buildings in a combined 8.5 million square feet located throughout the US listed for sale with third-party brokers and classified as held for sale. Two of these properties with a combined 77,000 square feet are under agreements to be sold for a total of approximately $2.1 million.

We currently expect to complete the sale of these two properties before year end and we expect to sell the remaining 45 properties held for sale by the middle of 2014. As a result of these activities, approximately 64% of the Company's cash basis NOI from continuing operations during the third quarter came from 38 properties located in CBD locations, which is more than double the percentage of NOI CommonWealth received from CBD properties just a few years ago.

Before turning the call over to John Popeo, I want to review some changes we recently announced concerning the Company's agreement with its manager, Reit Management & Research, or RMR, as well as several corporate governance changes that are currently planned for CommonWealth in the coming months. In September we announced that starting in 2014 the business management agreement with RMR will be amended so that the base management fee will be calculated it on the lower of either the gross historical cost of the Company's real estate assets or the Company's total market capitalization rather than solely on the basis of gross historical cost.

Also starting in 2014, 10% of the base management fee will be paid in common shares instead of the entire fee being paid in cash. Starting in 2014 the incentive management fee will also be changed to be based on shareholders total returns and excess of benchmarks established by the board's compensation committee, which is composed solely of independent trustees rather than based on growth and FFO per share. The incentive management fee will be paid in common shares that vest over time and will be subject to a clawback provision.

These announced changes to the business management agreement with RMR were the result of feedback received in discussions with shareholders and are meant to address requests to further align management's financial incentives with the total returns realized by shareholders. Also in response to feedback received from shareholders, in September we announced that CommonWealth intends to increase the size of its board so that independent trustees represent at least 75% of total trustees.

The board's nominating and governance committee, which consists of only independence trustees, is now working with the search firm, Korn/Ferry International, to help identify independent trustee candidates. Independent trustees also plan to elect a lead independent trustee once the new trustees are added to the board.

In addition, following the final resolution of disputes with Corvex and Related, the board announced its intention to eliminate the Company shareholders' rights plan and to recommend to shareholders the desizing of the board. I will now turn the call over to John Popeo, our CFO.

Thank you, Adam. As mentioned earlier, we made several changes to our financial statements and reporting this quarter. Most notably, this quarter we deconsolidated SIR from CommonWealth's financial statements and we are now accounting for the Company's investment in SIR under the equity method because our ownership of SIR fell below 50% to 44.2% in July 2013.

In addition, this quarter we moved 45 properties with 110 buildings and a combined 8.4 million square feet from continuing operations into discontinued operations. Although these changes may present a clearer financial profile of our core business of owning and operating office properties, a result of these changes is that parts of our financial statement for prior periods may not provide meaningful comparisons to the current period. For example, as a result of deconsolidating SIR in the third quarter, many increment expense line items, including rental income and NOI, appear to be decreasing significantly when compared to the prior year when, in fact, the majority of certain decreases simply reflect an accounting change required under GAAP.

Our same property analysis excludes SIR NOI in all periods and provides a better comparison of deconsolidated operating results. Same property occupancy increased by a modest 10 basis points to 88.5% and same property cash basis NOI decreased by less than 1% during the third quarter. The decline in same property cash basis NOI at our CBD properties totaled $3.5 million, or 5.3% primarily reflecting increases in real estate taxes and other operating expenses.

The increase in same property cash basis NOI at our suburban properties reflects the growth in occupancy and increases in cash rents from the expiration of free rent periods. The reporting of normalized FFO and net income available for common shareholders is more comparable on a year-over-year basis because the deconsolidating of SIR in the third quarter had no effect on the calculation of these numbers in prior periods.

Fully diluted normalized FFO available for common shareholders was $0.57 per share in the third quarter of 2013 compared to $0.83 per share for the same period last year. The decline in year-over-year per-share results primarily reflects the issuance of new common shares and a higher property operating expenses in the sale of our shares in government properties, income trust or GOV during 2013, partially offset by property acquisitions during the third and fourth quarters of 2012 as well as reduced interest expense resulting from our purchase of senior notes pursuant to our debt tender offer during 2013.

Normalized FFO available for common shareholders was $67.3 million for the third quarter of 2013 compared to $81.5 million during the second quarter of 2013. This sequential decline in normalized FFO primarily represents seasonally higher utility expenses in the summer months as well as higher real estate taxes and other operating expenses in the third quarter.

Going forward, we expect operating expenses to moderate and run rate normalized FFO available for common shareholders is currently expected to be higher in the fourth quarter of 2013 than the $67.3 million reported in the third quarter based on current estimates. During the third quarter, we spent $38.5 million on recurring capital expenditures, which includes tenant improvements, leasing costs and recurring building improvements. We generated $21.9 million of cash available for distribution, or CAD, during third quarter resulting in a rolling four quarter CAD payout ratio of about 76.7%.

Both the calculation of normalized FFO and CAD does not include shareholder litigation costs and related expenses, which totaled $13.8 million, or $0.12 per share, for the third quarter of 2013. The $436,000 acquisition cost credit amount in the current period reflects the reversal of overestimated closing costs related to properties acquired in prior periods. Net loss available for common shareholders for the third quarter of 2013 was $227.5 million compared to $122,000 for the third quarter of 2012.

Loss from discontinued operations primarily reflects results of operations related to properties classified as held for sale during the current year, including the 45 properties that were transferred to discontinued operations during the third quarter. NOI from properties classified in discontinued operations declined by $4.1 million from the prior year.

Loss on asset impairment from discontinued operations of $217.1 million reflects the right down to estimated fair value of 39 properties transferred to discontinued operations during the current quarter, plus the additional right down to estimated fair value of five properties previously classified as held for sale based on recent purchase offers or completed sales.

Turning to the balance sheet, on September 30, 2013 we held $166 million of unrestricted cash. Approximately $100 million of this cash was used in October to repay all of our outstanding 5.75% senior notes due in February 2014 at par plus accrued interest.

Rents receivable includes approximately $196 million of accumulated straight-line rent accruals as of September 30. Other assets include approximately $138 million of capitalized leasing and financing costs. The $678 million worth of property held for sale represents the net book value plus receivables and other assets related to the 76 properties held for sale as of September 30.

On September 30 2013, our total debt was about $3.1 billion and included $735 million of unsecured floating-rate debt, about $1.5 billion of unsecured fixed rate senior notes and about $900 million of mortgage debt. The weighted average contractual interest rate on all of our debt was around 4.9% at the end of the quarter, and the weighted average maturity was around five years.

We also have preferred shares outstanding with a total liquidation preference of $654 million as of September 30. At the end of third quarter our ratio of debt to book capitalization was approximately 48%. Our adjusted EBITDA to interest in our fixed charge coverage ratios were 3 times and 2.4 times respectively. Also, our debt to adjusted EBITDA ratio was 6.5 times.

These strong credit metrics primarily reflect the repayment of approximately $670 million of unsecured senior notes with proceeds from our equity offering in the sale of all of our common shares of GOV in March 2013. In conclusion, we have made significant progress over the last few years in executing our business plan, which includes repositioning CommonWealth's portfolio into high-value office properties located in CBD locations and away from properties located in suburban markets.

Furthermore, when all the properties currently included and discontinued operations are sold by the middle of 2014, CommonWealth will be substantially complete with this portfolio repositioning, which began several years ago. Finally, because of the changes to our reporting this quarter, we hope that investors may be able to better evaluate our results of operations and better understand CommonWealth's portfolio of properties.

Before we turn to the Q&A portion of today's call, I want to reiterate that the purpose of today's call is to discuss our third-quarter financial and operating results. We will not be answering any questions relating to pending litigation, the purported consent solicitation or any purported offers to acquire the Company. I ask for and appreciate your cooperation in this regard. Operator, we are now ready for the questions.

(Operator Instructions)

Josh Addy, Citi.

Thanks. Good afternoon. There was an announcement that FMC is moving to a build-to-suit in 2016. Are they a tenet of yours at 1735 Market? If they are, can you tell us how much NOI they represent and what your plans are to backfill?

Sure, Josh. Yes, they are a tenant of ours. Rooms about 206,000 square feet. I don't know the exact contribution to NOI, but I can tell you that the building they lease from us is probably one of the best office towers we operate in the entire portfolio. It's a building that currently is about 96% leased. We feel pretty good about our ability to backfill that space.

That's a building that we've actually had requests from tenants that are in the building or outside the building to lease space there, and we've in the past been unable to accommodate them. We actually think that we'll not only be able to backfill the space, we have a pretty good confidence we may even be able to roll up the rents fairly significantly as a result. So we feel pretty good about our ability to release the space, and we will probably be able to announce something well in advance of their lease expiring in 2016.

Okay, thanks. That's helpful. Can you also talk about the Glaxo building? I think that was moved to discontinued operations and it's now held for sale. I know you were in the market at one point looking for tenants. Can you just talk about the decision in terms of why that was the right way you think to maximize value to sell it as opposed to trying to lease it up first? I know that it required a lot of capital.

Yes, you're correct. A decision has been made to market that property for sale. It's now included in assets held for sale. It basically came down to return analysis.

You know, we did a pretty extensive amount of work trying to figure out what it would take to release that building, and the returns just don't make sense. It would be better for us to take capital from selling the building and redeploying it somewhere else. We'll get better returns on that capital than we will investing further in that building.

It will most likely -- I don't know for sure, but I suspect that many people that might be interested in that building may be interested in converting it away from office building, away from office use. So it just -- we just think it makes sense and it's the best allocation, it's the best decision for us in terms of getting return on capital.

Okay. Thanks. And just lastly, in G&A you've expensed $25 million year-to-date for the ongoing litigation. Do you have any sense for what that number could be in the fourth quarter now that we're in November already?

It's very hard to estimate what that number will be. If I had to go out a little bit on a limb and make a little bit of an estimate, I think it might be a little lower than it was running in the third quarter.

There was a lot of prep work that was done in the second -- sorry, in the third quarter for the arbitration hearing in October. Some of that work -- that hearing has now happened. But I don't know what could happen between now and year-end as well. So I qualify everything I'm saying. But at this exact moment, I think it could be lower than it was running in the third quarter.

Okay. Thank you.

(Operator Instructions)

Rich Moore, RBC Capital Markets.

Hi, good afternoon, guys. I'm curious. You gave, John, the impairment, the overall impairment for the bucket of assets that are held for sale. It included some I think that you had sold. But on just the group of 110 properties, or I guess 110 buildings now, what is the impairment on that so we can reduce the $771 million of previous book value to what I guess you guys are expecting to sell those for?

It's around $205 million. And then the balance was on additional buildings that were either sold based on sort of a revision of our discounted cash flows and based on recent purchase offers.

Okay, good. Thank you. Got you. And then what do you do with the proceeds from these asset sales? Do you think I mean, you have, obviously, a line of credit balance. But it almost sounds like you could generate perhaps more than that. I mean is there any -- maybe you won't, I guess, but is there -- what you plan to do with the proceeds?

Well if you look at our balance sheet, we had $165 million of cash on hand at quarter end. But as I mentioned in the prepared remarks, $100 million of that went to pay down our 2014 senior notes. But in addition to that, we've closed on a couple of large acquisitions. So cash is building.

We do have $235 million out on the revolver. So at some point in the near future we'll probably look to pay down the revolver. When we begin to sell -- to execute sales on the 110 buildings that were just recently transferred down to disc ops, then it'll be a decision. We don't really have any debt that is readily prepayable, although we could prepay some debt. But we may even look at selectively looking at acquiring quality CBD office properties.

Okay, good. Thank you. And then the same-store numbers, are those net of the assets held for sale? I mean, excluding the assets held for sale?

Yes.

Okay. Great. Thanks. And then last thing. I'm trying to understand exactly why you did the conversion of buildings into properties. Is that because you probably treat the entire asset as, for instance if you're going to sell one of the buildings you're going to sell the entire property? Is that the idea behind that?

Essentially, yes. In an effort to try to simplify the portfolio to make it easier for people to evaluate it, we thought it made sense if we had multiple let's say buildings on the same lot or in the same business park and you would most likely be -- if we were to sell it, it would be sold together. It makes sense to count it as one property.

All right. Good. Great. Thank you guys.

(Operator Instructions)

Josh Addy, Citi.

John, I think you had mentioned in the prepared remarks, I didn't catch all of it, that the run rate FFO is going to be higher in the fourth quarter because you have a reduction in some expenses. Can you just walk through what some of those were?

Sure, Josh, this is Adam. Basically, there were a couple things. One is that there's a lot of seasonal higher utility costs in the summer months, which we think will abate somewhat in the fourth quarter. In addition we had unusually high level of maintenance repair run through in the third quarter. We just seem to been biased towards doing a lot more repair work in the summer months, in the good months, in the good weather months than we have in past years. So a lot of it got booked in the third quarter.

The other thing that affected the third quarter was we ended up having some higher income real estate taxes, especially on some of our properties in the Chicago market which we're actively working through abatements on. So, hopefully, some of that will come back to us. But for all three of those reasons, we think that operating expenses will moderate in the fourth quarter.

Okay. I know you said that occupancy you expect to be flattish between now and year end. As you look across 2014 and as we think about our models, are there any big expirations in the portfolio that we should be aware of?

No. I mean, we have about 1 million square feet expiring in the remainder in the fourth quarter. We feel very good that we are going to renew a large chunk of that, and if not renew it, backfill it with new releases. So we feel pretty good where we are going to end up at the end of the year.

We have about 2 million square feet expiring in 2014. I can tell you as of right now about half of them -- about half those square feet we're in some stage of dialogue or negotiation regarding renewal with. So we feel pretty good about our ability to release all or renew the space in 2014. And what's also very encouraging is that the leases that are rolling in 2014, and this is also true for the stuff that's rolling in 2015, a lot of our in place leases are quite below market, so we not only think that we will be able to renew these leases in 2014 and 2015, but we think there may be an opportunity for some good roll up in rents, especially in some of the CBD properties in 2014.

Okay. Thank you.

Adam, it's Michael Bilerman speaking. You talked a little about sort of a lot of the preparatory work that you had done for the arbitration, which obviously led to a lot of the costs. Can you sort of share, now that it's completed, but at least what went through arbitration? What were the arguments for and against? Just so we can get some flavor of the back-and-forth.

Unfortunately, Michael, I really can't go into that. I can tell you that it was an arbitration regarding disputes with Corvex and Related. That's what it was focused on, that specific dispute.

And I should also point out I think it's important for listeners and shareholders and investors to understand that a few years ago the shareholders of CommonWealth amended through a vote our declaration of trust. And the declaration of trust has now been amended so that shareholders could bring option against the Company. They are held liable for those actions.

We feel confident that when we prevail in these litigations that a portion, if not all, of the legal fees that we have incurred to date we will be able to be reimbursed for that. So that is something you should also keep in mind when you think about the legal fees that the Company's been incurring.

Are you keeping from an accounting perspective a sort of effective asset in accruing those? Because you've been expensing all of them. I mean, are your accounts comfortable with it? You can treat that as an accounts receivable?

Michael, this is John. No, we don't capitalize those. They all run through expense. We're not allowed to capitalize those under GAAP.

Right. So I --

If we were successful in recovering those costs, they would flow through as income.

Right. And then just a couple others. One, you did make a number of the corporate governance announcements during the quarter. Was there any reason why those -- you just didn't make those all effective right away rather than trying to phase them in, really trying to demonstrate to the investment community and to investors that these are, that you are 100% committed to all those changes versus potentially reversing course should the arbitration rule in your favor? I'm just wondering how can we trust that you are not going to backtrack on those commitments?

Well, the only reason we -- some of the things were not put in place right away because of the pending litigation. In fact, we have been quite clear that once the litigation is over, a couple of those provisions that we've talked about, specifically eliminating the shareholders' rights plan and de-staffing the board will be implemented fairly quickly.

The other changes are all being implemented fairly rapidly. For example, the change in the management fee structures, all going to be implemented January 1. The increase in the board, that's something that's ongoing right now. It's in process as we speak. So that's something that is happening.

And so I think we are doing everything that we can do right away absent the litigation not being over. But we are 100% committed to those changes that we've announced. Once the litigation is behind us or the dispute is behind us with Corvex and Related, we fully intend to implement all of the changes that we announced.

I mean, I think it would be -- I think we would lose a lot of credibility with the market if we said we were going to do something and then just backtrack on it. So we take those commitments very seriously. The board and management.

And have you thought about, you know, you're in a role where you're effectively running RMR, but also CommonWealth relative to your other externally managed entities which have more distinct management teams from I would say CEO and CFO. I guess, what is your plan going forward in terms of putting in place a management team at CommonWealth separate from your external manager?

Yes. There is nothing to announce today or that is currently planned. I can tell you you are correct that you are right that I have a dual role. I am the CEO of RMR, the Manager, and I'm the President of CommonWealth. That has worked. I've heard investors argue both sides of this where I have heard some investors actually quite -- they like the idea that the CEO of RMR is the CEO of CommonWealth because they think that maybe CommonWealth gets additional attention because of it.

And then I've heard arguments I think more in line with what you've talked about where people ask if they think there should be some separation. It's something that is still something we are open to discussing and open to having a dialogue with shareholders and investors about, but I have heard shareholders have both reactions to this. It's something that I am not -- I mean, I'm not wedded to any position. I can tell you that. But we have no plans or any announcement to make today.

I guess what percentage -- put aside the increased time that you're spending with CommonWealth, given all that has transpired this year, what percentage of your time were you spending as CEO of RMR versus President of CommonWealth? Because there is some level that when you buy an internally managed REIT, we get 100% of the CEO's time, not 25% or 15% or 30% or whatever the percentage may be. There's a big difference. You have a lot of other responsibilities that you're getting paid for. You can't clone yourself where you can be in multiple places at multiple times.

Yes. You're right. I can't clone myself and be in multiple places at multiple times, but it's something, Michael, that again, I said we are open to it. I am not wedded to any one position. If it's something that shareholders really feel strongly about, and I hear your point of view, it's something I think that the Company could consider.

I can tell you that RMR is not just one individual. It's a pretty deep bench of individuals and it's a pretty large organization that is focused and works on CommonWealth. I will tell you of all of the REITs that are managed by RMR CommonWealth is probably the most management-intensive simply because the nature of the type of properties that CommonWealth owns versus some of the triple net lease or absolute net lease properties that are owned by some of the other REITs. I don't know how to describe the allocation of my time, but it's more than just me.

I just didn't know if you -- do you keep track of -- lawyers have to keep track of their time relative to different files and different companies that they work on. Do you have a time management where you have a percentage -- because ultimately it has to be your comp also, right? Depending on what the entities are paying for. There has to be some allocation.

Well, entities don't reimburse comp for the executives. No salaries are paid for by the Company. There's really no -- I mean, I could keep time sheets, but I'm not sure what purpose it would serve because all the expenses and all of the salaries of the executives is picked up by RMR.

Right. And just, lastly, I guess with all the changes that were announced inter-quarter relating to the enhancements that you've put forth, should we expect, or should the market expect, anything else down the road or once you've taken everything into consideration and sort of this is it, this is what everyone's gotten comfortable with. I just say that -- I guess, are you contemplating potentially taking RMR public as an entity? Are you thinking more strategically about other changes, or is this basically it?

The answer is there is no plan to do anything else, but at the same time I wouldn't preclude us from doing other things or making additional changes. I like to think of this as a pretty -- as a two-way street dialogue with our investors and shareholders.

As time evolves and things change I could imagine us making additional changes. There's no plan currently to announce any additional changes along the lines you've announced, but that doesn't mean that, you know, as time evolves and circumstances change and investors voice their preferences about things in the future we couldn't implement additional changes.

Right. Has Corvex and Related made a bona fide offer for the Company at all?

Mike, unfortunately I really can't comment on that. We made it pretty clear in our opening statement. We really can't talk about that topic.

All right. Thank you.

Rich Moore, RBC.

Hey, guys. It's getting kind of late in earnings season, but I thought I heard you say you're planning to do some acquisitions. I kind of did a double take or I would have asked you at the time. Do you have some acquisitions teed up and are you back at all in acquisition mode?

No, Rich. We have no acquisitions teed up. I would not say we are fully in acquisition mode at all. I think we're very much right now we are more in the mode of divesting of our non-core assets.

I think John mentioned there was a possibility. I think what he's talking about maybe more is in 2014 as we get some of the proceeds from these sales.

Again, the sales that we're targeting for 2014 I suspect will generate larger dollars than has been generated in 2013. And so there may be an opportunity to put some of those larger dollars to work in 2014. But there's currently no plan. We currently have nothing teed up and are not actively looking at acquisitions at the moment.

Okay, great. Thanks. Appreciate it.

Gentlemen, there are no further questions at this time.

That concludes our presentation. We look forward to seeing some of you at the NAREIT Conference in San Francisco next week. Thank you everyone for joining us today.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and using the AT&T executive teleconference. You may now disconnect.