Granite Real Estate Investment Trust (GRP.U) 2004 Q2 法說會逐字稿

Welcome to the MI Developments second-quarter 2004 results conference call. (OPERATOR INSTRUCTIONS). I would like to remind everyone that this conference call is being recorded on Wednesday, August 11, 2004 at 10 AM Eastern standard time. I will now turn the conference over to Mr. Brian Tobin, Chief Executive Officer. Please go ahead, sir.

Good morning everyone and welcome to our 2004 second quarter conference call. As you have just been told, I am Brian Tobin. I'm the Chief Executive Officer of MID. And I'm joined this morning by MID's Chief Financial Officer, John Simonetti and by Ed Hannah, who's the Executive Vice President of Corporate Development, Secretary and General Counsel of MID. During today's call John is going to review our financial results. And following our remarks we will open the floor for questions from all of those who are attending.

At this time, rather than reading our disclaimer referring to forward-looking statements, I would like to refer you all to this morning's press release which includes the usual disclaimer at the end of the text.

I would first like to update you on the status of our announced intention to acquire the shares of Magna Entertainment Corporation, that is those shares that we do not own. We currently have in excess of 60 percent of the shares of that company. On July 30, 2004 we issued a press release announcing that we would be offering $1.05 and .2258 of a share of MID for each of the approximately 40.8 million class-action subordinate voting shares of MEC that we did not own.

As stated in that press release, we are required by Canadian Securities regulations to include in our offering materials an independent formal evaluation of MEC prepared under the supervision of a special committee of independent directors of MEC. MEC announced in a press release dated July 13, 2004 that it had formed that special committee, that the committee had retained RBC Capital Markets to complete the required evaluation.

At this time, just as MEC was unable to do during its analysts call last week, we are unable to tell you when we expect this evaluation to be completed and to be provided to us. After the evaluation is complete and provided to us it is our intention to file with the Securities and Exchange Commission in the United States our offering materials, specifically an offer to purchase prospectus. This document must be cleared by the SEC before we can mail it to MEC shareholders.

Now as you may have read in today's Globe and Mail, it was reported that Greenlight Capital, a shareholder of MID, has sent a letter to the Ontario Securities Commission requesting that the Commission require that the proposed MEC transaction be approved by a majority of the minority shareholders of MID. I have to tell you we have not yet received a copy of that Greenlight Capital letter, so it is both inappropriate and, quite frankly, impossible for us to comment upon it. I can only emphasize that the proposed MEC transaction has been properly structured.

Now that is our update on the status of the proposed MEC transaction. And we will not be making further comment on that transaction during this conference call. Instead we will focus on the second quarter financial results related to our real estate business, which business is and will remain the cornerstone of our Company.

In terms of the second quarter results of MID real estate business, annualized lease payments at the end of the second quarter were $128.5 million, providing a year-over-year increase of 11 percent. The annual rents represent a return of 12 percent on the net book value of our income producing properties. Moreover based on MID's current share price, backing out our investment in MEC and the book value of our land holdings and cash balance, the implied cap rate of our rental portfolio is approaching 20 percent. Now that is by any measure a truly exceptional situation when compared to our industry peers, and certainly does not reflect the strength and the high-quality of our industrial portfolio.

Funds from operations in the quarter were $23.3 million compared to $22 million in the comparable period last year. From an operational standpoint during the second quarter two projects representing 215,000 square feet of leasable area came on stream. And we received two relatively minor new projects representing 37,000 square feet with a budgeted spend of $4.2 million.

At the end of the second quarter our construction group had a total of 7 projects under development, which will add 300,000 square feet of leasable area when completed. In terms of other potential projects, we continue to act as construction manager for a new 900,000 square foot manufacturing facility in Bowling Green, Kentucky for the Magna Group. We are currently in discussions with Magna in order to bring this project directly on to our books, and subsequently to enter into a long-term lease agreement with them.

I should also point out that there are other substantial development projects for the Magna Group which we're exploring. However, it has been our policy to not announce new projects until a binding agreement represented by an executed lease term sheet is obtained. That is the high-level overview. Now I want to ask John Simonetti to review our second quarter financial results in greater detail.

Good morning. Before I begin I would like to remind everyone that my discussion focuses on MID's real estate business. As Brian noted, annualized lease payments at June 30, 2004 were $128.5 million or $13 million higher over the prior year, representing an increase of 11 percent.

Since the beginning of the year annualized lease payments increased $1.5 million from 127 million. Financial drivers, including contractual rent increases, projects coming on stream, and new land leases increased annual rent by 3.6 million, while foreign exchange had a negative impact of $2.1 million as the U.S. dollar strengthened against both the Canadian dollar and the euro when the closing rates at June 30, 2004 and December 31, 2003 are compared.

On a sequential basis, annualized lease payments increased 2 percent or $2.5 million from 126 million at the end of the 2004 first quarter. Financial drivers and foreign exchange contributed $1.8 million and $.7 million respectively to this increase. Looking at the details of the financial drivers in the second quarter, we received one contractual rent increase of $.7 million from a facility of 200,000 square feet, and two development projects came on stream which increased annual rents by $1.1 million. Most of these projects were expansions to existing facilities and added 215,000 square feet to our income-producing portfolio.

In terms of the contractual rent increase which we received, it represents a three-year fixed rent bump of approximately 30 percent over the old rent and is significantly higher than those we typically receive. The rent increase was negotiated at the beginning of this lease and compensates for providing the tenants with favorable rent during the initial lease term in order to entice the tenant to occupy the facility under a long-term lease.

Looking at our funds from operations, our second quarter reported FFO was $23.3 million or 48 cents per share on a fully diluted basis. This represents an increase of 6 percent over the pro forma FFO of the 2003 second quarter of $22 million or 46 cents per diluted share. Sequentially excluding the after-tax impact of onetime cash, employee settlement expenses of $1.6 million, in the 2004 first quarter, second quarter FFO was $.7 million or 2 cents lower. This represents a decrease of 3 percent and is due to the following items.

Reported revenues net of the change in the straight lining of rents decreased funds from operations by 1 million. On a same-store basis, revenues decreased by $1.2 million driven primarily by foreign exchange as the U.S. dollar strengthened against both the Canadian dollar and the euro when the average exchange rate between the second and first quarters are compared. New projects on stream contributed $200,000 to revenues in the quarter.

Lower general and admin expenses added .4 million to FFO on a sequential basis. G&A expenses were $3.9 million in the second quarter compared to 4.3 million in Q1. I should note that the first quarter G&A of 4.3 million, which I have cited, excludes onetime employee settlement expenses of $3.9 million incurred in that period. The quarter over quarter G&A improvement is primarily due to lower salaries.

And finally the change in cash taxes decreased FFO by $100,000 sequentially. In terms of our tax provision, we reported a total tax provision of $6.9 million in the second quarter for an effective tax rate of approximately 37 percent compared to 5.2 million or 27 percent in Q1. Included in the second quarter was a onetime future income tax charge of $2 million as a real estate business was required to revalue downward future tax assets related to Austrian operations in order to reflect decreases in corporate income tax rates. As to the onetime charge, the second quarter tax provision effective tax rate was 26 percent.

On a year-to-date basis funds from operations were $47.3 million or 98 cents per share on a fully diluted basis, when onetime employee cash settlement expenses are excluded. This represents an increase of 11 percent over the pro forma FFO for the comparable six-month period in 2003, up $42.6 million or 89 cents per share, and is primarily due to an increase in revenues, excluding the impact of straight lining of $9 million, offset by an increase in G&A expenses of 4.1 million.

The increase in G&A expenses on a year-over-year basis is due to the additional public Company costs and additional staffing costs, included in G&A expenses for the six months ended June 30, 2004, but not included in the pre-spin off pro forma G&A expenses for the six months ended June 30, 2003.

Now turning to the balance sheet, the net book value of our real estate properties at the end of the second quarter was $1.2 billion including $1,067,000,000 of income-producing properties, 114 million of properties held for development, and $26 million in properties held for sale. During the second quarter one parcel of land located in the U.S. with a book value of $19 million was put up for sale.

The balance sheet of the real estate business remains virtually debt free with long-term debt of $6 million against total equity of $1.2 billion. Our cash balance at the end of June 2004 was $60 million, which is up 3 million from the end of the 2004 first quarter, and up $30 million from the beginning of the year. Looking at our cash flows in the quarter $24 million of cash was generated by operations, including changes in non-cash balances, cash used for capital expenditures of 13 million, and for payment of dividends, 9 million. On a year-to-date basis, $58 million of cash was generated from operating activities which contributed $56 million, the sale of one parcel of land for 1.3 million, and from the issuance of shares upon the exercise of stock options which contributed .7 million. Cash used over the past six months amounts to $28 million, of which capital expenditures accounted for 19 million and dividends 9 million.

This now concludes our presentation. We will now open the lines for questions.

(OPERATOR INSTRUCTIONS). Tim Rice with Rice Broker (ph).

Do I take it from your initial comment that you'll not answer any questions about Magna Entertainment or only questions about the offer?

I think that one and the other are linked, the offer and MEC. And I think in light of the valuation that is now underway at MEC, and of course our awaiting the results of that valuation, and further the material which was referred to this morning in the Globe and Mail, like Greenlight Capital, the letter that they sent to the OSC, a letter by the way that we haven’t seen as of this time. That it is difficult for me to comment.

Okay, well in that case, I’ve got no questions. Thank you.

Steve Bogart (ph) from Cathay Financial (ph).

Actually two questions. I know you said that Magna Entertainment is in the process of responding, but could you tell me if there is a particular time at which an answer is due from them? And then the second question is, if you could just tell me if the Board would consider all alternatives when it comes to the response from Magna Entertainment?

First of all, I can't tell you when an answer is due. I guess the answer will be forthcoming when the work of the special committee and the work of the valuation agency, in this case RBC Dominion Securities, is completed. And clearly they have to do what they think is appropriate on that side. And so we wait patiently for a response.

With respect to what we will do with that response, I don't want to prejudge that. That is a matter for the Board, not just the management team. And so we will await the response and make a determination at the time.

And there is no regulatory time frame or due date for Magna Entertainment to respond? If they took an inordinate amount of time there is nothing you can do about that?

Let me just ask Ed Hannah, our Corporate Counsel, to comment. But we don't expect they will take an inordinate amount of time. We think they'll respond in a responsible fashion and take the time that is necessary.

Brian basically just said the answer I intended to give. The valuation is supervised by the special committee of MEC's Board of Directors so we have no control over that. So it is an MEC response.

Jed Bonum (ph) from Cadmus Capital (ph).

Recently MEC announced that they were permitting, or in the permitting process, for a new thoroughbred track in Dixon, California. It is my understanding that the construction costs of this track are roughly $150 million. Generally understanding the finances at MEC, my estimation is that that is beyond their financial resources. I'm guessing that they're not other good third party financing sources for this development. So I guess I ask you the question, is this a development that is under consideration at MI Developments?

First of all, I think the appropriate answer is for me to give you is that is a question that ought to be put to the management team at MEC, as opposed to this management team. We're here this morning to talk about our second quarter results. And we just can't comment on that. We wouldn't attempt to comment on the details of the business plan of MEC in a MID conference call. And we, frankly, have not been involved in the transaction you're describing, so we're not in a position to comment.

In the past you have given some indication about the types of developments the Company is considering. And I just wanted to know whether this is something that your Company would consider?

Just for the record, in the past we have commented on some of the transactions that we thought provided opportunity, potential opportunity for MID. And we referred specifically to Gulfstream, to underutilized lands, to retail opportunities, we have never commented on this particular transaction that you put on the table. And I really don't have the knowledge to comment on it.

Would you, I guess a more general question, would you consider using MID or MI Developments funds to build a green field racing facility?

It is not something that we have discussed. It is not something that we can comment on. You have to put your questions to MEC. I think the comments we have made in the past are on the record. They're there. We referred to underutilize lands. We've talked specifically, as I just said a moment ago about Gulfstream and Forest City. We talked specifically about Santa Anita and Caruso. We have made those references. We have certainly made no reference to the project you just described and are not involved in it directly or indirectly. And any questions you have would better be put to MEC. And that is where you are more likely to get a more complete response.

Right. Having said that you are -- you are in the process of acquiring this Company. You have done -- I'm assuming that's a very thorough financial review of that company, and this project would be part of that analysis that you've done. I'm just trying to get a sense for whether this is the type of project that you would be interested in funding?

What I would say to you is the operative word is process. We are in process. We have made an offer. It is out there. It is quite specific. There is a process now underway, the appropriate process at MEC. And our job now is to await for -- await their response on that side. And at that stage, once the response is forthcoming, next steps will be taken.

I'm not going to attempt -- I'm not qualified to give a detailed analysis on a project by project potential -- project by project basis of what MEC may or may not be doing at any given location. I think that is asking me to do something that I am simply not qualified or able to do at this stage of the game.

Bill Charters (ph) from Booker Brown Asset Management (ph).

It is actually John Botty. I guess I'm struggling a little bit with your commentary before. It appears to me that I would be very surprised if every investor on the conference call has not already read the letter to the Board, as well as the letter to the OSC.

I'm sorry, which letter are you referring to?

The Greenlight letter to the Board.

I can tell you, John, quite in a full and forthright manner that I have checked literally as of minutes ago, including e-mails, to make sure that it didn't come by way of e-mail. We don't have that. We saw it in the paper this morning. Certainly Greenlight -- if Greenlight is on the call they can -- if they wanted to comment to the contrary, by all means do so, but we don't have a copy of that correspondence.

It’s a public --.

It is precisely for that reason I can't comment on it. I haven't seen it.

It’s a public document, and it was filed in a public 13D filing. It is a very easy thing to take off the Internet.

And I can assure you we have people who will be doing that today -- doing that this morning. But for the moment we don't have it.

I also struggled with the commentary that you haven't seen it, but you also commented that everything -- one of the things that the letter questions was whether you violated -- I will see if I can find the appropriate rule -- OSC Rule 61-501. Your commentary is such that everything with the transaction was done correctly. Why would you be making that comment if you don't have some sense of what is going in the letter?

We have seen the coverage in the Globe and Mail this morning. We have seen the interview and the commentary in the interview, and we're responding to that. We have not seen the letter, but obviously are quite interested in doing so.

After you see the letter will you make some comments -- commentary or will you be available for discussion about what is in the letter?

We will take advice from our lawyers. We will take advice from our Counsel and we will decide at that time. But frankly at this stage of the game, you're asking me hypothetical questions about a piece of correspondence that I haven't seen. I expect I will see it today.

Zack Fackof (ph) from Performance Capital.

The stock that you bought from Fair Enterprise, if the deal can go through is there an out on that sale, or is there any out on the sale by Fair at all?

I'm going to ask Ed Hannah, our General Counsel, to comment.

If a deal does not go-ahead, Fair Enterprises has the right to sell the stock -- to purchase the stock back on the same terms that it was sold to MID.

And you noted that the stock is trading at an absurd cap rate. And you see what the stock has done over the last couple of weeks. I was wondering if I can get your thoughts on what shareholders of MIM are missing?

I think we have to go back to first principles. I don't want to by the back door engage in a conversation that I indicated in the front end I would not engage in, and that is a discussion of the transactions -- the processes now underway. But I think we have got to remember that we already own, and have owned since the spin off, 60 percent of the shares of MEC. So the notion that we're somehow coming to MEC for the first time is quite frankly incorrect.

We‘re already a very substantial investor. We already have a vested interest there. We already have an interest to protect, to nurture and to enhance there. And we have said from the get go that our view is that MEC has a business plan that if executed properly can enhance shareholder value both for MIM shareholders, for MID here in Canada, and for MEC shareholders. And we have made that case I think very clearly and publicly. And I don't today propose to add something new or different to what is already on the public record.

And as an aside, the 13D came out at 8:06. Thank you.

Sorry?

The 13D came out at 8:06 this morning as a follow-on to the other guys comment.

I appreciate that. Thank you.

Sam Damiani from TD Newcrest.

Just on the Fair Enterprise deal, why was that put option put in the deal? Obviously Greenlight is proposing a rationale, and that you haven't seen that, but maybe it was referred to in the Globe and Mail. But if that put option is there then why wouldn't you just say that if Fair Enterprise still owns the MEC shares, and if the deal goes through, Fair Enterprise would do the deal based on these terms?

I'm going to ask Ed Hannah again to comment, but I'm going to begin by reminding us all that the purpose of the Fair Enterprise deal was to effectively remove Frank Stronach, who is the Chairman of MID, and who is also the Chairman of MEC -- remove from him the possibility of gaining financial advantage, that is personally, as a result of this proposed transaction. And it is -- it was at the recommendation of management that he tendered his shares and did so in advance of proceeding with this offer in order to prevent him from achieving any financial benefit. Now that has been the case at this point in time. With respect to the other part of your question, I would ask Ed to comment.

Once again, as was indicated earlier in the call, we as a management team have not had the opportunity to go through the Greenlight letter. And that part of the question was tied to that letter. So it is impossible for us to respond to something we have not reviewed yet.

I guess my question doesn't need any review of the Greenlight letter. The question is what was the reason for the inclusion of the put option in the Fair Enterprise deal?

I think Brian has already answered that question for you. We as a management team asked Frank to sell the shares at MID so he would not derive any economic benefit if the transaction was successfully completed. And that has been assured in the structure of the deal. And as part of the negotiations he asked for the right that in the event the transaction didn't go ahead, he could effectively unwind the transaction.

I guess that is the point. That part of the question has not been answered. Why does Frank Stronach need to have that right to unwind the transaction? Why would management and the Board have granted that option?

I can only repeat what we just said. What was requested of Frank was that he sell the shares to MID so that he would not derive any economic benefit if the transaction went ahead. We're talking about a scenario where the transaction has not gone ahead. It was a specific provision that was requested in the negotiations, and it was one agreed to.

I understand what you are saying. I guess an easier way of accomplishing the same goal in terms of not allowing Frank Stronach to derive a financial benefit would have been to simply say that if the deal goes through, Frank Stronach gets 576 or whatever it was for his shares, whereas the minority MEC shareholders get $7 per share. But instead the transaction was actually consummated before the deal was announced and with a put option put in to allow him to unwind it. So I'm just curious why Plan B was decided over Plan A there?

I think in the way you phrase the question you basically said that they accomplished the same results.

In a more complicated (multiple speakers).

(multiple speakers) result in the structure we have. You have given an alternative way to structure it.

No, by accomplishing the results you wanted, you could have just had him sell the shares. But instead the sale came with an option that he gains as well --.

I think we've recognized that we have made an offer. And it is going to be up to the MEC shareholders to respond to the offer, affirmatively or not. And we recognize at the end of the day the shareholders will determine whether or not they are going to take up this offer. All that has been done is that Frank Stronach has been put in a position where he has, as Ed has just pointed out again, no opportunity to derive an economic benefit as a result of this transaction as a MEC shareholder.

And number two in the event the deal does not proceed he is essentially back to where he began. That is in essence all that has happened here. And I think we need to emphasize and to point out that the action he took which prevented him from achieving the same kind of benefit that any other MEC shareholder would realize, the action he took to forego that, was at our request, precisely because we not only wanted the deal to be appropriate and transparent, but we wanted to avoid any perception of any benefit, personal benefit, to Frank Stronach as an MEC shareholder.

And I think he, frankly, put his money, if I can use that expression, where his mouth is in saying, I will forego that opportunity, one that is available to every other MEC shareholder. I think that is the principal and most important thing here on this transaction.

Sanpat Fajari (ph) from Perry Capital.

This is actually Ori Enthusial (ph) from Perry Capital. I have read the letter from Greenlight and one of the issues that it raises is the right of minority shareholders to vote on a deal when it is a related party transaction. And I guess I wanted to ask the management of MID whether or not there was any discussion or an assurance that there was no discussion that the transaction of buying Frank Stronach's shares from MEC was to avoid the appearance of a related party transaction and avoid a minority shareholder vote?

I just gave the reasons for the recommendation, which was made by the management team that Frank Stronach in effect surrender his shares at the trading price prior to the announcement of the transaction. And the reason for that was to ensure that there not even be the perception that Frank Stronach as an MEC shareholder would benefit from this deal.

And I think that is fair for me to observe that there has been an appreciation over the last number of weeks in the value of MEC in the marketplace. Perhaps some shareholders have taken advantage of that and so on. Certainly no advantage could be obtained -- could be realized by Frank Stronach by his decision to respond positively to the management committee's request that he surrender his stock. That was the only reason for that transaction.

I guess my question was specific which was, was there any discussion that the purchase of his MEC shares would avoid -- (multiple speakers) the vote of the minority shareholders?

You framed that question in reference to a letter that we haven't had a chance to review. So we're not going to answer the question. And please appreciate that. You’re asking us to comment on something and ask the question relating to what you've read in a letter that we haven’t read.

Peter Park from Park West Asset Management.

You have said at least four times now that the only reason for the Fairfield transaction was that Stronach wouldn't benefit. If that is the case, why don't you have the transaction go out to shareholders at MID so that they can vote on it?

Sir, can you repeat the question again?

I think Brian Tobin has said several times now that the reason why you’ve structured the Fairfield transaction as such was so that Stronach wouldn't benefit. That is fine. If that is the reason then why don't you have this transaction go out for shareholder approval at the MID level?

The transaction is structured in a way that does not require MID shareholder approval.

Right. That is because you went around this rule at the Ontario Securities Commission. If you could --.

No, that I categorically deny. The transaction as structured does not require shareholder approval. So why do you take a step that is not necessary?

Because it is good corporate governance. Whatever. Enjoy yourself.

Zack Splasis (ph) from Gates Capital Management.

I have a question, one that is similar to (indiscernible). I was just curious if you thought that if you didn't have to do something as far as the rules go, if that made it a good shareholder decision? It seems like you have a lot of people on the call that really don't like the deal. So if you have the majority of the people that own your stock that don't like the deal, why would you go ahead and do it if the majority of the people don't want it to be done?

Ultimately at the end of the day the only reason to do any transaction is to reflect the best interest of all the stakeholders, including the most important stakeholder, the shareholders. And as a management group, we obviously as we go through this process are looking at all of the facts, all of the information and we proceed, continue to proceed on the basis that we believe that this is in the long-term best interest of shareholders. I have said from the get go that we have got to recognize and remember that MEC is not a new entity for MID. We own and have held since the spin out from Magna International, 16 percent of the shares of MEC.

But that doesn't mean buying the rest is necessarily good for existing shareholders.

I'm saying we have an existing interest, and we want to make sure that that existing interest is protected, that the existing value in those shares is unlocked and fully realized. And obviously we're doing what we think is in the best long-term interest of shareholders.

It may well be that some shareholders would see in the shorter term or medium-term come to a different view. That is a discussion we can have. But clearly as a management team we would not proceed nor continue to proceed through the process if at some point we didn't believe that this was in the long-term best interest of all of the stakeholders, notably shareholders.

Do you think the decline in your stock price has affected your overall decision in any sort whatever?

No, at this stage of the game we had a proposal on the table. We have a process that is underway. That process now requires -- and we're awaiting a response from MEC. And we don't intend in any way shape or form to interrupt the process. We intend to respect it. Once we see that response, we will take next steps.

It is Ed Hannah speaking. I just want to remind everyone that the purpose of this conference call is to discuss the Q2 2004 results of MID. Brian stated in his preliminary remarks that, and he stated in answering -- two or three times now in answer to questions that the proposed MEC transaction -- we have updated you as to process. It is not our intention or desire during this call to discuss that transaction so we're not going to entertain any further questions related to the transaction.

That's correct.

Fidit Boujay (ph) from General Capital.

Actually it’s Ron Meyers (ph). There seems to be a little bit of upset here because everybody in the world has read this letter except you guys. And you've been roundly criticized for that, and that is fine. Why not read the letter and have another call? Will you represent that you will do that?

No, I will represent that I will read the letter. And once I have read the letter we will take advice on it. I, frankly -- it would've been very helpful if there was going to be a letter sent out or filed that seems to have been made available to (multiple speakers).

It is filed with the Securities and Exchange Commission.

It might have been more helpful -- I don't know if Greenlight is on the call -- if we had gotten a copy of the letter.

I don't mean to cast dispersions on you or on your counsel, but this thing was on the Web site of the Securities and Exchange Commission.

You're telling me it was on the Web site as of this morning.

Yes.

Well, we came in this morning and saw the Globe and Mail. I promptly asked my people whether or not we had a copy of the letter and they said no. I imagine we will have it as soon as this call is over.

Okay. Well, my suggestion is it would be fair and reasonable for you to review the letter and then --.

We will take your suggestion under consideration.

Tony, can we take one more question please?

Certainly. Your final question comes from Sam Damiani from TD Newcrest.

I will just maybe cover a few financial related questions here.

I thought you were going to let me off the hook, Sam.

Listen the developments that came on stream during the quarter, they come on beginning, end, middle of the quarter?

One was near the end and one was near the beginning. Actually no, wait, sorry, they came near the end of the quarter.

Okay.

Because the effect on revenue was kind of slight.

There is 215,000 feet with a run rate NOI of 1.1 million? Is that right?

That's right.

So that -- and what was the yield on those investments, around 10 percent or a little higher?

It is around 10 cents.

G&A was a little lower than expected, is that 3.9 a good run rate going forward?

It is a pretty good run rate. We hope to improve on that, but we will have to wait and see.

Cash taxes were a little higher than expected, anything unusual there?

No, not really. They are a little bit higher. Just a small amount can swing the effective tax rate, because we're not talking big numbers on absolute terms. But they're pretty much in line in the first quarter.

And then just finally the parcel of land it’s one parcel I gather in the U.S. is categorized for sale -- or listed for sale, I suppose?

Yes.

Can you tell me where it is and why you're selling it?

It is in the Michigan area, about 270 acres. I don't think we are going to be doing any Magna developments on there. We have held it for awhile. It is just no longer a strategic use, so best put it up for sale and deploy the capital in other industrial projects.

There is no provisions, so you obviously think you'll get at least 19 million for it. What do you think it is worth?

I'm not going to estimate on that. We hope to get more than book value, because you're right, we would have put a provision against it. So it is going to be higher than 19.

And when do you expect that to go through?

Don't know, Sam. It is a big parcel of land. It is 270 acres. So we will have to see.

So you're still at the early stages there?

Yes.

The final question is on the Bowling Green facility there. Can you give a little more color as to the likelihood of that coming on your books?

It is a great facility. You don't have a 900,000 square foot facility coming up every day. We certainly would like to see that on our books, and we're in discussions with Magna. So I will just leave it at that.

Gentlemen, there are no further questions at this time. Please continue.

Thank you very much everybody.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.