Retail Opportunity Investments Corp (ROIC) 2013 Q4 法說會逐字稿

Welcome to Retail Opportunity Investments' 2013 fourth quarter and year-end conference call. Participants are currently in a listen-only mode. Following the Company's prepared comments, the call will be opened up for questions. Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of Federal Securities laws.

Although the Company believes expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company can give no assurance these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations. Information regarding such risks and factors is described in the Company's filings with the Securities and Exchange Commission including its most recent annual report on Form 10-K.

Participants are encouraged to refer to the Company's filings with the SEC regarding such risks and factors as well as for more information regarding the Company's financial and operational results. The Company's filings can also be found on its website. Now, I'd like to introduce Stuart Tanz, the Company's Chief Executive Officer.

Thank you. Here with me today is Michael Haines, our Chief Financial Officer; and Rich Schoebel, our Chief Operating Officer. We are very pleased to report that 2013 was a highly productive and successful year for the Company. We achieved record results and created value in every facet of our business.

Starting with acquisitions, 2013 proved to be a great year for the Company. Through off-market sources and longstanding relationships, we identified a number of great opportunities to acquire exceptional grocery-anchored shopping centers. We worked very hard to make the most of each opportunity, capitalizing on our market knowledge and strong financial position.

As a result, 2013 was our most active and successful year to date, acquiring a record $437 million of grocery anchored shopping centers. These acquisitions serve to enhance our overall portfolio, further diversifying our tenant base and strengthen our market presence across each of our core West Coast markets. Additionally, these new acquisitions offer an excellent balance of recurring cash flow derived from well established anchor retailers along with a number of great opportunities to enhance value going forward.

In addition to posting a record year in terms of acquisitions, we also had another great year on the leasing front. For the fourth consecutive year, we steadily increased occupancy across our portfolio, reaching a new high of 96.3% as of year-end. Additionally, we again achieved a solid increase in same center net operating income, recording a 6.8% increase for the year along with a 7.3% increase in same space releasing rents.

In terms of our financial position, during 2013 we achieved a number of key objectives that enhanced our financial strength and elevated our financial profile in the marketplace. First, the vast majority of the Company's warrants were retired in 2013, generating over $226 million of equity proceeds to the Company. Retiring the warrants also served to simplify our capital structure as well as reduce the short-term per share dilutive impact as we move forward into 2014.

Second, during 2013, we acquired the remaining joint venture interest in Crossroads Shopping Center. Today, the Company does not have any joint venture interests. Third, during 2013, the Company achieved a very important milestone. It was awarded investment grade ratings from Moody's and S&P in recognition of our strong financial profile, high quality portfolio, and prudent business practices. We capitalized on the new ratings to refinance our unsecured debt facilities, lowering our borrowing costs and expanding the capital availability.

Additionally, in December we successfully completed the Company's first investment grade bond offering, issuing $250 million of 10-year notes. The offering was well received, generating considerable interest in the marketplace with over 50 institutions participating. Importantly, the bond issuance enhanced our debt profile and maturity schedule.

Finally, we are pleased to report that for the third consecutive year the Company achieved a double digit total return to shareholders, posting a 19% total return in 2013. Since the Company commenced operations as a shopping center REIT in November 2009, the total return to shareholders has been approximately 59%. An important component of our total return is in the form of quarterly cash dividends.

During 2013, along with growing our portfolio and business, cash dividends paid to shareholders increased by 13% over dividends paid in 2012. We are pleased to announce that the Board has increased the dividend again, declaring a cash dividend of $0.16 per share to be paid on March 28. This represents a 6.7% increase over our previous dividend and the eighth time in the past three years that we've increased our quarterly dividend for a total increase of 167%.

Delivering reliable cash dividends to shareholders that steadily increase as we grow our portfolio and recurring cash flow will continue to be an important part of our business plan. Now, I'll turn the call over to Michael Haines, the Company's Chief Financial Officer. Mike.

Thanks, Stuart. For the three months ended December 31, 2013, the Company had $33.6 million in total revenues and $8.8 million in net operating income as compared to $21.4 million in total revenues and $2.7 million in net operating income for the fourth quarter of 2012. The significant increase in revenues and net operating income reflects the growth in the Company's portfolio from acquisitions during the past year as well as the Company's leasing activity.

With respect to net income, for the fourth quarter of 2013 the Company had net income of $4 million, equating to $0.05 per diluted share as compared to a net loss of $278,000 or $0.01 per diluted share for the fourth quarter of 2012. In terms of funds from operations, for the fourth quarter 2013, FFO totaled $16.4 million as compared to FFO of $8.5 million for the fourth quarter 2012. FFO on a per share basis also increased substantially notwithstanding a sizeable increase in the shares outstanding over the past year, due to nearly $19 million warrants being exercised in 2013. Specifically, FFO per diluted share for the fourth quarter of 2013 increased by 40% to $0.21 per diluted share.

For the year-ended December 31, 2013, the Company had $111 million in total revenues and operating income of $28 million as compared to $75 million in total revenues and operating income of $12 million for 2012. With respect to net income for the year ended 2013, the Company had net income of $34 million equating to $0.48 per diluted share as compared to $8 million or $0.15 per diluted share for 2012. FFO for 2013 was $76 million or $1.07 per diluted share as compared to $39 million or $0.75 per diluted share for 2012.

Full year 2013 results increased substantially over 2012 not only because of the $437 million of acquisitions, but also as a result of a one-time non-cash gain on consolidation of $20.4 million that the Company recorded in the third quarter of 2013 in connection with acquiring the remaining joint venture interest in Crossroads Shopping Center. In terms of same-center net operating income for the fourth quarter, same-center NOI increased by 6.7% on a cash basis and for the full year same-center cash NOI increased by 6.8%.

Turning to the Company's balance sheet, at December 31, 2013, the Company had a total market cap of approximately $1.7 billion with $622 million of total debt outstanding equating to a total debt to market cap of 36.5%. With respect to the $622 million of debt, approximately $115 million is secured debt and $507 million is unsecured of which $250 million is the bond deal. At year end, we had approximately $57 million outstanding in our unsecured credit facility.

On a square footage basis, 83% of our portfolio was unencumbered at year end. For the fourth quarter of 2013 the Company's interest coverage was a strong 4.3 times. As Stuart noted, the bond offering that we completed in the fourth quarter helped to solidify our debt maturity schedule. In 2014, we only have one small loan that comes due and over the next three years only 15% of our total debt matures. Additionally, with the bond deal 71% of our total debt outstanding is now fixed rate.

In terms of our guidance for 2014, we currently expect FFO to be between $0.80 and $0.85 per diluted share for the year. Our guidance takes into account the $250 million of bonds the Company issued at the end of 2013 and the impact to FFO from replacing short-term floating rate credit line debt with 10-year fixed rate debt. Additionally, in terms of property operations and leasing, our guidance is based on achieving same property NOI growth in the 5% range largely being driven by expected leasing activity in 2014 as Rich will discuss in a moment.

In terms of external growth our guidance assumes we will acquire approximately $250 million of shopping centers in 2014. We intend to finance the acquisitions with a mix of debt and equity maintaining our current ratios. In terms of the warrants, we are assuming the remaining warrants will be exercised later this year when they are scheduled to expire. Now, I'll turn the call over to Rich Schoebel, our COO, to discuss property operations. Rich.

Thanks, Mike. As Stuart indicated, 2013 proved to be an outstanding year for the Company in terms of property operations. Capitalizing on the platform that we have built over the past four years, during 2013 we continue to expand our portfolio and deepen our presence in the best performing markets across the West Coast. We continued to steadily increase occupancy throughout the year thanks to another strong year of leasing, and we achieved solid rent growth.

Specifically, during 2013, we added 12 shopping centers to our portfolio. As a result, at year-end our portfolio stood at 54 shopping centers totaling approximately 5.8 million square feet of gross leasable area. Importantly, these 12 additional shopping centers serve to enhance our market presence across each of our core West Coast markets. Of the 54 shopping centers, 19 are located in the Pacific Northwest, representing 38% of our total GLA with 10 properties in the Portland, Oregon, market representing 17% and nine properties in the Seattle market representing 21% of our total GLA.

Additionally, we own 13 properties in our Northern California region, representing 23% of our total GLA. These shopping centers are primarily in the San Francisco and Sacramento markets, and in Southern California where we added seven properties in 2013, we now own 22 shopping centers representing 39% of our total GLA diversified across the Los Angeles, Orange County, and San Diego markets. During 2013, we continue to take full advantage of the strong demand for space across our portfolio. As a result, occupancy steadily increased each quarter throughout the year reaching a new record high for the Company of 96.3% as of year end.

Breaking that down between anchor and non-anchor occupancy, at year-end anchor occupancy was 100%, up from 99.1% as of the third quarter and non-anchor occupancy increased as well from 91.3% as of the third quarter up to 92.4% at year end. In terms of specific leasing activity, during 2013, we executed 190 leases totaling 624,000 square feet. Breaking that down between new and renewed leases, we executed 111 new leases totaling 391,000 square feet and renewed 79 leases totaling 233,000 square feet. In terms of same space comparative numbers, cash rents increased by 7.3% on average for the year.

With respect to leasing activity in the fourth quarter, we executed 52 leases totaling 207,000 square feet, including 32 new leases totaling 134,000 square feet and 20 renewals totaling 73,000 square feet. Same space comparative cash rents increased by 10.4% for the fourth quarter. Just to recap a few leasing highlights from the fourth quarter, at our Division Crossing Shopping Center earlier in the year we reconfigured the primary anchor space at the center and brought in a new very strong national retailer to take a large portion of the space at a higher rent.

And during the fourth quarter we signed an additional very strong national retailer to take the balance of the space, again at a higher rent. And by reconfiguring the space, we created the ability to expand the center by another 6,000 square feet which we just completed construction on and currently have several strong retailers vying for the space. With the new anchor tenants in the 6,000 square feet of additional space lease, we expect that our cash yield on the property will surpass 8% in 2014. Additionally, at our Happy Valley Shopping Center during the fourth quarter we completed a 6,000 square foot pad which is 100% leased, bringing our cash yield on the property to approximately the mid 7% range.

Looking ahead at 2014, we currently have 178 leases scheduled to expire, representing about 7% of our total portfolio. Breaking that down between anchor and non-anchor, we only have one anchor lease scheduled to expire, that is of 19,000 square feet. At this point, we expect that the tenant will renew their lease. We did have another anchor lease that was scheduled to expire in March, but in the fourth quarter we signed a new tenant to take over this space with no down time and with a significant increase in rent.

In terms of non-anchor space, we currently have 177 leases scheduled to expire in 2014 totaling 356,000 square feet. Given the demand for space that we continue to see across our portfolio, we anticipate that we will release the space, achieving positive rent growth of 10% to 15% on average during the year. Overall, we expect to have another strong year in 2014. Now, I'll turn the call back over to Stuart.

Thanks, Rich. Looking ahead at 2014, we intend to be focused on continuing to advance our strong West Coast shopping center franchise. We are pleased to report that we are already off and running. We recently acquired a terrific grocery anchored shopping center in Portland where our portfolio now totals over 1 million square feet.

Additionally, we have another irreplaceable shopping center under contract here in San Diego. Beyond those two acquisitions, our pipeline of off market opportunities continues to be active across all our core markets, so we are confident we will acquire 250 million in 2014. As always, we intend to continue our longstanding strategy of carefully seeking out only the most attractive opportunities to acquire irreplaceable shopping centers that will enhance our market presence and provide the Company with a balance of long term, stable cash flow and good growth opportunities for years to come.

As we continue to expand our portfolio in 2014, we will also be very focused on maximizing property operations, capitalizing on opportunities to improve the quality of our shopping centers and to increase rents prior to scheduled expirations. Additionally, our goal in 2014 will be to continue diversifying our tenant base. During 2013, we expanded our tenant base by nearly 40% and our top 10 tenants now only account for 21% of our total base rent. As always, tenant diversification with a focus on strong retailers that provide basic consumer goods and services will remain as one of our core strategies.

In summary, we look forward to 2014 with enthusiasm. While our accomplishments in 2013 have set the bar high for our team to surpass, we look forward to the challenge and are confident that we have the portfolio, the financial strength, and strategy to continue building shareholder value. Now, we'll open up the call for your questions.

Thank you.

(Operator Instructions)

Our first question comes from the line of Jason White from Green Street Advisors.

Good morning, guys, how you doing? You there?

Yes, we're here.

Okay. First question is your early acquisitions for the Company you seemed to have a lot of low-hanging fruit and a lot of lease-up opportunity, and it seems like a lot of the more recent acquisitions have been more stabilized and higher occupancy. Is there some of these new acquisitions that there's just not as much opportunity on the acquisition front these days so you buy more stabilized properties or is there still a lot of upside potential on the recent deals?

No, we continue to look for opportunities where the assets are high quality, well located and stabilized; however, like [Tigert], we do find opportunities that do have some upside either contractually through the rents that are rolling or the tenants that are rolling or through leasing up the vacancy, so it's not our philosophy, Jason, to be buying 100% occupied assets. It will vary from deal to deal.

Okay, that's fair. And then I guess sticking with acquisitions, you acquired almost $440 million last year and your guidance is for $250 million this year. Is that an indication that there's just not as much out there or is that just kind of conservative guidance and you hope to eclipse that mark?

No, looking at 2014, we are very excited in terms of what we see from the pipeline perspective, but -- and we started the year very positively, so depending on what we see in terms of the pipeline, I do think the $250 million will be met.

Okay, and then another question on leasing environment. Some of your peers have expressed some sentiment that it seems like this is really kind of the peak of the leasing environment and while they hope that it's better down the road, they get the feeling this might be one of the best times for leasing that they will have for awhile, do you get the feeling there's still momentum or that this is really kind of the [day the] leasing can shine in the sun?

Hi, Jason, it's Rich. We're still seeing a lot of demand for space. We've come into 2014 and our leasing team's never been busier. So, I think that as you look at our portfolio, we typically have one or two small shop spaces at a property here and there and just given the overall occupancy the demand remains very strong.

Okay, and then I don't know if you have this stat handy, but do you have commenced occupancy?

Yes, in terms of -- I'm not sure where that's coming from, that line; I don't know if you guys are hearing the noise on the line, but the spread between leased and build is about 4.7%.

Thanks guys, appreciate the time.

Thanks, Jason.

Thank you. Our next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

Hi, good morning. Just first question. A couple on guidance, I guess. In terms of the $250 million of investments that's embedded in guidance, I just want to clarify that the assumption includes the $69 million under contract already, so essentially $181 million of incremental acquisitions, is that right?

That is correct.

Okay. And then as far as your forecast goes is there any debt in place for anything that you're looking at buying?

Not at the present time.

Okay and then maybe a question for Rich. In the same-store pool, it looked like the recovery ratio year-over-year was up almost 800 basis points and I guess higher operating expenses account for some of that and occupancy was up just about 100 basis points in the same-store pool. So I was just curious is there something else that led to that sharp spike in recoveries in the quarter, any true ups or anything else like that that hit in the quarter?

No, nothing significant. I think you probably identified two of the big drivers.

Okay, so what should we expect going forward for recovery ratio in 2014?

Should be fairly consistent with what you're seeing here in 2013 for the year.

Okay. And then in terms of funding the acquisitions, I hear you that it will be a mix of debt and equity, but I guess just more broadly thinking here, you have a lot of capacity under the line and the accordion feature can be exercised, but leverage is starting to rise and will rise further as the line's used. I guess what's the view toward issuing equity here and if you source in excess of $250 million of deals again in 2014 is equity part of the financing strategy as you see it?

Yes, we're almost all the way through the warrant issue, sorry, of another $70 million or so of proceeds during 2014, so to the extent -- keeping our balance sheet metrics in line we're going to be probably going back to using our ATM to supplement debt issuance on the lines to fund the acquisitions.

Okay. All right. That's helpful. Thanks guys.

Thank you.

Thank you. Our next question comes from the line of Josh Patinkin from BMO Capital Markets.

Good morning, everyone.

Good morning, Josh.

I see that the bonds you issued last quarter are trading well inside the curve, so congratulations on that.

Thank you.

And what's the philosophy going forward in terms of the length of paper you might issue and how do you perceive that going forward in terms of your capital structure?

Well, we will go back to the bond market at some point this year and where interest rates currently are with the 10 years trading we'll probably look at doing a mix of seven and ten's, but it will depend on the marketplace and where the market is at the time we decide to issue more bonds.

Okay. And then the portfolio has grown quite a bit over the last year and it looks like you're going to continue acquiring, so G&A came down a bit this quarter. I'm wondering if you're going to require any more G&A going forward and what's a good run rate to assume?

I would use an estimate of about $11 million for G&A going forward in 2014. One thing that changed this quarter was we had some things that were classified as, quote, G&A that we didn't really think were G&A, but they weren't large enough to pull out, so now we've got this other expense line item which captures things like franchise tax expense and the costs associated with Moody's and S&P, so that actually got pulled out of our fourth quarter and we did all prior comparative periods as well, but G&A as a total should be roughly $11 million for the year.

Okay, and you've got everything in place to continue acquiring from here, you don't need to add too much to that?

From a staffing standpoint, very incremental based on the pace of acquisitions.

Okay.

That's operating with a very focused strategy in primary markets in terms of efficiencies you get with building a real estate (technical difficulty).

Very good, thanks gentlemen.

Thank you.

Thank you. Our next question comes from the line of Paul Morgan from MLV.

Good morning, Paul.

Hi, good morning. You mentioned the upside to your shop space and the leasing momentum there and you said you ended at 92.4%. I didn't hear guidance for the year as to where you might end up, but obviously that must be feeling a fair amount of your same-store 5% number, but do you have any color on shop space, momentum, and whether maybe there's been any acceleration across any of your markets and if you have the number where you think you'll end, if you have that?

Well, I'll let Rich answer the shop space, but in terms of guidance we assume leasing that occupancy would remain flat in terms of our guidance or in terms of shop space?

Yes, I think that we're to remain pretty level throughout the year (technical difficulty) occupancy level for the end of the year.

Sorry, could you say that one more time?

96% by year end. We don't have the break out between anchor and small space, but I can certainly follow up with that.

Oh, okay. Great. Do you have any update on the redevelopment either at Crossroads or Nevada? I haven't seen you talk about the plans there, whether there's any capital spend for 2014 or whether really that's looking beyond that. Is there anything new?

In Nevada we're up in high gear in terms of out master planning that expansion. We're up to -- we have under option a bit more land adjacent to the land that we have, so we're now looking at about 180,000 square feet in total and we are focused right now on moving that project forward but nothing will happen there in 2014.

In terms of Crossroads, a lot going on there. I can't really give you specifics but over time we are looking at building more retail, office and multifamily and more importantly that we believe that as we move through 2014, some of that will begin to take shape but, again, there will be no impact in 2014. That's more like a 2015 or 2016 event.

Okay, great. And then just lastly, obviously Safeway has been in the news this month discussing a potential sale. As your number one tenant, any thoughts, either implications for kind of the markets that you're concentrated in given the uncertainty there or anything potentially shaking loose or not shaking loose and how that might play out for you guys?

Sure. We're not really overly concerned with what's happening with Safeway. Safeway is the dominant best known supermarket chain on the West Coast and it's really been one of their primary focuses. They continue to do very well out here. We've seen some very strong sales numbers coming in from last year. We value them as a tenant in our portfolio. The good news as it relates to the Safeways that are in our portfolio, there's only about nine and they only represent about 5% of our base rent and most of these leases are substantially below market in terms of the rent they are paying.

Okay, great. Thanks.

Thank you.

Thank you. Our next question comes from the line of Craig Schmidt from Banc of America Merrill Lynch.

Good morning Craig.

Yes, thank you. I guess continuing with Paul's question on Safeway, there's some speculation that Cerberus] might be looking at them and if that were to be the case perhaps some antitrust concerns might arise and that would lead to divestiture. How does that impact you if one of your stores were ones to be divested?

I don't think -- well, it's hard to predict what stores would be affected, but I think it always comes down to performance and sales and, more importantly, the overlapping that may occur in these markets. We don't see -- I think the concern for overlap would be more if two entities or two supermarkets were merging versus someone just buying a single chain of supermarkets, so I don't really think there will be much to talk about in terms of overlap if this transaction were to occur and, again, as Rich articulated, our Safeways are in pretty good shape in terms of where they're located, what rents they're paying and, more importantly, what we've seen in terms of sales.

And I think just to add to that I would also say that our portfolio -- given its size we really don't have multi-anchor centers where co-tenancy becomes an issue. If they were to close one store and from an economic basis they would still be obligated to the rent.

Okay, thanks. And then absent Tigert, it seems like the acquisition cost per foot is increasing. Is that a reflection of where cap rates are heading and maybe could you give us some color on cap rates in your West Coast markets?

Sure. Well, cap rates continue to -- cap rates in our markets out West, depending on which market you're looking at, but primarily what we're seeing today is that the fully leased properties are trading in the five cap range. In some cases we're even seeing a bit less than that with a number of public and private buyers lining up for those deals. Of course chasing those type of deals is not our focus. We focus on off market unique opportunities where we can acquire exceptional shopping centers on more reasonable terms and quickly add value.

Often it's a situation, Craig, where the seller is either facing financial challenges or seeking a quick transaction which we can accommodate given our knowledge of the markets. In terms of buying assets at -- on a price per square foot, I think every transaction has got to be looked at in terms of its merit. We do look at that as one metric in terms of buying the assets, but our primary metrics are the stability of the cash flow and the credit associated with the tenants and then as it relates to the cash flow the contractual increases and what we can do as a team to build value by either repositioning or re-merchandising the space.

Okay thanks.

Thank you.

Thank you. Our next question comes from the line of Michael Gorman from Janney Capital.

Thanks, good morning. A couple quick questions on the guidance, the $250 million in acquisitions and then also kind of the source of funding. Should we think of that $250 million as a net number? I.e., you've talked in the past about potential dispositions of some more stabilized properties. Is anything like that on tap for 2014?

You should look at it as a net number. In terms of dispositions we are continuing to lack at what we've got in our portfolio to prune this year, but nothing to speak of at the present moment.

I don't have any dispositions in my guidance number for that.

Okay. Got you. And then on the two deals so far in 2014, the one closed and then the one under contract, did either of those include a portion of OP units or were those all cash?

Those were cash.

Okay, great. And then just a little bit more thematically on the tenant front, Wal-Mart came out a week or so ago and talked about aggressively expanding its smaller footprints. Just kind of curious if you could talk about the locations you do have in the portfolio, how they're performing, and then also maybe situations where you have tenants competing against the smaller format Wal-Marts. I mean do they have an outsized impact as opposed to traditional grocer or just how they affect the competitive landscape as they're looking to expand more aggressively?

So, the Wal-Marts we currently have in our portfolio are performing very well. I think that to the latter part of your question relative to where Wal-Marts have come into the marketplace where we have another competing grocer, typically you'll see a small dip in the sales but in most cases those rebound and in many cases go above where they were trending before. So, I think that people are curious and want to see what the Wal-Mart neighborhood market experience is like but they typically will come back to their hometown grocery store.

Great, thanks.

Thank you.

Thank you. Our next question comes from the line of Jeff Walkenhorst from Copeland Capital.

Hi, good morning, thank you. Stuart, we appreciate your commitment to dividend growth and the dividend growth that we've seen to date. The raise this year, the 7% raise, is a bit slower than the 13% last year and the pace of growth in earlier years. Now, clearly the Company absorbed a large number of new shares from the warrant conversion. With these shares in a somewhat more mature business today as well as a payout ratio near 80%, do you think a mid single digit pace of growth is reasonable expectation going forward? \\36.46

Well, first of all, as you know, Jeff, we started out with no assets so obviously as we ramped up the Company we ramped up the dividend along with it. The dividend policy is obviously governed by the Board of Directors, so it's tough for me to comment on dividend policy. Again, that's governed by the Board.

On the other hand, we will continue to grow the Company smartly and I think as the Company continues to grow, certainly as I said in my script the focus will be continue to keep that dividend -- hopefully keep that dividend growing. At what pace I can't really tell you at this point but the good news is that when you look at dividend growth, we really like to look at that as growth of really taking into consideration our FFO growth typically half of the FFO growth or a bit more.

That's helpful, thank you. I suppose thinking about the huge share increase last year, I think that was potentially one reason, but I suppose it could be up to the Board as you point out, but it seems there could be a potential for a higher pace of growth going forward on a more, quote, normal change in the share count. Is that fair?

Yes, I mean look, we're winding -- as you heard in the script, we're winding out of the warrant situation which we're all looking forward to around here, but you're right. As the warrants go away which again is not that long from where we are sitting here today, things will be then shifting to a very normalized pace in terms of dividend policy. So, we do look at the warrants and the impact in terms of dividend very closely but, again, going forward the good news is by the end of 2014, our capital structure will be very clean and very easy to get your hands around in terms of looking at dividend and the growth that comes with it.

That's great. Thank you. Very helpful, Stuart. One housekeeping-related question and maybe you said this, I missed earlier part of the call, but remind us again what the leverage ratios are in terms of where -- and how much room you think you have to maybe put on more leverage?

Well, currently, we've got plenty of capacity but we want to maintain our leverage ratio in the 40% range keeping our balance sheet metrics in check as well.

Got it. Okay. And that pertains to the -- you may use the ATM as necessary to raise equity capital to fund acquisitions?

Right. Once the warrant issues kind of resolve itself.

And again, we will look at as it relates to equity taking into considerations dispositions and other things that again may in terms of raising equity, equity is the most precious resource this Company has and we treat it very -- with nice gloves in terms of looking at raising equity, where I am not a big fan of raising equity. So, we'll see how the year goes but to me the focus is to certainly get the warrants resolved, get that cash into the balance sheet, and continue to grow the Company as we have in the past.

Okay, thank you so much guys, good luck.

Thank you.

This concludes our question and answer session for today. I would like to turn the conference back over to Stuart Tanz for any concluding remarks.

Thank you. In closing, I would like to thank all of you for joining us today. If you have any additional questions please contact Mike, Rich, or me directly. Also, you can find additional information in the Company's quarterly supplemental package which is posted on our website. Thanks again and have a great day, everyone.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a good day.