Good morning, and welcome to the Monmouth Real Estate Investment Corporation’s Second Quarter 2014 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. It is now my pleasure to introduce your host, Ms. Susan Jordan, Director of Investor Relations. Thank you, Ms. Jordan. You may begin. Susan M. Jordan: Thank you very much, operator. 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 along with the 10-Q are available on the Company’s website at mreic.com. I would like to remind everyone that certain statements made during this 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 second quarter 2014 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; Kevin Miller, Chief Financial Officer; and Michael Landy, President and Chief Executive Officer. It is now my pleasure to turn the call over to Monmouth’s President and Chief Executive Officer, Michael Landy. Michael P. Landy: Thank you very much, Susan. Good morning, everyone, and thanks for joining us. We are pleased to discuss our results for the second quarter ended March 31. Although the second quarter saw no new acquisitions, this follows last quarter’s substantial 1.1 million square feet in new acquisitions at an aggregate cost of $73.9 million. We do expect a significant amount of deal closings throughout the remainder of fiscal 2014 and into 2015. We are very excited about our best-in-class acquisition pipeline, which has grown over the quarter, and now contains 3.1 million square feet, representing $222.3 million in total acquisitions scheduled to close over the next six quarters. In keeping with our business model, all of the deals comprise brand new built-to-suit projects under construction with long-term leases, primarily to investment-grade tenants. These properties are located at major airports, major transportation hubs, and manufacturing plants that are integral to our tenants’ operations. Approximately 47% of our acquisition pipeline consists of deals with FedEx, while the remaining balance of 53%, includes a variety of primarily investment-grade tenants. The cap rates on these deals average approximately 7% and the weighted average lease maturity is 11.5 years. Subject to satisfactory due diligence, we anticipate closing these transactions upon completion and occupancy. Our gross leasable area now stands at 10.7 million square feet and consists of 80 industrial properties and one shopping center, located across 27 states. We now have a weighted average lease maturity of 6.8 years with in-place leases going out as far as 2034. As a result of the rapid growth in e-commerce, we are currently working with our largest tenant, FedEx, on the expansion of six of our facilities, totaling approximately 231,000 additional square feet. We are also working with another one of our tenants on a 62,000-square-foot building expansion. The total cost for these seven expansions will be approximately $24 million. Upon completion, these expansions will result in increased annual rent totaling $2.4 million. In addition, these expansions will result in a new 10-year lease extension for each facility being expanded. On the leasing front, thus far this year, we have renewed four of six expiring leases, representing approximately 53% of total lease expirations for the year consisting of approximately 438,000 square feet. These four leases comprising approximately 230,000 square feet were renewed for a weighted average term of 6.4 years and at a weighted average lease rate of $5.42 per square foot. This compares to $6.02 per square foot on expiring leases, representing a reduction of 10%. In addition, we have recently completed work on four property expansions, which resulted in new 10-year leases commencing upon completion and increased rent of $1.1 million, representing a 10% un-levered return on the capital we deployed. As a result, the weighted average lease rate on the properties expanded increased to $8.51 per square foot, representing an increase of 14.2% compared to $7.45 per square foot formerly. Also during the quarter, we extended the lease term with FedEx Ground for two additional years on our 87,500-square-foot building in Fort Myers, Florida. This lease was originally scheduled to expire in fiscal 2015. The lease extension resulted in a 4% increase in annual rent. Subsequent to quarter end, we entered into a lease termination agreement with DHL for our 83,000-square-foot facility in Roanoke, Virginia. This agreement resulted and our receiving a lump sum termination payment of $1.2 million, which represents 70% of the remaining amount due under the lease, which was set to expire in December 2016. In conjunction with the lease termination agreement, we entered into a lease agreement with CHEP USA for 10.5 years. CHEP has been around for 69 years and they are the leading provider of shipping pallets and containers. They operate in over 50 countries and generate approximately $5 billion in annual sales. CHEP will receive six months of free rent, and effective in the seventh month, annual base rent will initially be approximately $400,000 or $4.80 per square foot, with 1.5% increases each year. We will also be receiving as additional rent amortized tenant improvements amounting to $0.75 per square foot annually over the lease term. This results in a total average rent of $5.64 per square foot over the 10.5-year lease term. The combination of the lease termination income from DHL plus the rent being paid by our new tenant results in 20% greater revenue than the DHL lease would have provided. It also provides us with an additional eight years of lease term with a high-quality tenant. While the new average rent per square foot is 28% lower than the $7.88 per square foot rate that was being paid by DHL, we view the 20% increase in revenue over the remaining DHL term, combined with the additional eight years of lease term, as a very favorable outcome. With regards to the overall U.S. industrial market outlook, demand from both users and investors continues to strengthen. In 2013, the industrial sector experienced its best performance in eight years with 117 million square feet of positive net absorption. The national average vacancy rate has continued to drop, and is currently at 8%. The Association of Foreign Investors in Real Estate, known as AFIRE, recently identified U.S. industrial real estate as their top investment choice for the first time in a decade. We have seen a resurgence in domestic U.S. manufacturing that is helping to drive demand for industrial space. Global growth of e-commerce has continued to impact the supply chain and it is expected to continue to be a significant growth engine for our property type for the foreseeable future. We’ve certainly been benefiting from this at Monmouth, as evidenced by our numerous property expansions recently completed and currently underway. Additionally, the completion of the Panama Canal expansion is scheduled to take place in the second half of 2015. This will more than double the canal’s capacity, as products traditionally transported through the West Coast are expected to be rerouted through East and Gulf Coast ports. Monmouth’s portfolio is especially well situated to benefit from this development. As a result of these many factors, coupled with five years of very limited new construction, demand for well-located, high-quality industrial properties is anticipated to continue to strengthen in the years ahead. And now, Kevin will provide you with greater detail on our results for the second quarter of fiscal 2014. Kevin S. Miller: Thank you, Michael. Core funds from operations for the second quarter of fiscal 2014 were $6.9 million or $0.15 per diluted share. This compares to core FFO for the same period one year ago of $8.8 million or $0.21 per diluted share. Excluding securities gains realized during the quarter, core FFO was $6.5 million or $0.14 per diluted share, as compared to $5 million or $0.12 per diluted share in the prior-year period. Adjusted funds from operations, or AFFO, which excludes securities gains or losses, were $0.14 per diluted share for the recent quarter, compared to $0.11 per diluted share a year ago. The 27% year-over-year growth in AFFO per share is attributable to the positive impact of our accretive acquisition and expansion activities. Rental and reimbursement revenues for the quarter were $16.3 million, compared to $13.3 million or an increase of 23% from the previous year. Net operating income was $13.4 million for the quarter, reflecting a 20% increase from the comparable period a year ago. The increase was due to the additional income related to the eight industrial properties purchased since the prior-year period. Net income was $4.8 million for the second quarter, compared to $7.6 million. This reduction is driven largely by the $3.8 million in realized gains on the sales of our securities investments in the prior-year period. With respect to our properties, end-of-period occupancy was 95.4%, compared to 94.7% a year ago. As a result of the two previously announced lease expirations subsequent to quarter end, our current occupancy rate is now a 93.5%. The U.S. industrial market is experiencing strong demand, and therefore, we anticipate increased occupancy over the ensuing quarters. Our average lease maturity as of the end of the quarter was 6.8 years, as compared to 6.1 years a year ago. Our average annual rent per square foot was $5.55 as of the quarter end, as compared to $5.46 a year ago, representing an increase of 1.6%. This average rent is in line with the current national average rent of $5.42 per square foot. As of the end of the quarter, our capital structure consisted of approximately $334 million in debt of which $287 million was property-level fixed rate mortgage debt and $47 million were loans payable. 87% of our total debt is fixed rate, with a weighted average interest rate of 5.3%, compared to 5.8% in the prior-year period. We also had $111 million in perpetual preferred equity at quarter end. Combined with an equity market capitalization of $451 million, our total market capitalization was approximately $896 million at quarter-end. From a credit standpoint, we continued to be conservatively capitalized with a net debt to total market capitalization at 36%, net debt plus preferred equity to total market capitalization at 48%, fixed charge coverage at 2.1 times and our net debt to EBITDA at 6.2 times for the quarter. From a liquidity standpoint, we ended the quarter with $10.7 million in cash and cash equivalents. We also have $20 million in additional liquidity currently available from our recently expanded credit facility, as well as an additional $20 million available from the new accordion feature. We also held $53.5 million in marketable REIT securities at quarter end, representing 6.7% of our un-depreciated assets. At the end of the quarter, we had $3.2 million in unrealized gains on our securities investments, in addition to the $425,000 in gains realized during the second quarter and the $576,000 in gains realized thus far in fiscal 2014. And now, let me turn it back to Michael before we open up the call for questions. Michael P. Landy: Thanks, Kevin. Over the past six quarters, we have successfully added 2.2 million square feet of newly-constructed industrial properties to our portfolio, representing a 25% increase in gross leasable area. Our current acquisition pipeline of 3.1 million square feet of brand new Class A properties over the next six quarters will help to further enhance our quality portfolio of single-tenant industrial properties, net leased long-term primarily to investment-grade tenants. The positive yield spreads we have achieved on the transactions we’ve consummated to-date have resulted in continued improvements in our financial results. We look forward to continuing to build upon the substantial growth and financial performance that has been achieved to-date. We’d now be happy to take your questions.

We will now begin the question-and-answer session. (Operator Instructions) Our first question will come from Paul Adornato of BMO Capital Markets.

Thanks. Good morning. Michael P. Landy: Good morning.

I have kind of a bigger picture question. With respect to FedEx, could you talk about how their requirements may have changed over the years? I’m just trying to get a sense of obsolescence within the industry? So maybe you could talk about some of the physical characteristics of the buildings that they look for, location, size, talk about some of those attributes as well? Michael P. Landy: Sure, Paul. Well, the key factor that’s changing not only FedEx’s requirements, but the whole industrial property type’s requirements, is the shift in retailing to omni-channel retailing. So the old industrial warehouse was shipping business-to-business within a certain radius, about a 25-mile radius. Nowadays, you have these buildings that have to do that, as well as serve the Internet consumer. So you need to have a bigger building, you need to have more parking. FedEx is experiencing so much growth that we’re seeing seven expansions currently, one not FedEx, so six FedEx expansions. In our pipeline, we have 10 deals, 5 are leased to FedEx. So, they’re growing by leaps and bounds. And our buildings, as far as the ages of our buildings, we’ve grown our portfolio over the last three years 53% and this is all new build-to-suit. By the end of next year, we would have more than doubled our portfolio with all brand new build-to-suit. So, we’re very pleased that we have a very youthful portfolio, a very state-of-the-art, best-in-class portfolio that’s capable of these omni-channel-type distribution supply chain needs. A lot of buildings are going to be obsolete, older buildings, to handle this. And so it’s important that you look at clear height of over 30 feet, ample truck parking, ample employee parking. And the infrastructure that FedEx puts in these facilities and others put in these facilities, multi-million dollar material and handling equipment, computer-controlled equipment that could see the packages before they come in. They know where they’re going before they’re coming in and they could process the throughput very rapidly. So, it’s very high-tech. It’s not the racking people are familiar with in the past. The new industrial facilities, a tremendous amount of the capital expense is in the infrastructure itself.

Okay. Thanks for that discussion. Michael P. Landy: You’re welcome.

And our next question is from Craig Kucera of Wunderlich Securities.

Hey. Good morning, guys. Michael P. Landy: Morning, Craig.

And I’m sorry, I jumped on the call a little bit late, but in terms of the timing of the closing of the acquisitions, the pipeline’s grown significantly, I think last quarter was maybe $113 million, now we’re at north of $200 million. Did you say over the next six quarters you expect to close everything? Michael P. Landy: That’s right, Craig. Our portfolio was about five deals last quarter, $113 million. It’s doubled to now $222 million, 10 deals. Same with expansions, we had three expansions last quarter, seven expansions now. So we’re happy with the growth in our portfolio. These deals are spread out over six quarters. We anticipate doing $75 million in closings out of the $222 million this fiscal year, with the remainder in fiscal 2015.

Got it. And as far as the FedEx expansions, what kind of timing does FedEx generally ask you to complete those? Is that like a year or two-year kind of process that they want you to get those done or a little faster? Michael P. Landy: Well, the process is about a year. They come to you and make the request. Then you have to price it out. You have to work out the lease and you have to construct the expansion. So, from inception to completion, you’re looking at about 12 months.

Got it. And what’s the – I think you made a mention in the release that the rent was going to increase about $2.4 million with those expansions. Is that going to be kind of in your typical 14% increase or so to the existing rent? Michael P. Landy: It varies. It depends on what the existing rent is. On our expansions, we’re getting a 10% un-levered return. So we have $24 million committed for current expansions underway and that will generate $2.4 million in annual rent revenue. As far as what that works out on the per-square-foot basis, increase over the existing rent depends on what the existing rent is and what the cost of the expansion is.

Got it. So you’re underwriting to the 10%. Okay, great. So, in the past, you mentioned with your acquisitions you have a good sense of kind of the financing that you’d be able to get on the property and maybe to lock it in as you get maybe closer. But what is your sense as far as what kind of coupon you’re going to be able to get on the $220 million plus of acquisitions you guys expect to close over the next 18 – or 6 quarters I should say? Michael P. Landy: I’ll let Kevin take that. Kevin S. Miller: Yeah. Hi, Craig. On the 10 acquisitions that we have lined up in the pipeline, three of them we’ve already locked in on financing. We’ve obtained mortgages of about $31.5 million, and the rates range anywhere between 3.95% to 4.47%. So, we’re hoping for the remaining seven somewhere around there and between the rates luckily have stayed low recently. So, we’re projecting anywhere between 4% and 4.5% on the remaining seven.

Got it. And is my math right that it’s $15.4 million in revenue on that, is that equating to just under a 7% cap or is there some expenses affiliated with those? Kevin S. Miller: Are you talking about the whole pipeline itself?

Yeah. Yeah, exactly? Kevin S. Miller: On the whole pipeline, yeah, we have an average cap rate of about 7% on all the 10 acquisitions. Is that the question that you asked?

Yeah. Yeah, exactly. Just trying to figure that out because I know you guys have certainly targeted in the past or feel comfortable historically, I think, that maybe 200 basis points is good. So this is a little better than kind of what you’ve historically looked at doing. I know you had a big pull-through a quarter or two quarter ago at kind of north of 300 basis points. Kevin S. Miller: Right. Yeah, traditionally, we look for at least 2%, and these are above that.

Oh, really. So they’re closer to 2.5%? Kevin S. Miller: Yeah. Well, with the 7% average cap rate, and we’re assuming 4.5% loans, yeah.

Got it. Okay. All right. Thanks a lot, guys. Kevin S. Miller: Thank you. Michael P. Landy: Thank you.

(Operator Instructions) And we do have a question from Jon Petersen of MLV & Company.

That’s great, thanks. Most of my questions have been answered, but did you talk about – obviously with the increase in your acquisition pipeline, I don’t think you’ll be able to finance it equity-wise through the DRIP program, from the equity side of things, how should we think about that? Kevin S. Miller: Well. The deals are spread out over six quarters. We just increased our credit facility. So we have another $40 million capacity on the credit facility. We have in the securities portfolio about $55 million. We have in addition, the DRIP and SIP brings in about $30 million ratably throughout the year. And cash on hand is a little over $10 million. So, because these deals are spread out, we do have a good liquidity cushion. We do continue to source deals. The pipeline’s doubled over the last quarter and we’re continuing to want to grow the company. So, as the pipeline grows, we’ll continue to watch the capital markets and respond accordingly.

Got it. But in terms of the – I guess, in terms of the current pipeline, we probably could assume you’re going to sell down quite a bit of the marketable securities portfolio? Kevin S. Miller: Yeah. We have good gains in the portfolio. We, last quarter ended the quarter with $2 million in gains. Unrealized gains are up 63%, $3.2 million in unrealized gains at the end of the most recent quarter. And so it’s a good time to harvest gains and reallocate that capital in new acquisitions and to help fund our substantial expansion pipeline.

Okay. All right. Great. That’s helpful. Thank you. Kevin S. Miller: You’re welcome.

And our next question will come from Michael Boulegeris of Boulegeris Investments.

Thanks for taking my questions. Can you share with us your thoughts on Monmouth securing an investment-grade credit rating? I mean, you have a very solid capital structure, credit profile, certainly you’re forecasting a highly-qualitative growth, extending your GLA by maybe 30% over the next year. So can you update us on that? Michael P. Landy: Sure thing, Mike. Monmouth’s whole focus is qualitative, not quantitative. 90% of our rental revenue is secured by investment-grade tenants. The remainder we consider to be investment-grade quality revenue, although these are non-rated companies. Our assets are the youngest in the industrial peer group. They’re all single tenant, net leased long-term primarily to investment-grade tenants. They’re all at major transportation hubs. Many of our pipeline is at major airports. Our existing portfolio is at major airports. Some of our assets are at manufacturing facilities that are over 200 years old and integral mission-critical facilities for our tenants’ operations. So the problem being two-fold with achieving investment-grade rating, one is size. You simply have to be north of $1 billion to be considered relevant to key institutions, to Moody’s, to S&P, to a lot of the REIT world. And I think that’s why we trade at the discount we trade at is that we’re just not in that arena yet. But that’s part of the growth strategy. It’s why we’ve generated 53% growth over the last three years. That’s why we will have doubled in size with all new build-to-suits by the end of next year. And so that will take care of the size problem. And then, the other factor is they like to see a lot of unencumbered assets. We’ve been borrowing historically primarily with secured financing. Kevin’s been building up our unencumbered asset pool and that’s allowed us to recently increase our credit facility. And so we’ll continue to, as assets’ mortgages become due, put them in the unencumbered asset pool, build up our pool, and that will help us get an investment-grade rating. But we think our leverage ratios are all within investment-grade parameters. And so we’re well on track to achieve that rating. It’s just a question of time and it’s probably at this point I’m thinking fiscal 2016.

Thank you very much. Michael P. Landy: You are welcome, Mike.

(Operator Instructions) And showing no further questions, this will conclude the question-and-answer session. And I would like to turn the conference back over to Michael Landy for any closing remarks. Michael P. Landy: Thanks, Laura. Well, I’d like to thank everyone for joining us on this call, and for their continued support and interest in our company. We’re all available for any follow-up questions. And as always, we’ll be presenting at NAREIT in New York in June and hope to see everyone there. We look forward to reporting back to you after our third quarter. Thank you.

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 reply, please dial U.S. toll-free 877-344-7529, or international toll 1-412-317-0088. The conference ID number is 10042544. Thank you. And please disconnect your lines.