Mid-America Apartment Communities Inc (MAA) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for participating in the Mid-America Apartment Communities fourth quarter earnings release conference call. The company will first share prepared comments followed by a question-and-answer session.

At this time I would like to turn the call over to Leslie Wolfgang, Director of External Reporting. Leslie, you may begin.

Thanks Matt, and good morning, everyone. This is Leslie Wolfgang, Director of External Reporting for Mid-America Apartment Communities. With me are our Eric Bolton, our CEO; Simon Wadsworth, our CFO; Al Campbell, Treasurer; Tom Grimes, Director of Property Management; and Drew Taylor, Director of Asset Management.

Before we begin, I want to point out that as part of the discussion this morning, company management will make forward-looking statements. Please refer to the Safe Harbor language included in yesterday's press release and our 34X filings with the SEC which describe risk factors that may impact future results. These reports along with a copy of today's prepared comments and an audio copy of this morning's call can be found on our website. I'll now turn the call over to Eric.

Thanks, Leslie and thanks to everyone on the call for joining us this morning. Simon and I will provide a few comments on the quarter and our forecast for 2008 and then we will open the line for your questions. As reported in yesterday's earnings release, Mid-America ended 2007 on a very positive note. Our fourth quarter same store result was one of the best performances we have had in the past 10 years. For the quarter, Mid-America captured 12% growth in FFO per share and 19% growth in AFFO per share. Year end same store occupancy increased 60 basis points over the same point of the prior year to 94.8%. This is the highest year end result we have posted over the past 11 years. In addition to the strong occupancy, leasing concessions were down a significant 38% over the comparable prior year quarter.

The strong fourth quarter supports our belief that leasing fundamentals remain in an overall healthy position across our portfolio. As we head into 2008, we believe we are in a position to generate another year of solid results. Simon will walk you through the details of our 2008 guidance, but our basis of expecting another good year is built on the following three key points.

First, as we commented in last quarter's call, Mid-America's portfolio is not heavily exposed to the pressures from the excess of single family condo inventory that is impacting apartment leasing in a number of markets across the country. In our properties, traffic levels are holding up well. We continue to see evidence that the return to more disciplined mortgage financing is reducing our resident turnover attributable to home buying. Continuing the pattern that emerged in the third quarter, resident turnover due to homebuying dropped again on a year-over-year basis, declining by almost 8% in the fourth quarter as compared to prior year. Overall we expect to see continued positive absorption and stable leasing conditions in 2008. In fact, last week's same-store occupancy for January month end was 95.3%. It's worth noting that is an increase of 90 basis points in occupancy from the same point last year and up 50 basis points from year end just a few weeks ago.

Secondly, we believe that during 2008, we will capture year-over-year momentum from various new systems and technologies implemented over the past year. We continue to see upside from the implementation of LRO, the automation of processes associated with upfront application and move in fees, additional fee opportunities in the area of utility billings and additional efficiencies recently introduced integrating our software with outside collection agencies. By the end of the second quarter we expect to complete installation of new web-based advertising and leasing programs -- which will provide a fully automated seamless leasing process for potential residents. In 2008, we also are introducing new web based tools for interacting with our existing residents as well as enhancing several aspects of term processes. As most of you know, we have made a major effort over the last few years to retool and automate many aspects of our operating platform. Our systems and property management folks have done a terrific job with these projects. We continue to build capabilities in asset management and property management that has a growing competitive advantage over many of the management companies that we compete with in our local markets and submarkets.

And finally, we expect earnings momentum in 2008 to remain solid as a result of the excellent results being realized from our unit interior renovation program. Our team completed just over 2,000 renovations in 2007 and we expect to complete around 3,000 this year. Our properties are putting through very strong rent increases, averaging 14%, above and beyond the normal market rent increases we capture on non-renovated units. As we penetrate more of the portfolio with this program, the overall impact to operating results will increase. The benefits from this initiative are both on the revenue side for rent increases as well as increasingly lower turn expenses as these units are upgraded and new features are installed.

On the transaction front, we believe it is likely that opportunities are improving for making new acquisitions. Obviously, some of the aggressive leveraged buyers are out of the game for the moment. Well capitalized balance sheets with prudent performance and closing transactions are in a stronger position, and we are optimistic about improving opportunities to capture investments that meet our hurdles. For our own account, we are currently looking at a number of investment opportunities that will enable us to continue upgrading the age and quality of the portfolio. At an average age of now 15 years, Mid-America's portfolio remains one of the youngest among the apartment REITs and clearly one of higher quality portfolios for markets and submarkets where we operate.

As noted in yesterday's earnings release, we recently closed on our first acquisition for Mid-America Acquisition Fund I, a joint venture we established last year. The property, located in a strong job growth inner-tier suburban location in Atlanta represents the sort of turnaround and value add opportunities targeted for this fund. Through repositioning the curb appeal of the community and unit interiors, along with the ongoing on-site operating platform, we expect to capture a very attractive investment return for the fund and for Mid-America shareholders. We have another acquisition for the fund currently on contract and undergoing due diligence. We have quite a bit underway and are indeed optimistic about the opportunities and outlook for 2008. While we expect to see some slight moderation in 2008 as compared to the very strong performance captured over the past two years, we nevertheless expect to deliver another year of steady progress and good results. We are comfortable that our regional focus and unique diversification strategy across the Sun Belt coupled with a disciplined capital deployment program and a very strong operating platform will continue to generate performance and returns to capital that will be very competitive in the apartment REIT sector. That is all I have. Simon, I will turn it to you.

Thanks, Eric. Our fourth quarter FFO per share of $0.93 was $0.02 ahead of the midpoint our guidance driven by strong operating results, driven by strong operating results and lower interest expense. Included in our results was a $0.02 noncash charge associated with the refinancing of our Series F preferred and income of $0.01 from the sale of a land parcel, both of which are included in our guidance. For the fourth quarter, year-over-year same store NOI growth was at the top end of our guidance at 7.9% and one of our best quarterly results. The same store NOI growth prior to the accounting adjustment to straight line concessions was 8.9%, also close to a record. Same store revenues for the quarter were up 4%. Without the straight line revenue adjustment, the increase would have been 4.6%. Effective rent increased 3% on the concession reduction that Eric mentioned and on the 1.5% increase in average rent per unit. Before the impact of straight line in rental concession, effective rent was up 3.5%.

Same store expenses dropped 1.2% compared to the fourth quarter of 2006. Excluding taxes and insurance, property level operating expenses grew by 2.4%, but our insurance expense dropped 25% effective with the renewal last July and we had a good quarter for real estate taxes which increased only 1.8%. A year ago, we issued guidance for 2007 of FFO per share of $3.40 to $3.50 and same store NOI growth of 5 to 6%. We ended the year on the upper end of the range on each of those measures. Our NOI growth rate was only slightly below that of 2006, and FFO grew while we continued to expand our investment in projects that deliver long term value but carry short term FFO dilution, such as our modest development program, growing investment lease up properties such as Palace Ranch in Phoenix, and the sale of four higher cap rate older properties. Together we estimate that our three lease up properties plus our four dispositions cost us over $0.13 of FFO dilution last year.

For the full year 2007, AFFO increased 12% to $2.91, $0.04 above the midpoint of our beginning year guidance. Recurring capital expenditures dropped $0.64 a share, a reduction of $0.10 from the unusually high number in the prior year. Excluding the redevelopment program, total property capital expenditures at existing properties was $700 a unit in 2007, or $1 a share, and we expect this to continue at approximately the same levels in the future.

Results for the quarter included double digit same store NOI growth by our high growth markets with strong revenue performance in Dallas, Houston and Nashville, and strong overall performance in Greenville and Tampa. Other markets with double digit NOI increases include Memphis; Austin; Jackson, Mississippi; Chattanooga; Augusta; and Lexington. Revenues were down on a comparative basis by 1.8% in Jacksonville, mainly because of competition from single-family homes with just one large property. In Columbus, Georgia, revenues on our two properties dropped 1% because of troop deployment.

Strengthening markets and the implementation of the yield management software have enabled us to reduce concessions in the fourth quarter on a cash basis from $460 per move in a year ago to $201 this year, a 56% reduction and down from 3% of net potential rent to 1.3%, which is likely now approaching a stabilized level.

Turnover increased 1.6% for the quarter, compared to the same period a year ago, mainly because of an increase in job transfers, including military. As Eric mentioned, the number of people leaving us to buy a house continued to decline, dropping to 25.9% of moveouts from 28.5% in the fourth quarter of 2006. The number of people leaving us to rent a house dropped by 30 basis points to just 2.8% of moveouts. Net collection loss also declined from 0.74% of net potential rent to 0.69%.

Turning to the balance sheet, our leverage, defined as debt plus preferred to total gross fixed assets, dropped by 80 basis points from the end of last year to 59.2%. As a percentage of total market capitalization, our debt plus preferred stands at the sector median, 51.4%, and our fixed charge coverage continued to improve from 2.15 in the fourth quarter of 2006 to 2.37, ahead of the sector median. We have just extended the maturities of our Fannie Mae credit facility to between 2014 and 2018, and we have a lot of balance sheet capacity. We are fortunate that the apartment sector is unique in having Fannie and Freddie to provide debt financing, and our conversations with them indicate that they have plenty of lending capacity. The two agencies have been our primary lenders for many years and we have strong long term relationships. We have over $300 million of unused precommitted credit under our agency and bank facility, of which $160 million is available under in-place mortgages and an additional $150 million is committed at our existing credit spreads.

Also, we benefited as Treasury and swap rates have dropped, and as agency debt securities would trade very favorably compared to LIBOR. We are well positioned to reduce our average cost of borrowing in 2008. As we have $180 million of debt maturities, we anticipate the financing of $150 million of acquisitions and 15% of our debt is floating rate. This will have helped us take advantage of what may become an improved opportunity to make some attractive investments.

We are glad that in this environment our business strategy is safer than most apartment REITs. We don't have a lot of capitalized overhead and interest expense or major development pipeline (inaudible). Our FFO is not dependent on businesses that carry a lot of transaction risks and we have seen over the years that our three tier market strategy provides additional stability in operating performance during tough market times.

Our 2008 forecast detailed in the release takes into account slowing economic growth and a continuation of what we think is a long term shift of households back to the rental market. There's a lot of uncertainty, but we think revenues will continue to be fairly strong in most of our markets, especially in Texas and the Carolinas. We expect solid growth in some other markets, including Atlanta/Memphis and Nashville, and in many of our growth and income and stable markets. Florida will likely continue to grow at a more moderate rate, coming off some years of extremely strong performance.

We have a couple of advantages that are helping us offset slower market growth rates. Our revenues will be helped from a relative basis on at least the first six to nine months of 2008 by the implementation of LRO in the second quarter of last year. Secondly we believe that the straight line adjustment that's cost us $0.05 a share in revenues in both 2007 and 2006 should no longer be a drag in 2008. The combined impact of these should be 150 basis points of same store revenue growth. So we think that our forecast of same store NOI growth in the $0.04 to $0.05 range compared to 5.8% in 2007 seems to be reasonable, with revenue growth of 3.5 to 4.5%.

I commented about the $155 million of Series H preferred in the past, which is callable in August of 2008. This coupon is 8.3%. With this [two] forecast, one with and one without the $0.18 per share noncash cost associated with calling this preferred. We expect to increase the number of properties we will sell that are either older or in some low growth markets. Assuming we sell approximately $60 million, this could dilute FFO by $0.04 to $0.05 per share on a 12 month basis. We will continue our investment program in development and lease up properties and our two development projects.

While our investment focus will be on the high return opportunities in our redevelopment program and our Fund I joint venture, we have included $150 million of wholly owned acquisitions in our guidance. In January we closed on the wholly-owned acquisition of Cascade at Fall Creek, a new property beginning lease up in Houston, and Milstead Village in Atlanta, our first acquisition for Fund I. The acquisition environment continues to be very competitive, but Cascade was a special situation adjacent to one of our existing properties in an exceptional submarket. We think we have an advantage over many in our sector in making some attractive investments in this environment as well our cost of equity has risen, our cost of debt has almost equivalently dropped. We remain disciplined and frequently evaluate on an MPV basis the relative attractive (inaudible) strategies, including rebudgeting shares.

Excluding development, property capital expenditures are forecast to approximate $28 million to $29 million plus $2 million in newly acquired properties plus redevelopment. We anticipate that we will fund about $17 million for our share of the equity in Fund I on joint venture. We plan to finance our funding needs with almost $60 million in proceeds from property sales with debt under existing financing arrangements and if the equity markets recover, with equity from the continuous equity plan. We anticipate that our borrowing and leverage will rise slightly, but out fixed charge coverage should end this year at only about 10 basis points below current level.

Thanks, Simon. Our plans for 2008 are focused on deploying capital that will deliver steady and high quality earnings, cash flow, and long term value. We have always been disciplined about capital deployment and underwriting practices. We believe this discipline has enabled us to avoid some of the pressures and earnings volatility and balance sheet strain now evident with other strategies. With the solid earnings platform and balance sheet now in place, we plan to pick up efforts a little with capital recycling and will monetize internal rates for return out of some of our secondary and tertiary markets that I believe will surprise some people. We are committed to a steady program of continuing to upgrade our portfolio of properties and retain one of the younger portfolios in the REIT sector and in the markets where we operate. We believe that we are in a good position to continue delivering earnings performance and returns to capital that compete very well within the apartment REIT space, and we believe is being done without a lot of the volatility and risk inherent in other regions, markets, and strategies. Matt, that is all we have in the way of prepared comments. We will turn it back to you for any questions.

(OPERATOR INSTRUCTIONS) Our first question is from Kristen O'Connor from Morgan Stanley. Your question, please?

Thanks. Good morning. What level of job growth are you expecting in your 2008 forecast, and how does that compare to 2007?

This is Al. What we are basing our forecast on (inaudible). We base our forecast primarily on [REITs] and on economy.com and other providers like that. And generally what they are calling for in 2008 that we can see is GDP growth around 2 to 2.5% and with job production I think a total of about 1 million jobs adding in 2008. In our markets, we think that most of our markets have favorable job growth and expect that. We put that in our revenue performance -- in general, a modest growth period. That is what it is based on.

Okay. And what -- I don't know. Can you comment on the price and cap rate that you paid on the Cascade at Fall Creek asset during the quarter?

I can. We paid about a 5.6 cap rate, which is a little over 6 to 6.4 NOI yield on that, and we paid about I think it cost us $23.5 million for that deal at the Cascade.

And of course that property was just beginning lease up. So that is a stabilized cap.

Yes, I am sorry.

We will have some dilution for the six to nine month.

We will and we expect to have $0.025 to $0.03 over the full year diluted on that. But once it stabilizes, those are the cap rates you should see.

And you comment on the overall trends you are seeing in cap rates in your markets? Any change since last quarter?

Chris, this is Eric. I would tell you that it is still a little fuzzy out there right now. Clearly there is a lot of capital still lining up for good transactions and deals that we are looking at, both new deals as well as some of the repositioned value add plays. It appears to be still pretty competitive. Obviously the high leveraged buyers are out of the equation now, but for modest leveraged buyers -- and of course with Fannie and Freddie there, there is still plenty of capital. Based on the deals that we are looking at, and all the things we've studied, it does appear that probably a 50 basis point shift has taken place over the last four to five months, holding all the other assumptions stable. That's where we see pricing at this point.

Okay. Thank you.

Our next question is from Bill Crow of Raymond James. Your question please?

Good morning, guys. Following up on that question, the $150 million acquisitions are a little higher goal than we would have assumed. Do you think that's going to be more back end loaded? Does it pay to wait and see where cap rates ultimately go?

Bill, this is Eric. I suspect that it will probably be more back end loaded. Right now, it is still tough to make the numbers work. We look at a lot of things, but as I was just saying, there is still a lot of capital chasing in these deals, and some of the sellers are still getting pretty good pricing. The only way we are able to make things work right now is somewhat similar to Cascade where we have a special situation where we own the property right next door or we have a unique relationship with the developer or seller in some way where we can get it on an off marketed basis. So I do suspect that it will probably be more back end loaded. We are hopeful -- we continue to believe that the markets are recalibrating a little bit and we will have to see how this spread between public and private pricing continues to work its way out and hopefully we will see more opportunities that make sense for us.

Are you seeing any relief -- I know you are not doing development but construction costs in your kitchen and bath program, just your normal turns? Is there any relief there given the slowdown in the single family market?

I would say not a lot. Drew you want to add anything?

From a development point of view or a redevelopment point of view, our costs are what they have been in the past. So we are not seeing any net change in what it is costing us to redevelop or develop at this point.

On the development front, where you may see change over the next year is in land costs. I think material costs, I don't think we are looking at any declines, at least from what we see. We don't do a lot of it, as you know. But we are not seeing a lot.

Finally in concessions, that has clearly been a benefit to you as you brought those things down. How much is left to recapture? Are you actually starting to see concessions go up across any of your markets?

Bill, what we have in the forecast as a continued decline of concessions. I think there are about 1.9% of net potential ramp. We project them to go down about 1.4%, which is a couple million bucks in reduction. So then I think, concessions will continue to be a part of our platform on a much reduced scale. So we are seeing some improvement (inaudible)

Thanks guys.

Next question is from Rich Anderson from BMO. Your question, please.

Hi, thanks. Good morning, everybody. Just a clarification on your same-store closure, the total same-store -- that takes out the straight line impact or that includes the straight-line impact?

We reported including the straight-line impact. If you go to our supplemental data, you can see it without that.

So the revenue for fourth quarter was up 4.6 operating, 4% total? The total has the straight line in it?

That is correct.

Okay. So if it has the straight line in it, wouldn't that suggest if the number is lower that your concessions are higher on a year-over-year basis?

Go ahead, Al.

What that suggests is just that the burn off of concessions during the year that caused us to write off more of our balance sheet on account of -- prepaid concessions that we have. It is more related to accounting of straight line. Because of that.

Okay. Simon, you mentioned the $0.04 to $0.05 of dilution. I didn't catch what that was tied to. Potential annual dilution?

The $0.04 to $0.05 of annual dilution? (inaudible) We have three lease up properties.

I think we have several things in our 2008 forecast on a cost dilution. I think those, if you take the lease up development properties that we have, that is probably together about $0.04 or $0.05. That is Cascade --

I am sorry.

And the four dispositions that we made.

Correct. Together all of our lease up and for dispositions are expected about 8 to 8.5%.

For 2008?

Right.

So the lease up properties are $0.04 to $0.05 and the dispositions are another say $0.03 to $0.04?

Roughly. For 2008, that's correct.

Question on acquisitions, the $150 million target. The question is, if you miss your acquisition target, fall short of it, will that will be a positive or negative to FFO for the year?

It really has no impact.

No impact. Okay. Can you talk about how your return hurdles have changed in this environment from an acquisition standpoint, if at all? And how those return hurdles might be different for transactions done in the fund?

Our return hurdles have not changed in terms of the methodology and the way we define our hurdle process, if you will. What changes is our cost of equity. And our process has always been based on looking at cost of equity plus a 20% premium to that. Essentially becomes our internal rate of return hurdle. That is whether we are putting capital into a new acquisition, into a joint venture, or into redeveloping existing properties, the methodology is the same. So there's been no change, it's just that our cost of equity continues to fluctuate with the market, it will change.

So there's been no change to the absolute number because your cost of equity might have gone up, but your debt costs have gone down? Is that a fair way of looking at it?

Let me elaborate a little more. That is we look at our returns on leveraged basis.

Okay.

So our cost of equity has gone up, so our hurdle rate has gone up very significantly. But the effect on pricing has been mitigated because our cost of debt has come down. So that is the way it has been working.

Last question is hopefully not too grim. Any impact on the tornado activity on your portfolio?

This is Tom. No. Frankly other than we had a lot of folks under desks and things like that, it was quiet across. We got through Little Rock and Memphis was fine. And then we were worried about other places. And other than a few sticks down and a little bit of siding blown off, we were fine.

Sounds good. Thank you.

Next question is from Nap Overton of Morgan Keegan. Your question, please.

Good morning. Just a couple things. One, did I understand you correctly to say that your straight line rent adjustment negatively impacted both 2007 and 2006 by $0.05 per share?

That is correct.

And you expect that to be round to zero for 2008?

That is correct. Maybe slightly positive. Maybe a slight credit. Yes.

Should be close to zero. Drag is removed from 2008 forecast, yes.

Drag is removed. Okay. And then the 6.5% -- I think I know the answer to this but the 6.5% NOI yield on acquisitions you are assuming -- that is before deducting a capital reserve, is that correct?

That is correct. Probably equates to a 5.75 cap, something like that.

About 5.75? Okay. That is about it. Thanks.

Thanks.

Next question is from [Ki-Bin] Kim of Credit Suisse. Your question, please?

Just a quick follow up on the previous question. What process do you use to calculate cost of equity?

What we look at -- we actually use several methods. The one that we use routinely, we use complements the check routine method which is to take our dividend yield plus long term growth rate. And generally we assume a long term growth rate is in the 5 to 6% range. Take our dividend yield and multiply by 1.2 to come up with our hurdle rate as Eric was mentioning. That is the way we do it.

Okay. And second question, you mentioned share buybacks. Any plans for that in 2008 in terms of volume?

We have not dialed that into our forecast. It is something we look at but we are a net present value shop. Our decisions regarding capital deployment are driven by what do we think is going create the highest net present value for our shareholders. There is a point obviously where our stock price could decline low enough that that becomes the best alternative. We look at it and discuss it with our board on a routine basis.

What is your current authorization?

We have 4 million shares authorized and we have used, I think, we bought back 1.8 million. So we have about 2.2 million still outstanding.

Okay. Thank you.

Our next question is from Paula Poskin of Robert W. Baird.

Thank you very much. Good morning. Just to follow up, I think you said this earlier, but I missed it. Are you more focused on acquisition opportunities on buying redevelopment opportunities, lease up opportunities or more the fully positioned properties like you did at Cascade at Fall Creek?

For the moment our focus is primarily with our acquisition funds where we are looking for redevelopment opportunities. The numbers just work better on those kind of deals at the moment. We are very active in the market looking for both kinds of opportunities, but the numbers are working better at the moment on the reposition through our JV platform.

As a reminder, we have a one third interest in the JV platform and we get fees. So the IRRs just work for us better.

Do you find any -- is there any friction when you come across an opportunity between putting it on your own balance sheet versus putting it in the fund?

No. That is a good question. One of the things we were clear about up front in establishing this fund and the relationship. The way it works is any property that we find that's seven years of age or older, we show it to our fund and to our J.V partner. If it is less than seven years of age, then we do not show it to the fund. We are primarily looking to add on to our own balance sheet newer properties, but we have over the years done a lot of value creation through repositioning properties, but we did not want to put a lot of older product on the balance sheet. We wanted to limit our investment in those to our one-third ownership with the JV. So it is a seven-year cut off.

That is very helpful, thanks. On the redevelopment program, how many units do you do at one time and roughly how long does it take?

Well, the way it works is that we really look at it on a community by community basis and if we think that a particular property has has the potential for being repositioned through unit interiors, then we will go in and start testing a few units at the property and see if we are able to catch the higher rent as a result of the repositioning effort. And then we generally approach as units turn. We do not force turnover, generally, so on a given property it may take a couple years or so to get through all the units. Our approach is to look at all the communities that we have, all the different properties in the portfolio and evaluate it and start testing it and move forward. And we are very, very disciplined about it. We look at every specific unit. We make the renovation and then we rent it. If we are able to get the rent we felt like we had to get in order to justify the investment, then we continue. If it is not working, we stop.

Okay. Great. Thanks. Question on the move outs. Aside from homeownership, are you seeing any other trends in some of the other reasons for move outs?

The other two trends that were often -- other than buying home were -- and this is Tom. We saw an increase in rent increase as a reason for move out, which frankly we like to see. That means we are aggressively pushing rents. It wasn't at a large level. The other thing is on job transfers as people are moving around. Important to realize -- we do separate job transfers and job loss. Job loss is one that we saw go down about 8%.

That is very interesting.

It was encouraging.

One last question. On the Briar Creek project in Raleigh, it looks like there has been no leasing progress made since last quarter. Could you provide some color on what's happening there? How's traffic, etc.?

You get the $100 beer gift certificate for catching our typo.

Actually, it was my junior analyst. I can't take credit for it.

Nice job. What that is is occupancy stayed flat there, which we would expect this time of year for two reasons. The property is reaching that 65 or 70% mark where we typically see turnover occur. So we saw some turnover occur there. And then we also entered the weaker side of the leasing season. So winter slowed us down slightly. We have leased 158 units there total. We are currently 63.5 occupied and 70% leased. More important than that, on a year to date basis, we are about 21% ahead of pro forma on our revenues. Our occupancy is slightly behind pro forma but our effective rents are about 4.4% higher. So we are seeing a little bit of a lull because of seasonality and turn over. We had a better leasing month in January than any of the prior months in the quarter.

That is very helpful. Thank you very much. That is all I had.

(OPERATOR INSTRUCTIONS) Our next question is from Carol [Keffle] of Hilliard Lyons. Your question please? Your question, please.

Good morning, everyone.

Good morning.

What was the cap rate you all paid for the Milstead Village?

Let me just check on that. That was a redevelopment property.

The NOI was between 5.25 and 5.5. I think it's important to remember that is a redevelopment property.

There is a significant component income you won't gestate for the first couple years.

We can get you that specific number. My guess is once it is stabilized after the repositioning, you are looking at an NOI yield of probably closer to 7. 6.5 to 7.

I would say 7% NOI once it is stabilized.

Once we get the repositioning done.

Okay. Thank you.

Thank you.

Our next question is from Andy McCullough of Green Street. Your question please?

Most of my questions were answered. I just have one. How much NOI did Briar Creek throw off in 4Q?

You have that, Tom, right there.

On fourth quarter it was $299,000. We expected it to do about $218,000.

So about $80,000 ahead of pro forma.

Good enough for me. Thanks, guys.

Thanks.

I am showing no further questions from the audience.

Thank you very much. If you have any follow up questions feel free to give us a call. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Good day.