Gladstone Commercial Corp (GOOD) 2012 Q2 法說會逐字稿

Good morning and welcome to the Gladstone Commercial Corporation second-quarter ended 6-30-2012 shareholders conference call. (operator instructions). After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to David Gladstone. Please go ahead.

Well, thank you, Valerie, for that nice introduction, and thank you all for calling in. We enjoy this time we have with you on the phone and wish there were more times to talk with you.

By the way, if you're ever in the Washington DC area, we're located in a suburb called McLean, Virginia, and you have an open invitation to come by and see us here. You'll see a great team at work. There are 57 members of the team now, and we are no longer a small company, and oh, by the way, we have a couple of puppies that wander around the halls everyday.

Now let me read a forward-looking statement. This report that we are about to give includes statements that constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Act of 1934, including statements with regard to the future performance of the Company. These forward-looking statements involve certain risks and uncertainties, and based on our current plan, we believe that plan to be reasonable. There are many factors that may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all those factors listed under the caption Risk Factors of our Company's 10-K, 10-Q and the filings that we file with the Securities and Exchange Commission. Those 10-Ks and 10-Qs can be found on our website at www.gladstonecommercial.com and on the SEC website. The Company undertakes no obligation to publicly update or revise any of the forward-looking statements whether as a result of new information, future events, or otherwise.

In our talk today, we all plan to talk about funds from operations, or FFO. And since FFO is a non-GAAP accounting term, I need to define FFO, and that is net income excluding gains or losses from the sale of real estate but adding back depreciation and amortization of the real estate assets. The National Association of Real Estate Investment Trust, or NAREIT, has endorsed FFO as one of those non-accounting standards that we can use in a discussion of our REIT. Please see our 10-Q filings yesterday with the SEC and our other financial statements for a detailed description of FFO.

Now, before I begin, we have here in the room Bob Cutlip. He has recently been appointed the new President of Gladstone Commercial. We're really excited to have Bob join us, and he will be available for questions at the end of the presentation. Going forward, Bob will be participating in the presentations next time, and we will begin the call today by hearing from our Vice Chairman and Chief Investment Officer Chip Stelljes. Chip is the Chief Investment Officer of all the Gladstone Companies, and today he's calling in from Nashville, Tennessee where he is looking for a new deal. And Chip, take it away.

All right. Thank you, David. Good morning, everyone. During the quarter, we acquired four additional properties and issued long-term debt on eight of our properties. Pipeline remains robust, and we are hoping to announce additional acquisitions in the near future.

As of today, all but two of our buildings continue to be occupied, and all the buildings that are occupied continue to pay as agreed. The two empty buildings constitute about 2% of our stabilized gross portfolio income and about 1.2% of the total square feet of space we own. We continue to take appropriate action to re-tenant these properties.

The four new properties we acquired this quarter total about 505,000 square feet and were purchased for an aggregate of $31.8 million. Two of these properties are located in the Columbus, Ohio area. One is in Iowa, and the fourth property is located in Columbus, Georgia.

The weighted average cap rate over the term of the leases for these four properties is 9.6%.

The market for long-term mortgages has improved. We are seeing mid- to long-term mortgages become much more obtainable. The collateralized mortgage-backed securities or CMBS market has made a comeback in recent months, but it's more conservative than it was prior to the credit crisis. And the market remains somewhat volatile. Consequently we are looking to regional banks and insurance companies and other non-bank lenders as an alternative to finance our real estate activities.

During the quarter, we issued five new mortgages for $33.7 million. Two of these mortgages were issued through the CMBS market and totaled $21 million. The remaining three lenders were banks or insurance companies. The five new mortgages were collateralized by eight of our properties at a weighted average interest rate of 5.8%, and the weighted average loan to value obtained was 67%. Depending on several factors, including the tenant credit rating, the location of the building, terms of the loan, we are seeing interest rates in the marketplace today ranging from 4.5% to 6.5%. Because we were able to obtain long-term debt during the quarter, we continue to have ample available equity to fund additional purchases of real estate in our pipeline. Other than through our senior common stock offering, we do not anticipate a need to raise any additional capital through share issuances until later in 2012 but most likely 2013.

Despite the challenges in the marketplace, we've been successful during 2012 in raising cost-effective equity and issuing additional term mortgage debt to grow our portfolio of properties. While we are seeing signs of improvement in both the debt and equity capital markets, we believe that these markets will remain somewhat challenging during 2012 as we adjust to the new terms available in these markets.

Now, we continue to only use our line of credit to make acquisitions that we think can be financed with longer-term mortgage debt. As you recall, our customary business model calls for us initially to borrow from the line of credit to buy properties. We then obtain longer-term fixed-rate mortgages as we did this quarter as soon as we can. By doing this, we're then able to secure a spread between the rent coming in and the mortgage payments going out, thus locking in the profit for five to 10 years or in some cases longer.

From a liquidity perspective, the proceeds from the mortgages then pay down our line of credit, thus making the line available for the purchase of the next property. We expanded our line from $50 million to $75 million back in January to give us more room to acquire additional properties, and we had one additional bank join the syndication group.

With the turmoil in the credit and equity markets over the past few years, our business model adjusted so that we are matching as closely as possible long-term leases with long-term credit. And if we don't believe that we can secure an attractive debt on new acquisitions, then when we buy properties that already have long-term mortgages on them that we can assume.

Our current availability under the line of credit is $22.1 million. In addition, we currently have approximately $16 million of cash on hand. So assuming we can obtain 65% loan to value on new acquisitions, we have enough liquidity available to acquire about $108 million worth of new properties.

We also continue to improve the value of our existing portfolio of properties by reviewing and renegotiating existing leases, performing improvements at those properties and selectively selling certain of our assets. To this end, we are actively working with our existing tenants who have leases expiring in 2012 and 2013 to renegotiate their leases and extend the terms. The tenant for the one remaining lease that expires in 2012 has signed a lease extension for five years, and we're waiting on the lender on that property to approve the lease, and we believe this will be finalized in the next few weeks.

At quarter end, all of our existing tenants are paying as agreed, and our portfolio is 98% leased. We have two buildings without tenants and are working hard on finding new tenants for each. Signing new leases here will require some capital outlay for leasing commissions, tenant allowances, etc. Pipeline of possible acquisitions is strong today, and we hope to close on more properties in the upcoming months. So stay tuned for that.

And with that, I'll turn it back over to David.

All right. Thanks for that good presentation. Now let's turn to our Chief Financial Officer and Treasurer, Danielle Jones, for a report on the financial results. Danielle?

Thanks. Good morning. Our quarterly results are positive and reflect our growth from our recent acquisitions. At quarter end, our total assets increased to $497 million, up 16.2% from one year ago. The amounts outstanding under long-term mortgages and our line of credit increased to $314.8 million, which was a 14.3% increase from last year.

In addition, our stockholders equity, including our newly issued term preferred stock, increased by 18.8% to $166.1 million from our preferred equity offering earlier this year.

As discussed last quarter, we completed a public offering of the 1.54 million shares of our 7.125% Series C Term Preferred Stock at a price of $25 per share, resulting in gross proceeds of $38.5 million in January. We used the proceeds from the offering to repay the outstanding balance on our line of credit. Due to its mandatory redemption feature, the preferred stock is classified as a liability on our balance sheet, and the costs incurred related to this offering are recorded in deferred offering costs and will amortize over the redemption period ending in January 2017.

We have mortgage debt in the aggregate principal amount of $2.4 million payable during the remainder of 2012 and $58.9 million payable during 2013. We have no mortgage maturities in 2012. The mortgage payments due in 2012 are only principal amortization payments, and we have sufficient cash and borrowing capacity under our line of credit to pay these amounts.

Of the $58.9 million of principal payable in 2013, $53.9 million are balloon principal payments not due until the fourth quarter of 2013. We are currently in discussions with those lenders and anticipate being able to extend the maturity dates or alternatively refinance mortgages with new lenders.

The weighted average interest rate on our existing mortgages is 5.7%.

Because we are able to obtain a significant amount of long-term debt, we do not need to draw from our line of credit to fund our four acquisitions during the quarter and thus have nothing outstanding under our line at the end of the quarter. Our debt to equity ratio at the end of the quarter, including our new tranche of term preferred stock, increased approximately 2.7 to 1. If you exclude the term preferred stock, the ratio is 2.5 to 1.

Our sources of liquidity continue to include the cash flow generated from our operations, our existing cash on hand, availability under our line of credit, obtaining mortgages on our remaining unencumbered property and initiating additional equity securities. Our current available liquidity is approximately $38.9 million comprised of $16 million in cash and an available borrowing capacity of $22.1 million under our line of credit. The borrowing capacity on our line of credit is limited to a percentage of the value of properties pledged as collateral to the line with both the amount outstanding under the line and our outstanding letters of credit. With the capacity under our line and our current cash flows from operations, we have sufficient liquidity to acquire additional properties, fund our operations, service our debt this year, perform capital improvements to our properties and maintain our current distribution to our common shareholders.

In addition, we continue to have the ability to raise $218 million of additional preferred or common stock equity through the sale securities that are registered under our self registration statement in one or more future public offerings. Of the approximately $218 million of available capacity under our shelf, approximately $22 million of common stock is reserved for additional sales under our open market sales agreement.

And now I will discuss the operating results.

Per-share numbers referenced are fully diluted weighted average common shares. FFO available to common stockholders for the quarter was approximately $3.8 million or $0.35 per share, which was unchanged compared to the same period last year.

FFO remains flat, primarily because of the 15% increase in operating revenues derived from the 10 properties acquired subsequent to June 30, 2011, was offset by a 16% increase in interest expense due to the mortgage debt issued and assumed during the second half of 2011 and 2012, coupled with dividends paid on the recently issued Series C Term Preferred Stock, which was not outstanding in 2011 and an increase in our property operating and due diligence expenses during the quarter.

Property operating expenses increased because of ground lease payments we are now responsible for at two of our properties acquired subsequent to June 30, 2011, and due diligence expenses increase this quarter because of the four properties acquired combined with costs incurred on deals in our existing pipelines.

FFO for the six months was approximately $8 million or $0.73 per share, which was a 4.5% increase over FFO for the prior period. The increase in FFO for the six months was a result of the increase in operating revenue during 2012 from new acquisitions, coupled with the smaller increase in interest expense for the six months ended June 30, 2012, as compared to the three months ended June 30, 2012, due to the fact that the long-term debt was only outstanding during the second quarter.

We paid out 14.4% of the incentive fee during the quarter and 25.3% of the incentive fee for the six months. This amount was limited because of the additional preferred equity raised in January and debt issued in April, which was not deployed until late in the second quarter. We expect this percentage to increase next quarter with a full quarter of earnings from our most recent acquisitions, coupled with our strong pipeline. We are hopeful that we will be able to pay out a larger percentage of the incentive fee for the remainder of 2012, and as we continue to build our portfolio, we will be able to consistently pay out 100% of the incentive fee earned so that we will be able to grow our FFO.

And now I will turn the program back over to David.

That was a good report, Danielle. Thank you. We encourage all of the listeners to read our press release and our quarterly report that was filed yesterday with the SEC called Form 10-Q, and there's a lot of good information in there, and I hope you all take a chance to read that. You can find them all on our website at www.gladstonecommercial.com and also on the SEC website.

To stay up-to-date in our latest news involving Gladstone Commercial and our other public companies, please follow us on twitter using the name Gladstonecomps at the end and also on Facebook, keyword Gladstone Companies, and you can go to our general website and see more information about all the Gladstone companies at www.gladstone.com.

I think the main news report for this quarter is that we're able to acquire four more properties and issue some long-term debt to fund these acquisitions and so very positive news for our shareholders. We built up a nice pipeline of potential properties that we are interested in acquiring and are in due diligence phase on those. Because of that pipeline, we hope to be able to grow the assets and the portfolio even more during the second half of 2012. With the increase in the portfolio properties comes greater diversification for all shareholders, and we believe we'll get better earnings as well.

We are still selling some of our senior common stock and have sold over $1 million worth to date. Momentum is building there. We've made monthly dividend payments to those folks, and that program continues to get stronger. I think the Company is in a great position to increase its assets, and to increase the income on those assets during 2012, I think it's going to be a great year.

On another note, I've been able to find some attractive long-term mortgages, and the group here has been able to find mortgages in the marketplace from banks and getting much better, and I think it's almost as robust in some cases as it was four or five years ago, and we now have long-term mortgages on 68 of our 77 properties, and the remaining properties are pledged on the collateral in our line of credit or two of them are obviously the ones we don't have mortgages on or have mortgages on but are not paying rent these days.

We also continue to look at properties with mortgages already on them, but we can assume and, therefore, we don't have to go find mortgages for them or those we can secure financing and close simultaneously with the acquisition as we did with three of the properties acquired in 2011 and two of the properties thus far in 2012. We don't close debt -- if we don't close debt simultaneously after using our successful obtained debt on the properties a few months later, we use our line of credit and get there.

The marketplace for us is still divided into these three major areas. They are the tenants that have AAA or triple BBB rating that are located in high-quality real estate that's being sought after by a large real estate investment trust and insurance companies and some pension funds. But cap rates on those continues to move around. I don't know where they will stop, but they continue to go lower, and that's just the cap rates that we can't possibly handle.

Small real estate portfolios are another group that we look at. These are properties like fast food locations or pharmacy chains. They are being purchased by individual investors at cap rates between 6.5% and 7%. That's moved down a bit more as people have moved into that marketplace. They do this for income. Instead of doing a bond, they buy the real estate. We purchased two of those last year that were somewhat out of the normal marketplace for these kind of properties and got them at very substantially higher cap rates.

As most of you know who follow us, the area that we like to invest in is the middle market where we see non-rated tenants and small- to medium-size businesses for commercial and office and industrial properties, as well as some medical properties. We like those because we have a great underwriting staff for the tenants, and we can underwrite them the same way we would if we were lending money to them or buying their businesses. And so our competitive advantage is the expertise that we have to underwrite the non-rated business tenants in conjunction with the acquisition of the real estate.

So we're in a good position to see a lot of opportunities here. Cap rates for these groups are in the 8%, 9%, and sometimes a little higher and after leverage, when the rate of return is in the 11% to 15% range return on equity. So, good opportunities for us there to continue to do what we're doing.

We're focusing our efforts on finding good properties with long-term financing and match those long-term leases with long-term debt. And being able to lock in for the long-term financing is wonderful for us. We are much more optimistic that things are going to be positive for us in this next 12 months. So while we will proceed cautiously as we always do, we are expecting some real beneficial transactions in the near term.

Much of the industrial base that rents industrial and commercial properties, which we like, remains pretty steady. Most of them are paying their rents as agreed. We still have some businesses that have problems, but in my way of thinking, we are still better off this year than we were last year, so things continue to get better. However, it's worth noting that economic growth has stopped in this country. We seem to be slipping not perhaps into recession, but we are certainly going sideways because there's so much uncertainty about what government may do. Past stimuluses haven't worked, and so, as a result, we are just wondering where the economy is going at this point in time and just being very cautious.

While I'm optimistic that this Company will find future transactions very good, nevertheless we continue to be very cautious on acquisitions as we've done in the past. We made it through the last recession without cutting dividends or having a lot of problems from tenants, and if there is another recession coming, my way of thinking I think our portfolio will continue to stand the test again.

We are successful in raising commons equity twice in 2011, and we raised preferred stock in 2012. I think we can raise new equity if we need to in the future years. So, at this point in time, we're in pretty good shape.

July 2012 the Board voted to maintain the monthly distribution of $0.125 per common share for July, August and September or at the annual rate of $1.50 per share per year. This is a very attractive rate, such a well-managed REIT like ours. We have now paid out 96 consecutive common stock dividends since inception, and we went through the recession without cutting our dividends.

Because the real estate can be depreciated, we are able to shelter the income for each of our shareholders. The distribution in 2011, for example, was 83% of return on capital, and as all of you know, that's tax-free. This is a very tax-friendly stock in my opinion, and I think it's one that can go into a lot of personal accounts. This return on capital is due to the depreciation of the real estate assets and other items that has caused earnings to remain very low after the depreciation, and that's why we talk about FFO because that means you've added back the real estate depreciation.

Depreciation of a building is a bit of a fiction. It's a tax accounting thing. It's a fiction since at the end of the depreciation period, the building is still standing. While you might have to put some money into the building, it's not worth zero. So if you own the stock and it is in a non-retirement account as opposed to having, say, an IRA or retirement plan, you don't have to pay any taxes on that part that is sheltered by the depreciation. However, the return of capital does reduce your cost basis on a stock, which may result in a larger capital gains when the stock is sold.

With the stock price at about $17.29 close yesterday, the distribution yield on the stock is about 8.7%. Many REITs are trading at much lower yields. I just read the entire REIT universe is trading at about a 4% yield. I think we were trading at 4% yield. We would be a stock price of $37, and all the triple net REITs, which are similar to us, are trading at about a 5.4% yield. And if we were trading at that today, we would be at $27.70 per share, and there's really no reason we can't get this into the 20s because of such a stable and strong portfolio that we have today.

We've traded there in the past. We've been in the $20s in the past, and it's just going to take some folks wading into the stock and bidding it up so that the yield goes down.

We will vote in early October during our quarterly board meeting to declare monthly distributions for October, November and December. And before we go to questions, let me mention that Lindsay is here as our Investor Relations person, and she can answer many of your questions. So if you have a question that comes up after this, please call Lindsay. She has the answer to most of the questions, but if she does not, she can always find some of us in the office to get that question answered.

So now we'll stop and have some questions from our loyal shareholders and analysts out there who follow this wonderful REIT, and would the operator come on and help us listen to some of those questions and see if we can answer them?

(operator instructions). John Roberts, Hilliard Lyons.

I've got a few questions here. Due diligence expense rose pretty heavily in the quarter. A), what is your expected run rate on that going forward?

Well, what's happened to us, as you know, John, is we used to be able to amortize all of that expense. It was about $0.035 this quarter, and some of that was expense that we have for deals that we are trying to close in future quarters. But the large amount of it was due to those deals that we purchased and had to write off all of that due diligence expense. We are not able to amortize it anymore. And unfortunately I think as we continue to ramp up and close deals, the due diligence expense will stay high. So it's directly related to the number of transactions we close, and it goes right into the P&L. And that's what dampened the P&L this time is a lot of due diligence expense.

All right. So that number you had in the current quarter, which was what, $519,000 or somewhere in that range, we should look at that range we should look at that -- or $528,000 -- we should look at that going forward as being a run rate?

You should just say to yourself, if they closed that many deals as they did, then that's going to be the run rate. So you make an assumption about how many deals and then, let's see, maybe divide that number by -- the number for this quarter by 4 or 5, and that would be sort of the average due diligence expense.

Okay. What's the return on investment you're getting on that? Are you guys looking at that? I assume that you feel pretty good about what you're spending versus what you're getting from an acquisition perspective.

Yes. It's unfortunate that it costs us that much to get a deal closed, and it's a higher percentage obviously because these are smaller transactions, and you just about spent the same amount of money for a small one as you do for a large one. So, as a result, when you do the appraisal and you have the lawyers and the research that it's all done, some of it is done here, but obviously we hire outside people to do some things such as structural analysis, those kinds of things. It just happens to hit, and it hits in one quarter. So if you close a lot of transactions in one quarter, it's going to damage that quarter's earnings.

Okay. Very good. Dividends, I mean obviously you didn't cover it this quarter. You said that you've declared it here for the next quarter. You still feel pretty good about it at this point? I'm obviously getting questions from financial consultants about that. So I just wanted to be able to be able to go back to them and say, yes, David is still very positive on the dividend.

Well, add the $0.035 back. So, if we just close down doing deals, you would cover it very well, but we don't want to do that. So, yes, we have plenty of money to cover the dividend, and from a perspective of growth, as you're going to wait down the earnings every time you close a deal so, again, we're going to make our dividend payments, and obviously we damage our incentive fee first. So, you've seen that being damaged first, and don't like to do that because that's something that everybody looks forward to hear. So we are taking the first hit on that, and you shouldn't worry about the dividend because you are covered in essence now.

Very good. The other line item looked like it jumped pretty significantly this quarter as a percent of revenue would be the property operating expenses. Is that a run rate that you have -- has something happened where you have got higher property operating expenses as a percentage of revenue? Are the properties you are purchasing more expensive to run? Are they non-triple net, and what's the story there?

Danielle is going to answer that one. She's closer to the number.

There was a couple of properties we've acquired subsequent to June 30, 2011, that had ground leases on them. So we are actually subject to the ground lease payments, which fell under the property operating expense line item now. Our rental income covers some of that, so you'll see some of that in the rental income. But I would probably say that's a pretty accurate run rate.

I mean we also have expenses at our two vacant properties that we are now incurring. So if we release those, we would expect those expenses to go down. But for now I think that's a pretty accurate run rate.

And a final question is, David, can you discuss the acquisition pipeline a little more? I know you said you have got a lot of due diligence expense, so I assume that indicates you've got quite a few properties that may be on the hopper if we are looking at purchasing.

Well, Chip can probably better answer the pipeline question. He's closer to it than I am. Chip?

Yes, I mean I don't have it -- we never released straight numbers on it, but the pipeline has remained good, even though we've closed properties, and those obviously come out of the pipeline because they are on the books. But they have remained good, and I think with Bob Cutlip onboard, we are pressing forward as aggressively as ever to put more deals into the funnel. So we're pretty optimistic that deals at cap rates that are attractive and accretive for us are out there, and we're able to get them in, and I think we doing a good job of processing the pipeline.

Very good. Thanks, Chip. Thanks, David.

Dan Donlan, Janney Capital Markets.

Thanks. Good morning. It's actually Elizabeth Bland here with Dan. I'm just wondering if you have any color on prospects for the two vacant properties?

We do. We are working it hard obviously, and we had one already lined up and something happened to them. I can't remember the exact story, but we are working. We've got, oh, I would say two possibilities in Richmond and only one possibility in St. Louis right now of looking at the properties. But again, the one in St. Louis is in much better rental capacity position, if you will, and I expect that want to go sometime in the next six to eight months.

Okay. And then as you look out at your portfolio over the next few years, I know you're working on extending the remaining 2012 expiration, but do you see any other major vacancy risks either through non-renewals or any potential tenant bankruptcy?

I think the biggest problem we see on the horizon right now is the one we have in Minnesota. It's a building that we had for Unisys. Unisys vacated part of the building. They are still in a large part of the building, but we're going to have some vacancy there come next year and unless we can find tenants.

Now we've got a lot of tenants looking at it because it's a very attractive space, but at the end of the day, you don't know until a tenant actually signs a lease whether you've got them or not. So, that would be the next one to put on the worry list, if you will.

Okay. Great. Thank you.

Justin Meng, V3 Capital Management.

I have two questions for you, one related for leasing and one related to the balance sheet. With regard to your Roseville, Minnesota asset, there's been discussion about this being leased as a data center, and I'm just curious from your perspective, what kind of TI wouldn't be needed to put into that asset to bring it up for leasing standard?

Yes, there's two approaches to that. First of all, Unisys has a data center in there. So we already know what their costs are and what they are doing. So they're not moving out for that data center. But we're looking at it from a number of perspectives. One is, can provide the shell, which includes the powers there that connect to all the things that you need to have a data center such as cooling are all in that location or can be set aside and put in place relatively easily on our side.

So we're trying to work that marketplace of saying we can provide the shell if you want to provide the buildup to put your -- obviously get a lower rental rate. If you go to the other end of the extreme where your are providing all of it, we looked at it and we have a couple of consultants that have talked to us about it. You do it in suites in terms of carving up part of the building at a time. You don't convert the whole thing to data center overnight obviously. That would be a horrendous expense, and it would cost you anywhere from $6 million to $8 million to do a suite in terms of a data center. And we may partner -- we've talked to a couple of the data center managers and data center REIT people about having them provide some of it.

Now, if we put $8 million in, the rents would be astronomical compared to where they are today. So it would cover it. It's just a question of how much money we want to have in any one building in any one space with any one tenant. So a lot of consideration there, but we are in the marketplace marketing it as a data center. A lot of people are looking at it from that perspective, as well as a group that wants one of the -- one portion of the floor as a call center, which was obviously a very different approach to that building.

So we've got a number of tenants moving around, and we've put out some -- we've answered some RFPs for some of them, but it's moving along.

Got it. And if you were to go with a high funding sort of scenario, how would you fund those leasing costs?

Well, first of all, we have a line of credit, and we obviously can raise money in the capital marketplaces, neither of which I'm excited about doing because there's just a lot of money to invest in that location. So I'd rather do a partnership with someone or end up just selling the building to somebody. Some of the real estate investment trusts are in the data center business. If we landed one of these suites to some potential tenant, I'm sure it would be a very attractive purchase to some of the people who are in that data center business.

Got it. Second question is probably for Danielle. With regard to the book value per share, I'm looking at your latest investor presentation. On page 28, it states that net book value is roughly $19.37 a share. In prior presentations, it was closer to $14.00 or so. Can you just sort of walk me through how to calculate it and discuss what drove the $5.00 a share increase?

You know, I don't have that sitting in front of me, and I'm probably going to have to go back and look at it to see how we exactly calculated that number. But if memory serves, we added back depreciation to get to the book value per share, and I think it was cumulated depreciation over the life of the portfolio. But let me take a look at it, and I can post it to the website or send you an e-mail afterwards.

We have a Q&A on the website, and when we get questions we can't answer on the phone, we usually post them. So we'll post your question and an answer to it on the website sometime today.

Got it. I haven't been able to attribute it exactly, but it looks like there might be inclusion of preferred equity in that calculation. So I am just trying to confirm that.

We'll take a look.

Thank you, sir.

Next question.

(operator instructions).

Okay, Valerie. It sounds like it's no more questions.

That is correct.

All right. Well, we all thank you for calling in. We enjoy this time, and if you have questions, just e-mail them or call Lindsay here. She's always very anxious to get your phone calls and get the answers back to you. Thanks, again, and that's the end of this call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.