Rithm Property Trust Inc (RPT) 2011 Q1 法說會逐字稿

Greetings and welcome to the Ramco-Gershenson Properties Trust first quarter 2011 conference call.

At this time all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Paula Antio, Director of Finance. Thank you Ms. Antio. You may begin.

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

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.

Additionally, 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. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks that could cause actual results to differ from expectations are detailed in the quarterly press release.

I would now like to introduce Dennis Gershenson, President and Chief Executive Officer, and Gregory Andrews, Chief Financial Officer, both of whom will be presenting prepared remarks this morning. Also with us today are Michael Sullivan, Senior Vice President of Asset Management, and Catherine Clark, Senior Vice President of Acquisitions.

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

Thank you Paula. Good morning ladies and gentlemen. We're pleased you could join us. First, a piece of very good news -- Dawn Hendershot, our Head of Investor Relations, someone familiar to many of you and the usual voice to introduce this call, just had a baby girl. Mother and daughter are doing well and we anticipate Dawn's return in time for her to participate in our second quarterly report.

And now to business -- these last 90 days have been very busy and a very productive period for the Company. Our activities involved all aspects of our business including balance sheet improvement, portfolio management, and corporate restructuring. I will ask Greg Andrews to address our balance sheet advances including the dollars we raised through both our recently completed convertible preferred and controlled equity offerings.

Other balance sheet positives include the financing of our Jackson Crossing Center in Jackson, Michigan, the payoff of all significant short term obligations and the very limited schedule of loan expirations through the end of 2012.

Greg will also update you on our new and pending revolving line of credit. Suffice it to say that in a relatively short period of time, we have not only made substantial progress in positioning our balance sheet so that debt represents less than 50% of our capital structure but with our new revolver and the flexibility our debt reduction provides, we are positioned to aggressively move our Company forward.

I would like to focus on the progress we're making in asset management and corporate cost containment. In our 2010 yearend conference call we set out a number of operating metric goals for 2011 including improvements in our same-center operations, driving our overall occupancy, reducing the number of mid-box vacancies including spaces where our tenants were dark but still paying rent, and increasing our average base rental rate. I'm pleased to report that we are on track to achieve all of these goals.

First, relative to our same property analysis, at yearend we projected that for wholly owned centers, our 2011 numbers would approximate our performance for 2010. In the first quarter of the year the same-center comparison showed that our operations were indeed approximately equal to our results for Q1 2010 at a modest negative of 0.1%. Even with the departure of a number of mid-boxes, many of which await their identified replacements, our leasing efforts and property cost containment allowed us to maintain our net operating income.

On same center for off balance sheet joint venture analysis, a very positive story that does not necessarily come across in our numbers. Minimum rents, recoveries, and occupancies have all been impacted by the departure of mid-box retailers like Albertsons at Mission Bay, Borders at Hunter's Square, as well as R.J. Mars and Excellence in Exercise in Chester Springs. All these tenants were in our 2010 numbers but have been removed to make way for Golfsmith and Fresh Market at Mission Bay, buybuy Baby at Hunter's Square, and Marshalls at Chester Springs.

The relatively small dip in occupancy, minimum rent, and recoveries at these centers compared to the size of the departing anchors is an indication of our small tenant leasing progress as retailers sign agreements in anticipation of the opening of our new anchors in the second half of 2011 and in early 2012.

On the leasing front, understanding our first quarter statistics is not necessarily a simple, straightforward process. We issued a press release in March, touting the fact that six new mid-boxes would be signed in Q1. We have indeed executed all six new lease agreements. These achievements must be put in context however, as our supplement shows a small drop in both physical and lease occupancy. Neither dip was a surprise and we had forecasted a small decline in Q1 before we accelerate past our yearend 2010 numbers for both leased and occupied space.

Further, the first quarter is typically a period for both lease expirations and a time when weaker tenancies throw in the towel after benefiting from whatever the holiday season provided.

The larger tenant departures included Bealls Furniture at our South Bay Center, the burn-off of the CDF lease guarantee on the Linens and Things at Pelican Plaza, and the departure of Borders from Hunter's Square at lease expiration in January. The drop in our smaller tenants represents the majority of the departures we expect to experience for them in 2011.

Let me briefly explain why the six new mid-box leases do not more than counterbalance these drops in occupancy. First, four of the new leases replaced currently dark but paying tenants. The new retailers include two new Bed Bath & Beyond stores and two sporting goods operations, both regional, MC Sports and Dunham's. The replacement of a dark but paying anchor by a new vibrant retailer benefits our centers in two ways -- as the installation of a new, exciting draw increases both customer traffic and interest in filling vacant spaces adjacent to our new anchors by ancillary retail uses.

Our other two new mid-box retailers fill existing vacancies. A national fitness center more than doubles the size of a vacant 23,000 square foot box in metropolitan Atlanta and a buybuy Baby store, a new entrant into the Detroit metro market, will open at Hunter's Square in Farmington Hills, Michigan replacing the vacancy created by the Borders departure. The reason this latter change does not positively impact our occupancy number is because Borders was included in our 2010 yearend number and only vacated in the first quarter of 2011.

Going forward, the number of tenants and square footage of departing retailers should drop precipitously and the number of new leases and occupancies will rise above prior levels. Included in our plans for the balance of the year is the signing of a number of additional mid-box leases. Because we're on track with our 2011 leasing program, we reaffirm our projection of leased occupancy at yearend 2011 to be between 91% and 92% and physical occupancy to be between 90% and 91%.

Turning to lease renewals, in the first quarter we retained 83.6% of all expiring tenant leases, a major positive shift from historical averages of 72% to 74%. Please note that even with this high retention rate we achieve a positive average rental increase of 1.3%.

The leasing statistics in our supplement, in addition to our renewal information, provide an accounting for both total comparable leases which include new leases as well as renewals and an additional schedule showing comparable rates for just new lease agreements.

During the first quarter, because one large format user accepted its premises in an as-is condition with a modest allowance for improvements, we reached an agreement with the retailer to pay a rental rate substantially below that paid by the prior mid-box occupant. This one lease agreement therefore, has had a significant impact on our leasing spreads.

For total comparable leases in the first quarter, we experienced an average decrease of 5.6%. Excluding the impact of the one box, the number would have been negative 1.8%. It should be understood that even with the acceleration in retailer interest in locating in our centers, market rents in many of our trade areas are still challenging as our competitors are offering extraordinary deals to try and entice tenants into their assets.

It is our belief that a well occupied shopping center is always preferable to holding out for higher rental rates that may take some time to achieve. That said, we expect our leasing comparisons to improve as we move through the year. Also, for all leases signed in the first quarter we experienced an increase in our portfolio average annualized base rent per square foot, an increase from $10.98 at the end of 2010 to $11.03 at March 31.

Another one of our 2011 goals was to further streamline our corporate structure. Although our latest staff reduction occurred in the first week of April, we've issued an 8-K and so I thought it appropriate to address the change at this time.

In 2010, we informed you that we would be scaling back the number of value add redevelopments that we would commence in 2011 to no more than two to four projects. We also expect that any developments we would undertake will be timed in such a manner that we did not need to maintain the size of our development and redevelopment group at its prior staffing level. Thus, after a review of our potential projects we concluded that a staff reduction was appropriate. In addition to several other departures, the Head of the Development Team has left the Company. His responsibilities will be divided and assumed by several of our Senior Executives who have extensive development and redevelopment experience.

As for dispositions and acquisitions, you will remember that on our fourth quarter conference call we updated you on the status of the three shopping centers we had offered for sale. As a further update, we will be closing on the first of these three in the second quarter and we expect to sell the remaining two in the second half of the year. The unusual amount of time it has taken to affect these sales is the result of a lender approval process which has been delayed because our [CMBS servicers] have their attention focused on problem loans.

During our last call I also outlined our plan to sell a number of non-core assets. We have now identified a number of properties and we are in the process of implementing the best approach to marketing them. Please understand that when we identify an asset as non-core, it does not mean that it is by definition, distressed. On the contrary, one of this group is a freestanding mid-box. Another property consists of approximately 30,000 square feet of retail space which is very well leased and sits adjacent to a shadow major national anchor. Also, there are several additional centers we have placed in this category which have buyable anchor draws. However, the major tenant does not fit our definition of what we will consider a core anchor going forward. Thus, our approach to what constitutes a non-core property encompasses a broad range of assets. We expect to begin to sell these properties in the second half of 2011.

Lastly, having established a strong financial base with minimal debt maturities through the end of 2012, with the pending sale of three stable assets that should generate $40 million to $42 million and with the closing on our new unsecured line of credit, we are in the marketplace actively seeking acquisition opportunities.

I would just like to conclude by saying that our entire Management Team is energized by the potential in our future and I am personally excited to share with you over the next several quarters our ongoing progress toward the goals we set out at the first of the year.

I would now like to turn this call over to Greg Andrews who will cover our financial activities over these last 90 days.

Thank you Dennis. Let me start by discussing our balance sheet. Then I'll cover our income for the quarter and wrap up with an update on our outlook for the year.

We have substantially strengthened our balance sheet this year through five capital raising activities. First, at the end of the quarter we closed a $24.7 million, seven year mortgage on Jackson Crossing located in Jackson, Michigan. This center is our only enclosed mall. The interest rate on the loan is 5.76%. Proceeds were used to pay down part of the $30 million balance on our term loan.

Second, at the end of the quarter we obtained one year extensions on two mortgages, totaling $13.9 million and secured by Beacon Square and Gaines Marketplace. We also reduced the rate on these variable rate loans by eliminating their LIBOR floors.

Third, during the quarter we raised $8.6 million due to issuance of 650,000 shares of common stock under our controlled equity offering program. Proceeds were used to pay off the remaining balance under our term loan and to pay off our 20% share of an $11 million mortgage secured by Peachtree Hill, a joint venture property.

Fourth, subsequent to quarter end we closed an offering of $80 million of convertible perpetual preferred stock. The dividend rate on the preferred stock is 7.25%. Proceeds from the offering were used to pay off our $30 million bridge loan and to reduce the outstanding balance under our secured revolving line of credit. Under GAAP, our convertible perpetual preferred stock will be treated on our income statement either as reducing net income by the preferred dividends or as converted into common equity, whichever is most dilutive to that income and to FFO. We expect our income statement treatment this year will be to reduce net income by the preferred dividend.

Fifth and last and also subsequent to quarter end, we received commitments for a new bank facility. The new $250 million facility is unsecured and is comprised of a $175 million revolving line of credit and a $75 million term loan. The line of credit matures in three years and the term loan in four years. Both allow for a one year extension at the Company's option.

The new facility eliminates the 2% LIBOR floor of the existing loan agreement and reduces the interest rate spread from 350 basis points to a range of 200 to 275 basis points depending on the Company's leverage. We anticipate that this loan facility will close within the next few weeks. After we close our new bank facility we will have lowered our borrowing costs, enhanced our liquidity and flexibility, and unencumbered nearly $500 million of property.

Let me walk through the pro forma changes to our balance sheet measures as a result of our preferred stock offering and bank line restructuring. Our debt to market capitalization decreases from 52% to 45%. Our debt to EBITDA decreases from 8.1 times to 7.0 times. The weighted average term of our debt increases from 4.8 years to 5.7 years. Our interest coverage increases from 2.0 times to 2.4 times. Our fixed charge coverage remains unchanged at 1.7 times. And finally, our availability under our line of credit increases from $15 million at quarter end to over $150 million.

In summary, we have greatly improved our balance sheet strength and flexibility which will leave us free to focus on leasing, cost control, and other opportunities to create value going forward.

Turning now to the income statement, our first quarter income was in line with our expectations. I'd like to cover a few notable items. Our property NOI was approximately $500,000 higher than budget, primarily because of higher minimum rent. NOI for the quarter included a $300,000 reduction in recoveries for our true-up for last year's expenses. As a result of the true-up, our recovery ratio for the quarter was 88.7%. For the remainder of the year we expect our recovery ratio to be approximately 90%.

In the first quarter we received lease termination income of $1.2 million. This income relates primarily to the departure of two mid-box tenants who will be replaced by new retailers. We anticipate another $1 million or so in additional lease termination income over the balance of the year although it may not be evenly distributed in each quarter.

Our provision for credit loss which is included in property operating expenses was $422,000 in the quarter, lower than the $618,000 in the comparable period last year. The current quarter's provision equates to 1.5% of property revenue and we consider this to be a reasonable run rate estimate for the rest of the year.

Our General and Administrative expenses for the quarter were $5.1 million. This included approximately $300,000 of expenses budgeted for later in the year. We expect an offset for this amount through lower expenses in the remaining quarters of 2011.

At the beginning of the second quarter we reduced our employee count by four. We expect to incur a modest severance expenses related to this reduction in the second quarter and anticipate recurring savings of approximately $600,000 on an annual basis.

Overall, we now expect G&A for the full year to be in the low to mid $18 million range with a lower run rate in the second half of the year than in the first.

Now I'd like to comment on our outlook. As noted in our press release, we are affirming our 2011 guidance for FFO in the range of $0.90 to $1.00 per share excluding any non-recurring items such as impairment charges or RAFs.

As a result of restructuring our bank facilities we expect to write off certain deferred financing costs related to the existing line in the second quarter. This write off is not included in our FFO guidance and we are still in the process of identifying the exact amount to record in accordance with GAAP. In conformity with NAREIT's definition of FFO we will include this item in our reported FFO.

To sum up, we are pleased with the progress we have made on our balance sheet so far this year. The addition of preferred equity capital, the lowering of our borrowing costs, and the creation of a sizeable unencumbered pool of property results in significantly greater financial flexibility. This enhanced flexibility allows us to better withstand any unexpected market surprises and provides us with the capacity to take advantage of value creating opportunities.

Now I'd like to turn the call over to the Operator for Q&A.

Thank you sir. Ladies and gentlemen, at this time we will be conducting a question and answer session. (OPERATOR INSTRUCTIONS)

Our first question today comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Hi, good morning. I'm on with Jordan Sadler as well.

Hi Todd.

Hi, in just thinking about acquisitions, I was just wondering if you could provide a little color on some of the opportunities that you're seeing today and just give us a sense of the competition and what that has done to pricing for some of the assets that you're looking at.

We find that the acquisitions we're researching fall into two categories. The first are those assets that are very widely marketed, a tremendous amount of competition and in most cases we find that the cap rates that these are going to sell out fall below the numbers that we would find acceptable as far as our use of capital.

The second group that Cathy Clark has been reasonably successful in finding are those group of assets where for a variety of reasons, either we know the seller, we have a very good relationship with the broker, and we are able to be part of a much smaller group of bidders who are looking at those shopping centers and we are having much more success in coming up with pricing that makes sense to us.

What are your return thresholds today and how do you measure that?

Todd, I think the return threshold for any investment depends on the -- you can have characteristics of that particular investment. You know, what kind of risk profile is attached to it and what type of growth that you think you can get out of it, whether it's organic growth or value added growth. So there is no sort of one answer to that question but in today's market I think we see opportunities in cap rates that are in the same range as we described last quarter, 7.5% up into the eights.

Okay and then just on the, looking at the same-store pool it looks like three properties dropped out this quarter from last quarter. I was just wondering, I think one of them may have been one of the A&P Centers. I was just wondering what the other two properties were that fell out of the same store pool.

Yes, I think it was properties that are held for sale or pending redevelopment.

Okay and what would the same-store performance have looked like with the A&P property in the same-store pool this quarter?

I don't have that number in front of me. I think last quarter when we described the impact of A&P we provided a number that indicated its effect on our income and I think if you look at that press release you can come up with I think a pretty good estimate of what that impact would be. It was roughly I think $800,000 on an annual basis.

Okay, thank you.

Thank you. Our next question comes from the line of Geoff Dancey with Cutler Capital. Please proceed with your question.

I was curious about the controlled equity offering that you used during the quarter. I was wondering how you decided how much of that to issue and what your plans are going forward with it.

Hi Geoff, it's Greg. We were very focused during the quarter as I think is apparent from our prepared remarks, on a whole series of steps to improve and strengthen our balance sheet and given the level of our stock price in the first quarter and given our goal to pay down certain debt that was coming due we thought it was appropriate to avail ourselves of among all the venue, some equity in addition to the mortgage debt, the preferred offering and so forth.

It was a modest amount that helped us achieve our goals. I think at this point we feel like our balance sheet is very strong and we don't need to continue to do anything on that front but as we continue to look at opportunities to invest capital we will be very protective of the progress we've made on our balance sheet and so equity may factor into future funding of investments.

Okay and is there any further equity issuance assumed in your guidance right now beyond what we saw in the first quarter?

There is not.

Okay, thank you.

Thank you. (OPERATOR INSTRUCTIONS)

Our next question comes from the line of Wes Golladay with RBC Capital Management. Please proceed with your question.

Good morning guys. Can you tend to give us a range of what to expect for the severance and the deferred financing costs, the write off for that, a ballpark?

As far as the severance costs, we are finalizing an agreement now with the one individual who headed up the department. This was a very amicable parting and so we're not in a position yet to talk about that. Obviously as soon as we've reached that agreement then we'd be more than happy to let you know. You're not talking about significant dollars.

It's not a material amount in the overall scheme of things, Wes. The deferred financing cost is a material number but we are in the process of combing through what is required under GAAP for that and it's surprising technical, how to interpret that so we should be able to provide some more information shortly but we're not prepared to do so at this time.

Okay and looking at your assets held for sale, it looks like you guys have $9 million in the assets held for sale but the mortgage is about $9.6 million. Is this something you can just hand back to the bank and record a gain on?

What's on the balance sheet is the book value. The market value is a different thing and obviously much higher.

Okay and do you have any new developments in the works? What's a good one, two to four year, would these be second half related?

First, the two to four references the redevelopment and we have a reasonable expectation that in the second quarter, based upon leases that have been executed we will be commencing one or two redevelopments. As far as actual developments are concerned, we will certainly give you a heads up before we would commence any development and let you know the rationale, the relative costs, and relative returns.

Yes, sorry about that. I meant to say redevelopments on that. Okay, and it looks like, with the D&A increase, was that just a write off of straight line rents, the increase this quarter?

In which line item?

The depreciation.

No, I think what reflected the increase in depreciation and amortization was that we bought assets in the fourth quarter including one right near the end of the fourth quarter.

Okay, okay I think that is it for now, thank you.

Thank you.

Thank you. Ladies and gentlemen our next question comes from the line of Michael Mueller with JPMorgan. Please proceed with your question.

Good morning, it's Sarah King here with Mike. Just a follow up on the redevelopment question, can you add a little bit more color there in terms of dollar amount and expected returns?

At least the one redevelopment that immediately comes to mind is a shopping center where it's in an off balance sheet structure and although we'll probably be talking about $7 million to $8 million total, our percentage of that is only 20% so our number there will come in somewhere between $2 million and $2.5 million at the most and in each of these redevelopments as we put them together we have historically and expect going forward, we'll be talking about low double digit returns on new dollars invested.

Great and in terms of the two to four that you mentioned earlier would you say, just put some dollars around those in terms of what you're expecting?

Again, I believe that in each of these the dollar cost is very modest. Certainly even if we undertook four projects I don't think you'd be talking about more than maybe $10 million in total and again double digit returns.

Great and then following up in terms of the asset sales that you guided to, I believe the last quarter and I apologize if I missed this earlier in the call, but that the three assets held for sale you expected to sell at around $40 million -- if I'm correct -- and then I believe you guided to potentially an incremental $50 million of dispositions. I just wanted to make sure given the delay in some of these, in the expected closings of these dispositions that nothing has changed there.

Right. The $40 million to $42 million referred to the three stable shopping centers that we are in contract -- again, one closing is imminent. And as far as the $50 million you referenced, that's what we guided you to at the beginning of the year for what we have considered non-core but we indicated at that juncture that that did not necessarily mean that all or even the majority of those would be sold in 2011. Some of them are in a position where we say these were non-core and again the two that immediately come to mind have good anchors. We've just put those anchors in within the last maybe four or five months which means that we want to achieve some lease-up adjacent to them before we would actually market them so the timing of marketing the $50 million non-core will vary depending upon the status of the asset.

Okay, that's helpful. Thank you very much.

Thank you. Our next question comes from the line of Tayo Okusanya with Jefferies & Company. Please proceed with your question.

Yes, good morning gentlemen. I just want to talk about leasing spreads for a little bit. When we kind of look at the numbers and the fourth quarter spreads for new leases being down 21.5%, could you talk a little bit about that? Is it just that one anchor that's kind of skewing those numbers and if it is, what exactly was the situation with that anchor?

As I mentioned in my prepared remarks I only dealt with the overall same-center comparisons. If you took out that one tenant then new leases would be down right around 11%. The thing you have to understand is, as I said in my remarks, the mid-box retailer who was in there before and it was indeed a Linens 'n Things who was paying a very aggressive rent. The new retailer came in. We really did not give them anywhere near what it would cost to build out the space and therefore that gave them greater negotiating power to deal with a rental rate that was lower.

Seeing as the vast majority of spaces that are included in those quote new tenant leases, are very small spaces, you can have a 30,000 to 35,000 square foot retailer having a very significant impact on those numbers and that's basically what happened.

Okay but even if you exclude that large anchor then the rest of the space was still down 11%. Just talk a little bit about what you're kind of seeing in the market and why things seem to be getting incrementally worse?

Again, it's not necessarily getting incrementally worse. What we're finding is that a lot of companies, both public companies and private companies, are pushing to lease up their spaces. As I mentioned in my prepared remarks, what we're finding is that a number of our peers are more than willing to either give a lot of money in allowance or accept significantly lower rental rates and are really driving market rents lower.

We're not filling our spaces at the sacrifice of rents if it would be below market but we are at the upper end of the market range in these areas and our conclusion is lease the space and as I mentioned in our fourth quarter call, our philosophy is still the same that if we're going to lease an individual space at market but that market is lower than what we think that the individual shopping center truly deserves, we prefer especially on the smaller tenants, to sign a shorter term lease -- let's say a three year versus a five year lease -- and then get those higher rental rates when the short term lease expires.

That's very helpful, thank you.

Thank you. (OPERATOR INSTRUCTIONS)

Our next question comes from the line of Vincent Chao with Deutsche Bank. Please proceed with your question.

Good morning everyone. Just a question on the TI side of things -- those also looked like they were up a bit quarter on quarter and just wondering if you could provide some color there. I know it sounds like the mid-box tenant wasn't getting a lot of TIs and so they had some pricing power on the rent side but the overall TIs looked like they were up a little bit.

Yes, the rationale for the increase in the TI obviously relates to the very significant number of mid-boxes we have leased to in 2010 as well as in the first quarter of '11. Even where they may be more modest compared to a complete build out it's still higher than the kinds of numbers that we deal with when we're talking about the smaller retailer and we are having, relative to the smaller retailer, very good success in giving very little money.

Okay, I guess just based on sort of what you're looking at in terms of leasing volume for the rest of the year, are the current levels in 1Q sort of what we should be thinking about for the rest of the year?

I can't make a definitive statement but again, I'll reinforce as we ramp up with the number of smaller tenant leases, one would logically think that that number should come down.

Okay, thank you.

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please proceed with your question.

Hi, good morning. Just two quick questions, can you go through, maybe not all 16 but at least give some stats in terms of what the box leasing has done for the small shop leasing, perhaps start with some of the older of those 16 and see what has happened in the small shop leasing in those centers since you've signed those leases?

Nate, this is Greg. I don't think we're prepared here today to have some kind of quantified data about it but I will tell you just anecdotally from being familiar with our properties that to the extent we've filled a mid-box space that was previously vacant it's given us the ability to have traction on the shop leasing. I can think for example just off the top of my head of Delray Marketplace down in Florida where we put in a Ross Dress for Less, a Dollar Tree next to Office Depot and we had a whole slew of vacant shops right next to that that we've seen significant traction on.

So anecdotally, it's working and it obviously makes sense but I don't have any stats for you on that.

Nate, what we could attempt to do for our next call though is maybe give you, because we do talk about gaining that recent traction as we put these boxes in, we would be more than happy to provide some information that truly gives you a feel for the differential that we're able to create based upon the new mid-boxes.

Okay thanks and then just lastly, on the at-the-market you had done in the first quarter, are you still active with that? Do you see further activity with that in the second quarter or was that for a specific need in order to (multiple speakers)?

Someone asked a similar question earlier Nate, and I think maybe I wasn't entirely clear but we tapped that for a specific purpose in the first quarter which was part of this overall plan of reshaping our balance sheet and it's available to us to tap in the future but I think that would only happen in conjunction with specific investments that match the cost of capital appropriately with the return on our investment.

Alright, thanks.

Thank you. Our next question comes from the line of Vincent Chao with Deutsche Bank. Please proceed with your question.

Just had a follow up question, in terms of the secured markets I'm just wondering what kinds of terms you're seeing today?

In the secured debt market?

Yes.

I think we're seeing looser terms generally than was the case last year, lower debt yields, lower debt service coverage requirements, higher LTVs, and then on the pricing front, generally still some floors at the shorter end of the debt structure but spreads that are in the low to mid maybe 200s over.

Low to mid 200s -- and that's on five year?

Again, it sort of varies whether it's five or ten and at the shorter end of the curve in order for lenders to reach some sort of minimum overall interest rate it tends to be a little bit higher.

Okay and on the LTVs? Can you quantify that a little bit? Is it like 75% today?

Yes and perhaps even higher.

Okay thanks and I apologize if I missed this earlier but on the new unsecured line, are there any floors on that?

In terms of rate?

Yes.

No.

Okay, thanks.

Thank you. Our next question comes from the line of Ben Yang with Keefe, Bruyette & Woods. Please proceed with your question.

Hi, good morning. I apologize if you already answered this or addressed this but is it your expectation that the underwriters are going to exercise the $12 million shield on the convertible preferreds that you guys just did?

We don't have a definitive answer. It is possible. That option period has not run out yet.

Okay and then can you just confirm, is that convertible only at your option or do the buyers of that security have the option to convert as well at some point?

Yes, they have the option to convert into common -- they wouldn't have an incentive to do that until such time as it made some more economic sense but yes, after a non-call period of seven years we have the ability to essentially force conversion under certain circumstances that are generally tied to where our stock is trading at that point.

Okay great, thank you.

Thank you. (OPERATOR INSTRUCTIONS)

I'd like to turn the floor back to Management for any closing comments.

As always, we would like to thank everybody for their attention and their interest and we look forward to talking to you in approximately 90 days -- be well.

Ladies and gentlemen this concludes today's teleconference.