First Industrial Realty Trust Inc (FR) 2007 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. My name Natasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Industrial Realty Trust fourth quarter and full-year end results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS). Thank you, it is now my pleasure to turn the floor over to First Industrial Realty Trust. You may begin.

Good morning everyone. This is Sean O'Neill, Senior Vice President of Investor Relations and Corporate Communications. Before we discuss our results for the quarter, let me remind everyone that this call contains forward-looking statements about First Industrial. A number of factors may cause the Company's actual results to differ materially from those anticipated. These factors can be found in our earnings release that is available on our web site at www.FirstIndustrial.com. Now, let me turn the call over to Mike Brennan, President and CEO.

Okay. Thank you very much, Sean and welcome everyone to our fourth quarter and full-year 2007 earnings call. Before we begin let me introduce the other members of senior management who are here today. Mike Havala, Chief Financial Officer, Jojo Yap, our Chief Investment Officer and Rick Czerwinski, National Director of Leasing and Asset Management. For our call today, I am going to start out by providing an overview of our results for the year and the fourth quarter and as well as our outlook for 2008, and Mike Havala will then cover our operating results, detail our capital position and also provide an update for our guidance for 2008 and then of course we will open it up for Q&A.

2007 was a very good year for First Industrial. As you can see from the press release, our funds from operations were up 12% per share that's on top of the 14% growth that we had in 2006 and our results exceeded the top end of our guidance range. Funds available for distribution, FAD, rose 24% per share and our results in the fourth quarter were particularly strong with FFO growing per share at 18%. Now, the success that we've had in our bottom line financial performance is tied directly to our focus on corporate customers, starting with understanding the trends that drive their demand for industrial space and then building the franchise to serve those needs.

While we have tempered our macroeconomic outlook for 2008 and tightened our underwriting assumptions, given the softening outlook for the U. S. economy, our strategy has long been centered on structural changes in our customers businesses that are driving the demand for industrial space. These long-term structural changes we have mentioned before that are driving demand but again they are the increasing volume of containerized cargo, rising from international trade. It's coming from the demographic shifts that affecting both population and income levels and creating more demand for storage and distribution of consumer goods and it's also coming as a result of companies that are reconfiguring their supply chains to accommodate evolving manufacturing and distribution patterns and also to wring costs out in the supply chain.

We have been building our resources to take advantage of these structural trends in several ways. First, we grew our platform by opening up new territories for investments in 2007, and those include Belgium, the Netherlands, Toronto, Calgary, Edmonton, Seattle/Tacoma and by staffing those offices with the best industrial professionals in those markets. Second, we increased our capital sources to grow these new markets. As you know we've added a new $475 million joint venture to invest in the Netherlands and Belgium. We signed a $285 million joint venture for investments in Canada, and also, we increased the size of our strategic land and development fund from $950 million to $1.6 billion making First Industrial among the leaders in private equity raised in the United States over the past three years in our sector. Third, we remain focused on growing our corporate customer relationships. I am proud to say for the seventh year in a row we received top customer service scores in the independent Kingsley Index Surveys. We are very pleased that with these accomplishments they have contributed to building the largest investment pipeline that we have ever had now totaling $2.2 billion.

In 2007 we executed well on overall strategic plans with several key accomplishments. The portfolio occupancy improved each and every quarter and we ended the year at 95.1%, with same-store NOI up 5.9%. We raised significant new joint venture capital and with that capital we made major investments in high growth markets. Our net economic gains, were a record $149 million up 20% and that reflects the combined efforts of our investment, portfolio management, and disposition teams, each of whom add value as we invest, manage and sale properties. And most importantly, we expanded our infrastructure in both new and existing markets by recruiting high caliber employees and that, of course, has led to an increased FFO per share and has set the stage for future growth in 2008 and beyond. Now with that I will turn the discussion over to Mike Havala.

Thanks, Mike. I will start with the investments area and there is three key points I'd like to make first about our investment activity overall and then I'll provide some more detail on our investment activity.

First, in 2007, we completed more than 250 separate investment and disposition transactions. That means on average we closed a transaction every business day of the year. We acquired and placed in service more than $1.4 billion and we sold nearly $1.7 billion of properties in which we created value and are now recycling that capital. So while the disruption in the capital markets has impacted the investment market in general, our business is still doing well and that's due to our product type, industrial, and of course the strong and desperate demand for high quality assets and good locations.

The second key point is that as we have discussed in the past we have significantly increased our development business. In 2007, we had $578 million of development starts and that's more than double our starts in 2006. Then as of year-end we had more than 4300 acres of land, which has a development potential of about 68 million square feet, most of that is in our joint ventures and this was approximately double the potential that we had one year ago.

The third key point, as Mike mentioned is that our investment pipeline has increased and now stands at $2.2 billion, which is the highest it has ever been.

So let me provide a little more detail on our investments. First, starting with our joint venture activity. For the full year, our investment activity in JVs totaled $805 million. That's composed of $644 million of building and land acquisitions and then $161 million of developments placed in service. Currently, we have about 5.5 million square feet of development in process in our ventures and that will total about $300 million upon completion.

Key investments in the fourth quarter in our JVs included a 263 acre site in Seattle and a 155 acre site in Phoenix. We also placed in service three development projects totaling $46 million, including the InterPort Distribution Center, which is a 598,000 square foot facility located at the Port of Houston. In 2007, our dispositions in the venture totaled $777 million and our average holding period was about two years.

Let me now turn to our balance sheet investments. For the full year our balance sheet investments totaled $610 million. And that's comprised of $471 million in acquisitions and $139 million of developments placed in service. Our largest balance sheet acquisition in the fourth quarter was an 848,000-square foot distribution center in Atlanta. Also, among our acquisitions in the fourth quarter, was a 61 acre land site in the Toronto market. Moving on to dispositions, for the year we sold 165 properties totaling $896 million, that's on our balance sheet. Our average holding period for the balance sheet properties sold was four years and notably during the quarter we sold 36 properties for $234 million, and the weighted average cap rate on those sales was 7%.

Moving on to net economic gain from our balance sheet. For the year 2007, we generated $149 million in net economic gains and that had a margin on cost of 21.6%. Then consistent with our previous guidance, 58% of our gains during the year were for merchant activity. In the fourth quarter our net economic gain was $44 million and we had a margin of 24%. On these properties that were sold, we achieved an internal rate of return of 13% and that's on an unleveraged basis.

Moving now to our outlook for 2008. For our balance sheet, we see total investments in the $900 to $1 billion range with dispositions in the range of $1.1 to $1.2 billion. We expect to produce net economic gains in the range of $146 to $156 million with margins of about 15%. We have also updated our cap rate range slightly, increasing them 25 basis points and that is both on investments and dispositions. We expect gains from our merchant activity to be about 55% of the total economic gain on balance sheet. That's similar to 2007 and that is simply based on our asset management plans for the properties that we expect to harvest in 2008.

For our joint ventures we see investments in the range of $950 to $1.05 billion and we see dispositions in the range of $1.2 to $1.3 billion and this includes the anticipated sale of the properties from our 2003 net lease joint venture that we have KFH, and then also, as you may recall in 2006, we established a new net lease program with UBS and that's for $900 million. In 2008 we expect JV FFO to grow to a range of $60 to $70 million. For our joint ventures we have reduced our expected development starts for 2008, and we now expect development starts to be about $375 million. And then total development starts in 2008, both for the balance sheet and joint ventures, are expected to be slightly less than 2007, about $0.5 billion.

Turning now to our portfolio results, with respect to our balance sheet portfolio, we again delivered strong results this quarter. Our occupancy rose to 95.1% as of year end, and we finished the year with occupancy levels of 94% or greater in 19 of our markets. For the fourth quarter, our same-store NOI on a cash basis was up 5.7% and that's 4.4% excluding lease termination fees. For the full year, 2007, our same-store NOI was up 5.9% and that compares with 2.2% in 2006. Our rental rate growth on a cash basis for the quarter was 6.2% and that's up from 3% from the year ago quarter. For the full year our rental rates were up 4.2%. Our rental rate growth was broad based as the majority of our markets delivered positive rental rate increases. Our tenant retention for the year came in at 71% and our leasing cost were very strong at $2 per square foot comparing to $2.17 per square foot in 2006. So we are very pleased with our 2007 portfolio performance and we anticipate good results for 2008. Specifically for 2008 we expect average occupancy to be about 94%. We see same-store NOI up between 3 and 5%, and positive rental rate growth. Note that occupancy will start out the year lower which is the typical seasonality and is expected to rise during the course of the year.

Next, let me give you an update on our capital position. Our current capital base is about $10 billion and that includes both our balance sheet and our joint ventures. And this, of course includes our two recently announced joint ventures, one for Canada and the other for our European investments in the Netherlands and Belgium. For just our joint ventures we had a bout $4 billion of available capital capacity and remember much of our joint venture equity capital is revolving which gives us additional dry powder for investment opportunities, which by the way we think is even more valuable in this current market environment. Regarding our balance sheet, some of the conservative qualitative features that I have discussed in the past will bode especially well for us in this volatile credit market. For example, our weighted average debt maturity is long, at over seven years. And maybe even more immediately relevant is the fact we have no debt maturing on our balance sheet in 2008 and we have less than $150 million of debt maturing in total over the next three years. So again we have very little debt maturing on our balance sheet over the next three years.

In 2007, we renewed our $500 million credit facility, and we extended the maturity out five years rather than the typical three years. We also lowered the rate on our credit facility down to LIBOR plus 47.5 basis points. Our financial ratios were strong with a fixed charge coverage for the year at 2.9 times and our FFO and FAD pay-out ratios improved to 61% and 67%, respectively.

In the second half of 2007, we repurchased approximately 1.8 million shares of our common stock at a weighted average price of $38.60, for a total of approximately $69 million. And to keep our stock repurchase leverage neutral there will be a similar reduction in debt in 2008. Currently, we have about $60 million available under our existing stock repurchase authorization and importantly note, that no further repurchases have been factored into our guidance numbers for 2008.

With regard to our strong FFO results in 2007, we exceeded the upper end of our guidance range and this was due principally to higher than expected margins on properties sold which more than offset the lower than projected JV FFO which resulted from the timing of some of our sales transactions in our joint ventures. Moving on to our 2008 guidance, we are reaffirming our FFO guidance in the range of $4.80 to $5 per share and we have updated some of our line item assumptions as follows. Number one, we have factored in a more cautious view of the U.S. economy and have adjusted our development assumptions accordingly which tempers our JV FFO forecast. Number two, we've now factored in a lower interest expense, given the lower interest rate environment. Number three, we have also increased our net economic gain projections slightly. Number four, our G&A expense is now forecasted to be up about 20% in 2008 which is actually a little bit less than originally projected. And then finally, number five, we have a lower share count in 2008 as a result of our stock buybacks in the second half of 2007.

So the last point that I should make about our guidance is that similar to prior years, we expect our 2008 FFO to trend upward throughout the year, and this is simply due to the timing of transactions in our pipeline. This is reflected in your first quarter guidance which we initiated in our press release. So with that let me turn it back over to Mike Brennan. Mike.

Thank you very much, Mike. Before we open it up for questions, I want to re-emphasize that 2007 was a very good year for our company and we look forward to a solid year in 2008. Within our organization, there is sufficient, significant capacity to grow, both in terms of the financial capital that Mike laid out and the capacity of the work force. We have grown our resources considerably and we expect FFO will be up in 2008, even with the investments that we are making to grow our platform. Our sector continues to exhibit solid fundamentals. And so while the macroeconomic outlook may be somewhat more challenging, the structural demands for our business, such as growing international trade, demographic trends, supply chain reconfiguration projects are solidly in place. And I think we are in a great position to capitalize on those growth opportunities, especially with the strong capital position and our expanded platform. With that operator, we will now open it for questions.

Thank you. (OPERATOR INSTRUCTIONS). Your first question comes from Christine Brown of Deutsche Bank.

My first question has to due with margins, they were 24% in the quarter and yet you decreased your outlook from 17% to 15% but economic gains are expected to increase. Are you just seeing the difference being made up with volume?

Kristin, hi, this is JojoYap, basically our profit margins derived from better visibility of all of our projected dispositions as they go through their asset management plans. So now we have a better view of the potential returns and margins that we can get from our disposition pipeline.

Christine, I think other component of joint venture income, are the fees, the development and construction fees that are also larger than they were last year that is another contributor to the joint venture income. So you have that as well.

My other question is on yields on acquisitions were up a little bit, 9% this quarter. Can you talk about the mix and whether or not it reflects a change in strategy in the kind of assets you are pursuing?

Is this in terms of ?

On balance sheet.

On balance sheet and in terms of acquisitions?

Yes.

No. We have not changed our focus. Our focus is still to do a number of things, first, invest in the path of growth that is driven, again by drivers that Mike had mentioned. We are fully engaged in the acquisition, redevelopment, repositioning and development business. What we have seen in the last six months is that the repositioning, and specifically the development opportunities, have potentially and will offer us better returns. So over time we will allocate capital where we see better returns.

Okay. Great. Thank you.

Thank you. Your next question comes from Paul Adornato of BMO Capital Markets.

Hi guys. Was wondering if you could give us a little bit more color on cap rates that you're seeing in the market. I know you said in your prepared remarks that you assume a 25 basis point increase. I was wondering if you could delve into that a little bit and perhaps differentiate between Class A and Class B and C properties.

Paul, this is Mike I'm going hand it over to Jojo and I think the other distinction that we are going to make here is distinguishing between both cap rates on stabilized properties and cap rates on the redevelopment projects that we are looking at because there is some wonderful opportunities in the market place based on that.

Absolutely. This is Jojo. In terms of cape rates, the cap rates for well located stabilized portfolios or stabilized buildings have ranged anywhere from very little to about 40 basis points, 40, 45 basis point with a midpoint of about a 25 base point range and when I say stabilized I mean well leased properties over 90% occupancy. Where the cap rates have widened more is in the value add type of investments. That is where, where the investments are repositioning, speculative development and land acquisitions. There, what you see is that the cap rates have widened anywhere from 25 to as much as 75, 80 basis points with a midpoint of closer to 50 to 60 basis points. That is also one of the reasons that if you look at our pipeline, our pipeline for acquisitions and investments for value add properties has increased because that is where we see future opportunity. I hope that answers your questions, Paul.

Yes, related to that, I was wondering if you have run your model, assuming an either, a larger increase in cap rates, let's say 50 to 75 basis points overall how that might affect the different lines of business.

Yes, Paul, and we have let me address basically all of the lines of our business. In terms of our economic gain projections and JV FFO projections, we have factored in already an increase in cap rates in terms of residual and basically top end of underwriting. In terms of our investment business, we have also factored that in. Bear in mind if you look historically as you, as you have seen in the press release, we provide you an investment range of anywhere from 8 to 9% cap rate. If you look historically, we, most of the time, have been closer to the higher end of the range. Also we have already also given you an exit cap rate range of 7 to 8%. Historically if you look at our guidance and compare it to what we actually sell properties at, we have also been closer to lower end of that range. So what I'm telling you is that we have been out performing our projections for yields.

Okay.

Paul, this Mike just big picture. You can run through the model and see what the effect would be of cap rates rising even more, but big picture is that what we are selling is mainly stabilized and we haven't seen much movement on that. What we are buying is mainly unstabilized and we have seen a lot of movement on cap rate up, a lot more than the stabilized stuff. And mainly it is because the people that engage in those activities, especially on the redevelopment side, are largely entrepreneurs that had a fairly high reliance on debt and high levels of debt. So, that's I think you know big picture, that's what we see. I think that represents for us a wonderful opportunity, because that is really where we will make our margin difference up. Having the wherewithal that we have and capital capacity means that we should be, we should have a significant competitive advantage.

Okay.

What you now see in the pipeline which we didn't see as much of last year, is a lot more of those value added acquisitions at some pretty descent cap rates. In fourth quarter, we show a stabilized cap rate of slightly over nine. So that's a good sign.

Finally, looking at your merchant building business, it seems like the typical REIT investor or the REIT market in general has a definite distaste for that business in this environment. I was wondering if you thought about somehow spinning off that activity or otherwise monetizing what should be a significant benefit to shareholders from that activity or if you are willing to just ride it out?

Well, look, no we're in that business. Remember that 2001, 2002, 2003, we did a great business when the market was not so conducive to leasing. We picked up our acquisition and our surplus redevelopment side of our business significantly. Look, most of the, about 80% of the acquisitions and the land deals that we did this year are in markets that are benefiting from international trade, from demographic expansion and from supply chain reconfiguration. You can take a look at the land that we bought, take a look at where the buildings are that we are buying. We have had a great track record of being able to buy below replacement cost and a great track record of being able to find some wonderful land acquisitions as well. We take the long-term view and we want to make sure, however, that we can profit in the short-run as well. So when Jojo talks about, so absolutely we are not getting out of that business. We have made some great acquisitions both land and buildings in great markets and we have got some great pricing on it. With respect to our ability to stabilize them, while that's going to be a slightly more challenging in this market, we certainly did a good job of it in the last couple of years. And if you take a look at the pipeline that Jojo is monetizing on the balance sheet and joint ventures, it is 91 and 63% respectively. We own all the properties and we are not counting on any properties in our pipeline to replenish that. So absolutely the value creation business is one that we are here to stay. Last thing, not to get too long winded on you. We make money on the real estate side of the business, we have never been in the business, although we benefited from cap rate contraction, we made our money by buying be replacement, by being able to manage construction and leasing risk very well. We are very bullish on that.

Okay. Thanks.

Thank you. As a reminder, if you would like to pose a question, press star and 1 on your telephone key pad. Your next question comes from Jamie Feldman of UBS.

Great. Thank you. Can you give a little bit more color on what you are seeing from the tenant side, in terms of like which markets you are seeing weakness and where you're seeing tenants the most concerned about what's happening in the economy?

Yes, this is Rick. Right now, we are seeing some companies taking a longer period of time to make decisions and others are putting decisions on hold. But despite that, overall, we are still seeing good activity in our marketplaces which is why we are comfortable with leasing levels and why we haven't adjusted our guidance numbers. From an overall pace standpoint the leasing pace in the first quarter is right on track with the first quarter of 2007 from a new leasing standpoint. Rents are still growing in this first quarter. TIs and concessions are stable from what we are seeing so far this quarter. Just a week or two ago, we had our leasing teams update all of the 2008 leasing assumptions and projections in our budget forecasting model. There were some changes up and down but nothing that caused us any concern at this point. So that really gives you the overall view, is there a specific market that you are interested in?

I guess, what do you think tenants are looking for and what are you watching for, for a sign that it is going to get a lot worse?

Based on the indicators so far this quarter things are still strong. Obviously, what we would be looking for is things are getting worse would be we have a severe drop in the number of prospects for our spaces, we begin having more delinquencies and overall activity is down which we are really not seeing. As I said, I don't want to be Pollyanna about it, but some companies are taking longer to make decisions and that happening. Some are putting decisions on hold but the vast majority are still active and out there. So at this point we are not seeing any signs of a slow down.

Now, Jamie, Mike Brennan, rest assured however in our guidance we did several things, most importantly we extended the lease-ups on both our existing properties that we own today as well as the developments that we expect to stabilize in '08 and '09. So we have extended those, we've modified our views in terms of the amount of rent that we would achieve. Now, probably as important I think, Rick sees though that with the high capacity utilization of the tenants, our early discussions with them was that they would, even if the business slowed down further, are utilizing so much of the facility that they would not want to give it up. I think I have made this point on conference calls before, the capacity utilization inside industrial is measured by the manufacturing plant utilization and the sales to inventory ratio are so high today that even if there's a further contraction in business, we think that the odds that we are going to have high retention are very good. Rick, we can give rhyme and verse in terms of what we have done on our bottoms-up review of that but big picture, that's what we see.

Well, one more point. We approach our tenants at least a year in advance and what we have, we haven't been seeing any abnormal responses from our tenants that would cause us any alarm in terms of their renewal timing or their renewal intentions.

Okay. And then the reduced JV guidance, it sounds like it is more from slower lease up or just more conservative assumptions on lease up?

It is mostly a function of us reducing our development starts down to $375 million in our joint ventures and the associated economics with respect to that.

Okay. Then what are you seeing on the third-party demand side? We saw Duke bring their numbers down because they're concerned about people, would otherwise buy their assets, not getting capital. Are you seeing anything along those lines?

No, this Jojo. Can you clarify your question to make sure that.

Duke came out a couple of weeks ago and brought down their '08 guidance in concern they won't be able to get as many sales done because the credit markets really aren't there for third-party buyers as they originally thought.

Okay. Sure, sure. That's a good question. Here is what we are seeing, Jamie. For well located stabilized properties, there continues to be strong interest in industrial properties. You...hopefully, you saw that even in the fourth quarter for First Industrial. And a lot of the properties we sale are well stabilized properties and there's significant for those well located industrial properties. We don't see that change. Where we see the change is when the, is in the value-added type of investments, whether it is land or underleased, underperforming buildings or when somebody engages speculative development. That's where we are focusing because that is where we believe we will shine because there is a significant fallout of well capitalized buyers there, before a lot of investors could allow leverage that's virtually gone. That's where our focus is. So there is this almost a tale of two worlds, Jamie.

All right. Thank you.

Thank you.

Thank you. Your next question comes from Cedrik Lachance of Green Street Advisors.

Thanks. Just want to piggy back on Jamie's question there. Who's your typical buyer and how do they finance the properties they acqurire from you?

Sure, Cedrik, hi, this is Jojo. If you look at a buyer profile for '07, a majority of our buyers have been institutional buyers or users. So the majority comes from institutional buyers who are typically pension funds, advisors who are advising high net-worth individuals and typically they put in about 60 to 65% debt. Maybe even lower for some pension funds because they have to maintain a debt ratio much lower than 65%. So overall the 60 to 65% financing marketplace, Cedrik, is available. For users, users use a really range the gamut in terms of debt ratios. Typically, a lot of users have bank lines that they draw upon because these are relationship banks that also lend them to their business. Now, the rest of the minority for private leverage buyers still, they do go to life insurance companies today, they do go to specialty finance companies, Cedrik, very few gets done, I think I am telling you something you already know. Very few is getting done based on CMBS-type debt and it is very tough to do that in today's market. I hope that answers your question.

It does. Do you see any difference between the way properties are financed in coastal markets versus middle of the country markets?

Overall, I see the difference based on the pricing, but not the way it is underwritten. So, in terms of lenders financing coastal markets, they value property at lower cap rates, which is what we see anyway. But in terms of underwriting, where there is a big difference is the type of investment. If you have a well-stabilized functional property, you have got very little reserves and they will allow a lower debt coverage ratio when they buy properties. If you are a private investor and you want to acquire an underleased building or particular land to embark on speculative development, the loan to value significantly comes down. And for a underleased property, reserves are high and the debt coverage ratios are much higher than stabilized properties. So that's where you will see the change.

Okay. Turning to the fees you get from JVs, the on-going fees have declined a little bit. Is it fair to assume it is because of construction management fees going down?

As far as the fees the increase in fees that we saw in 2007 versus 2006?

I am thinking just 4Q versus previous quarters, there seems to be a little decline.

Yes. No, that had to do with more so on the property management and disposition side. Dispositions were a little bit lower in the quarter in joint ventures and so it had to do more so with respect to that in the fourth quarter. Again just as a what I was referring to, just to mention in 2007 our development fees and other fees from our joint ventures were higher than in 2006. So, the composition of our joint venture FFO in 2007 was more weighted toward fees than in 2006.

Just focusing on the on-going fees, I know you are careful about talking about your fees, but what percentage of on-going fees is from asset management versus the percentage that would be from a combination of construction fees, disposition and acquisition fees.

Sure. I'm not going to give you a precise number because obviously it is a moving target as the activities move, and it is also different within the different ventures depending on the nature and the purpose of the venture. Some ventures are more asset management oriented others are more development, redevelopment so forth. But the, most of the fees that we receive from our joint ventures are from the activities of things like development and leasing and property management and so forth.

Okay. Turning to your press release on the outlook for 2008, there's a line in which you discuss book gains from property sales being $243 to $253 million expected in '08 and your net economic gains would be $146 to $156. Book gains, is that a number that's after depreciation?

Book gains is based on your sales price minus your book basis, which is after depreciation. So that's why, I know you know this, but that's why your book gains are always a lot higher than our net economic gains, because of course the net economic gains are cash in, cash out.

Okay. So your expected book gains in your current guidance for '08 versus the guidance that was presented last quarter have increased by about 20%, whereas your assumption of net economic gains is virtually the same, it's up about $3 million for both the low end and high end.

Yes.

So it is fair to assume you will be selling properties you have held for a longer period of time?

That may be part of it, but it's just a function of the mix of properties and the population of what we are going to monetize in 2008 based on the value that has been created. So, yes in general you might see that, yes.

Okay. Final question, in terms of the merchant building dispositions during the quarter, it seems to me that there wasn't any development in there. So was it all recently repositioned acquisitions, something you have acquired in recent quarters, or is there anything that can be an older, vintage property that somehow is in the merchant building bucket.

Well, I have to what I want to do is go to the sales activity and give you, give you that. In general you are right but I wanted to, I just want the make sure as I go through the properties because I know these properties really well. Okay, hold on a second. Yes. That is correct. Primarily, repositioning with the largest one, with the largest one being the Valentine Way building. Correct.

And those would be assets you acquired in the last 12 to 18 months.

I do not have, I do not have that information on the assets in terms of when they were bought. So we have to get back to you on that.

Thank you for the answers.

Okay. Thank you.

Thank you. Operator, I don't think there's anymore questions, so I just want to thank everybody for calling in, we have got a very exciting year ahead of us in 2008 with all that we have done with the platform, so look forward to updating in future quarters. Thank you very much.

Thank you. This concludes today's conference call. You may now disconnect.