Good day, and welcome to the Investors Real Estate Trust Second Quarter Fiscal 2014 Earnings Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Lindsey Anderson, Director of Investor Relations. Please go ahead.

Good morning, and welcome to Investors Real Estate Trust's Second Quarter Fiscal 2014 Earnings Conference Call. IRET's Form 10-Q was filed yesterday and our earnings release and supplemental disclosure package for the 3 months ending October 31, 2013, were posted to our website and also furnished on Form 8-K on December 10. In the 10-Q and earnings release and supplemental disclosure package, Investors Real Estate Trust has reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with the requirements set forth in Regulation G. If you have not received a copy, these documents are available on IRET's website at iret.com in the Investors section. Additionally, a webcast and transcript of this call will be archived on the IRET website for 1 year. At this time, management would like to inform you that certain statements made during this call, which are not historical, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Investors Real Estate Trust believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, Investors Real Estate Trust can give no assurance that its expectations will be achieved. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed in Tuesday's earnings release and from time to time in Investors Real Estate Trust's filings with the SEC. Investors Real Estate Trust does not undertake a duty to update any forward-looking statement. With me today from management are Tim Mihalick, President and Chief Executive Officer; Diane Bryantt, Executive Vice President and Chief Financial Officer; and Tom Wentz, Jr., Executive Vice President and Chief Operating Officer. At this time, I would like to turn the call over to Tim Mihalick for his opening remarks. Timothy P. Mihalick: Thank you, Lindsey, and good morning, everyone. First of all, I want to thank all of you for taking the time to listen to our call this morning. And I hope you will find the information provided to be beneficial to you. As most of you may have seen in our a recent press release, IRET suffered another devastating loss last week. The Chateau Apartments located in Minot, North Dakota were burned to the ground last Thursday morning, December 5. I'm happy to state that there are no injuries reported from the fire. The fire was confined to the 15-unit and 57-unit buildings on the East side of the complex, both buildings were currently under construction and were not occupied. The 15-unit building was anticipated to open in February of 2014, and the 57-unit building was anticipated to open in the summer of 2014. As many of you may have remembered, this building was vacated during the flood that Minot suffered. In a year ago last February, the same building burned to the ground. They say things happen in threes. So from my perspective, I say, enough already. I would like to publicly acknowledge a quick response and the actions that Minot fire department to extinguish the fire, and to protect the surrounding neighborhood in bitterly cold conditions. The Minot fire department, along with local law enforcement, will work to identify the cause of the fire as soon as it's deemed safe to do so. Now onto the business at hand. As I noted in our 8-K release yesterday, I am pleased to report that we are continuing to make progress on our planned disposition of non-core properties. Sustaining the momentum we achieved in the first quarter of the current fiscal year by closing in the second quarter on the sale of 5 industrial and 3 office properties. IRET added 120 apartment units in our multi-family portfolio, following our purchase of apartment properties in Sartell, Minnesota and Grand Forks, North Dakota, and acquired during the quarter an interest in a joint venture entity, currently constructing 130-unit multi-family residential property with 10,000 square feet of commercial space in Minneapolis, Minnesota. Our River Ridge and Cypress Court apartment developments, in Bismarck, North Dakota and St. Cloud, Minnesota, respectively, are scheduled for completion in the third quarter of our current fiscal year, and we continue to expect strong lease-up at these projects at completion. Additionally, results improved at our stabilized properties in the second quarter, driven by some improvement in occupancy in our commercial office segment. I believe we have made progress in the second quarter on maximizing the opportunities available to us in our Great Plains region. As I stated last quarter, much more work remains to be done. Thanks. And I will now turn the call over to Diane, our Executive Vice President and Chief Financial Officer. Diane K. Bryantt: Thank you, Tim. Good morning, everyone. Yesterday, as Timothy stated, we filed our fiscal year 2014 second quarter report on Form 10-Q and the 8-K earnings release and supplemental disclosure. This morning, I will provide for you a brief recap of significant items of note that occurred in the second quarter ending October 31. First, starting with the balance sheet activity. We continue to maintain a strong cash and liquidity position. However, with less cash than prior comparative periods on the balance sheet. We had $69 million of cash on hand as compared to $93 million at the first quarter of fiscal '14, and as compared to $84 million at the end of the comparable quarter in fiscal 2013. We did see strong cash flow from operations of $36 million in the quarter with the most significant use of cash being for our development projects and acquisition. Subsequent to quarter end, we increased our credit facility to $72 million and extended the maturity date to December 2016 with the current interest rate of 4.75%. Regarding the acquisitions in development, we acquired a 24-unit townhome project for a purchase price of $2.8 million with an anticipated cap rate of 6%. We also acquired senior housing property for $12.4 million with an anticipated cap rate of 6% as well. Both these properties are in Sartell, Minnesota. We acquired a 96 apartment unit complex in Grand Forks, North Dakota for $10.6 million with an anticipated cap rate of 7%. We invested $42.3 million in the quarter in 10 active development projects. Construction loans provided $16.5 million of source for a net use of cash of $25.8 million during the quarter. Year-to-date, we have acquired $32 million of income producing assets, $4 million of unimproved land and placed 108 units in service. We have under development 1,389 apartment units with a total cost of $254 million. These developments will range in cap rates of 7% to 13%. Detail on these projects can be found on Page 16 of the 10-Q. Moving on to debt. We paid-off 6 mortgage loans with a principal balance totaling $18.1 million. The average interest rate on these loans was 5.8%. We refinanced the multi-family project in Manchester, Minnesota, the loan having a 30-year amortization. It was non-recourse and has a fixed rate of 4.12%. Cash out was approximately $2.9 million. Regarding debt metrics, our mortgage debt to undepreciated cost is at 48% at quarter end, improving from 53%, 1 year ago. Our overall weighted average interest rate is 5.5% as compared to 5.66% at the end of the comparable quarter of the prior fiscal year. Regarding dispositions. We continue to be very active with our disposition strategy, with 8 commercial properties sold during the quarter with an approximate cash out of $45.9 million. These funds from sales were used for acquisitions and developments in process. As discussed before, the point of sales proceeds into development projects will cause a drag on our earnings until the development properties are placed into service. Equity issued during the quarter was 1.3 million shares, under both our IRET direct and the dividend reinvestment plan. Net proceeds under the IRET direct was $6.6 million. Again, we use these proceeds for development projects. Year-to-date, 3.8 million shares have been issued with a net average price of $8.48 -- $8.48. And finally, regarding equity. During the quarter, we did execute a sales agreement for up to $75 million of shares through the at-the-market program. However, we did not issue any shares during the quarter using the ATM program. Final comment on the balance sheet. As Tim mentioned, subsequent to our quarter end, our development project of 72 units called the Chateau II Apartments had burned down. As of quarter end, the company had invested $6.5 million into the project, of which $1.2 million was yet to be reimbursed from the insurance as a result of the fire -- prior fire loss. We do not expect any interruption in the receipt of these proceeds from the first fire loss, and when we received, they we will be recorded as a gain on involuntary conversions. Moving on to results of operations. We are very pleased with results of the second quarter of fiscal year '14. As we continued on a positive path with a net increase of 193,000 square feet leased up in our commercial space. We have continued strong occupancy in our stabilized multi-family properties, and strong operating results from our developments that have been placed in service over the last 2 years. Note that impacting comparative results to the prior quarter and prior fiscal year, the effect of the involuntary gain of $2.3 million that was recorded in the same quarter of fiscal year '13. When we're doing our reports, note that the gain is included in our non-stabilized portfolio. When looking at our stabilized portfolio comparative results, we have seen NOI increases of $476,000 for the comparative quarter, and $1.5 million year-to-date. Again, strong operating improvements in our stabilized portfolio. Moving on to FFO. For the quarter, FFO per share was $0.16 for the quarter and $0.32 year-to-date. This was based upon a weighted average shares outstanding of $127 million. AFFO for the quarter was $0.12 and $0.23 per share year-to-date. Details on the calculation of FFO and AFFO can be found on Page 8 of the 8-K earnings release and supplemental disclosure. These results are definitely impacted favorably by the positive NOI -- by positive NOI within our stabilized portfolio and the development project placed in service. As stated before, the disposition strategy and deployment of these funds into development projects will cause drag on our per share results, and the execution of commercial leases will result in tenant improvements and leasing costs that will cause drag on cash flow or AFFO as we lease up this space. We are staying the course and seeing the results of this course in our financial statements and cash flow. The execution of that strategy is primarily the most significant result of both the quarter and year-to-date for fiscal year '14. To close, I report that IRET Board of Trustees declared a quarterly distribution of $0.13 per common share and unit to be paid on January 15, 2014, to shareholders record on January 2, 2014. This will be IRET's 171st consecutive quarterly distribution. Thank you. And now I will turn the call over to Tom Wentz, Jr., Executive Vice President and Chief Operating Officer. Thomas A. Wentz: Thank you, Diane. The second quarter results for fiscal 2014 continued the trend we've seen in previous quarters of overall improved operations, as we execute on our plan to grow by focusing on our leading segments of multi-family and health care real estate in our core markets, while reducing our investment in those assets where we are not the market leader or have no clear path to market leadership. Even though core FFO was slightly lower on a per share basis year-over-year, this is primarily due to delivery timing between when we deployed new equity versus delivery of the related development. As our current group of developments come online later this fiscal year and early fiscal 2015, the FFO impact related to our increased development pipeline is expected to close. I will focus my remarks this morning on the trends and opportunities IRET has identified in its core markets and segments which are: the development of new multi-family projects as the top growth strategy, maintaining current leverage levels; and disposing of non-core assets on an accelerating basis. In regards to development, we continue to see good income and growth opportunities in those markets that are leaders in healthcare, education, energy, food, fiber and water. IRET plans to pursue accretive development and acquisition opportunities, primarily in our multi-family and health care segments, as well as continue to evaluate acquisitions of existing real estate as those opportunities present themselves. As Diane mentioned, IRET currently has approximately 1,400 apartment units under various stages of construction in 5 of our core markets, which is a slight increase over the prior quarter but still includes those projects where the first phase is open during the quarter and are now leasing up. Additionally, over the last 12 months, IRET has acquired land that would allow for the immediate development of a similar amount of units in calendar year 2014. We continue to remain active in the land acquisition area for the purposes of positioning IRET as the market leader in new multi-family construction in our core markets. We believe that this focus on development provides IRET with the best path to successfully executing on our primary strategy of making our overall portfolio younger, more focused by segment and the leader in its respective categories and markets. Our plan for the remainder of this fiscal year and the coming fiscal year will be to focus on new multi-family development to meet the market demand for apartments, as well as to leverage off of the leading position IRET currently enjoys in our current operating footprint. We are also seeing select opportunities to grow our health care portfolio through a combination of acquisition, development and expansion or renovation. While a primary focus on growth by development does create a temporary drag on earnings and cash flow as we raise and deploy the equity capital necessary to complete each project, as well as hold larger quantities of non-income-producing land, the returns to date on development have proven to be accretive and we believe that current market conditions certainly support additional development activities. Additionally, in our view, there is a continuing lack of acceptable acquisition opportunities in almost all of our markets when compared to development returns. We have a strong cash position and available credit facility capacity that we expect will allow us to not only complete the projects currently underway, but also to develop out our current landholdings. We are carefully monitoring all the challenges associated with development and are continually adjusting our approach to proactively deal with these challenges. With our existing strong product position, combined with being first-to-market with high-quality projects, we believe that IRET is in a great position to execute on its portfolio growth strategy. Our focus is developing assets that will be positioned as best in market, avoiding the requirement to compete on price and keeping IRET as the market leader in our core communities. Turning to our leverage policy. We expect no material change to our overall current levels of debt or the type of debt. In that approximately -- we are now approximately below 50% debt to gross assets. We have good flexibility on how we fund our growth and operations going forward. We expect the amount of developments and acquisitions to remain consistent with our current levels, with our goal being as much as $300 million over the next 12 to 18 months, again, depending on the final mix of acquisitions versus development. Our expected acquisition and development cap rates have not changed and range from approximately 5.5% to 12% in the multi-family segment, and 7% to 8.5% on the commercial segments. In certain cases, actual results have been higher for developments in the energy-impacted markets of North Dakota, South Dakota and Montana. As for dispositions, we have successfully completed a number of sales in the commercial and non-core -- of non-core assets, and we are currently marketing a number of additional non-core assets for sale. Sale proceeds would be deployed into new development and general corporate purposes. Thank you. And I will now turn the call back over to the moderator for questions.

[Operator Instructions] And our first question is from Rich Anderson of BMO Capital Markets. Richard C. Anderson: So -- just turning quickly first to development. It's running, I guess, 250 or so, $250 million in the -- with the multi-family side. I mean, how much do you think you can replenish that? I mean, is it a number of $250 million of a total development pipeline kind of your comfort zone or can you see that going up over the next year or 2? Thomas A. Wentz: Well, Rich, this is Tom. It's certainly possible to increase that, I think, as a percentage of our existing units. And just given the size of our markets that we're focused on. That's really a good comfortable number for us. And I think we've had good results. So unless we see something very compelling, which would convince us to accelerate that, I think we're at a pretty good level. Richard C. Anderson: Okay. And so you talked about the drag to your FFO and AFFO, as it relates to using disposition proceeds to fund development. As you get into 2015 -- your fiscal 2015, I think that, that drag starts to slow, right, as you start to deliver product. But if you're bringing on more products, you get into this treadmill. But do you think in 2015, you can actually start to see a material positive impact on your bottom line results as a consequence or do you think adding more product to the development pipeline will kind of keep it in that drag in place for the foreseeable future? Timothy P. Mihalick: Rich, this is Tim. That's certainly our expectations. And as we've discussed before, we see fiscal '15 as kind of a crossover year that allows us to do that, and to continue to deliver product going forward, but to see the impact of these as we bring them online, so. Richard C. Anderson: All right. So then that brings me to the dividend question. Is that -- that the thesis is then as development starts to matriculate to the bottom line, that you feel like the dividend is going to be covered, and no cause for alarm there in terms of the payout being above 100? Timothy P. Mihalick: That's certainly our goal and what we hope to accomplish. Richard C. Anderson: And do you feel like the second quarter results were a good approach to that ultimate goal? Or do you feel like product is kind of in line with where you were a quarter ago? Would you feel like you made progress towards that goal? Timothy P. Mihalick: I think we've made some progress. We can always do better. But we're making progress towards the goal. And as we layed it out and hope to accomplish it. So we're in line and making progress, I should say. We're right where we want to be. Richard C. Anderson: Okay. And then on the Williston area multi-family, the corporate housing of the corporate units in Williston Garden, when do they start to expire? And what kind of roll up do you think you'll get when you kind of start to lease units to -- in a more conventional basis to individuals? Thomas A. Wentz: Well, the first corporate -- we kind of stagger that on that first project. And the first ones are just starting to come up. So far, we've been able to achieve close to double-digit rent increases on the renewals. And there's still definite corporate housing demand. There's also a very strong individual market. So I guess, we haven't, at least to date, seen any material impact from the construction activity that's been taking place in Western North Dakota and parts of Montana and South Dakota. The growth still seems to be there even though there definitely is more available units. Richard C. Anderson: Sure. And is it -- I think this is right, the new model is as opposed to like an abundance of corporate units but more a stipend-driven individual employee, but they kind of get a stipend from their company to live in one of your apartments, is that about -- is that the right way to think of it? Thomas A. Wentz: We've seen some of that. There is still a number of companies that are doing corporate housing. Most of those companies have established relationships. And so a lot of the additional growth in companies or staffing is following that model. But there is still a lot of companies that are using the corporate housing model. Richard C. Anderson: Last question for me. Is it multi-family expenses, on a year-over-year basis, went up. Can you just kind of give us some color on that, why that happened? You'd think multi-family would be a NOI growth leader at a same-store base and it wasn't this quarter. If you can give me some color on the expense line item there? Thomas A. Wentz: Well, there's a couple of items in there. Obviously, the biggest component of the increases in expenses was increased depreciation, amortization. But you also have some height and staffing and anticipation of the development in the construction that we generally like to staff in advance of that. And again, we're pushing rents pretty aggressively. Richard C. Anderson: But Tom, let me just interrupt. I'm talking about the stabilized portfolio. So that wouldn't be -- the real stem looking at Page 16 it was up to almost $9 million. Thomas A. Wentz: On the 6-month basis? Richard C. Anderson: Yes. No, no. 3-month basis. Diane K. Bryantt: You'd want to go to Page 37 on the 10-Q, there's a good narrative in there that explains what's going on with the multi-family. There's -- a couple things in there, we had some insurance under deductible losses of $231,000, if you read in that narrative. So that was in -- it's not a reoccurring but we did have some losses that are under the deductible that run through the maintenance expense. And then also we have some increased property management expenses in there. Probably more so from salaries and things we had to deal with, with employees in our Western markets, things like that. There's a few items in management. So it's not particularly just for salary but that's probably the largest component. Richard C. Anderson: Okay, I'll take a look at that. Timothy P. Mihalick: And that spells it out pretty well, Rich. It gives you a recap of what's been incurred there.

And the next question is from Dave Rodgers of Robert W. Baird. David B. Rodgers: I can -- maybe start with Chateau, sorry, we'll go there first and then go to better topic. But the answer, I assume that you still have insurance coverage on the new build and so you're still kind of collecting on the old and that you'll have to kind of go through the process of kind of reclaiming the new build that you were in the process of? Timothy P. Mihalick: Yes, yes. David B. Rodgers: Okay, so you do use some coverage which is good. And then in terms of loss of rent, I mean it's been obviously a couple of years. Are you able to claim any loss of rent on the asset, I know it's traditionally typical -- a difficult thing to get completed. But now it's been a couple of years of, I don't know, vacancy, if you want to call it that, is there any claim there for loss of rent? Timothy P. Mihalick: This one -- the expectations would be no on this. There would be, because there is, obviously, new building, no tenants in there at this time. So, no. David B. Rodgers: Okay. All right, that's very helpful. Thank you. Leasing volume continues to track, I think 2x of what it was kind of year-to-date a year ago. Maybe give a little bit more color to the extent that you can in terms of that, how much of that leasing is market-driven? How much of it is IRET driven to kind of position some of these assets for sale, et cetera? Just maybe a little bit more color around kind of the strength and fundamentals in the markets that we're continuing to see? Thomas A. Wentz: Well, I guess, Dave, this is -- our assessment really is it's all market-driven. We haven't fundamentally changed our approach. I mean, we're not out there buying commercial leases. I mean, we really tried to avoid that. I mean, there's just general overall increased activity in our markets, both from existing users and new users, which is positive. So a lot of our markets, as we've noted previously, have basically returned to employment levels that are equal to or exceeding the downturn in 2008, 2009, which means the total number of office jobs is now equal or above where it was. Of course, there's been some population growth, so it's not a percentage-wise, but number wise, and of course a lot of commercial space has gone off-line then repurposed, otherwise it's disappeared. So it continues to be small, but it's positive. It's going in the right direction. And obviously, success from the commercial segment starts with occupancy. But I would say, it's market. It's not anything we're doing above and beyond what we've done previously. David B. Rodgers: And I think outside of the energy-affected areas, are you seeing any primary rent growth in the markets or are you still kind of in the occupancy gain mode and we're still maybe a little ways away from seeing real market rent growth? Thomas A. Wentz: Yes. I guess, we haven't seen any pricing power on the Commercial Office retail segments. Maybe a little bit in the industrial, depending on the asset. Multi-family pricing power has been universally pretty good throughout all of our markets, obviously much stronger in the energy-impacted markets and matching the modest increase in employment wage growth and inflation in some of the more traditional markets that aren't experiencing the energy boom. David B. Rodgers: Okay, that's helpful. In industrial, I think leasing was up in the quarter, continues to be pretty strong but I think the occupancy stat for end of period was down. You did sell some assets during the quarter. But I guess, rents were also up. So leasing was good, rents were up, but occupancy was down. Were we missing something in there or are you able to kind of lease up and then sell some assets pretty quickly and that just kind of have had an intra-quarter impact that, that's what we saw? Thomas A. Wentz: Yes, there's a lot going on. Again, that's a smaller segment by total assets and square footage. And obviously with the sales, those were pretty highly occupied properties. Obviously, the ones that didn't sell maybe had other reasons. So there is just a lot of noise in that quarter. Difficult really to get an overall picture of what's going on. But I guess what we've seen is again, pretty good activity in the industrial space for what we've got left from that standpoint. So no real negative trends economically. I mean, it's just really the activity you've got going in that segment on the disposition side. David B. Rodgers: Okay. Last question. I guess with respect to, you got several developments that are set to complete in the quarter that we're currently sitting now. I think both of those have occupancies kind of in the 80s-plus, or pre-lease percentage in the 80s-plus. Can you kind of give us an update on, with that in hand, where that brings the yields to? I think you've kind on talked on the call earlier about yields that were up to 12%. But can you give a little bit color specifically on how those are shaping up relative to the proformas? Thomas A. Wentz: Yes. I think those pre-leasing numbers were as of October 31, and those projects opened in phases, I think River Ridge, Cypress, they're now fully open. And I guess at this point, we don't have all the details in the subsequent events. But basically, we're on target or exceeding what our target was, both from a cost, final cost budget standpoint, and also from a projected rent and occupancy standpoint. So I don't see it materially exceeding the ranges that we've given. But it's definitely not going to be below those ranges. So it should be right on or slightly above.

And our next question comes from Andrew Cowen of Badge.

Just a real quick question. I'm assuming a lot of this is due to development, but I just noticed that administrative costs are now up 2 quarters in a row pretty aggressively, especially in light of the increase in revenue. Can you just speak to that? Timothy P. Mihalick: Just overall, Andrew this is Tim Mihalick. Overall compensation has been up. We've had to raise that a little bit just to compete in our markets -- in our backyard the energy-impact has had some impact on our...

On our corporate level, that's at the corporate level, right? Timothy P. Mihalick: Mid-corporate and upper to corporate and executive comp also. I mean, just overall, we saw -- certainly saw an uptick.

I mean is that something we should see to stabilize versus revenue growth or is that something that... Timothy P. Mihalick: Yes, I would expect the stabilization there, maybe a little bit of a bump and not much more. You're not going to see much more of an increase. Thomas A. Wentz: I think, this is Tom. I mean one of the things we implemented on the commercial side is we added some executive staffing in our Minneapolis office for purposes of addressing really what we saw as a need to aggressively deal with our existing commercial portfolio. And that occurred a little over a year ago, maybe about 16 months ago. And those were all existing assets, but we added that really at the corporate level in our Minneapolis office. And so that is part of the overall trend, too.

Yes, I just saw the bump start in the first quarter, and it lessened a little bit this quarter. But it's still relatively high versus last year, especially in light of revenue growth. Thomas A. Wentz: Correct. That's correct.

So is that something was just like about a $2 million -- is it a $2 million pace for increase over the last year and that's sort of over? Or are we going to look at a -- and it looks like we're about on a $8 million administrative expense pace and now we're up to about $10 million. So is $10 million sort of the run rate going forward? Thomas A. Wentz: Yes, this is Tom again. I guess I don't see -- we're not anticipating any material changes to corporate staff. Again, just to deal on the commercial side which obviously we've got some corresponding increases in occupancy. That's really where we allocated the dollars on a compensation level at corporate added some positions. And then also looked at compensation and basically bonus and other types of programs for purposes of really getting into those segments that we thought were understaffed.

And next, we have a question from Craig Kucera of Wunderlich Securities.

I had some questions. Some of your core markets, particularly Minneapolis, are really showing a lot of strength. And I guess -- I was wondering, are you seeing any increase in sort of the bids or number of bids on assets that you're marketing? And if so, is there a potential for you to kind of accelerate your disposition plan? Thomas A. Wentz: This is Tom. I guess, yes, we've had pretty good activity on the sales packages that have gone out. We didn't really notice any corresponding increase or decrease in the number of potential buyers. And one of the things you have to remember is, there was a pretty significant increase in interest rates -- about 150 basis points from when we started the disposition program to current. And that really didn't seem to change much either on cap rate expectations or number of potential acquirers. But the activities really remain the same. I mean, there's a lot of buyers out there, a lot of different types of buyers, from private money to 1031. Not as many REITs, but again most of the assets we were marketing really didn't fit the bill for REITs, and again we don't have a lot of public real estate investment trust operating in our market, including Minneapolis. But no, I guess, no material change that we've seen.

Okay. There was the property, I think, in Roseville, the industrial property. Can you give some color kind of on the expectation for a redevelopment, and what kind of timeframe that might entail? Thomas A. Wentz: Well, that point -- I mean, we're still evaluating that. That's a very good location. It's an older industrial asset. So that's still under evaluation on whether or not that building is completely redeveloped or whether we deal with the existing structure. But the existing building is there now, primarily vacant. But that's in the process of being evaluated and the decision is going to be made probably in the next couple of quarters on what direction we're going to go there.

Okay. And then finally, obviously multi-family has been pretty strong, it showed a little bit of weakness this quarter because of expense growth. But do you have any commentary on renewal rates and are you losing any tenants to home purchases? Timothy P. Mihalick: On the multi-family?

Yes, are you seeing any change there or is that still kind of sticking? Thomas A. Wentz: Yes, we haven't seen, I mean, obviously we track not as scientific as maybe some other types of data points. But we do track to the extent it's provided by our tenants the reason for move-outs. And I guess I -- we haven't seen any spike to home ownership like we saw earlier in the decade. So...

[Operator Instructions] And our next question is from Michael Salinsky of RBC Capital Markets. Michael J. Salinsky: Just first question. Talk a little bit about acquisitions. It seems like you -- the type lines firmed up a little bit relative to the last quarter if you looked in the Q. Can you talk about what you're seeing in the acquisitions? Is interest rate kind motivating that? Are you seeing more product come to market? And then kind of can you talk about your cap rate expectations over the next 12 months -- whether you've seen any impact as a result of the rise in interest rates we've seen over the last 6 months? Thomas A. Wentz: Well, Mike this is Tom. We haven't really seen any material increase in the availability of quality acquisitions in our markets in the multi-family. I mean, there's a few here and there and obviously you can see that we did pick up a senior housing project and a few other things. But, didn't really see any material change in what's available for product. Again, I mean there's just a lot of interest in acquiring quality real estate from a lot of different investment groups, including ourselves. As far as cap rates, even though there's definitely been an increase in interest rates, I mean we were coming out of a period where cap rates seemed to really stabilize and didn't go below certain levels. And just the resulting if you're a leveraged buyer, the resulting spread was just larger. Cap rates really have stayed at that level, I guess in our assessment even though interest rates have creeped up a little bit, but a lot of lenders have really compressed their spreads. So even though you've got 100 basis, 150 basis point increase in the underlying benchmarks in certain instances, that didn't necessarily translate into the same increase just due to spread compression by some of the lenders. So our cap rate expectations really remain the same. We're still seeing, if there is a multi-family project that comes to market that's new, that's lower 6 cap level, senior housing ranges from the 7s to mid-8s, and suburban commercial offices, if it's a B or higher, it's really in that 8.5 to maybe 9.5 range. Michael J. Salinsky: That's helpful. Just in your commentary, you mentioned that you're seeing more buyers. Are you seeing institutional buyers or is it still mostly local and regional guys? Thomas A. Wentz: I mean, it's a really mix. There's definitely buyers from other geographic regions looking at this part of the United States. I mean, we're seeing definitely more funds, more private money coming out of the coastal markets just looking for incrementally higher cap rates, but no real particular group. Timothy P. Mihalick: Yes. There's no big institutionals that are coming still to our markets to aggregate holdings that we've been able to see yet anyway. Michael J. Salinsky: Okay. Then the second one, as you look forward to funding. I mean, you gave a $300 million on development/acquisitions investment. As you think about forward funding the pipeline from hereon out, to date you've done a lot of recycling, I know you've stepped up a lot of the industrial. And there's a plan to step up a bit more at the office as debt matures on that, but should we expect a more balanced mix of asset sales in new equity or and given where you are trading in day you think that you're going to focus a bit more on recycling? Timothy P. Mihalick: Mike, Tim here. I think we'll probably continue to focus on the recycling and maybe a little farther down the road, look at the balanced approach. And so, at this point in time, that would be looking out 6 to 9 months to continue the recycling process, use our liquidity as best we can. And then look to the market probably a ways out, hopefully. Michael J. Salinsky: So then just to tie in Diane there, then on the leverage, I'm assuming that you're comfortable with current leverage, there's no plans to take that down any further at this point? Timothy P. Mihalick: No. I think we're pretty comfortable about with where we're at. So that's -- we'll continue down the road that we started with our de-leveraging as need be, but kind of like where we're sitting at this point in time.

And our next question is a follow-up from Rich Anderson of BMO Capital Markets. Richard C. Anderson: Can you -- what are you thinking about dispositions? It's still kind of like $30 million, $50 million a year, kind of number or is it more or less than that? Timothy P. Mihalick: Rich, Tim here. Probably that number or maybe a little more for the next 12, 18 months. Richard C. Anderson: Okay. And then after that 12 to 18 months, do you think you're available -- availability of non-core assets significantly goes down or do you think -- what's the pipeline of dispositions if you look further out? Timothy P. Mihalick: I think that continues. As we targeted additional growth, we've got a portfolio that really ranges in age from assets that are 30 -- 30 years old to newer assets. And one of the things that I've talked about in the past is the plan is continue to recycle and get younger so to speak. In that path, we will continue. Assets specifically need to be off our books. Richard C. Anderson: Got you. Could you quantify the number of units that are under development in Williston? Timothy P. Mihalick: Yes. We should be able to give you that real quick. Thomas A. Wentz: Yes. I'm just looking at projects in process on Page 53. 288 units and 44. Richard C. Anderson: That's -- that's who is that? Thomas A. Wentz: Well, this is Tom. Dakota Commons. Richard C. Anderson: No, no, no. I mean, but I'm talking about all development going on in Williston. Thomas A. Wentz: All development going on in Williston. Not off the top of my head. We get - we pulled the permits. But if I want to say, there is probably 800 to 900, but I'm going from memory based on the last permit report. And then that, then there's obviously another number that's potentially planned. But one of the things is there's still almost 10,000 special, I mean basically temporary type housing, whether it's man camps, RVs... Richard C. Anderson: Special purpose, right? Thomas A. Wentz: Permits, right. Especially use permits that are still in Williams County which is the primary jurisdiction that encompasses. Richard C. Anderson: So do you think development is up 50% over the past year or is it more or less than that? I mean... Thomas A. Wentz: Yes, I think 2012 was probably going to be the peak depending on how 2013 finishes out. But there's a fair number of units that are contemplated for next year. There's still some infrastructure that needs to be delivered in Williston to open up some of these areas. So I think our assessment is that there's still a fair amount of permanent housing demand in that market. And again, it's going to be a combination of lender willingness to go into that market, which we have yet to see on basically manner that we see in other more stabilized markets. Interest rates are going to play a factor, and then construction costs. There definitely is still a lot of demand for construction capacity in Western North Dakota from a lot of the energy companies, just due to the size of the infrastructure projects. Whether it's rail, whether it's refineries. The significant amount of capital investment that's being put into the market by the energy companies. Richard C. Anderson: Got you. Okay, sorry. Diane, I just read the Page 37 of the 10-Q. And it reads like the maintenance and the property management increases are kind of recurring in nature. Is that the right way to look at it for the multi-family expenses? Diane K. Bryantt: I wouldn't say the maintenance the most because of all the insurance losses. Richard C. Anderson: Okay, so the property management will be kind of more of a recurring number? Diane K. Bryantt: Yes. Richard C. Anderson: Okay. And then last for me, again, the stone container industrial asset that went vacant. I'm curious why that was taken out of same-store if there's no redevelopment decision made on it? If it's a bummer that it's -- you lost the occupancy. But if it's not in redevelopment, why is it not still in the same-store pool? Thomas A. Wentz: Well, I guess, to clarify. Something is going to happen there. I mean, either the existing structure is going to be substantially renovated which would take it off-line, or that building is going to be mostly scraped and a new one put in place. So it's just really the extent of what's going to happen there, Rich, but we haven't made a decision on whether this is a much more involved project of scraping the existing or all of the existing facility, or a substantial interior, exterior renovation of the existing or most of the existing structure. Richard C. Anderson: Are trying to lease it the old fashioned way right now or is that -- you're not even bothering at this point? Thomas A. Wentz: Well, everything is always for lease if someone comes along. But long-term, that's not really the opportunity. I mean, we wouldn't say no if something materializes. But I think our assessment given that location and what happened in that general area of Roseville, either a material renovation of the existing facility or scrape new is going to be the best path to value creation there.

I'm showing no further questions. I would like to turn the conference back over to Tim Mihalick for any closing remarks. Timothy P. Mihalick: Thank you. And just -- short remarks to say thanks again for listening in this morning, and to wish everyone a Merry Christmas and a Happy New Year. And hopefully, the weather will turn to the better here in the Western part of North Dakota. So thanks again.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.