Good morning and welcome to Monmouth Real Estate Investment Corporation's First Quarter 2013 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. It is now my pleasure to introduce your host, Katie Traks, Controller. Thank you, Ms. Traks, you may begin.

Thank you very much, operator. Welcome to Monmouth Real Estate’s conference call covering our first quarter results for fiscal 2013. I will be filling in for Susan Jordan today. In addition to the 10-Q that we filed with the SEC yesterday we have filed an unaudited quarterly supplemental information presentation. This supplemental information presentation is available on the Company’s website at www.mreic.com with the link on the home page. I would like to remind everyone that certain statements made during the conference call which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements that we make on this call are based on our current expectations and involve various risks and uncertainties. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can provide no assurance that its expectations will be achieved. The risks and uncertainties that could cause actual results to differ materially from expectations are detailed in the Company's first quarter 2013 earnings release and filings with the Securities and Exchange Commission. The Company disclaims any obligation to update its forward-looking statements. Having said that, I'd like to introduce management with us today. Eugene Landy, Chairman and Chief Executive Officer; Kevin Miller, Chief Financial Officer; and Michael Landy, Chief Operating Officer. It is now my pleasure to turn the call over to Monmouth's Chief Operating Officer, Michael Landy.

Thanks, Katie. Good morning, everyone, and thank you for joining us. We are very pleased with our results for the first quarter ended December 31, 2012. It was a very productive quarter for Monmouth representing an excellent start for fiscal 2013. With regards to acquisitions, during the quarter we acquired two industrial properties totaling 787,000 square feet for $42.4 million. On November 9, the Company purchased a 172,000 square foot building located in Livonia, Michigan which is just outside of Detroit for $14.4 million. This building is leased to FedEx Ground through March 31, 2022. Then on December 20th we purchased a 615,300 square foot building in Olive Branch, Mississippi for $28 million. This brand new credit based facility is leased to Milwaukee Electric Tool Corporation through March 31, 2023. The building is situated on 39 acres and is expandable by an additional 215,000 square feet. The average cap rates throughout the lease terms for these acquisitions were 8.3% for Livonia and 7.2% for Olive Branch. From a run rate standpoint, we expect these two properties to generate a combined total of approximately $3.2 million in annual rent. We financed these properties with a total of $27 million of mortgage financing at an average interest rate of 4%. Also as the $28 million Olive Branch facility acquisition was consummated towards the end of the quarter, it did not meaningfully contribute to our first quarter results. As a result of our recent acquisitions our gross leasable area is now approximately 9.2 million square feet consisting of 73 industrial properties and one shopping center located across 26 states. Our property portfolio continued to performance well with an occupancy rate at quarter end of 94%, a weighted average lease term of six years and in place leases going out as far as 2024. While it is still early in fiscal 2013, I'm pleased to report that of our 11 properties totaling approximately 897,000 square feet whose leases where original set to expire this fiscal year, eight lease renewals representing 554,290 square feet or approximately 62% of such lease expirations have already been executed. These leases have been renewed for a weighted average term of 3.6 years and at an average lease rate of $4.81 per square foot as compared to $5.16 per square foot formally or a reduction of 6.8%. One tenant FedEx Express who occupied our 59,425 square foot building in White Bear Lake Minnesota elected to not renew their lease which expired on November 30. This property is now actively been marketed for lease. Our discussions regarding the remaining two properties up for renewal this year are ongoing. It is anticipated that both of these leases will be renewed. Also during the quarter we entered into an early termination agreement with our tenant Hajoca Corporation at our 160,000 square foot facility in Monroe, North Carolina resulting in a one-time payment to us of approximately $577,000. This payment represents an acceleration of nine months of future rentals and reimbursement income through July 31. While this Class A building has only been vacant for a short while, we have received strong interest here and expect to have this building occupied in the near future. With regards to our acquisitions pipeline we have entered into separate agreements to purchase seven new built-to-suit industrial buildings that are currently being developed in Kentucky, Minnesota, Pennsylvania, Texas, Virginia and Wisconsin totaling approximately 1.2 million square feet. Leases for these properties are 10 years or longer and are with investment grades tenants. Approximately 664,000 square feet or 55% of our current acquisition pipeline will be leased to FedEx Ground. The purchase price for these seven properties is approximately $81 million, subject to satisfactory due diligence we anticipate closing these transactions upon completion and occupancy which is scheduled for the second half of fiscal 2013 and fiscal 2014. In addition, we’ve entered into agreements with FedEx Ground to expand three of our existing buildings by approximately 170,000 square feet. The total cost for these three expansions will be approximately $14 million. On completion the expansions will result in total increased rent of approximately $1.4 million annually. In addition, the expansions will result in a new tenure lease extension for each building being expanded. With regards to the U.S. industrial property market, we’ve seen continued strengthening. Industrial absorption rates have now been positive for 10 consecutive quarters. The National average vacancy rate is currently at 8.9%. As we’ve discussed in prior calls, new industrial construction levels have continued to be at very depressed levels for over four years now. There has been a recent return to some spec building in certain markets. However, new construction levels continue to average well below the 1% of in place inventory level needed just to replace obsolescence. Demand for industrial space is highly correlated with GDP growth and with the limited supply of new space it has been built over the past four years, very favorable and substantial imbalances have been mounting. We view the explosive growth in E-commerce as a major catalyst for our property type going forward. Consumer spending representing two thirds of our nation’s economy is its driving force. Online retail sales are outpacing brick and motor retail sales by a three to one margin. Well they currently represent only $1 out of every $10 spent. I’m sure many of you are familiar with the internet sales numbers over this past holiday season. Each year they break the prior year record and we view E-commerce as still a very young industry, because goods sold over the internet need to be warehoused. We believe that the industrial property sector is poised for continued increase demand. Additionally, because these goods will need to be shipped, we are very optimistic about the continued growth prospects for our largest tenant FedEx. Now Kevin will provide you with greater detail on our results for the first quarter of fiscal 2013.

Thank you, Michael. Core funds from operations for the first quarter of fiscal 2013 were $7.5 million or $0.18 per diluted share. This compares the Core FFO for the same period one-year ago of $7.8 million or $0.21 per diluted share. Excluding securities gains realized during the quarter of $2.1 million or $0.05 per diluted share, Core FFO was $5.3 million or $0.13 per diluted share. Adjusted funds from operations or AFFO, which excludes securities gains or losses were $0.13 per diluted share for the quarter compared to $0.14 per diluted share a year ago. Excluding, lease termination income AFFO was $0.12 per diluted share for the most recent quarter. As Michael previously mentioned Core FFO and AFFO for the quarter do not yet reflect the full run rate effect of recent acquisitions undertaken during the quarter. Rental and reimbursement revenues for the quarter were $12.8 million compared to $12.2 million or an increase of 5% from the previous year. Income from property operations which we define as revenues excluding non-recurring items such as the $691,000 in lease termination fees receive this quarter, less property taxes and operating expenses was $11.1 million for the quarter reflecting a 10% increase from the comparable period a year ago. Net income was $5.7 million for the first quarter compared to $5.4 million in the previous year’s first quarter, representing an increase of 7%. With respect to our properties end of period occupancy was 94% as compared to 97% in the prior year period. Our average lease maturity as of the end of the quarter was 6 years as compared to 5.3 years a year ago. Our average annual rent per square foot was $5.44 as of the quarter end as compared to $5.58 a year ago representing a decrease of 2.5%. As of the end of the quarter our capital structure consisted of approximately $284 million in debt of which $256 million was property level fixed rate mortgage debt and $28 million were loans payable. 99% of our total debt is fixed rate with the weighted average interest rate of 5.7% compared to 6% in the prior year period. We also had $111 million in perpetual preferred equity at quarter end, combined with an equity market capitalization of $429 million our total market capitalization was approximately $824 million at quarter end. From a credit standpoint, we continue to be conservatively capitalized with net debt to total market capitalization at 33%, fixed charge coverage at 1.9 times and our total debt to EBITDA at 6.1 times for the quarter. From a liquidity standpoint, we ended the quarter with $10.3 million in cash and cash equivalents. We also have $8 million in additional liquidity available from our credit facility. In addition we held $66.8 million in marketable REIT securities representing 10% of our undepreciated assets. At the end of the quarter we had $3.6 million in unrealized gains on our securities investments in addition to the $2.1 million in gains realized during the first quarter. Now let me turn it back to Michael before we open up the call for questions.

Thanks, Kevin. To summarize, the first quarter represented a strong start to the New Year. The positive yield spreads we are seeing on our acquisition cap rates over our financing costs represent some of the best returns we’ve seen in our 45 year history. As we close on the several deals currently under contract and as some property expansions come online, we expect to see continued positive results. While lease renewals are proceeding favorably and our tenant retention rates remain very high. A strong balance sheet and liquidity position provides us with capital needed to continue to execute our growth strategy. We'll now be happy to take your questions.

(Operator Instructions) Our first question comes from Paul Adornato at BMO Capital Markets.

Hi, good morning.

Good morning.

I was wondering if you could talk a little bit about your funding plans for the $81 million built-to-suit pipeline and whether the securities portfolio might figure prominently into those plans.

Sure Paul. In addition to the $81 million I mentioned in acquisitions we have $14 million in expansions and that number may increase as well. So, roughly $100 million in capital needed to grow the portfolio with deals in place. The securities portfolio will be a factor. We have been taking gains and reallocating capital from our liquid real estate to our brick and motor real estate. We raised about $25 million a year through the drip and sip and that provides good capital that comes in ratably over the year to fund our acquisitions. As the pipeline grows perhaps we would contemplate accessing the capital markets, but for the deals in place right now those will be the sources.

Okay, and just looking again at the securities portfolio, I was wondering if you could provide a little bit of inside as to how you manage that on a quarter-to-quarter basis with respect to booking gains versus booking income from the securities?

I am not sure I understand the question. I am not sure I understand it. We have 20 different companies we invest in. We have a substantial portfolio of preferred shares which as you know in the market is very strong for the preferred shares. They’ve all had a premium and if we need capital we can liquidate the preferred shares. We do pick and choose and make judgments about various weak comments that we invested in and we have been very fortunate over the past ten years that we picked some of the better REITs, performing REITs. At certain times if we need the money for our property investments we reduce the size of our portfolio.

Okay thanks I appreciate it.

(Operator Instructions) And our next question comes from Jeff Lau at Sidoti.

Hi good morning. Question for Kevin. I think Kevin you said the weighted average debt outstanding was 6% I think was the cost. Do you have any idea what it is just for this year and next fiscal year? Is it around the same percentage or is it lower or higher?

Actually the weighted average debt outstanding right now is actually it was 6% last year…

5.7% currently.

And 5.7% currently. So we’re getting that reduced as we’re able to pay off some of the loans they come due that are higher interest rates and then enter into new loans that are at lower interest rates. We’re getting sub 4% right now on some of the new acquisitions.

Okay, and I mean it is for the mortgages that are coming due this fiscal ’13 and fiscal ’14. Are those rates around 6% as well or do you think those are a little higher or?

Yeah most of them are a little higher actually.

Okay. And I guess Mike in terms of the two other leases that haven't been renewed yet are those with FedEx has bought in I couldn't find the information quick enough so I figured I'd just ask you, are those with FedEx, are those with other tenants?

One is with Carlisle Wheel & Tyre and that's pretty much signed, sealed and delivered. So that's going to probably be a -- that's going to be five year renewal, Westchester, Ohio, is a FedEx Ground and we're just pricing out the expansion work in conjunction with a tenure renewal on the FedEx Ground in Westchester. So I'm very confident those two remaining leases will be renewed and that will give us a 94% tenant retention rate for fiscal '13.

94%, okay, and then I guess lastly back to the securities portfolio is it, is there what's the weight, right now in terms of I guess common and preferred?

So the rating right now is 55% common and 45% preferred.

Okay, and do you have any specific focus on the comment in terms of sector right now or is there is a just spread amongst more of a I guess bottom up type of approach in terms of you know, finding a specific REIT you want to invest in?

We've not too much sector (Inaudible) surprisingly we're looking at suburban office because everybody says that's terrible and I would disagree with but we think perhaps some of that REIT's stock prices have been overly impacted by the market impression that suburban office is not doing too well. And we think the economy is going to turn around, we think there's going to be inflation and if suburban office picks up that whole sector and those few REITs that sector could do very well, but we haven't made a decision on that yet, but we're watching it closely.

Okay, great, thanks.

Yeah, just jumping on your earlier questions on interest rates, not only refinancing the expiring mortgages in the mid 60s to new debt low 4s, high 3s the stuffs in our pipeline because these are forward commitments by the company to close the average cap rate for 1.2 million square feet in the pipeline its 7.5% and the financing on that has been in the high threes and low fours. So I think we just announced on the deals we closed in the first quarter $27 million and $28 million in financing at 4% on the 42.5 million acquisition. So when that would return and the yield spreads are the best in 45 years history, so we're getting levered returns of 16% on these acquisitions and its really generating a lot of accretion and had we priced these deals today the cap rates would be much lower but because these are deals that we negotiated in advance directly with the developers we're getting much higher cap rate then the market rates.

Great. Thank you.

You are welcome.

The next question comes from Louis Feldman at Wells Capital Management.

Feldman actually, good morning, folks. Quick question, Mike, can you touch on what pressures you're seeing on the rent rolls for the renewals I mean you only have two left that you feel that are signed, sealed, and delivered but as you start work on '14 can you talk about what the pressure is because what you've closed already for this year there was a drop and do you feel that pressure was continuing and we'll continue as you start working on '14 and as you finish '13 and work on '14.

Yeah, okay so leasing spreads were down 6.5% on the renewals we have consummated thus far, but our weighted awaited average rents per square foot on our total 9.2 million square foot portfolio is down only $0.025, that was the rental rate. The rents aren't that volatile and as I mentioned in my prepared remarks the positive net absorption for 10 consecutive quarters now is creating supply and demand fundamentals that should have leasing spreads go from negative to positive. Now the factors are what are the expiring rents rolling to the new market rents and the Carlisle renewal that virtually signed, sealed, and delivered will be rent increase. So that should help that 6.5% weighted average negative leasing spread that we're seeing thus far in '13 improve. '14 rents are at average of $4.72 per square foot, so 2014 the rents are below market. So I don't anticipate substantially negative leasing spreads, we could positively have positive leasing spreads some of the FedEx leases rolled over but get a tenure renewal and you get return on the expansion. So that's a factor as well. So you're giving up rent per square foot for the visibility of earnings over the long-term and we think that's a worthwhile investment. So hope that answered your question but I do think leasing spreads will be strengthening going forward.

Great, prefect. Thank you very much.

You're welcome, Lou, operator?

Our next question comes from Michael Boulegeris of Boulegeris Investments and I apologize if I said that wrong.

Good morning. Mike, you mentioned, 8 acquisitions, I believe in the pipeline for the balance of fiscal year.

Yes.

And could just give some characters as to, is there a mix between FedEx and non-FedEx or are they predominantly FedEx or-

Well. They are -- I mentioned in prepared remarks, Mike, that there's 55% FedEx ground 45% non- FedEx. We just closed the -- in December in late December, our largest acquisition 615,000 square-foot acquisition in the Memphis market to Milwaukee Tools. So, that took the percentage much lower than 55%. Now, we've announced in the past, we won't turn down good FedEx deals, so we're trying to offset the FedEx deals with non-FedEx deals to have a -- best of the FedEx concentration, while not turning down these deals and we'll be able to do that is the FedEx building size is averages about 125,000 200,000 square feet, non- FedEx buildings are about 4, 5 FedEx deal. So, over time you'll see that concentration come down, but we're happy to do FedEx ground deals because our relationship with FedEx is over 20 years now. And we see time and again what a fantastic company they are, we get renewals, we get expansions, they're a key factor in our long-term consistent performance. We've only experienced two move outs over a 23 year period with FedEx. So, really happy to do the FedEx deals in those to move outs were just because they outgrwe the building not because they were moving out of the area.

Right, that's a remarkable track record. Could you comment, or expand on you’re the FedEx relationship in terms of, well some might think of FedEx is being affected by the economy, in some respect it seems like, FedEx ground, while defensive has growth elements of the internet interwoven in that in the FedEx ground as we're seeing, you know the stages of ecommerce and so on, the Amazon effect.

Well, it's important to look at FedEx the way FedEx was designed. They were designed as really poor [separate] companies. You have FedEx Express the original company and the largest company. FedEx Ground FedEx Freight, and FedEx Services. Monmouth owns assets, leased to FedEx Express and FedEx Ground Two biggest divisions. We have 37 FedEx buildings, 1 million square feet leased to Express and 3 million square feet leased to Ground. And these divisions are inversely correlated, Express, when the global economy is eating up and growing at fast pace, goods need to be shipped from point A to point B urgently, and so people are using the more time sensitive, Air Freight Express division. Over the next 5 years, because of the global slowdown the Ground division has grown over 50% over the last five years. And consequently we're getting all the expansions in ground, we're getting all the new acquisitions FedEx ground, but it's important to know these two divisions are inversely correlated. So FedEx has somewhat of an internal hedge in structure and by associations so does Monmouth and people probably look at our Monmouth percentage of revenue or percentage of square-foot lease of FedEx and count it as one number when in fact there is more diversification within the FedEx brands than you would think at first flash.

I appreciate for that explanation and finally, like many larger, let's say defensive REITs during the great recession that plummeted or reduced their dividends, Monmouth was able to maintain a very stable dividend. Should you execute your business plan throughout the rest of the fiscal year, do you think Monmouth might be in a position to grow the dividend in fiscal year 2014 and may be you can share with us, some of the metrics that would apply, you know prior to dividend increase?

Well we've been working really hard here to get free cash flow after our dividend requirements. And we're generating FFO in excess to the dividend we've generated FFO in excess of the dividend for the past three years now, but I want to get to the point where there's free cash flow after all our dividend requirement that, let's not rely on really on any securities gains, as we execute the deals in the pipeline. And with some of the other things going on a leasing front. I think in '14 we will be at the point where the company is generating free cash flow without depending on security gains that's our cheapest cost to capital when we get to that point. Now, then the conversation will become what's the best use of those funds. Hopefully we'll have a robust acquisition pipeline because I think shareholders would be better served if we allocate that capital to growth but deals aren't in place, then I guess, we would consider raising the dividends but that's not in the cards currently. Eugene you want to add to that, I think you do.

Yeah, I would just want to add to that, that when we started in real estate 45 years ago, we always looked at real estate as a total return vehicle and everyone is focusing on the income from the properties today and there's little focus on the gains. And may be rightfully so, because we've gone through the tenants 15 years without substantial gains in the values of the properties. And there without substantial gains in the rents on the properties. If in fact we have a period of inflation, which I anticipate very much. Then when you have that and you see rents rising throughout the portfolio then we'll look at the total return, without really looking at the current earnings but on the increase in the values of our properties and if we have substantial increases perhaps we could be more generous with the dividend and then otherwise. But then that's all way in the future and we'd had a tremendous year, we think we're going to have a good year this year and we'll wait for 2014 as Michael said and evaluate the dividend at that point.

Thank you all go back in queue.

Thank you, Mike.

(Operator Instructions) This concludes our question and answer session -- oh, actually, we have another question from Michael, at Boulegeris Investments.

Okay, just follow-up, Gene, might you come as you look may be beyond the fiscal cliff and some of the uncertainties in our economy and what is your long term outlook this coming decade in terms of how Monmouth is positioned and it seems like Monmouth is in unique position being nimble and being able to capitalize on some opportunities quicker than some of the larger REITs Mike, but could you share with us your outlook for this coming decade.

Yeah, I can only add to what Michael has said in that I always point to the graphs being used in the presentations, we deal with merchant builders, we get out product through a merchant builders, who deal with the investment grade tenants, that we have at our portfolio, and over the last few years perhaps this money is four or five years the country has not build sufficient amount of industrial space. And if you're getting 10% increase in the gross national product you're going to get a need a 10% increase in the industrial space in the country. And we're beginning to see a pickup in business, we're going to see a pickup throughout the United States and as that picks up then we think we're going to get more proposals and again as Michael said as spreads are the best they've ever been in terms of being able to borrow at 4% and invest at 7%. And so we really think that we're coming into a very good era. On top of that we specialize with FedEx and again as Michael pointed out the internet is shopping is here to stay and everything that gets bought on the internet gets shipped, not to all FedEx but a good percentage even can ship FedEx and they need additional warehouse space if the internet sales are going up to 4%, 8%, 10% or 12% then we're looking forward to good [paychecks]. So we do think that Monmouth REIT is especially well positioned with small REIT and we want to grow the REIT over a billion in assets and we're very confident that we can do it.

You said that you're saying early signs of a pickup, does that suggest that the 8 acquisitions that you're expecting in the balance of the fiscal year is there any possibility that number might grow incrementally?

Yes, there is, Mike, yes there is -- we're discussing several other deals and hopefully next quarter we can add more color on that.

Okay, thank you congratulations for a solid quarter.

Thank you, Mike.

This concludes our question-and-answer session, I would like to turn the conference back over to Michael Landy for any closing remarks.

Thank you, Amy I would like to thank everyone for joining us on this call and further continued support and interest in our company as always Kevin Gene, and I are available for any follow up questions we look forward reporting back to everybody after our second quarter.

The conference is now concluded, thank you for attending today's presentation. The teleconference replay will be available in approximately one hour to access this replay please dial U.S. toll free 877-344-7529 or international toll 141-231-700-88, the conference ID number is 100-224-50 thank you and please disconnect your lines.