Rithm Property Trust Inc (RPT) 2005 Q1 法說會逐字稿

Good morning.

My name is Jamie, and I will be your conference facilitator today.

At this time, I would like to welcome everyone to Ramco-Gershenson First Quarter 2005 Earnings Conference Call.

All lines have been placed on mute to prevent any background noise.

[Operator Instructions]

Thank you.

Ms. Hendershot, you may begin your conference.

Thank you.

Good morning and thank you for joining us for Ramco-Gershenson Properties Trust's first-quarter conference call.

I'm hopeful that everyone received our press release and supplemental financial package, which are available on our web site, at "www.rgpt.com."

At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although Ramco-Gershenson believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be obtained.

Factors and risk that could cause the actual results to differ from expectations are detailed in the press release and from time to time in the company's filings with the SEC.

Additionally, we want to let everyone know that the information and statements made during the call are made as of the date of this call.

Listeners to any replay should understand that the passage of time, by itself, will diminish the quality of the statements made.

Also, the contents of the call are the property of the company and any replay or transmission of the call may be done only with the consent of Ramco-Gershenson Properties Trust.

Having said that, I would now like to introduce Dennis Gershenson, President and Chief Executive Officer, and Richard Smith, Chief Financial Officer.

And at this time, I would like to turn the call over to Dennis for his opening remarks.

Thank you, Dawn.

Good morning.

I would like to start by saying that I will not let new, unfounded claims by IRS agents, who failed to prove their prior case against us, obscured the momentum of our first quarter.

I will, however, address the IRS claims in my initial remarks.

And we have both corporate legal counsel and our tax accountants from Deloitte & Touché here, with us and available, if there are any questions that we cannot answer.

First, I would like to cover some of the highlights from the first quarter.

I'm pleased to report that our diluted funds from operations was in line with First Call estimates at 60 cents.

This represents a 9% increase in both total dollars and FFO per share.

Total revenues for the quarter were up substantially, primarily, as a result of the number of acquisitions we made in 2004.

Tenant recoveries were also up.

A portion of that number reflects the yearend reconciliation for 2004 charges.

Although we do not expect to maintain recoveries above 100% for the year, we do anticipate an increase above the 2004 yearend number, based on our well-leased acquisitions and our improving occupancy rate.

Earnings were share were depressed, because of the effect of the additional preferred dividend paid as a result of our May 2004 preferred Series C offering.

On the acquisition front, you will remember, when we announced our joint venture with the Clarion Lion Fund last December, we told you that we had under contract over $265 million in assets, which represented approximately 60% of the entire venture of $450 million.

In the first quarter of this year, we completed the purchase of the last six shopping centers -- four in Florida, on the Gold Coast, and two in several of the wealthiest suburbs of Metropolitan Detroit.

These purchases have added 1.5 million square feet to our portfolio.

All nine centers are located in densely populated trade areas and are tenanted by many of the best known and most creditworthy national retailers.

The average center size for these acquisitions is 211,000 square feet.

The demographics are superior with an average of over 106,000 people with aiming either a 3- or 5-mile radius, depending on the type of center and average household incomes of approximately $71,000.

We are especially pleased to report that in an incredibly competitive acquisition environment, the average capitalization rate for the 9 shopping centers approximate 7.6%.

This advantageous cap rate for superior quality centers insures both increased shareholder value and reoccurring contributions to our annual FFO growth.

It is our intention to, not only, continue to purchase centers for our joint venture, but we plan to acquire as well a number of assets on balance sheet to which we can add value.

At this time, we expect to add another substantial acquisition to our Lion Properties Fund venture before the end of the second quarter.

And we are planning to buy at least one center on balance sheet prior to the end of the third quarter.

As to our development program, both our Michigan projects, Beacon Square in Grand Haven and Gaines Marketplace in Grand Rapids are nearing completion.

These two centers, which total approximately 450,000 square feet, are over 90% leased.

We have initiated conversions with our joint venture partners in order to arrive at a mutually agreeable price at which we can acquire their interest.

At our River City development in Jacksonville, Florida, we have commenced site work.

Our leasing efforts are bearing fruit and we will be announcing the signing of three more major tenants for the project by the end of this month.

We are still on schedule for an opening of the first phase of the center in the spring of 2006.

In April, we formed a joint venture for the River City project, structured similarly to our Beacon Square and Gaines Marketplace developments.

In asset management, our team has been busy completing a number of redevelopment projects and achieving solid rental increases with both new tenants and lease renewals.

Our shops at Lakeland redevelopment is nearing the 98% leased level.

We will be announcing the signing of our last mid-box anchor at this center before the end of May.

Their occupancy in late fall will bring this asset, which we took offline in 2002 to full capacity.

Excuse me.

The viability of the North Lakeland Florida trade area has been further validated by the opening of additional expanded discounters, and home improvement stores.

We have also heard from additional mid-box retailers, who although late to the dance, would like to be part of our project.

Taylors Square in Greenville, South Carolina is basically complete.

The super Wal-Mart is open, and we have less than 4,000 square feet less to lease -- left to lease in our ancillary retail space.

In our redevelopment centers, as well as several centers with vacancies, we will be announcing, before the end of the second quarter, no less than three new mid-box retailers, who will be added to our portfolio, filling these vacancies.

In the first quarter, we have reported the opening of 18 new retailers at an average size of approximately 2,100 square feet and average rental rate of $17.58.

The tenants are approximately evenly spread throughout our mid-west and southeast centers.

New lease generation continues to pickup, and we expect to see healthy rental increases throughout the balance of 2005.

Lease renewals for the quarter at 46 are relatively typical at this time of the year, as many of our shopping center leases expired January 31.

The significant number of lease expirations in the quarter explains why occupancies even with the new lease signings and lease rollovers is relatively flat as compared to the fourth quarter of 2004.

However, first quarter 2005 shows favorably against first quarter in 2004.

You should begin to see occupancy increase in the second quarter and that number will accelerate based on the planned larger users I have just referenced.

Baring anything unforeseen, I expect our occupancy to approximate 95% by yearend.

Our same center analysis shows over a 5% increase in net income, because we will be bringing our Lakeland center and several other redevelopments to full occupancy in 2005, as well as filling a number of our larger vacancies.

We should experience above average same center growth throughout the year.

The first quarter, also saw the company increase its dividend by over 4%, which on an annual basis will increase our distribution to shareholders from $1.68 to $1.75.

This increase demonstrates the company's confidence in its ability to grow its earnings, while providing an increasing return to our shareholders.

Evidence of our ability to increase the dividend can be seen in our FFO and FAD payout ratios for the quarter, both of which improved substantially over the same period from last year.

Now, I would like to address the tax issue.

The most important aspect of the two letters received by the company from the IRS purports to disqualify us as an REIT from 1996 through 2000.

This is based on our IRS agents' belief that first operating partnership unit holders are subject to the same requirements concerning shareholder demand letters that are required of shareholders of the trust common shares.

We have been advised by council that the law is very clear regarding from whom the trust must request information and that OP unit holders do not fall into that group.

Further, if one were to disregard the law and somehow OP unit holders were considered subject to the demand letter requirement, none of the operating partnership unit holders would own more than 5% of the Company on an as converted basis, and so, even as common shareholders they would not have to be notified.

Thus either by law or by fact the IRS is not correct in this assertion.

The services other claim for disqualification concerns the ownership of stock in Ramco-Gershenson, Inc. during the period being examined.

The structure of the ownership of Ramco-Gershenson, Inc. parallel to form and structure used by most REITs at that time, and legal and tax council are both perplexed by the services position.

We state unequivocally that the IRS agents' conclusions are dead wrong on the law and the tax, and although this issue must wend its way through the appeals process, we expect to be completely vindicated.

The last issue would be IRS, concerns deductions taken in 1996 and relate to actions by our predecessor company RPS Realty Trust.

The issues are basically the same as those that were the subject of the prior IRS examination.

We achieved a favorable resolution of the prior case, and as the facts are similar here, we expect to prevail again -- I'm sorry; excuse me.

No one is more frustrated than I by the IRS notification.

Yet, we will not be diverted from our 2005 business plan by this distraction.

Ramco-Gershenson is focused on a healthy increase in our acquisition schedule, an expanding number of new development opportunities, and the continued improvement of all of asset management statistics.

This will be a successful year for our company.

For those of you who believe in the quality of our assets and the professionalism of our management team, the current dip in our stock price could be viewed as a buying opportunity.

I certainly do.

I would now like to turn this call over to Rich Smith, who will provide color for our financial information.

Thank you, Dennis.

Good morning to everyone.

For the first quarter, our diluted FFO per share was $0.60, which met first call estimates.

This represented a 9.1% increase from the 55 cents reported in 2004.

The primary reasons for the increase resulted from the lease-up of several big-box spaces, including Michaels of Tel-Twelve, Staples of Southfield Plaza and Big Lots of Clinton Valley, as well as a major portion of shops at Lakeland coming back on line during the redevelopment process.

We've also had positive contributions from acquisitions over the same quarter last year, and have seen significant fees from our off-balance sheet joint ventures.

On a gross basis, our diluted FFO increased $989,000 we won from $10,913,000 in 2004 to $11,902,000 in 2005.

The $989,000 increase was made up of a $2,244,000 contribution from property acquisitions and $915,000 acquisition fee earned on a joint venture; $422,000 increase in income from core assets; and $441,000 increase in earnings from unconsolidated entities.

The increases were offset by $1,070,000 in preferred stock dividends, $1 million increase in corporate G&A and $963,000 increase in interest expense excluding interest expense connected with property acquisitions.

The increase in our G&A was due to a $443,000 increase in salaries due to normal, annual increases and staff added to manage our joint venture activity; $143,000 in fringe benefits, including healthcare cost and accrued long-term incentive costs; and $561,000 increase in legal and audit fees, 350,000 to 400,000 which should be non recurring charges.

For the three month ended March 31st our FFO payout ratio improved from 76.8% in 2004 to 72.8% in 2005.

On a FAD bases, the Company's payout ratio also improved from 87.2% in 2004 down to 80.2% in 2005, just provided us with approximately $2.2 million in reinvestment of business plan or pay down the company's debt.

The total debt at quarter end was $672 million, with an average rate of 6.1% and an average term remaining of about 3.6 years. 84.5% of debt was fixed at an average rate of 6.4% and only 15.5% of our debt was floating, with an average rate of 4.7%.

Availability to quarter end under our credit facilities was approximately $26 million.

Our EBITDA interest coverage at quarter end was 2.3 times and for the quarter, our debt to market cap increased to 51.9% up from the 46.5% reported at yearend.

The increase was the result of additional debt associated with acquisitions and decrease in our stock price this year-end.

During the quarter, the Company acquired six shopping centers for our Clarion joint venture; four of the assets were located in Florida and the other two in Michigan.

As Dennis has indicated in previous conference calls, that our goal is to make joint venture income a component of our growth strategy.

With that in mind through quarter end, Ramco had invested $35.1 million of equity and joint ventures and for the quarter we ended $915,000 in acquisition fees $100,000 in management fees and recognized $395,000 in FFO.

Upon completion the Clarion joint venture should purchase approximately $450 million of shopping centers.

After debt our share of equity investment will be about $54 million and we expect to earn total acquisition at least of $2.8 million have recurring management fees of $1.6 million and continuing FFO of about $4 million.

Our capital expenditures for the quarter totaled $41.9 million, $30.2 million was in equity contributions to fund our JV acquisitions, 7 million on redevelopment -- development projects, $4 million on expansion and renovation projects, $513,000 non-recoverable CapEx and about $197,000 on recoverable camp.

We expect to fund future goals by retaining cash from operations, continue to sell non core assets and selected assets with limited upside potential, by refinancing assets, which have been expanded or renovated in prior periods and by drawing on our current facilities.

Lastly for 2005, we maintained our FFO guidance of between $2.39 and $2.44.

Jamie, if you're ready, I'd like to open the calls up for questions for Dennis and I.

Thank you.

[Operator Instructions]

Your first question comes from David Ronco of RBC Capital Markets.

Hi.

Good morning, guys.

How are you?

Hi David.

Great.

Hey, first question was related to G&A, I wondered how that might have changed, obviously, with the work you guys are going to have to do to defend yourself from that area?

Again, I think that what we'll probably incur, David, is some additional legal fees and some of your account fees or tax fees associated with that.

Again, as it pertains to '96 and prior, yes, we expected to reimburse by those cost through the Atlantic indemnification on an ongoing basis.

We're going to incur more cost, and really, don't have a sense for what that's going to be at this point in time.

Okay.

Just one...

David, just as a topic to that, we don't expect to see some huge spike in legal fees that -- unfortunately, the process doesn't move as rapidly as we would hope.

There are certainly preparations of documentation and some meetings with the IRS.

But, we monitored the cases, it moved through, its functions, you know, when we were involved with the prior issue with the IRS.

And, although any sum -- it's something that isn't devoted to improving the capital structure of the company, those sums of money were never so significant that it would have an important impact on our financial sides.

Okay.

Great.

And then, I just wanted to clarify looking to your Q yesterday, the 22 million you guys referenced that you would be responsible for in back taxes, penalties and interest, that pertained only to the period '96 to 2000, correct, and does not contemplate the impact of being disqualified -- potentially being disqualified as a REIT from '01 to '04, is that right?

I think that's so much like a worst-case scenario, David, I think that's correct.

Okay.

Great.

And then finally, it was just related to the same store pool, I saw that it went from 52 assets last quarter to 60 this quarter.

I wondered if you could, kind of, talk about the changes there, and then, maybe, address how much do you think it will change through the balance of the year?

As far as the...

How many assets will be added to the same circle, because it looks like you added eight assets quarter-over-quarter here?

I think for this year it probably should remain pretty stable, I guess.

Next year we may pick up a few acquisitions -- acquisition made in '04, you'll have in '05 or '06.

Okay.

Great.

Thanks.

Okay.

Thank you.

Your next question comes from Rich Moore of KeyBanc Capital Market.

Hi.

Good morning, guys.

Hi, Rich.

Let me ask you a question, Dennis, on this IRS issue.

Is it true that Atlantic, you think is on the hook for anything prior to May 10th, 1996?

Well, Atlantic is responsible for and has indemnified us concerning the tax issues as it relates to assets that were taking back by them prior to the reverse merger, which really concerns two shopping centers; the primary one, it was a Long Island shopping center called Highland.

And under the indemnity agreement they have the responsibility for any taxes that would have to be paid.

Again, look the facts really are the same as the facts in the '91 to '95, and as a matter of a fact, the final formation of the reverse merger occurred only after the Highland asset was indeed taken back.

So, you know, we believe it's absolutely clear by the attempt of the agreement between Atlantic and ourselves that they are indeed responsible.

Okay.

And then in the Q, you indicated that both past years '96 and '97 are under review.

What do you think about '97?

I mean, what's going on in there?

Is that significant?

Yes.

Rich, I think the Lion shares of the bad debt deductions, if not all of them, were in '96 prior to the -- in fact prior to May or during the Atlantic watch or the RPS watch.

After that I think there is some amortization or costs in some other things but the Lion shares that disallowed or proposed disallowed reductions are in fact '96 and not '97.

Okay.

So, then, Rich, do you have some estimate as to how big the '97 -- can you just give us some ballpark figure of what we are talking about in '97?

Not right on my fingertips, Rich.

Okay.

And then what do you guys think on timing for this.

I mean the last time, we went through this, the IRS guys clearly took forever, which I think is ridiculous but what do you think is going to happen this time and what's the process?

Well, last time we continued to work with the agent because we believe by providing additional information etcetera, we could convince them to take a different position or at least change their position.

We have now seen that that type of an approach didn't work there and isn't going to work now, so that we want to get right to a pallet.

So the sooner we can get to a pallet, the better and we would expect then a much shorter timeframe this time around.

I can't give you an exact time period but we would -- we hope it will -- we could resolve this by the end of this year or early next year.

Okay.

And then maybe the tax guys could help me out a bit on something, in the Q, with reference to the IRS looking at certain trustees and members of management who own voting stock, resulting in a deemed prohibited ownership of more than 10% of the voting stock.

I'm not sure I understand it.

That's the first time I've seen 10% that I can remember, creep up as a number of importance.

First of all, let me introduce Paul Walters, who is a partner to Deloitte and Touch

Hello Paul.

Good morning, Rich.

I think what the service is focused on there is one of the REIT qualification test, an asset test, whereby REITS are prohibited from owning more than 10% of the voting securities of any issuer.

That was true back in 1996.

The law since changed but I think their focus here is based on the commonality of board membership and/or management between the trust and Ramco-Gershenson Inc., which is the management company.

They try to argue what I would -- I have always referred to as de facto voting control.

In other words, they continue to argue that the trust actually controls Ramco-Gershenson, Inc.

Okay.

So the trust with the 25% ownership, is that, what you are thinking of properly enrolled?

I'm sorry, Rich.

Could you repeat that?

Yes.

Did the 25% unit trust -- the 25% ownership position by the unit holders, is that what you are thinking up there?

Really, I think, you are confusing Ramco-Gershenson, the VLT was Ramco-Gershenson Inc.

And I think what we are talking was Ramco-Gershenson Inc, the management company and Ramco-Gershenson Inc., the voting control was not owned by the trust, it was owned by outside partners, so to speak.

And again that changes after you allow taxable REIT subsidiaries, but back in '96, I think the trust had a preferred stock in that and other members had a voting stock interest in that, that's the 10% we're talking about.

Okay.

And that's a slightly different issue isn't it than the ones you guys were discussing in the prepared remarks, is that right?

Yes.

I think Dennis touched on that.

Okay.

So it's all part of the same, okay...

It gets more complicated.

But I will repeat that a great deal of time and energy was expensed at the get-go in creating the Ramco-Gershenson Inc. structure to exactly parallel what everybody else was doing all others REITs, not just up-REITs but all REITs because they were allowed to have voting control of these entities.

And there are either -- even IRS letter rulings, private letter rulings that relate to the structure, again, that we paralleled as well as every other REIT.

Okay.

So then it's safe to say you guys feel pretty comfortable that this is not an issue that's going to survive and cause the rating?

Again, this has been examined very carefully by both corporate counsel and our tax professionals at Deloitte as well as outside -- some outside counsel, and everybody is confounded by their conclusion.

Okay.

And then, one of the things that just scares me about this tendency is how it might impact what you guys do for the rest of the year?

I mean if it takes to the beginning of next year to actually resolve, I'm kind of curious how you're going to look at your external growth?

I mean I know you want to fill the rest of the fund that you can, you know, how do you feel about filling that up this year?

And then, how do you feel about paying for that because obviously, your debts starts to creep up and may have to issue or access the capital market issue equity something like that.

I mean what's your view of external growth for the rest of the year?

Well, as I said in my prepared remarks, Rich, we're going a stay the course on our growth.

As you've mentioned, several of our opportunities to fund those, which is debt and raising capital, we also have not an insignificant number of high quality assets on our books that, in an incredibly aggressive sales market, we could sell probably at a number that would approximate 6%.

So, if we had to, we could sell assets -- we could add, sell assets that were fully valued in order to either acquire things off-balance sheet that show a much higher return on our investment or by assets on balance sheet that we can then add value to.

Okay.

So do you still anticipate showing up the fund this year?

Well, we have a divergence of opinion here if you heard from us before.

I want to aggressively sell out the balance of that, and I've talked about wanting to do it this year.

Rich, then, always reminds you that we have up to two years to fill that.

So, we could go as long as June of '06.

And again, Rich, our model shows half and half.

In fact, half this year and half next year.

Okay.

So guidance, Rich, is more like half and half?

Yes.

Okay.

And then a couple of line items, if I could guys, the fee line, I mean, that was about 1.2 million in the quarter, where does that go for the rest of the year, how does that move around?

I think one set of piece I'm seeing here, Dennis, talked to you about Jacksonville.

I think we'll earn some development leasing fees and that because we have taken the shopping center portion of that offline.

The other piece I talked about depending on how quickly we go through in close on the properties for ING, I think we've got some significant acquisition fees.

In total, we expect to earn about $2.8 million of acquisition fees there.

So you can take what we've earned to date and provide the two over the next couple of years, I think you are probably pretty close and that doesn't pick up other fees that we earn on that venture.

If we lease up some space to earn leasing fees or if we have to redevelopment portion, that will get redevelopment fees and financing fees, if we arrange financing for the project as well.

So where do we go, we might -- well, I'm looking at fees that we have coming up.

I think that will be approximate of what we had last year.

Again, we had some other developments coming offline there, Beacon Square and Gaines and then, again, depending on how quickly we load up on ING acquisitions it could exceed that.

Okay.

And then, last thing, on the G&A one more time, you were 3.7 for the quarter, you said that drops to about 3.2, as a run rate, is that kind of why it took away from there?

I think around there, but if you look at what we have this quarter and you agree that's about right.

You're back out, you know, call 3.50 to 4 and then hopefully that some times four, you are about there.

Okay.

Great.

Thanks a lot guys.

Thank you.

Your next question comes from Philip Martin of Stifel Nicolaus.

Good morning, gentlemen.

Hello, Philip.

Ladies and gentlemen, I should say.

Well, number one, I think, this should be worth -- at least one call it credit for like IRS-101.

So something we could consider.

But a couple of things regarding the portfolio, the 22.6% increase -- you leased roughly 38,000 square feet of vacant space in the quarter, that was 18 non-anchor leases, add rents 22.6% higher.

Can you talk a little bit about that?

That was a nice number and was that add properties that were being redeveloped etcetera.

I just want -- if you can characterize that a little bit or just talk about that a bit, because that was a good number.

And I know in the prepared remarks, Dennis, you mentioned that, on a same-store basis and from a rental environment on a go forward basis, you expect kind of above average.

It's a pretty good environment out there.

Yes.

Just in my remarks I mentioned that it involves all manner of centers that we own, all the way from Metropolitan Detroit Centers to some of the newer developments, really no redevelopments per se but when you are averaging 2,100 square feet, I think, I'm looking a the list here in the largest store that we really singed a lease with, with the 5,000 square foot store and the smallest was about 910.

But with the number of the small spaces, we were averaging anywhere from 25 to $35 of square foot.

With the lowest rent that we achieved was in the range for 5,000 square feet, around $11 a square foot.

So there is really a broad range of tenants, but what we are seeing is, that a significant acceleration even though we will never doing poorly on leasing, our portfolio in the past always averaging around 100 new leases a year.

We are seeing a very nice acceleration of space leased at very healthy rental rates.

So we are confident that this number would -- 22%, I am not prepared to say that that's going to continue to the year.

But we certainly should be able to achieve rental increases that are above portfolio average.

Because it's a -- and the 90 to 95%, I mean, you are looking at a 95% occupancy by year-end and again, that's going to require some lease-up, obviously, of vacant space.

So that 226, you know, the portfolio average, remind me what the portfolio average -- in term of, you mean above the portfolio average rent.

Our portfolio average is 14.33.

33.

Right.

Okay.

So can you give us any indication where -- you know you are probably talking to a lot of potential tenants to take space?

But, Philip, understand, that to get there -- and you know I referenced a nut like, we will be announcing three mid boxes...

Exactly.

...before the end of the quarter.

And, obviously, the larger users, the 20 to 45 or 50,000 square foot users, their average rent is lower.

Above 688 and not for the anchors.

Okay.

So it's 688 for the anchors.

Okay.

Over 19,000 feet, so that's included as well.

Yes, but I would assume that the mid-box retailer typically go for -- any every from 7 or $8 up to about 13 to $14.

Okay.

Depending on who they are.

Okay.

Perfect.

Secondly, the same store operating margins declined this year and I think you touched on that a little bit that was just a vacancy -- or talk about that a little bit?

They went down, I think, just slightly here from 60 -- they are 68.5% versus 69.6 a year ago.

Anything there to...

They are looking for it.

One second, if you could?

Okay.

I think where you are seeing that is...

And I took out fees and income, the 1.2 and 0.5 million from last year.

I think what you are seeing there, is some vacancies, you know, debt to bottom and offset by some lease-up.

Okay.

And I know Dennis touched on that a little bit that there is...

Yes, he did.

The significant number of, you know, in the old days, which probably go up to about 24 months ago, what we would like to do is, we had most of our leases expire as of January 31.

And that put a tremendous amount of pressure on our leasing people to get a significant number of lease renewals and new leases sign within a relatively compact period of time.

So we stop that practice albeit there is still a significant number of tenants, who have those expiration.

And so those people who are not renewing or that we have signed leases with new tenants to take over, we are working on getting those tenancy into those spaces now.

And so those numbers will pick right back up again.

Okay.

Perfect.

And then, lastly, here the fees and I know, Rich, you talked a bit about this year.

You had 915,000 of acquisition fees in the quarter of that 1.2 million and you had 100,000 of management fees.

The 915 is obviously not recurring, because that's an acquisition fee.

Again, not recurring, but I think we are going to have more acquisitions.

Exactly.

Yes and you talked about a large acquisition here in the second quarter, is that -- so we should work at 2.5 million for the year and phase, you said it's going to be somewhere to '04?

If you would look at just -- looking at more recurring type things, just on the assets we've acquired through this joint venture, yes, we'd expect to have our share of income there to be about $2.7 million on our share or really our management fees to be about $1 million on a common annualized basis.

And like I said, I expect those to grow, the management fees from $1 million up to about 1.6 million over the next couple of years.

Okay.

And our share of income to go from like $2.7 million up to about $4 million.

Okay.

Okay.

That is just the acquisition venture, we expect to earn also some fees on the development as well.

You know pretty similar to what we've had in prior years.

Okay.

Okay.

Okay.

And actually, the very last question, can you talk -- can you give us any information on the significant acquisition that you are looking at here in the second quarter, just even in terms of timing or the size etcetera?

Well, we are in contract on one asset of some size and we would expect to close that either by the end of May or in early June.

And so you could expect an announcement on an acquisition in the very near future.

Okay.

And can you give any size, dollar amount?

It's between -- how about between 50 and 55 million.

How is that?

That's good.

Okay.

Thank you very much.

Thank you.

Again for any further questions, please press "star" "one" on your telephone keypad.

The next question comes from Andrew Rosivach with CSFB.

Hi.

Good morning, guys.

Hi Andrew.

How are you?

I heard that a lot folks in the market buying your stock on an NAV basis and I'm actually calculating an implied cap rate and your current share price, that's higher than where you've been buying.

And assuming your added discount to NAV, the way your arbitrage at this, is by selling -- you are either selling out or you are assets and buying back shares.

Especially, Dennis, given that you said it in your comments that you thought this dip was a buying opportunity for investors to buy Ramco, if this is an opportunity for Ramco to buy Ramco?

Well, let's put it this way.

We've talked about the off balance sheet venture.

There are a number of opportunities where we can actually add assets with the superior returns, certainly, because we feel that our stock price does not reflect the true net asset value that would be an alternative.

And I'm not saying that we wouldn't avail ourselves of that.

But as we look at our sources and uses of capital, we first have some very accretive things to do constructively with the acquisition of additional assets and the redevelopment of core assets.

I guess, as a follow-up, what kind this year your return hurdle, given that the public markets are making a cost of equity pretty steep?

If we look at the ING venture, basically, our return on equity, and that's about 10.5%.

And then I think that that seeing today's prices -- stock prices I think we can put that blended cost of capital together then still make that accretive, pretty accretive.

Okay, and then finally on the topic of accretion, you pressed on some other stuff Rich, your G&A was up a lot, it's 40% overall, its look like it's 25% after your backup some onetime stuff.

You're not going to get earnings growth no matter how good your acquisitions or your portfolio performs as long as the G&A keeps growing like this.

I guess the big question is how much work is still left for you to, in terms of building out infrastructure, that's going to have additional cost on the G&A line item or are you there today?

Stepping from a staffing standpoint, I think we're pretty close to being there today.

I think that at the - a good hunk of us had talked about the G&A increase was really legal, and a lot of that pertained to Sarbanes 404 compliance work, and documentations all done expect that the backlog a little bit in the coming years, and that they really expect to get some economies of that with the auditors as well, relying audit control they ought to be able to reduce their scope on a go-forward basis.

So, again, public -- the answer to your direct question on staffing basis, I think we're pretty close to be able to manage the ING ventures as well as bring on more development, and from economy ancillary SG&A increases, we expect that what we saw in this past year, I wouldn't expect those to be -- I expect -- we'll expect those to be coming down, not increasing.

It sounds like you might have a couple of more people to hire though, will that be fair to say?

Yes.

I think that that's probably is fair to say.

Okay.

Thanks guys.

Okay

Thank you.

At this time there are no further question.

Well, we thank you all for your attention, and management here is very focused on both the opportunities as well as the challenges that we have ahead.

Again, thank you for your interest.

Good-bye

Thank you.

This concludes today's conference.

You may now disconnect.