Whitestone REIT (WSR) 2014 Q4 法說會逐字稿

Good day and welcome to the Whitestone REIT fourth-quarter 2014 earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Suzy Taylor, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Shannon. Good morning, and thank all of you for joining Whitestone REIT's fourth-quarter and full-year 2014 earnings conference call. Joining me on today's call will be Jim Mastandrea, our Chairman and Chief Executive Officer; and Dave Holeman, our Chief Financial Officer.

Please note that some statements made during this call are not historical and may be deemed forward-looking statements. Actual results may differ materially from those forward-looking statements due to a number of risks and uncertainties. Please refer to the Company's filings with the SEC for a detailed discussion of these risks. Acknowledging the fact that this call may be webcast for a period of time, it is also important to note that today's call includes time-sensitive information that may be accurate only as of today's date, February 27, 2015. Whitestone's fourth-quarter earnings press release and supplemental operating and financial data package have been filed with the SEC. Our 2014 10-K will be filed shortly. All will be available on our website, WhitestoneREIT.com, in the Investor Relations section. Also included in the supplemental data package are the reconciliations from GAAP financial measures.

With that, let me pass the call to Jim Mastandrea.

Thank you, Suzy. And thank you all for joining us on our call today.

We're very pleased to report another strong quarter and year, driven by excellence in executing our strategy of acquiring value-add properties in high-growth markets, strategically cycling of capital through the sale of non-core legacy properties, building upon a forward-looking operating model, and maintaining a balanced and flexible capital structure.

In 2014 our team delivered another year of profitable growth, with a 35% increase in FFO core and a 9% increase in FFO core per share. In 2014 we exceeded the guidance provided for FFO core, and met or exceeded almost every one of the underlying drivers including same-store growth and acquisition volume. These results highlighted the acceptance of our business model as it continues to drive value, producing a 22% total return in 2014 and a three-year total return to shareholders of over 60%.

Specifically, in 2014 we acquired attractive properties in our core markets, transformed legacy properties into profitable community centers, sold non-core properties, strengthened our balance sheet, and drove revenues, net operating income and FFO per share growth. I'll touch on each of those in more detail, but I want to first comment on our operating model and acquisition strategy, which were central to our success in 2014.

Whitestone was a first mover in implementing a business model which recognizes two significant macro level societal changes that have created a paradigm shift in consumer behavior: first, a greater percentage of households with two wage earners, and, second, online commerce continuing to transform the way consumers shop. Consumers, while facing greater demands on their time, are benefiting from increasing transparency in pricing and product information from the Internet and web-based services that yield far more choices than ever before. Today consumers make trips to the local retail centers seeking convenience, services, and unique experiences.

Following shifting consumer behavior and preference patterns, Whitestone has crafted its business model and modified its real estate to meet these consumers' underserved needs. Our Whitestone community approach caters to these new purchasing habits by blending a complementary mix of grocery, restaurant, health, wellness, beauty, education and services. With our customer-centric discipline we strive for a tenant mix of small, regional, and national tenants that meets the unique needs and preferences of the neighborhood.

Our customers typically occupy smaller spaces, which produce premium rental rates, and seldom contain restrictive lease clauses such as co-tenancy, approval rights, and exclusive uses, and often contain rent bump and percentage clauses. As a leader in this space, our approach in attention to a complementary tenant mix differentiates our business and allows us for high value creation in our communities, and geometric benefit to Whitestone from any form of a tailwind that will or can or may be caused by inflation.

Our value-added approach to redevelopment, repositioning, and rebranding makes our properties stand out and enhances visibility, circulation, and community. We focus not just on what we own, but what we do with what we own, starting with our purchase of properties, continuing with enhancing the customer experience through improvements, and blending a tenant mix to create a center that offers consumers convenience and drives traffic to the property. Our acquisition and redevelopment repositioning approaches are supported by a solid pipeline of acquisition opportunities, proven management team, balanced capital structure, and flexibility within our model that is designed to mitigate downside risk and position the Company for continued growth.

Now, let me share with you some additional highlights of the past year. We continue to build on our past success, and in 2014 focused on acquisitions that were high-quality, well-located community centers in Arizona and Texas markets. During our fourth quarter, we completed $94 million of acquisitions. For the full year of 2014, we closed over $132 million in acquisitions. These acquisitions represent the third consecutive year of adding more than $100 million in external growth. As we move forward in 2015 we will further benefit from our 2014 acquisitions, which closed primarily in December. These communities will begin to fully contribute starting in Q1 2015.

At year end we owned 63 community center properties with 5.5 million square feet of gross leasable area, including six development land parcels. Our occupancy grew sequentially to 86.8% at year end, up from 85.8% at the end of the third quarter, and our same-store NOI growth was a very strong 5.2% for the full year.

Let me take a moment to speak to our holdings in Texas, given the current energy markets and lower oil prices. The attributes that brought us to Texas, and specifically Houston, are still intact. Texas remains a business-friendly state with its low cost of living, great schools, and a highly educated and diverse employment base, as well as low taxes. The state has been leading the nation in job expansion and population growth for 15 years. While energy has played a considerable role in that growth, Houston has flourished outside of the oil industry and grown to be the fourth-largest city in the country bolstered by a world-class medical center, Port of Houston, and a strong technology sector.

Over the past four years we have deliberately diversified our geographic mix to Phoenix, Arizona, and other Texas markets. Thus, in 2014, 34% of Whitestone's total revenues were generated in Houston, down from 42% in 2013; while in the same period our Phoenix portfolio revenues grew to 46% of the Company total revenues, up from 40%. We have seen little or no impact to our business in terms of occupancy, and believe that our community center property business model, in which our tenants provide everyday needed services, insulates us, to a large degree, from negative effects of lower energy prices. Conversely, lower gas prices have resulted in slightly increased disposable income and greater consumer spending.

Now, let me turn to our capital allocation priorities. During 2014, our capital markets activities utilized debt refinancing which was directed towards acquisitions that provided the greatest returns to our shareholders, with an expanded credit facility and the redeployment of capital from the sale of non-strategic office property assets. Our acquisition pipeline remains substantial. Our solid capital structure allows us to continue to make accretive acquisitions and development opportunities in our target markets. In 2015 we also expect to continue to recycle capital from the sale of additional non-core assets.

With that I'd like to turn it over to Dave Holeman, our Chief Financial Officer, to discuss our financial results. Dave?

Thanks, Jim.

As Jim said, we ended a strong year with a great fourth quarter. For the fourth quarter our total revenue grew 14% to $19.2 million, while our annual revenue improved 20% to over $72 million. Contributing to our top line growth was a positive GAAP-based leasing spread of 7.9% for new and renewal leases we signed during 2014. FFO core grew 22% over the prior year, to $7.5 million in the fourth quarter, and the full year 2014 FFO core increased to $28.2 million, up from $20.8 million in 2013, or 35%. More importantly, FFO core grew 14% to $0.32 per share in the fourth quarter of 2014, up from $0.28 per share in the fourth quarter of last year. FFO core per share for the full year grew 9% to $1.20 per share.

Our fourth quarter was marked by a 20% year-over-year improvement in property net operating income and the signing of 75 new leases totaling over 183,000 square feet of space, with an average positive leasing spread on new and renewal leases of 10.6% in the fourth quarter. For the year, our leasing team signed 372 new and renewal leases, totaling 862,000 square feet, with a total lease value of over $53 million. Our tenant base consists of 1,347 tenants. And our forward-thinking operating model continues to be effective, producing increases in occupancy and industry-leading positive leasing spreads. We have a diverse tenant base, minimizing our individual tenant credit risk with our largest tenant representing 2.2% of our annualized rental revenues.

For the fourth quarter our total property NOI grew 20% to $12.7 million from a year ago, and, as Jim mentioned, does not include the full impact of our $94 million of acquisitions in the fourth quarter. For the full year 2014, property NOI grew 25% to $47.2 million from the full year of 2013. The annual increase in NOI was attributable to strong same-store growth of 5.2% and our 2014 acquisitions.

Our weighted average interest rate for the quarter was 3.6% and for the full year was 3.3% versus 3.7% in 2013. Our general and administrative expense for the quarter includes $700,000 in acquisition expenses and $1.6 million in expense relating to the amortization of non-cash share-based incentive compensation. We continue to see the benefit as we gain scale from our larger base of assets on our property expenses and our overhead costs. As of the end of the quarter we have 81 employees, and our G&A cost, excluding acquisition expenses and non-cash stock expense, was 11.3% of revenues. We continue to believe that performance-based stock compensation, resulting in significant ownership by management, is the best way to align our team with all of our shareholders.

Now let me turn to our balance sheet. In 2014 we continued to strengthen our balance sheet through the addition of strong capital institutions and the addition of high-quality assets. Our underlying capital structure remains quite simple, with a conservative level of secured and unsecured debt, a low weighted average interest cost, and laddered maturities. We have one class of common stock and no joint ventures or partnerships. This composition gives us significant financial flexibility and the ability to be quick and nimble.

During the fourth quarter we amended our existing credit facility, expanding the facility from $175 million to $500 million, extending the maturity, and improving the pricing grid by approximately 35 to 55 basis points. Also, we added five high-quality banks to our existing bank group of four. The facility also has an accordion feature that will allow it to further increase to $700 million. And the facility consists of $100 million in term loans and $400 million in revolving loans. As of year end, $220 million is drawn on the facility and $280 million remains available.

During 2014 we refinanced $47 million of property level debt at a weighted fixed interest rate average of 4.3% and a weighted average term of 10 years. As a result of the expansion of our credit facility and proceeds received from property dispositions, we did not raise equity in 2014 other than approximately $6 million in proceeds from our ATM program. We did not issue any shares under our ATM program in the fourth quarter.

In 2015, to fund our growth, we continue to evaluate all sources of capital, including usage on our corporate credit facility, further recycling of capital from property sales, public debt issuance, and accretive issuance of equity. As of year end, we have a total market capitalization of approximately $741 million, with $394 million of debt and approximately $55 million of in-place net operating income. Our ratio of debt to EBITDA is 8.9 times at year end, and we have 43 unencumbered properties with an undepreciated cost basis of $426 million.

Finally, let me provide a few comments regarding our financial guidance. As Jim stated, we are pleased to report that in 2014 we have exceeded the guidance we provided for FFO core, and have met or exceeded almost all of the other underlying drivers including same-store growth and acquisition volume. In 2015 we are providing guidance for both FFO core and FFO in accordance with NAREIT's definition. Guidance for FFO core is $1.25 to $1.30 per diluted share. And our guidance reflects the asset level we have as of year end and does not include the impact of 2015 acquisitions.

Each of the last three years we have completed over $100 million in acquisitions. In 2015 we expect to do in excess of $100 million in acquisitions that will be accretive on an FFO core per share basis. Due to the difficulty in predicting timing on acquisitions, we are not including the impact from 2015 acquisitions in our initial 2015 FFO core per share guidance. We will update our guidance on a quarterly basis, reflecting the impact of our acquisition volume and other factors as necessary. All of the details of our guidance are included in our supplementals.

Jim?

In 2014, our team demonstrated its commitment to produce another consecutive year of exceptional returns. In 2015 we expect no less and are focused on the following goals: number one, to increase overall occupancy; number two, increasing the quality and size of our property holdings; number three, continuing our repositioning and redeveloping efforts on legacy properties that fit our business model. Four, developing out parcels and land adjacent to our properties; five, selling or spinning off additional non-core assets; six, increasing FFO core, supporting a dividend payout ratio that is below 85%; and seven, delivering exceptional returns to our shareholders.

I would like to thank you all for joining us today and for your continued interest in Whitestone. Operator, we will now be happy to take some questions.

(Operator Instructions)

We'll take our first question from Mitch Germain, JMP Securities.

Good morning. Jim, you both mentioned asset sales as a potential funding source. Curious what potentially is planned for dispositions.

Thanks, Mitch. We have continued to, obviously look, at all of our properties. We do that on a very analytical basis. As you know, when we started there were some legacy assets in the portfolio that over time we said we will sell and recycle that capital.

So, as we look to this year, we continue to look at assets. Is not a large amount, but we've probably got five or six assets in the portfolio that we'll look to dispose of over the next couple of years that will provide capital to invest in community center properties that meet our model.

And there's not much I'd add to that, Mitch, except one of the metrics we look at is that when the revenues and the NOI increase at a decreasing rate, when we start seeing that trend mathematically, that's when we start looking at a property to take it off-line and sell it.

So there's no attempt to reduce office or flex specifically?

No, there is an attempt to do that. We just haven't fully developed the plans for what we're going to do yet in 2015. But there is a definite plan to do that.

All right. When I look at your debt, leveraged a little high, and I think you were up-front in terms of talking about the different funding sources. What sort of leverage are you comfortable operating at longer term?

Let me just mention, when you say leveraged high, we have to look at it and say leveraged relative to what? If you look at our average cost per square foot of our total asset base we're at $134. The replacement cost of this portfolio is about $250 to $300. So, when you look at leverage you have to look at relative to what, so we look at it relative to that basis.

We also have been successful in working with a terrific group of bankers to put together $0.5 billion unsecured line of credit. These are very smart. They understand asset basis very well. And for us to have a Company that is $741 million in assets and a $500 million unsecured line of credit really speaks to the underlying value of our assets.

So, we don't quite look at leverage the same as you might look at it on a fully-valued company where assets are in the company at a much higher price. So, we're comfortable where we are. We've set a maximum on it.

Dave, you can address that, if you like.

Sure.

And I'll just add a couple comments to what Jim said, Mitch, and then maybe more specifically address your question. I think we said previously that we do believe in a value-add growth model where we're buying real estate at very attractive prices. It's probably appropriate to have a little greater leverage because we are producing value in those properties that will be seen over the coming quarters and years, that's not necessarily seen in NOI or in purchase price.

Given that, you've also seen, from a leverage perspective we have a corporate target of not greater than 60%. As of the end of the quarter I think we were about 51% of market cap. So we're at 8.9 times EBITDA.

We're probably, like you said, up in the higher range, but we're comfortable with that range. And we do expect to utilize lots of sources of capital as we go forward. 2014 we did utilize primarily debt. As we go forward in 2015 we'll probably utilize greater other sources and continue to look at recycling, accretive issuance of equity where it makes sense, and then obviously we have room on our facility.

Great. Last for me, just curious about some of the momentum you're seeing on the leasing front.

Yes. We did some restructuring in terms of our team at the end of the year last year. Of course whenever you're looking at the activity you're getting, you can usually walk it back to maybe a small group of individuals. Once we restructured it we started seeing a lot of traction and the deal level picked up significantly in the fourth quarter and so far this first quarter.

So, we're confident internally that you are going to see a lot more momentum. Also, the properties we have spent money to reposition are starting to come online -- for example, Lion Square and some of the other properties we have, maybe four or five properties are coming online now. So, it takes a little bit longer to reposition and redevelop a property than it does building from scratch, and you will see some of that coming on. I think you're going to see some very good results in the leasing and occupancies quarter by quarter this year.

Thank you.

Carol Kemple, Hilliard Lyons.

Good morning. Can you quantify the acquisition pipeline?

We can. We'll both talk to it. It is large. Our acquisition team is constantly looking at a large amount of assets, as we've talked about before. We follow some of those for a year, two years, three years until the situation is ripe.

So, our acquisition pipeline, I think in the past we've talked about a $0.5 million, continues to be large and probably above that amount. We have more short-term acquisitions that are either LOI or under discussion. But we continue to see a very large opportunity on the acquisition side in the target markets we are in and possibly some other markets.

Okay. And then you all mentioned earlier that you would like to have a dividend payout ratio of 85%, that's your goal. Is the Board committed to continue to pay the dividend until it gets there at the current level, or should we think that there could possibly be a cut in the near future?

I can say as a Board member we have no intention on cutting the dividend. We think our cash flow is really solid. And we've said that from day one, even when the dividend payout ratio exceeded the FFO.

What's interesting in a REIT, because we can't retain capital, we have to continually pay it out, so you've got to use of combination of debt and equity. And we're pretty good at balancing the debt and equity side of it, and also the value-add process. So, we know where the cash flow is coming from and we're confident in our dividend.

One of the things that differentiates our model, say, from the traditional real estate retail REIT model is that we have a small percentage of discount retail stores in some of the big boxes. In most of the leases that we have in those, and which traditional REITs have, they have limitations in terms of the percentage increase they can increase the rent, usually to about a percent per year.

They also have restrictive covenants in terms of occupancies, in terms of co-tenancies. So, the large tenants have a lot of approval rights. And the nature of our model is we have as few as possible of those types of tenants so that we really run the real estate.

Now, offsetting that is we stick to a three- to five-year lease and we will have restaurants that generate high revenues. For example, we might get a $36 or $38 a square foot rent and when they hit a breakpoint of $2.5 million or $2.4 million we get a 6% percentage clause that kicks in. So we have a lot of percentage clauses. Almost all of our restaurants have percentage clauses. We have rent increases that are in excess of what you're going to see on the national-based large discount retailers and we have all the value add in the lease-up.

So, I think you're going to see some really strong cash flow developing in Whitestone over the next couple of years, as it has been in the last -- and you've followed us -- for the last three years. So, I think you're going to see that. We're very confident in the dividend. We make that statement because we want our owners to be sure that we're consciously providing to pay the dividend out of cash flow.

Okay, thank you very much.

Craig Kucera, Wunderlich Securities.

Good morning.

Getting back acquisitions, you were pretty back-loaded this year. Did you see any break in pricing in the year, or were these just simply deals you had been working on for a while that happened to close in the fourth quarter?

Let me just start with this. A couple things. Our pattern has always been to do rifle deals, one-off deals sequentially. We took a little direction change on that and looked at some very large portfolios, and in doing so they're very time-consuming. At the end of the day one portfolio that we were in the final list on we decided that we wanted to take a pass on it.

What we did is we then fell back to deals we had in our pipeline and put those together. This year we're taking an approach that's more balanced. Like, we have one deal that we have, we're in the final list, it's a fairly large deal. But we're also queuing up the things that we do best and that's these one-off transactions. So, I think that's why you saw it load up towards the end of the year.

Just to touch on the fourth-quarter acquisitions, I think we did see some very nice assets that we bought in the fourth quarter. We were weighted towards the end of the year a little bit but those were assets we had been working. A couple of them were in our Houston markets, a very nice addition to this market. And then obviously a couple in the Phoenix market.

They were assets -- our model, as Jim has said, is really to follow assets, to get to know the principals, to look for deals that are not marketed heavily. And, so, those were assets that just happened to be weighted towards the end of the year but they fit very well with what we have done throughout the last several years.

And I'll just add to that that, if you look at it, we did about $90 million in December, and we have a positive spread. Our cost under our line of credit provides us with a fairly high spread on the $90 million. And none of that is reflected in our 2014 FFO. So you'll start seeing the results of those acquisitions starting to kick in first quarter.

And we're hearing from some of your competitors, perhaps more on the office side, that Houston has frozen up. It's nice to see you were able to get some stuff done. But when you think about where you want to be, do you think you'll push a little bit more to Houston, if that is the case and when you do see some upward pressure cap rates? Or do you think you'll go a little bit further into Phoenix or maybe even elsewhere in some of other markets you are positioned?

I think that the market here, new construction has really slowed down tremendously in Houston. And it was getting overheated. We think we'll probably see some fallback in prices and I think that's the time for us to buy. We're really good at buying off cycle.

What we'd like to see is our balanced approach. When we have this portfolio up around $3 billion, we'd probably see ourselves in about six or eight markets, balance somewhat equally in terms of the total assets. We're looking at some deals in Houston right now, we're looking at some deals in other parts of Texas, and we're looking at possible deal in a new market for us, as well.

Got it. Thanks for the color.

(Operator Instructions)

Dan Danlon, Ladenburg Thalmann.

Thank you and good morning.

Jim, just going off that last comment, you said when the portfolio was at $3 billion, just curious how long you think it is going to take you to get there? It's almost five times the size of the current Company.

All have Dave start on that.

We've had a lot of growth over the last few years. We've given guidance as to growth. I think, we think, there's a tremendous opportunity. It's tough to put a time line on a $3 billion goal. We think there is a great opportunity.

We think this business model works very well as you scale it. We've spent a lot of time building infrastructure and structure to scale to that $3 billion level. But I don't think we want to put a timeframe on that number.

Okay. And, then, Jim, you mentioned that you might continue to sell some assets and you also used the word spinoff. Could you maybe quantify what you meant by spinoff?

I use that synonymously with selling, as well. In spinning off we think about, if we did that -- a better way to describe that is spinning off might be collectively more than one asset at a time, maybe three or four assets. We have some interested buyers in some of our properties.

What we wanted to do, Dan, was make sure we had our cash flow sufficiently flowing and increasing before we took some of these non-core assets out of service. Because when you take them out of service you are also taking away some of the cash flow in the Company, so we want to make sure we're ready to replace that. And we've also been using it to pay down some debt.

Understood. If I could dive a little bit into your guidance, if I look at the FFO per share guidance that you provided, that's about a 9% increase over last year. But the FFO per share core is only a 6.3% increase over last year. Is the delta between the two, are you just assuming there's going to be less non-cash stock comp in the year?

In our guidance for 2015 we provided, obviously, FFO. The NAREIT definition of FFO core related to the big items between FFO and FFO core are acquisition expenses and non-cash share-based comp. So, the difference between FFO and FFO core in the 2015 guidance really reflects mainly the non-cash stock comp.

As you know, Dan, the accounting rules around the expensing of that don't necessarily tie to when the actual awards are made or when it's earned, but they reflect the period of time that we expense that stock over. So, in 2015 it's probably a little higher amount of stock comp being expensed than in 2014, which would cause the difference between FFO and FFO core being a little bigger in 2015.

Okay. Yes, I reversed it. Thank you for the clarity.

And then just looking at the assumptions, digging further into the assumptions, since you're not including any acquisitions or dispositions, should we just be running your leverage of around 9 times net debt to EBITDA, just run that forward? Is that the assumption we should be making?

Yes, I think -- and obviously you're going to build your models and you're going to have your underliers. We provided guidance as far as same-store property NOI growth. We've given some guidance on the year-end occupancy.

We will do acquisitions. I think the earlier comment was about the end of the year weighting of last year. That's why we felt it was prudent just to give that guidance as we go forward.

I think from a leverage standpoint for a modeling perspective we're at 8.9 times EBITDA today. I think that's probably at the high end where we'll operate on a going forward basis. So, maybe that's helpful in your modeling.

Yes, absolutely, appreciate it. And appreciate the additional disclosure on the net debt to EBITDA on page 21, as well. And then as far as the same store, the revenues were only up 2% in 2014 versus 2013, but you had a nice 3% decline in expenses.

Just curious, what really drove that reduction in expenses? And do you think you can continue to see your expenses decline like you have? And maybe what you're thinking on real estate taxes as those were basically flat year over year.

Yes I think we believe that with the scale comes some benefit on the expense side. We see the ability to get larger contracts at better rates with a larger amount of services provided. So, we do expect to continue to be able to drive expenses down.

I think on the revenue side, you saw our leasing spreads, very good leasing spreads for the year which are contributing to that same-store growth. And then we also saw a really decreased bad debt in 2014 versus 2013. So, as we've continued to improve really upgrade our mix of tenants, we've also seen the bad debt percent as a percent of revenue go down. So, I think those are all good indicators.

On the property tax side, as you probably know, Texas is a state that has a lot of tax on the property as opposed to from an income approach. And so, from our property tax standpoint we actively work those property taxes. We were able to keep that fairly flat in 2014. Actually, in Texas probably we'll see some pullback on property taxes over the coming years if the oil prices stay where they are.

So, we think we'll be able to work the expense side. And then on the revenue side we are continuing to push leasing spreads. And then I think we've also got room on the occupancy to make improvement there, as well.

Okay. And then just one granular question. The acquisition costs that you provide on page 19, you had $1.3 million this year, what exactly is that? Is that just simple brokerage fees? Or is there some type of legal costs and other things that are in that line item?

It is the transaction costs so it would include title fees for title insurance when you close, attorney fees, really just the direct transaction fees of acquiring properties.

And I think, Dan, along those lines you can look at some of the legal fees all of us this year are experiencing. And on real estate transactions, you're somewhere between $500 and $700 an hour. On security work you're somewhere between $800 and $1,000 an hour. So, legal costs are really significantly higher today than they were ten years ago, or a year ago even. I think everybody is experiencing some of that, as well.

Okay. I was just curious. Some folks put a little bit more in there than maybe they should, and yours is completely reasonable. Just more or less asking the question.

We do a lot of work in-house on our acquisitions. And we actually have the quality of staff and associates combined with the experience and knowledge that we can close deals very fast. I think the fastest we did was a $50.5 million deal in 22 days from contract to closing. So, we do a lot of it and as much as we can in-house.

Okay. And then just lastly, your full-time employees have gone from 68 to 81. Should we see a similar increase in 2015, or does that start to taper back? Do you have the scale that you want right now given your acquisition thoughts on this year?

I think if you look at the numbers, it probably looks like a bigger increase than probably on a dollar basis. Obviously we have a senior management team that's positioned to support a lot higher asset level than we have today. So, as we grow we continue to hire probably more front-line folks: property managers, leasing agents. So, I think you'll see from a number perspective, similar but from a dollar perspective, a lot of the infrastructure is in place to really scale that cost.

Okay, thank you.

There are no further questions in the queue at this time.

I think we're good. Operator, thank you very much.

And I'd like to thank each and every one of you for joining us on this call. And at any time, please feel free to call Dave Holeman or myself with any questions you might have. And we invite you at any time to come into our offices, either in Houston or Dallas or Phoenix, to meet with us personally and we'll happily take you out to see some of the properties that you own. Thank you very much, operator.

That does conclude today's conference. Thank you for your participation.