COPT Defense Properties (CDP) Q4 2018 Earnings Report, Transcript and Summary

Welcome to the Corporate Office Properties Trust Fourth Quarter and Year-End Earnings Conference Call. As a reminder, today’s call is being recorded. At this time, I will turn the call over to Stephanie Krewson-Kelly, Corporate Office Properties Trust's Vice President of Investor Relations. Ms. Krewson-Kelly, please go ahead.

Thank you, Heather. Good afternoon. And welcome to COPT’s conference call to discuss fourth quarter and year-end 2018 results, as well as our guidance for 2019. With me today are Steve Budorick, President and CEO; Paul Adkins, Executive Vice President and COO; and Anthony Mifsud, EVP and CFO. In addition to the supplemental package and press release related to our results, we issued a separate press release detailing our 2019 guidance. And we posted slides on the Investors section of our Web site to accompany management’s remarks. On our Web site and in the press release results, you will find reconciliations of GAAP and non-GAAP financial measures management discusses. At the conclusion of management’s remarks, we will open the call for questions. Statements made during this call maybe forward-looking within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors. Please refer to yesterday’s press release and our SEC filings for a detailed discussion of forward-looking statements. With that, I will hand the call over to Steve.

Thank you, and good afternoon. We have very successful 2018. The results we achieved during the year solidified the foundation to support multiple years of growth in FFO. We've seen success in both the operating and development portfolios. We'll contribute the FFO growth in 2019, accumulating into a fourth quarter run rate of 3% to 4% annualized growth over 2018 full year results. The healthy defense spending environment that existed for the past few years combined with continuing strong by bipartisan support financial defense initiatives supported last year's record setting leasing results. In total, we leased 4.2 million square feet, 94% of which was at defense IT locations, capitalizing on the demand created by the defense spending environment. We seen highlights include; we successfully negotiated the largest volume of lease explorations since 2011; and we renewed 2.5 million square feet the most in our history, which resulted in a strong 78% retention rate. The 600,000 square feet of vacancy leasing we achieved during the year was 38% higher than 2017 levels. And development leasing of 1.1 million square feet ranked as the second best year in our 20 year history. Last year, we outlined the five ways of demand recovery related to higher defense spending would manifest in our markets and benefit our company. At that time, we expected to realize progress in three of the five categories during 2018, and ended up achieving success in four of the five categories. The first category was incremental leasing by defense contractors, arising from new contract awards. During 2018, we achieved 529,000 square feet of vacancy leasing at defense IT locations, demonstrating expansion of demand, following defense budget increases. The second category was realizing deferred leasing with U.S. government users' awaiting funding. During the year, the government leased 220,000 square feet of new space from pent up demand with additional requirements carrying over into 2019. The third category would occur when demand exceeded available inventory. We projected this would occur in 2018 and 2019 only at ransom gateway where demand is outpacing supply. We started two spec buildings mid-year that are 61% leased and we are finalizing leases that will stabilize both developments. The fourth type of demand recovery would come from major preleases or build to suites with defense contractors, which we anticipate could occur as soon as 2019. In June, we executed a highly confidential defense contract to build to suite driven by a new government award, well ahead of the initial timing expectations. Additionally, in December, we commenced an office development in Huntsville, concurrent with the prelease negotiations for a defense contractor that has a tight delivery schedule. We're also in advanced stages of lease negotiations with a second defense contractor to prelease the rest of the building. The fifth category of demand recovery was long term expansion at secure government campuses, which we expected that would material in the next few years. We are confident that we will capture at least one opportunity this year and several in the following years. We see continued opportunities in each of these five demand categories as leasing momentum continues to be strong into 2019. In mid-January, we completed the 34,000 square foot long-term lease with U.S. government for the second floor of 310 NBP. The same government user now leases approximately 30% of the building and we're working with the customer to advance additional expansion names. Among the 10 projects we have under construction or redevelopment, 5% are 100% leased and the four scheduled for shelf completion in 2019 should achieve stabilization before year-end. In terms of development leasing, our 2019 objective is to release 900,000 square feet equal to last year's initial goal. Today, we've completed seven of the 11 data center shelf leases we agreed to develop in November of 2017. We placed three in operations during 2018 and we'll place the four we have under construction in the service during the first half of this year. Among the remaining four build-to-suits, we expect to announce the next two leases in coming weeks and the final two leases during the summer, completing the 11 facility program. Additionally, as we finalized our land acquisitions, we purchased and entitled more development capacities than originally contemplated, and we have the capacity and the demand to develop another four shelves, totaling 800,000 square feet of future build-to-suits. So in summary, an orderly defense spending environment continues to support strong demand in our defense IT markets and should translate into another strong year of leasing in 2019, both in the operating portfolio and for new development projects. Because of our leasing achievement last year and the clear timing on development deliveries this year, 2019 is the year that FFO growth materializes. Over the coming quarters, we expect results to accumulate into a fourth quarter FFO per share run rate with growth of 3% to 4% that positions us to enter 2020 with solid momentum. With that, I'll turn it over to Paul.

Thank you. As Steve noted, 2018 turned out to be a record year for leasing. This strong leasing achievement supported 200 basis points of occupancy gain in our core portfolio over the last three quarters. Three of our sub-segments experiencing particularly strong demand are the Fort Meade, BW corridor, our three Navy support locations and Redstone Gateway in Huntsville, Alabama. In our Fort Meade BW corridor sub-segment, we leased the total of 2 million square feet during 2018 and currently have 650,000 square feet of available space, against which we are in various stages of negotiations for 535,000 square feet. Within this sub segment at the National Business Park are 3.8 million square foot park serving the U.S. government was secured campuses and defense contractors who support the missions at Fort Meade. During 2018, we completed 955,000 square feet of leasing at the NBP, including 56,000 square feet of vacancy leasing and 899,000 square feet of renewals. Currently, the NBP contains 430,000 square feet of un-leased space, against which we are working on 360,000 square feet of prospects. Our navy support sub-segment is 93% leased and has 88,000 square feet of availability. We have active prospects for 95,000 square feet or 108,000 of the current vacancy. In Huntsville, Alabama, demand is very strong and we have no vacancy in our operating properties. Accordingly, we are engaged in pre-development activities for three additional buildings. Development demand and development leasing continue to be key elements of our external growth. In 2018, we placed into service seven properties totaling 688,000 square feet that were 90% leased, plus the defense contractor build to suite that 100% leased. These newly operational properties are highly leased and nearly all of their $16 million to $17 million of cash NOI that is in our 2019 guidance is contractual. Furthermore, based on expected operational base and demand we are tracking, during 2019, we should place another 900,000 square feet into service that we expect will be 100% leased, supporting solid low-risk FFO growth in 2020 and thereafter. Among our 10 active construction and redevelopment projects, five buildings totaling 800,000 square feet and representing a total investment of $125 million are 100% leased. There is 210,000 square feet of unleased space in four projects we expect to complete during 2019. Against which we are tracking the following demand. At Red Stone Gateway, our two spec developments, 4000 and 4100 Market Street are currently 61% leased and we are in late stages of negotiating two leases that will stabilize both buildings in the coming months. In December in Huntsville, we started 8800 Red Stone Gateway concurrently with negotiating a large prelease with a defense contractor. Since commencing construction, we are now in negotiations with the second defense contractor to prelease the balance of the building. Lastly at 6950 Colombia Gateway, a 106,000 square foot building in redevelopment. We completed the 10,000 square foot lease there earlier this week, and are in late-stage negotiations with 40,000 square foot user that would raise our preleasing to 47%. Similar to other redevelopments we have completed in Columbia Gateway, we are updating architectural features and amenitizing this property to target a growing base of technology and cybersecurity companies choosing to locate in this area. Our shadow development pipeline of build to suite and large preleasing opportunities remain strong. A year ago that contained up to 3 million square feet of deals, two thirds of which were datacenter shelves. We executed 1.1 million square feet of leases this past year, or past year. And our shadow development pipeline still contains 2.1 million to 2.5 million square feet of potential transactions. 40% to 45% of which are datacenter shelves. The healthy defense spending environment continues to support methodical and deliberate procurement decisions among government users and defense contractors, and we look forward to updating you on our future leasing successes. With that, I'll hand the call over to Anthony.

Thanks Paul. For 2019, we are initiating full year FFO per share guidance with a fairly tight range of $2.02 to $2.06. This range includes a $0.01 negative impact due to the new lease accounting standard. In terms of leasing, we assume we'll renew between 70% to 75% of expiring leases. Our same property year-end occupancy guidance of 92% to 94% is relatively flat for the year as we re-tenant the 700,000 square feet that did not renew last year and as leases commence on 600,000 square feet of vacancy leasing executed in 2018. Despite the change of our re-tenancy, we expect same property cash NOI will grow 1.5% to 3%. In terms of cash rents on renewals, we forecast rental rate conditions to be stable versus last year. So our guidance on cash rents is flat to minus 2%. Remember that over the term of our average lease, we benefit from 2% to 3% annual rent escalations. Over a typical five-year lease, a 2.5% annual escalation yields approximately 11% appreciation in the in-place rent stream. In effect, we achieve our rent growth annually in the form of rent escalations, which have been modestly outpacing market rent growth as opposed to one large mark-to-market at the end of a lease. Our 2019 guidance includes NOI from the two floors at 310 NBP at the U.S. government leases. The remaining four floors total 137,000 square feet and would add $0.01 of FFO per quarter, but are not included in our outlook at this time. When we achieve further leasing at 310 NBP, we will update our guidance. Our 2019 guidance assumes we invest $250 million to $300 million in development during the year. This includes spend on existing projects, as well as development starts contemplated in our plan. In terms of funding this growth, first, we expect to draw the remaining $46 million from our forward equity facility during the first quarter. Second, we intend to raise between a $125 million and $150 million from sales of properties for venture interests to fund the remaining equity requirements, the impact of which is reflected in our guidance range. Our 2019 plan should result in our year-end debt to adjusted EBITDA ratio remaining steady year-over-year at 6 times. We also are establishing first quarter guidance in a range of $0.49 to $0.50, essentially flat with fourth quarter results. Our first quarter guidance anticipates the typical impact from seasonal utility and snow removal costs. With that, I'll turn the call back to Steve.

Thank you. So to recap, we had a very successful 2018. Accumulating record or near record achievements in all leasing metrics. The defense budget environment has translated into healthy market conditions throughout our defense locations. Our new development demand is widespread, representing opportunities in five geographic areas. Our 2019 plan is very simple and very low risk; leverage demand strength to lease vacancy in our operating portfolio; complete the developments we leased in 2018; achieve new development leases we are cultivating now; internally fund our development spends; and maintained balance sheet strength and flexibility. Our record leasing in 2018, driven substantially by defense contractor demand will contribute to 2019 results and further contribute to 2020 FFO growth. As we advance through the year, our quarterly FFO per share will build a run rate in the fourth quarter that approximates 3% to 4% growth over 2018 full year results. We have high confidence that we can deliver strong level of achievement in 2019 and that our development leasing achievement will similarly provide channels for growth in 2020 and beyond. I will wrap up with a final remainder. The vast majority of our defense IT segment demand is driven directly or indirectly by U.S. government actions. And their pace of progress is measured, thoughtful and deliberate. Accordingly, our pace of progress will not materially change from a timing standpoint, but the volume of opportunities has increased and we expect it to remain strong over coming years. With that, operator, please open up the call for questions.

Thank you, Mr. Budorick [Operator Instructions]. Your first question comes from Jason Green with Evercore. Your line is open.

Can you guys talk about the decision to introduce $135 million of dispositions, and how you guys think about dilution versus some other sources of funds?

Well, we're committed to maintaining the balance sheet strength we've worked very hard to create over the last five years. In the current pricing environment, we don't believe it's prudent to time to raise equity externally. We have multiple alternatives to harvest some development profit within our portfolio and recycle that into our strong and value creating development opportunities.

And then I guess switching to another part of your guidance. You're calling for tenant retention in the 70% to 75% where historically it's been more of 75% or 75% plus. Is there a reason that tenant retention should drop in the coming year is there a level of conservatism baked in? And if there is, if retention were to come in around 80%, I guess what's the upside to earnings?

Well, we stated last year same guidance. And we think it's a deliverable safe guidance. In terms of upside to earnings that's really hard to predict in terms on what, were, when in the rental impacts.

Thank you. Your next question comes from Jamie Feldman with Bank of America Merrill Lynch. Your line is open.

So Steve, to focus on this 3% to 4% growth rate by year-end '19. Can you just talk about what would get you -- what are the potential hiccups that would derail you from hitting that number? And then what's the opportunity to actually beat that number?

So there is very little speculative revenue in our plan to put that number at risk. So we have high confidence we can achieve it. In terms of exceeding it, it would require additional revenue creation beyond our plan. And the likelihood of that making a material impact is pretty low, because of long lease cycles and build-out times in our business. So we think it's pretty good number that you can count on.

And then it seems like you do have some pretty good visibility on a pretty long runway here. So if I read it right, you're talking about if you would annualize the fourth quarter of '19 overall of '18, it gets you to 3 to 4. So what was your 2020 growth rate look like at this point if you have any visibility on that, on both the same store and even in earnings growth basis?

Well, we're confident there will be growth. We're reluctant to put out any number now.

I mean, do you see acceleration in both of those metrics?

Well, I'll refer you back to my final comments. Everything in our business is ultimately driven by U.S. government decisions and they're measured and deliberate and thoughtful. So that message is intended for you to interpret that our progress is going to continue at about the same it is now.

And then it seems like things are tightening up in the portfolio. What's your ability to push rents and how should we think about market rent growth?

To be honest with you, we don't see market rent growth in 2019 and potentially could occur 2020. Right now, we're focused on driving up occupancy. All of our markets have increased demand, but there is competition. We have advantaged locations but we're not in a position to really drive rents yet.

And is this across all the sub-markets you're thinking the same thing?

Yes, there's one of our sub segment that maybe support sub segment. We're in a couple of those locations. We feel that due to demand, we can slightly push up rents during '19 and '20 going forward.

And then on Page 13 of your presentation, you talk about five leases expiring in '19. One of them is going to be taken out of service 155,000 square feet. Can you just remind us what that project is and what your plans are?

That is the legacy assets this company owns for a very long period of time. It's located in downtown Annapolis, Maryland. It was a managed services provider property. We held that in the SRP, because we recognized at that point in time the land is really more valuable than the building would be if we sold it. As that property -- the lease on the property has been 100% leased for 15 years. As that expires, we've already achieved a land lease agreement to create significant value. So we'll demolish it turn it over to our land lease tenant and it'll be a good candidate for recycling.

And what's the earnings impact of that I guess not much other than the land lease?

Currently, the project is generating about $2.5 million worth of annual cash NOI. The land leases can be a bit lower than that on an annualized run rate. And there'll be a little bit of downtime between probably a little more than a year of downtime between the expiration of the existing lease and commencement of the new ground lease.

When does the lease expire?

Right now, it will expire at the end of this year.

And so that’s in 2020?

That's correct.

Thank you. Your next question comes from Manny Korchman with Citi. Your line is open.

Steve, just thinking about the government shutdown. Has that impacted the psychology or your confidence of any of the tenancy, specifically contractors but also the U.S. government looking to spend?

No, not at all. First of all, let me just address point you didn't asked. From a rent collection standpoint, shut downs never affect our business. Government is obligated to pay the rent. This particular shutdown did not include the DoD. Several budget line items were passed in September. It was the un-passed line item categories that got shut down. So we saw no impact.

And no impact of the conversations with the contractors other than thinking about that business in the same way?

Actually, demand is accelerating over previous quarters and both with the government and defense contractors, so no impact.

Anthony, maybe this one is for you. You came out with a really tight FFO guidance range for the year, but your fundamental ranges are as wide as they've been from both the same store occupancy et cetera perspective. What's driving the wider ranges in the fundamental operations of the business but allowing you to pinpoint where FFO is going to go?

Well, with respect to occupancy, we've got a pretty good line of sight based on the activity that we accomplished in 2018 and what we've got in our prospect list for 2019. So I think the range there is just to focus folks on the midpoint of both of those both from cash NOI standpoint as well as occupancy there.

And was there anything specific that changed between October and today that your same store range picked up a little bit?

It's just the benefit of the incremental leasing that was done in the fourth quarter that will -- those leases will start to commence in 2019 at various points along the way. So the volume was a bit more healthy than we had anticipated in third quarter.

And if I can ask one last one to Steve. You talked about the additional shelves within the data center development program. Would those or are you targeting those for the same customer or different one? And then is a pricing or the yield on those projects any different than the initial other few or 11 however you want to think about it?

So it will be the same customer. We've had discussions with customer. Our expectations and yields is stable with what we've been delivering.

Thank you. Your next question comes from Craig Mailman with KeyBanc Capital Markets. Your line is open.

Anthony, on the dispositions, did I catch it right? Are those going to be basically shelves that get joint ventured?

No, you didn't catch that. We're currently working on variety of alternatives, both in terms of properties as well as structures. And at this point, we're not going to say what component of the portfolio we'll be harvesting that value from. All we can tell you is that we've got interest from several capital sources in these investments and that interest is very high. And we're confident in our abilities to generate the capital that we need to continue to invest in the development pipeline, while maintaining our balance sheet strength.

But can you give us a sense of what's embedded in guidance from a timing perspective and yield perspective on the sales?

No, not at this point. We'll update you when we execute those transactions.

Maybe first half back half weighed, just a sense of how we should think about it, because that would obviously impact quarterly guidance. Or you just want us to think about you guys are going to be 3% to 4% higher than the $0.50 run rate in 4Q '18? So we should just think about you get the $0.52 by the end of the year. Is that just a better way to think about it?

That is. The vast majority of the impact of the funding and the sales are embedded in that run rate.

And then just as we think about it, because you guys are basically selling here 2020 growth is as what to look for. If we just think about the components you've laid out so far in the call, think of that $0.52 run right here in the fourth quarter, so that gets you to 2.07, 2. 08 depending on where you're in that $0.03 or $0.04 range. And then you have $0.04 from 310 NBP that should start to flow through since nothing is embedded in '19, and then takeaway $0.02 related to the downtown in Annapolis. So should we think about 2.09, 2.10 and the baseline and then some upside from same-store and other deliveries of developments?

Yes, that's about right.

So if we think about I think consensus right now is about 2.16. That seems like a realistic place for the street to be thinking about, without giving guidance of course?

I don't want to comment on consensus. We'll do that as we move through the year.

And then just one last one, your second largest tenant is close to 9% of rents right now. You have another four projects that are going to flow through. Depending on what you guys ultimately sell or on a stabilized base of dictate where that comes in. But how comfortable are you guys having that concentration? The government is one thing because it's different tenants within the government. But from a tenant concentration, where do you want to limit the individual credit?

Well, we've had discussions with our Board. We're very comfortable thinking that concentration up to about 15%.

But with the projects that we have in the pipeline, as well as the ones that we've contemplated and the growth in the underlying portfolio that beyond the data center shells that number doesn't get much above 10% with the activity that we've got in the pipeline.

Your next question comes from Blaine Heck with Wells Fargo. Your line is open.

Steve, I think this is a second time you guys have tweaked the language in the presentation on Page 20. Now it's saying leasing can take as far as 18 months from authorization and appropriation. I think a few quarters ago, it was six to nine months. I guess what do you think is lengthening the decision process this time around? And is this a systemic change? Or is there something in particular that being the timeline this cycle?

We hit that on the last call. We haven’t extended any further. And frankly, we consider it a good thing, not a bad thing. We had some contracts that were awarded in 2017 that we landed at the end of 2018. And frankly, they're finalized in '17. The initial awards were '16. It's merely meant to suggest that the process with contractors can be delayed, because of contestation or the complexity of the contract. And that in fact the demand from budget year last longer than our initial timing had suggested.

Just one quick one for Anthony. Can you just give some color on the impairment on non-operating properties you guys took during the quarter? Was that on something held for sale or what was the situation there?

We started some redevelopment activities on a project here, property here in Columbia Gateway. And that project was fully leased in the fourth quarter and didn't require the investment or the redevelopment capital. So the costs that we had incurred for the redevelopment plans we wrote off. And yes, the space was leased 100% to a defense contractor to support a contract award from a tenant at Fort Meade.

Thank you. Your next question comes from Tom Catherwood with BTIG. Your line is open.

A quick question on Redstone Gateway. It's good to see the demand pick up there. Obviously, it looks like in the presentation that you're in pre-development on a number of buildings there as well. Is this demand new companies coming into the market? Is it relocations? Is it expansion of existing tenants in your properties? How should we think about that from the demand side?

I don't mean to be a smart guy, but yes. In some cases, it's people relocating into Huntsville. In other cases, it's expansion for sites or contracts specific needs. And generally that's probably the highest number. And then some is relocation and planning for long term investment to capture location and efficiency advantages. But it really represents the full spectrum.

And then Steve, I can't remember. Does the gateway have similar structure to NBP, where there's a portion that's behind a gate that could be used for secure reasons or is everything outside the gate?

No, it does have roughly 30% of the development capacities behind defense.

Is any of that that you're seeing behind the fence, or is it still all in the core of the park right now?

We do have some demand behind the fence and we're working with couple of users for possible solutions.

And then for Paul, obviously, on Page 8 of the presentation, notes the challenges with some of the DC trophy market assets. How will you see demand coming in and tenant interest in 2100 L Street?

At 2100 L, we are on time and on budget for delivery of the shell in first quarter of 2020.And it is a competitive market. But I'm pleased that we have 180,000 square feet of prospects right now against the 90,000 square feet of remaining office space. And within that 180, we are on the shortlist and in active negotiations and advanced proposals with 55,000 square feet. So very aware of the competitive environment but again our timing of delivery does line up well relative to the broader market.

[Operator Instructions] Your next question comes from Dave Rodgers with Baird. Your line is open.

Paul, I just wanted to ask about 310 NBP. I think your comments you said demand from government and contractors seem to be accelerating regardless of the shutdown. Again, remind us what we're waiting for then on 310? And you did make some progress in the quarter but nothing else less than a year. Is there any particular waterfall we're waiting for on that particular asset?

Well, we signed the lease for the second floor about three weeks ago. And really all I want to say is that we're still working with the same user and continuing our discussions about additional space in the building.

Steve, going back to one of the comments you made about data shelves. I think in response to another question, you had said you expect it to be the same user. But I guess no agreement in place. So I would take from that commentary and have you had discussions with other users if you're going to go forward with these developments and perhaps not have a user into, or the same user into. Can you provide a little more clarity on that comment?

Well, we have no contractual obligation nor do they. But we have a relationship of trust and confidence. And we fully expect it to be them but we're not contractually obligated.

And then last question just on the dispose. The stock was back up to $30 a share. Do you still anticipate executing on the disposition this year?

It's a hard question to answer. But I think as the year progresses we're going to get pretty committed to our internal rates. So we'll probably end up fulfilling that.

Your next question comes from Chris Lucas with Capital One Securities. Your line is open.

Just a couple of quick questions some follow-ups. On Redstone, Steve, just was an announcement by the FBI that they were moving a little over 1,000 people down to Redstone and over the next couple of years. Do you see the play off on that or more business more tailored to more of the stricter defense contractor business down there?

We have no contractors negotiating that would represent a tale today. Ultimately, I do. I think they're going to have to make their big move first. Because the elements that we see moving down there are very technology research oriented. And it fits right in their wheelhouse with strong demand we get from the DoD activities on the base, as well as the space expiration activities.

And just so I'm clear on the data shelves. So you've got seven net, you've got leases on and under construction and or have completed. There's four left of the original that you don't have leases on. Is that correct? Do you have the land acquired for the work?

We do. I think you pointed out in your research that we closed on one parcel.

So specifically, how many pieces or how many shelves can get on that parcel?

So that part of the delay initially we anticipated getting a smaller parcel that would hold two. We ended up being more efficient to buy a larger parcel that will ultimately hold free, but we anticipate getting leases, two leases for that property in coming weeks. And then the second, the remaining parcel is firmly under contract. We have a scheduled closing date and we referred to those leases in the summer months.

So the issues that you've talked about delays on the third quarter calls related to the data shelve deliveries. Have those been resolved at this point?

Yes, they have. We've intimated that in our conference and deliveries. Yes, we're in very good shape.

And then the other four possible shelves that you're talking about, those are on existing land that you own or have under contract. What is that?

Well, those four I just mentioned one. So the land parcels that we bought, we upsize. And similarly, other land parcels that we acquired, we're able to scoop up more and have some built in land inventory.

So just so I'm clear, I just wanted to understand. It's a total of 11 then that you're talking about, there's not as 11 plus to look for, it's 11.

So the 11 program, we're anticipating four to complete the 11 data shelve build to suite program that we had suggested. A happy outcome is we have additional land capacity that could hold another four in the future.

And then a last question, your stock was beaten up pretty bad in the fourth quarter in the beginning of January, not unlike a number of other REITs but yours was particularly hit bad and there was a buyback on the stock. I guess I was just curious as to -- you have a buyback in place and if not, why? And if so, why did you go execute during that timeframe?

So we don't currently have one in place. We've engaged robust discussion with our board. It's possible in the future we would have one in place. We did that move for one, because we just felt the best use of the capital resources we had and continue to have is to continue to create value through the low risk development that we've already signed and is pending.

Thank you. This concludes our question-and-answer session. I will now turn the call back to Mr. Budorick for closing remarks.

Thank you all for joining our call today. We are in our offices this afternoon. So please coordinate through Stephanie if you'd like follow up call. Thank you.

Thank you. Thank you for your participation today in the Corporate Office Properties Trust fourth quarter and year-end earnings conference call. This concludes the presentation. And you may now disconnect.