Sarah Byrnes - Vice President, IR David Helfand - CEO Adam Markman - CFO David Weinberg - COO.

John Bejjani - Green Street Advisors. Mitch Germain - JMP Securities Manny Cordesman - Citi Michael Bilerman - Citi John Guinee - Stifel Jamie Feldman - Bank of America Merrill Lynch Rich Moore - RBC Capital Markets.

Greetings and welcome to the Equity Commonwealth First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It’s now my pleasure to introduce your host, Sarah Byrnes, Vice President of Investor Relations for Equity Commonwealth. Please go ahead..

Thanks, Kevin. Good morning and thank you for joining us to discuss Equity Commonwealth's results for the quarter ended March 31, 2015. Our speakers today are David Helfand, our CEO; Adam Markman, our CFO, and David Weinberg, our COO.

Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of federal securities laws.

These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results of the company to differ materially from historical results or from any results expressed or implied by these forward-looking statements.

We refer you to the documents that we file from time to time with the SEC, which refer to these and other factors that could adversely affect the company's results. The company assumes no obligation to update or supplement any statements that become untrue because of subsequent events. Today's remarks also include certain non-GAAP financial measures.

Please refer to yesterday's press release announcing our first quarter 2015 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results, which is available on our website. With that, I will turn the call over to David Helfand..

Thanks, Sarah. Good morning and thank you for joining us. I’ll start with the brief overview of our results for the first quarter and then provide an update on the progress of our disposition program. During the first quarter, we completed 1.5 million square feet of leasing.

Strong new leasing activity was offset by downsizing and vacates, resulting in flat occupancy for the quarter. Same-store NOI was up 2.5% compared with the first quarter of 2014, primarily attributable to operating expense savings.

Overall, I would describe the operating environment as benign, with modest demand growth and improving market fundamentals, largely the result of little new supply in the bulk of our markets.

Against this backdrop, the team at EQC is making steady progress in executing our 2015 plan with continued focus on leasing velocity, tenant retention and improved responsiveness. In February, we announced a repositioning program with the objective of selling $2 billion to $3 billion of assets.

We’ve made significant progress to-date in executing on our plan. In the first quarter, we closed on the sale of three small assets for total proceeds of $21 million. Subsequent to quarter end, we entered into contracts to sell 52 additional properties comprising 8 million square feet, 85% of which is office and 15% industrial by square footage.

Proceeds are anticipated to be approximately $750 million. These properties are located in 24 markets in 18 states and were 82% leased as of 03/31. These assets are being sold in a combination of portfolio and individual property transactions.

We hope to complete these sales during the second and third quarters of 2015 and each of these transactions remain subject to certain closing conditions. Moreover, we are in various stages of marketing in additional 32 properties comprising over 9 million square feet, of which 86% is office and 14% industrial.

These properties are located in nine states in Australia and were 79% leased as of 03/31. We continue to focus on improving operating performance and leasing velocity across our portfolio.

We expect our focused efforts on improving tenant relationships and responsiveness with the brokerage community will lead to increased retention and higher occupancy. With that, I’ll turn the call over to Adam Markman..

Thanks, David. Good morning. I’ll cover our financial results for the quarter and provide a few details on delevering opportunities that we’ll focus on as we begin to generate proceeds from asset sales. Same property cash NOI was up 2.5% from a year ago.

Given our disposition program and portfolio repositioning, same property cash NOI continues to be the primary metric that we use to evaluate performance. The increase in same property cash NOI was generated by lower operating expenses, including $33 million in one-time property tax refunds.

Please note that without the one-time tax refunds, same property NOI would have been flat. FFO for the quarter was $0.50 per share compared to $0.51 a year ago. Normalized FFO, which generally excludes non-cash items and other items, which impact comparability was $0.55 per share compared to $0.51 last year.

The increase in normalized FFO was primarily due to $0.08 per share of G&A savings excluding shareholder litigation and transition costs, $0.06 of lower interest expense and $0.02 of higher same property cash NOI.

The increase in normalized FFO was partially offset by the SIR sale in 2014 as well as the sale of other assets, which together resulted in a $0.12 per share decrease. Dilution due to the election of some series D preferred shareholders to convert to common in 2014 also negatively impacted normalized FFO by $0.01 a share.

As mentioned, G&A was lower in the first quarter of 2015. G&A included approximately $3.5 million of shareholder litigation and other non-recurring costs, primarily related to the potential Related/Corvex reimbursement as well as the final $2.2 million paid to RMR for transition services.

So, just to recap, the shareholder approved reimbursement of the Related/Corvex consent solicitation and litigation expense is split into two remaining payments. In the third quarter of 2015, $8.4 million will be paid only if our average share price is above $26 during the one-year period ending July 31.

As of yesterday’s close, the average to-date was $26.06. The final payment of $8.4 million will be made at the end of July 2016, only if our share price is about $26 during the proceeding one-year period. Through the first quarter of 2015, the fair value of the Related/Corvex liability on the balance sheet was $9.3 million.

Recurring G&A in the first quarter totaled $10.9 million, which is somewhat lower than anticipated due partially to timing as well as to certain expenses coming in below expectations. Turing to the balance sheet, following the repayment of over $800 million of debt in 2014, we are continuing to focus on improving our debt profile.

In the first quarter, we entered into a new $1.15 billion credit agreement. The agreement is comprised of $750 million revolving credit facility at $200 million five-year term loan and $200 million seven-year term loan. The new facility and term loans reduced interest expense and extended duration.

Cash and cash equivalents were $421 million at the end of the quarter. Net debt to annualized adjusted EBITDA improved to 4.1 times from 4.3 times at year end and from 6.1 times at end of the first quarter of 2014. Subsequent to quarter end, we redeemed $138.8 million of our 5.75% senior unsecured notes that were due to mature on November 1.

There are no other debt maturities in 2015. Our focus will be on the $1.2 billion of debt and preferred equity on the balance sheet that matures or is pre-payable at par before the end of next year. This $1.2 billion has a weighted average rate of about 6.3%, which we see as an attractive use of sale proceeds.

As has been evident this past year, we are committed to maintaining a conservative capital structure to ensure we're nimble and flexible as we move forward with our repositioning plan. Specifically, we believe that our leverage policy aligns us with a BBB unsecured credit rating profile.

With that, I'll turn it over to David Weinberg, our Chief Operating Officer..

Thank you Adam and good morning everyone. I will review our recent dispositions, walk you through our leasing activity and markets, and update you on operations. As they say, every journey begins with a first step and our disposition program began with a sale of three small buildings, each less than 75,000 square feet.

We sold one vacant building to a user; a 71% leased building to another user, and a third building to a local investor. The gross sales price was $21.2 million or $127 per square foot and the blended cap rate was approximately 6.25%. For the two occupied buildings, the blended cap rate was closer to 8%.

Turning to leasing, during the first quarter, we signed 132 leases totaling 1.5 million square feet, almost half of which consisted of new leasing. In total, cash rents were flat and GAAP rents were up 5.6%. Our largest new deal was 13-year 260,000 square foot lease with Baxalta, the $6 billion bioscience spin-off from Baxter.

The property, 1200 Lakeside Drive is located in the northern suburbs of Chicago and was 75% leased to three tenants but the largest tenant was not occupying its space was expected to vacate. Our team got creative and worked with the tenants to come up with a solution.

Through a combination of landlord lease buyouts and tenant lease termination, we were able to lease 100% of the property to Baxalta. Taking into the account the improved credit profile and term on this lease, we believe this deal created about $15 million of value.

While leasing velocity, especially in new leasing was strong in the first quarter, occupancy remained flat at 85.9%. Our largest move out was 170,000 square foot tenant at our industrial building at 111 Southchase Boulevard, near Greenville, South Carolina. The tenant vacated in January when it exited the market.

Our second largest move out was 44,000 square foot tenant at 17th Street Plaza in Denver. We have signed at least to backfill 37,000 square feet of this space. The balance of our move outs and downsizings this quarter were primarily smaller tenants, most of whom occupied less than 20,000 square feet.

As we look ahead, as of the end of the first quarter, there were 3 million square feet of leases expiring this year. Based on where we stand today, we estimate about half will vacate or downsize, including Bank of New York Mellon and 1735 Market in Philadelphia. BNY Mellon, as we previously disclosed, was expected to contract.

Subsequent to quarter-end, they signed an 11-year renewal for 48,000 square feet and will be vacating the remaining 184,000 square feet in September. We continue to believe that our focus on engagement and responsiveness will improve leasing results and the overall customer experience.

We have received favorable feedback from our leasing agents, tenant brokers and tenants and think we are heading in the right direction. While this is good news, it will take time for these efforts to be reflected in our numbers.

We are encouraged by the volume of new leasing this quarter, but we remain mindful of the challenges we face from move-outs and contractions and it feels like we will be working to hold occupancy in the balance of this year. Also, with respect to leasing, Expedia occupies 398,000 square feet of our 417,000 square foot tower in Belleview.

Last month they announced that they have purchased the former 40-acre Amgen campus in Seattle for their headquarters. Their lease expires in October 2018. We do not expect them to stay beyond their lease expiration and we are in discussions with them regarding their plans. Belleview is one of our larger markets.

It has a vacancy of 10% but it is just 8 million square feet. The three office buildings under construction totaling 1.5 million square feet, the releasing of Expedia space could be impacted by this new supply. Having said that, we like the underlying fundamentals of Belleview including its young, well-educated technology oriented work force.

Belleview is a leading technology market and we are bullish on its long-term outlook. Turning to our other larger markets, most of them continue to show signs of strength. Austin and Denver are our top performers with vacancies around 11.5%.

In Austin, we are watching the construction pipeline, but so far so good and we often had multiple prospects buying for the same vacant suite. In Denver, we have organic growth from our existing tenant base in competition for our limited vacancies. Chicago, while not as strong Denver or Austin, is doing well.

Its vacancy rate of about 13% is better than the national average. Chicago CBD has benefitted from the movements of tenants from the suburbs into the city which has helped offset the impact from tenant downsizings. Chicago has a growing base of technology companies which is contributing to the demand for office space.

Philadelphia CBD also has a vacancy rate just under 13% and the vacancy rate of its trophy assets is just under 10%. Philadelphia has not experienced the same level of movements of tenants into the city as in other markets as population has grown and there are another 3,600 apartments under construction.

This growing population base could attract more employers in the future and the repurposing of Class C buildings also has helped lower the city's vacancy rate.

We have been responding to more lease proposals which is a positive sign in terms of tenant activity that Philadelphia is still a competitive market and landlords will get aggressive to retain tenants. The Indianapolis market is very competitive with a vacancy rate around 20%.

The majority of our vacancy resides in Chase Tower, which is one of the premier buildings in the city. However, given current market conditions we still need to be aggressive to generate leasing activities. Now, turning to operations, as you know, CBRE is our exclusive property manager in the United States.

This relationship covers property management only. We are free to engage whomever we choose for leasing and investment sales. And even with CBRE's role, we remain responsible for the management of our assets. We are continually challenging ourselves and CBRE to find ways to improve our operations.

This includes closely managing our controllable expenses and identifying opportunities to improve the customer experience. We also interact directly with onsite property managers much as we would with management more in-house.

We believe these points of emphasis will lead to an improved customer experience, higher retention ratios and better long-term performance. With that, let me turn the call back to David Helfand for a few closing comments before Q&A..

Thanks, David. We appreciate that there's interest in understanding the details of our pending dispositions. We hope that you will understand that we're going to wait until the transactions are closed before providing additional details on the specifics of the deals. Things change, deals go sideways and we don’t want to get ahead of ourselves.

What we can say is that we are focused on executing our disposition plan and we are working to maximize proceeds. To-date, we have seen significant investor interest in virtually all of the assets we have slated for sale. Speaking to the closed sales and the transactions under contract, market pricing has been consistent with our expectations.

We look forward to next quarter’s call on a further discussion of the results of our disposition activities. Finally, I want to recognize the efforts of the EQC team. The significant accomplishments over the past seven months is a result of their desire to make EQC better every day.

Their commitment and hard work provides EQC with a remarkable competitive advantage. And with that, we would be happy to open it up for questions..

Thank you. [Operator Instructions] Our first question today is coming from John Bejjani from Green Street Advisors. Please proceed with your question. .

Good morning, everyone.

David, I know, you said you can’t discuss too much about the properties that are under contract or what’s being marketed, but can you give us a general sense of maybe the market mix or leasing profile or anything even in general terms?.

Well, I think what we can’t say is that we prioritize some of our smaller assets and more tertiary markets, but there is also a mix of other things in there, and given the breadth of the disposition going on, it’s really hard to characterize them in short form. .

Okay. And then I guess as you guys are thinking about exiting markets and just selling assets, I have seen a report that Illinois Center is being – that Illinois Center is on the market.

Theoretically if this is true, does that necessarily suggest an exit from Chicago or would you also even in markets where you have scale look to sell certain assets if they just don’t make sense to put capital into?.

This is David Weinberg. I would not conclude because a certain asset is on the market that we’re necessarily exiting the market. We look at each asset individually taking into account that asset’s profile.

So just because there are certain assets that we may or may not sell over time, it does not as I said earlier, lead to any broad conclusions with respect to where – whether we will be in that market long-term. .

Okay. And then just another last sort of general question.

Properties that you’re – that you have been – or that you’re under contract to sell, what’s the financing look like in those markets for those kind of assets?.

Well, I can speak to the ones we have closed on and those were three smaller assets, two of them to users, one of them to a local investor, they each got bank loans or closed all cash.

And then the feedback we’ve gotten through the marketing process is so far financing appears to be available, leverage ratio seems to be very attractive to our buyers as do terms and we haven’t heard anything negative in terms of financing that gives us positive concern with respect to our disposition program. .

All right. Thanks, guys..

Thank you. Our next question today is coming from Mitch Germain from JMP Securities. Please proceed with your question..

Good morning.

I know that the big bulk of assets for sale, you said that you’re going to hold back details, anyway to get partially some of the buyer composition in terms of who are talking to on the contractor deals and maybe some of the other deals in the market today?.

I don’t think we want to address that with respect to the specifics of the assets that are under contract.

But I think given the nature of the portfolio which spans $2 million to $3 million small assets in tertiary markets all the way to very large towers and major CBDs, it’s fair to say that we have got an interest from buyers across the spectrum from the smallest local player who has assets in the market and has local expertise to private equity funds to large owners who have a presence in the markets that we are in.

So it really ranges across the board. .

Great.

And any assets you guys holding back for asset management purposes or if you can find a buyer, you're going to pursue yourself?.

Yeah. I think the answer is, what we've said before, we are always looking at our portfolio trying to find value creation opportunities.

The one I walked you through previously in the northern suburbs of Chicago is a great example and as we start looking more close at assets as we prepare them for sale, sometimes, we see those opportunities and that causes that asset to be pulled back and we will work it through some period of time and when the time is right, then we will market it..

And I think there has been, just to add to David's comments, I think there has been a lot of questions about the pace of the disposition activity and our discussion of it taking two to three years. Part of that is that we're not placing everything into the market right now.

As David mentioned, each asset has its own profile and natural times to market the asset per sale. So there may be defensive things we need to do to stabilize an asset before we market it.

In other cases, there may be an opportunity to create value, sign a lease, reposition the asset modestly before taking it to market, so that's part of the reason that this process plays out over two plays years..

Understood, thank you.

And then the Expedia property, just in terms of, I haven't seen it in several years, any CapEx needs there or how do you feel in terms of how the property sits right now?.

Well, overall, it's a nice property, it was constructed in 2008, so we don't anticipate any unusual CapEx needs.

The one thing we need to do though is walk every floor, get a feel for the buildout, is it open, is it closed, et cetera and we are starting to revisit the amenity package, making sure it's positioned properly to compete with the new construction..

Excellent.

And then just one last for me, David Helfand, your comments about the 32 properties that would be marketed right now and sort of make sure how that nine states with Australia almost 80% leased and about 85% office, is that consistent?.

32 properties, 9 million fee, 86% office, 14% industrial in nine states in Australia..

Thank you so much. That's it from me. Thanks guys..

Thank you. Our next question today is coming from Manny Cordesman from Citi. Please proceed with your questions..

Hi, guys.

David, maybe to follow-up on the comment you just made on timing, this first batch, the 750 million, did that sort of hit your timing expectations or did that portfolio itself come faster than you expected?.

Pretty much on target.

I think so far, we don't want to get in to deal specifics, because we just don't want to prejudice the situation, but to answer your question, we're pretty much on track of where we need to be, we're running ahead of the process, making sure we understand the asset, positioning them right, getting them cleaned up and putting them into the market when we can maximize value.

I don't think we're ahead of schedule and I don't think we're behind schedule..

Michael Bilerman has a couple for you as well..

Hey, David.

And I know you won't get into specifics on the individuals, but just in aggregate, on the 750 million, that's gross, right, that's before the secured debt that may be on the properties?.

Yes..

And then, how much secured debt is on that 750?.

Almost none [ph]. There is two small mortgages, we can take it offline and get to the details, but the vast majority are unlevered assets..

Can you give us at least sort of gross cap rate ranges and goal posts as we think about that 750 in terms of how much cash NOI approximately is coming off of that batch of assets?.

We would be happy to as soon as it closed..

But I don't want individual, I'm just saying in aggregate, it's not going to play against you because there are multiple contracts and multiple things?.

Yeah, I don't think the issue is it playing against us, I think the issue is we just want to be clear and right when we get disclosure and things are still moving, assets could drop out of some of the portfolios and could change the metrics..

Do you have any plans to do seller financing on any of the 750 or the next batch that's coming?.

On the 750, we do not. On the next batch that's coming, we are open at times given the right structure, providing financing if that maximizes value..

What's the book value, gross book value of the 32 properties, the 9 million square feet that's to come?.

We, again, I think in keeping with the policy that Dave has outlined, we’re not going to be providing the specific details on those numbers..

I guess is it reasonable to assume that it’s not too far off of the $94 a foot that you’re selling the existing batch for?.

Different assets, different markets, and different characteristics. So, there is no reason to make that assumption..

Is there anything on the tax refunds? I guess what did that M&A from? Is there anything else in the nine months, the back half of the year that we should be aware of from an operating perspective that’s impacting results?.

The tax refunds are just an anomaly that sometimes happens when you run a large portfolio. There are actually refunds that we’ve been -- we as a company been fighting for years, sometimes decades and they just happen to hit in this quarter. I think of it as a one-time event and in fact some of the rebate are for assets that we no longer own..

Right. And then, maybe just last one.

David, as you think about when you get through the six round, is there an element of being able to provide growing concern EQC versus the liquidating portfolio EQC in terms of trying to delineate between what’s going to be core going forward with non-core?.

I think that we’ll bedevil [ph] to engage in that discussion in the next few quarters as we clear out the stuff we don’t want to own, take greater focus on the stuff we have, evaluate what market pricing is for that versus our own internal evaluation.

I think Sam was pretty clear on last call and we have talked before, there is nothing that we wouldn’t sell given the right price and some of the assets that are being marketed for sale, back to the question of do they pretend to exit from a market, in many cases just we’ve had enquiry about the specific asset, we think pricing could be very robust and would be in excess of what we think it’s worth and in that case, we’re selling..

And the proceeds of first $750 million is going to all go down to net pay down initially?.

Well, it will go -- it likely will go to debt pay down when debt becomes available to pay at par, but that’s going to be something that evolves over between now and the end of next year. As we’ve talked about in our previous calls, there are variety of investment opportunities that we continue to evaluate.

We have talked about being opportunistic and about being nimble and flexible and that cash proceeds help us to achieve those goals..

Do you have anything under contract or letter of intent to buy?.

We do not..

Okay, thank you..

Thank you. Our next question today is coming from John Guinee from Stifel. Please proceed with your question..

Great. I think that Michael Bilerman is a very thorough guy. One last question.

If assuming you don’t do any 10/31 exchanges, do you have a sense as to what’s your taxable income could be and therefore can back into a 2015 dividend whether it be normal or special?.

We’ve talked about this a little bit on previous calls and the makeup of our taxable income will be very much dependent on the specific assets that end up closing during the year and as you’ve heard on the call, there is a lot going on and so, basically we’ll wait until we have the answers and then we’ll start that discussion..

Great, thank you..

Thank you. [Operator Instructions] Our next question today is coming from Jamie Feldman from Bank of America Merrill Lynch. Please proceed with your question..

Great, thank you. Good morning.

I’m hoping you could just provide a little bit more color in terms of the investment opportunities you are seeing? What looks interesting to you these days based on your commentary and the last question?.

I wouldn’t say that there is any specific. We’ve tracked a number of deals many times. There are assets that we owned in the past are there in markets where the assets are competitive assets.

We look at the deals to see if there is an opportunity to see what pricing is, to see with the market looks like, but I think we've been in discussion with investors being pretty clear that pricing today, generally speaking, is more robust than we'll be comfortable with as a buyer.

In many cases high quality assets and quality markets are trading for close to or at replacement cost and that's not an entry point that we're comfortable with. So we're always tracking deals, we're always evaluating acquisition opportunities, but really nothing has made it beyond sort of initial evaluation given the market dynamics right now..

Okay, and then as you spend more time digging into these markets that you are in, can you just give us update on kind of which markets seem most interesting to you long-term?.

Well, if you are speaking just with respect to leasing fundamentals and growth and putting aside today's pricing, it's the markets I referenced earlier, it's Austin, it's Denver, it's Belleview. They have all the right fundamentals, right, young, well-educated work force and a growing population which all bodes well for long-term growth..

So Philadelphia is not in the list?.

Well, Philadelphia is a market that's trending in the right direction. It just doesn't have relatively speaking the same dynamics as well as other markets..

Okay. And those tend to be more cyclical markets too.

Is that something you think changes going forward?.

I don't know, you can never change the cyclicality [ph] of this business but that's why I said putting aside pricing over the long-term we like these markets..

Okay.

And then can you guys talk to TIs and leasing commissions, just how they are trending across the portfolio?.

Sure. I can speak to that. I think there's some good data in our supplemental on page, is it 20, which gives you a good sense. So if you are looking at the information we provided, on a blended basis, it's a little skewed, because we did a lot of new leasing this quarter relative to our renewals which we haven't done historically.

So if you dig a little deeper renewals at $2.70 a square foot per year, last year it was lower than expected because we did a couple large renewals about $1, year before that was $3. So it feels like we're in line with historical trends. And then new leasing $4.99 per square foot per year. Last year we had $5.48, in line with that.

And of course it's hard to glean much in the way of big picture conclusions and tell you wherein rents on top of this information to get better sense for the payback on these deals. But it looks like this past quarter was consistent with what we've been experiencing recently..

I guess more generally, though, are you seeing any improvement across the US as a whole or it's really very market specific or some markets are doing better than others?.

I think it's market specific. We've heard construction costs are moving up in certain markets which is obviously impacting TI cost, but often the TI allowance is based on the market or more of a function of just landlord versus tenant strength in the negotiation and what the condition of the space looks like. .

Okay. And then just finally, so it sounds like same-store NOI for the quarter would have been flat without the tax refunds.

Do you guys care to give a thought on what you think same-store could do this year?.

We have not provided projections, the same-store pool is something that's clearing going to be in flux given the pace of the disposition program. So it's a great question but not one we can answer..

Okay, all right. Thank you..

Thank you. Our next question is coming from Rich Moore from RBC Capital Markets. Please proceed with your question..

Yeah. Hi, good morning, guys. I'm curious, Adam, you mentioned that you wanted to work on improving, I think you said improving the balance sheet, improving the debt metrics of that profile.

And the balance sheet looks pretty good and I am wondering since again you kind of mentioned you guys that you don't have that much to do in terms of paying down debt when it comes due because of the upcoming due rent, what are you thinking in terms of improvement in the balance sheet and where are you trying to take this?.

I agree the balance sheet is certainly looking very healthy today and that's clearly one of the goals that we have as a company and the reason we have that goal is because that's the engine that will drive future opportunity for us.

And really that's the goal, I think we are fortunate given the pretty layered maturity and laddered maturity schedule that we have that we're able to actually between now and the end of next year get to $1.2 billion of what in today's market is above market debt and preferred, so that 6.3% coupon is going to an attractive use for our proceeds.

I think to your point, our goal isn't that we want the balance sheet to be a ton healthier than it is, it's that we want to have flexibility to use the balance sheet to grow as we think about our future..

Okay. The reason I ask is that, I'm kind of curious here, it seems, I mean you guys could obviously refinance the debt that's coming due and you have a lot of cash on the balance sheet currently or at least at the end of the quarter.

Why not buyback stock for example, I mean, you don't seem to be finding any acquisition opportunities, you guys aren't developing and there really isn't anything to immediately pay down, not sure you would need to pay it down, you can refinance it if that was coming due, so why not just give the money back to shareholder to buy back stock?.

We have thought about a lot of different uses of proceeds and clearly buying back stock is on that list. It doesn't you know it's going to be a strategic decision that's made in conjunction with the actual cash coming in, which to-date hasn't really happened from these sales.

So it's kind of forward looking and also wait relative to other opportunities that we see in the marketplace..

Okay good, thanks and then, I don't want to delay with too much, but I mean, are you guys actually looking at acquisitions or you spending anytime underwriting them or is it just sort of you taking a close review of what you see out there and not really doing much study of it?.

I think the hallmark of this shop is the breadth of opportunity we see given the relationships and experience we have across the country and the business.

So we're actively underwriting things, we do that on an ongoing basis, we just find that today pricing is very stout and we're unlikely to transact unless the decision is unique and we see an ability to create some sort of competitive advantage, some sort of edge..

Okay, good.

And then you mentioned last quarter, Office Depot and their headquarters, is there anything else on that?.

No, they still have eight plus years left at term, I think they’re focused on their potential merger with Staples; we're ready and willing to speak with them when they're ready but they're just not there yet..

Okay very good, thanks guys..

Thank you..

Thank you. We've reached the end of our question-and-answer session. I want to turn the floor back over to Mr. Helfand for any further closing comments..

That's all we've got, we appreciate your interest and we look forward to speaking with you on our next call. Thanks for joining us..

Thank you. That does conclude today's teleconference; you may disconnect your lines at this time and have a wonderful day. We thank you for your participation today..