COPT Defense Properties (CDP) Q1 2019 Earnings Report, Transcript and Summary

Welcome to the Corporate Office Properties Trust First Quarter 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, COPT's Vice President of Investor Relations. Ms. Krewson Kelly, please go ahead.

Thank you very much. Good afternoon and welcome to COPT's first quarter 2019 conference call. 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 posted slides on the Investors section of our website to accompany management's remarks. On our website and in the press release, you will find reconciliations of GAAP and non-GAAP financial measures that management discusses. At the conclusion of management's remarks, we will open the call for questions. Statements made during this call may be 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. I'll now hand the call over to Steve.

Thank you and good afternoon. We're off for a strong start in 2019. As anticipated the healthy defense spending environment that propelled the record leasing in 2018 continues this year. Our concentration in defense industry is being rewarded with new leasing opportunities with defense contractors for both new facilities and expansion space. The strength of this environment is evidenced by the 1.1 million square feet of development and vacancy leasing completed through April. We're seeing strong activity in all five categories of demand previously outlined. First, defense contractors continue to require additional space to execute incremental contract awards. Through April, we completed 236,000 square feet of vacancy leasing, an amount that already exceeds the volume we completed in the first half of last year and these leases were predominantly at Defense/IT locations. Second, to-date we've completed 126,000 square feet of leasing related to deferred US government demand. This includes the 34,000 square foot lease we completed in January as was another 92,000 square feet signed with the government in April, at various locations in our portfolio. Third, demand continues to exceed supply in Huntsville. The two speculative buildings we started last year at Redstone Gateway are now stabilized and based on our current discussions with defense contractors, we're planning our next speculative building to create inventory to meet requirements. Fourth, major pre-lease and build-to-suit demand from defense contractors is accelerating. Recall that this time last year, we thought we would start to see this type of demand as early as 2019. Last year, ahead of expectations, we captured two deals, a defense contractor build-to-suit driven by a new government award which we executed in June and then later in the year we commenced RG 8800, a 76,000 square foot building in Huntsville to capture a known pre-lease opportunity which we executed in the first quarter. Yesterday, after markets closed, we issued two press releases announcing more than 350,000 square feet of development leasing at Redstone Gateway with two different defense contractors. The first press release announced a 37,000 square feet lease with Abacus Systems, a manufacturer of rugged embedded computing solutions for military, defense, aerospace and industrial applications for the remaining space at RG 8800, which is now 100% leased. The second press release announced the four building build-to-suit campus for Yulista aviation, that will be over 300,000 square feet. Yulista will occupy their campus by the end of 2020. In our data shell business we executed leases for two buildings totaling 431,000 square feet. These two transactions represented the eighth and ninth facilities in the 11 deal pipeline we introduced at the end of 2017. We expect to announce the final two leases later this year, completing the 11 -- the leasing of the 11 facility program. We continue to work with our customer on additional facilities beyond that program. So in the past 12 months, we've completed 13 build-to-suit major pre-lease transactions for defense contractors totaling 1.7 million square feet, seven leases exceeding 500,000 square feet for traditional defense contractor facilities and six data center shell leases totaling 1.2 million square feet. The fifth category of demand recovery is associated with the government returning to long term planning and expansion at our secured campuses. Last month, we started 100 Secured Gateway, the first building in our secured campus at Redstone Gateway. We've been in discussions with the government and we've started construction to meet their space and timing requirements. We also remain in discussions with other government users for new facilities at our secured campuses including additional prospects in Huntsville. Combining the first quarter development leasing with deals recently signed with [indiscernible] and Yulista, we've already met our annual development leasing goal of 900,000 square feet and we're increasing our full year target by 0.5 million square feet to 1.4 million square feet in total. When achieved, this volume of development leasing will be the highest ever in our 21-year history. Because our development leasing success to date significantly exceeds our original plan, we're up-sizing the development investment and asset sales guidance ranges in our full year forecast. The increased volume of asset sales is slightly dilutive to this year's results, but the expanded investment pipeline being funded will generate outsized FFO growth in 2021. With that I'll turn the call over to Paul.

Thanks, Steve. Last year's leasing momentum continues, as demonstrated by the depth and breadth of leasing opportunities in our operating portfolio and new developments. Within our operating portfolio, we completed 126,000 square feet of vacancy leasing in the quarter, which is 77% above first quarter 2018's vacancy leasing volume. In April, we completed another 110,000 square feet bringing our four-month total to 236,000 square feet which is 26% higher than the vacancy leasing we completed in the first half of last year. Nearly 75% of the vacancy leasing was in the Fort Meade/BW corridor subsegment, where we are currently tracking 640,000 square feet of activity against 725,000 square feet of vacancy. Both the leasing and demand are primarily with defense, cyber security and technology users. In Northern Virginia, our NoVA Defense/IT subsegment was 92.1% leased at the end of the first quarter. We are tracking 327,000 square feet of demand against the approximate 250,000 square feet of current and pending vacancy in that subsegment. In our four Northern Virginia Regional Office Buildings, we leased 20,000 square feet of vacancy in the first quarter. We are working 72,000 square feet of activity against 85,000 square feet of vacancy. Roughly, three-fourth of this demand is looking at our Pinnacle buildings which continued to benefit from their metro access and from the mixed use developments being constructed around them. Our Navy Support sub-segment is 91.3% leased and we are working 132,000 square feet of demand against the 108,000 square feet of vacancy. In Huntsville and in Texas, we have 1.6 million square feet of operating properties and we have zero vacancy. Our pre-lease development projects continue to support cash flow growth and value creation. During the first quarter, we placed 181,000 square feet into service that were 100% leased. We will place another 715,000 square feet into service during the remainder of this year that today is already 99% leased for a total of 896,000 square feet of fully leased buildings that will boost future results. Demand for new development in 2019 has exceeded our expectations. And as Steve mentioned, we've already completed 900,000 square feet of development leasing, 52% of which has been with cyber and defense industry tenants in Huntsville and the Fort Meade B/W corridor and 48% of which was in two datacenter shells. Our Yulista deal at Redstone Gateway best illustrates the demand we are experiencing for new facilities that are precipitated by DoD awards. Yulista is an aerospace defense contractor headquartered in Huntsville. Last December they won a $4.7 billion contract from one of the major commands at Redstone Gate Arsenal. This new award triggered their need for a modern efficient campus that is closer to the government customer and resulted in the transaction we announced yesterday, a four-building build-to-suit campus at Redstone Gateway. Yulista's campus will exceed 300,000 square feet and will be operational by the end of 2020. Demand for newly developed facilities has been strong and we expect it to remain so. On our last call, our shadow development pipeline contained up to 2.5 million square feet of potential transactions. Today, notwithstanding the 900,000 square feet of transactions we have executed to date, our shadow development pipeline contains up to another 2.8 million square feet of possible deals serving government users, defense contractors, and including additional data centers shells. Accordingly, we are raising our development leasing target for the year to 1.4 million square feet which would make 2019 a record year in our 21-year history for development leasing. As demonstrated by the 1.1 million square feet of vacancy and development leasing executed to date, the healthy defense spending environment continues to support a growing number of methodical and deliberate procurement decisions amongst government users and defense contractors. We expect our ongoing discussions with these customers to lead to additional investment opportunities and look forward to updating you. With that I'll hand the call over to Anthony.

Thanks, Paul. First quarter FFO per share of $0.50 was at the high end of guidance primarily due to the impact of lower weather related costs. The benefit of last year's record leasing are beginning to flow through our same property results. The 1.4% year-over-year increase in same property occupancy to 92.7% and cash rent commencements supported the 4.7% increase in same property cash NOI. Guidance for full year same property cash NOI growth of 1.5% to 3% remains unchanged. Tenant retention of 71.3% in the quarter was in line with full year guidance of 70% to 75% percent, and leasing economics were in line with our expectations. During the first quarter, cash rents on renewing leases declined 6.8%. This roll-down related to a handful of leases, one of which was a 98,000 square foot renewal at Maritime Plaza in D.C. which accounted for 60% of the impact. We anticipated these transactions in our original full year guidance and cash -- for cash rents on renewals, which we continue to forecast overall flat to down 2%. Regarding our full year guidance, we are increasing our expected asset sales to fund the expanded volume of development opportunities. As Slide 17 in our presentation shows, we are increasing our full year development spend guidance by $75 million to between $325 million and $375 million and increasing our disposition guidance by the same amount, to a new range of $200 million to $225 million. We are in advanced stages of executing a transaction with an institutional investor to recycle capital at attractive valuations. We expect the transaction to close in the second quarter. The increased volume of dispositions enables us to fund these expanded development opportunities, with the appropriate level of equity to maintain our strong balance sheet. And we forecast our year-end debt to EBITDA ratio will be approximately 6 times. The net effect of these changes is $0.01 of dilution to our original full year FFO per share guidance and the $2.03 midpoint of our revised range implies 1.5% growth over 2018 FFO per share. We are also establishing second quarter guidance in a range of $0.50 to $0.51.This range reflects the remaining $1.6 million shares we issued in March from the final $46.5 million funding of our forward equity program. In addition, second quarter guidance include same property cash NOI growth of 2% to 3% and the expectation that same property occupancy will end the quarter between 92% and 93%. With that I'll turn the call back to Steve.

Thank you, Anthony. Development opportunities are accelerating and we're adjusting our 2019 plan accordingly. Our plan remains straightforward and low risk, leverage demand strength to drive occupancy and our operating portfolio, capitalize on our expanding set of development opportunities in our markets, internally source the equity for our development investment, and maintain balance sheet strength and flexibility. Our pipeline of active developments now stands at 1.9 million square feet, which is about 11% of the current size of our total operating portfolio. Moreover, those 1.9 million square feet of developments are 81% leased today and will be substantially or fully leased when they're placed in the service. The penny [ph] of dilution we're incurring this year to internally fund the greater volume of development investments is well worth the outsized FFO growth for share we expect to achieve in late 2020 and for the full year in 2021. With that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Jason Green of Evercore. Your question please.

Good morning. I was wondering if you guys could talk about financing expectations moving forward and generally where you're comfortable using equity? And in the absence of additional equity, how much runway you have to complete the current pipeline without additional dispositions beyond where your guidance is right now?

So, we're not comfortable accessing equity or trading below NAV and our plan with the equity that we plan to raise, we have sufficient capital to complete the developments we've announced and what we've guided to and we have additional capacity beyond that if our opportunity set increases.

Okay. And then maybe given you're on the ground in Huntsville, how much additional space do you think on square footage basis needs to be built in the Huntsville area just to support the amount of growth in headcount that they're going to experience in the next two to three years?

Two to three-year forecast based on the nature of that question would be tough for me to give. I can tell you that we have great demand for the value proposition of our park and we expect additional success in the near term.

Okay. And then last question for me. Just on kind of the outperformance of Huntsville, is that in any way taking government space that otherwise would have leased in Virginia down to Huntsville or are they completely different?

Completely different. So there are many new weapons and research programs that are being funded out of the Redstone Arsenal with a variety of the commands there. And what you're seeing is a combination of growth, and repositioning to more modern facilities for efficiency to serve the customer based on very long term contract awards.

Okay. Thank you.

Sure.

Thank you. Our next question comes from the line of Manny Korchman of Citi. Your line is open.

Thanks. Good afternoon. Just flipping through your deck a couple of things stood out. I mean, I don't think that we've touched on them on the call. One of them was the DC-3 sale which is way on 2020 FFO. Could you just go through that a little bit and also any other potential large items that we should watch out for into 2020?

So, DC-3 was -- it's a legacy asset that the Company has owned for about 20 years. It was an office building constructed with a moderately sized datacenter component connected to it. It's located in Annapolis, Maryland and its long-term lease will expire near the end, if not at the end of the year. Tenant has a little flexibility. Its highest and best use is as the land parcel. So we've already executed a land lease with a user, very long term land lease that will create some significant value and we will sell that upon fulfillment of our obligations under the land lease.

And any other large items like that, that we should be e watching out for?

No.

And then a question on just development. If you're thinking about the yields you're getting on build-to-suits versus inventory or spec projects, how big is that or how wide is that margin?

Well let me address spec. So on the build-to-suits, they're very comparable. Our build-to-suit threshold is an 8% cash yield on cost. Our spec is 8.5%.

Thanks, Steve.

Thank you. Our next question comes from the line of Blaine Heck of Wells Fargo. Your line is open.

Thanks. Good afternoon. So following up on that a little bit, when we think about future growth and how dispositions play a part, how should we think about the mix of properties you guys are willing to sell or JV versus the properties you guys are going to keep on the balance sheet? Is it just a matter of selling at the lowest cap rate and keeping the highest yielding properties or are those kind of one and the same? And then in that case how do you make that decision?

Well. I think we've talked to that in the past about always thinking about the regional office portfolio as potential capital that we would recycle into the development pipeline. And I think we have been consistent talking about how each of those seven assets in the areas that they're in have value creation opportunities that we're executing between now over the next 12 to 24 months. So until that value creation process is completed we would continue to focus probably more on our shell program as a source of capital because that is clearly the most attractive cost of capital that we can access and clearly has a very deep number of institutional investors who are interested in investing in those assets. So I think until we complete that value creation work that we're doing on the seven regional office assets we'll continue to focus in the shell program.

And I guess in the case of any potential kind of shell JV, the mix of the properties being contributed into that JV determined by you guys solely or by the partner and how does that work?

It's solely at our discretion.

Okay. That's helpful. Maybe one for Paul out of curiosity. So you guys are obviously excited about the defense spending budget and what that should mean for leasing for good reason. Are there any emerging trends you guys are seeing amongst your potential tenants that make you nervous like becoming more efficient with things like we saw with the legal tenants and financial tenants or looking to be closer to mass transit or maybe any other trends that could be a disruptor to kind of the effect that this increase in defense spending and its effect on your leasing in your portfolio?

No, we're not. The one trend we see is incremental growth with incremental contract awards and that's really driven by the history that we lived through from 2011 through '16 after the Budget Reform and Control Act, that compelled defense contractors to accelerate their consolidation and efficiency because they had to compete margin as opposed to market share. And so, what we've been experiencing ever since the increased funding in these defense budgets is the incremental win requires incremental capacity and incremental bodies. And so, we don't see that at all.

Just add...

With regard to relocating to urban locations, it's really not applicable to our business at all with regard to the defense business. The missions we serve are the downtown that the environments -- the environments that they operate in. Proximity to the defense customer is and continues and will always be the primary factor for the value of a location.

And just to put a finer point on that, actually one of the more salient trends of the last few quarters has been the uptick in new leasing in the Fort Meade B/W corridor, where in the last two quarters we've leased 270,000 square feet of vacancy leasing, and then so far in this quarter we've already knocked down 92,000 square feet of leasing. So the trend is not in a right sizing it's actually increased velocity and demand within that corridor.

Very helpful. Thanks guys.

Thank you. Our next question comes from Craig Mailman of KeyBanc Capital. Your line is open.

Hey guys. Anthony, you mentioned the advanced stage of the 2Q assets sales, apologize if I missed this, but did you give a magnitude and composition of that?

The magnitude would be in line with the guidance that we put out yesterday which would be up to the $225 million.

And should we assume that this is data center or --?

You can assume that.

Okay. So kind of closer to the five gap?

We're not going to discuss economics at this point.

Okay. That's fair. And then just on the new leasing or the vacancy leasing you guys did in the quarter and post quarter end, was any of that the balance of 310 NBP?

No. None of that activity was 310. We did some in the first quarter and we continue to have discussions with the customer. But as we said on our last call we don't expect anything to happen til near the end of the year and nothing regarding that building will affect our 2019 business plan.

All right. That's helpful. And then just on the incremental 500,000 square feet, it sounds like you guys have the next two shells. So, the predominant portion of that should be data centers, right? You guys don't anticipate any more announcements in Huntsville or elsewhere on the kind of Defense/IT leasing?

Stay tuned, Craig. We're very confident we're going to hit that objective. There will be two data center shells in there or we expect to have two. But we expect some additional Defense/IT development as well.

Okay. And just you guys did a lot on a square footage basis but some of the buildings in Huntsville are sort of less expensive R&D buildings. So I guess as you guys look at sort of a record on square footage but if you look at like dollar volume and sort of impact to forward growth, I mean are you guys still in record territory when you look at on that basis or is it kind of more trend toward the average?

Yeah, I think we're pretty close to -- I mean the development pipeline right now that's in the ground is 1.9 million square feet that is in terms of total development cost is almost a $0.5 billion. If you take 2100 L Street out of that, it's still 1.7 million square feet and $325 million. So, I think as we continue to look at the investment opportunities that we have that number is going to continue to expand.

Okay. And then just one last one for me. You guys have a big chunk of the wholesale data center coming to maturity next year, I think it's about $17 million of rent. Any early indications on the tenant decision of staying or going and kind of how are you guys viewing that exposure?

Hey, Craig. It's Paul. We fully expect that tenant to renew its 11.25 megawatts for its next five year extension, without diminution in the rent.

Perfect. And I think you said 11.25 megawatts, there's 12.5 megawatts. Is that all just one lease, or is there another tenant in that mix as well?

There's another tenant in that mix who intends to renew, they might get a bit smaller.

Okay. Perfect. Thank you.

So there could be some contraction in that rent.

Okay. Great. Thank you guys.

Thank you. Our next question comes from Jamie Feldman of Bank of America. Your question please.

Great. Thank you. So I think you'd mentioned you're working on potentially another deal with the same client with -- for the 11 deal data center program, kind of resetting that or doing more. Can you talk more about that?

No. I can but I'm not going to give any specifics. Well, what I will tell you is the 11 buildings took longer, because the assembly of the land sites were more complicated. In some cases we ended up with surplus capacity. So we believe that the capacity of the land that we have will be fulfilled, and we continue to work with our customer on longer term identification of attractive parcels for their business in the future.

Okay. So it sounds like it would be building out the remaining land and then maybe some incremental. Would it be still in that same region, or is there a chance you would expand other markets?

Our discussions remain in the Northern Virginia region.

Okay. And like just kind of re-upping what you have now, could be this a similar magnitude?

Be more specific on the magnitude.

Well you've 11 buildings now, I mean it could be another 11 building deal, something of that size?

I don't think, you'll see us move out an 11 kind of building program, I think it would be more, is what we have averaged over the 2012 to 2019 period which is a couple year.

Okay. And then, I mean Huntsville clearly is starting to see the demand pickup meaningfully. I mean can you paint a picture that any of your other areas or any of your other markets might see that same kind of late demand flowing, just given the timing of how things are playing out in some of these other areas does Huntsville really stand out right now and probably will continue to?

Form a rate of growth standpoint certainly Huntsville is number one. But we do see additional opportunities for new development in multiple markets.

Okay. And then just to be clear on the funding, so is it safe to assume the more development announcements you announce, the more asset sales you'll do? And from what I heard before it sounds like you'll use the data center JV shell or data center shell JV as the best way to do that. Is that kind of how we should be thinking about just the flow of things here going forward?

In the current environment, yes, I would.

Okay. And on the last call, I think you guys talked about a run rate. You get to -- I think by the end of '19 you get to a 3% plus run rate for the next year. Does anything change -- has anything changed in that view or can you update that view of how things look starting at year-end '19?

Long term view or are you talking about fourth quarter?

From the fourth -- I think last quarter you said like starting in the fourth quarter we will have a certain percentage growth rate going forward. How does that look today? Has anything changed?

Well, what we cited was the growth rate of the fourth quarter over full year of 2018 and with the dilution we just took we probably gave up 1%.

Okay. But if you look ahead, has anything changed in your growth rate, your expected growth rate?

Well, in fact it will be higher than we had expected before. And as we mentioned in the call, we expect outsized growth in 2021 with these fully leased buildings coming on line in late 2020.

Okay. All right. Great. Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Dave Rodgers of Baird. Please go ahead.

Hey, Paul. I wanted to follow up on some of your comments earlier. I think you said 1.4 million square feet as kind of tracking demand and maybe something to the tune of 2.8 million square feet kind of in total on that shadow pipeline. But then you went through kind of each of the major markets or sub markets that you're operating in and kind of detailed demand relative to vacancy. So I'll ask it open wise and you can answer how you want. But I guess there is three questions with regard to the demand that you're tracking in each of those major areas. One is timing, are these 6 to 12 months deals or are you looking out maybe multiple years in terms of these awards? The second would be build-to-suit or demand for development relative to just filling existing pipeline. And then the third would be with all of that demand are you starting to see any more meaningful signs of rent growth?

Okay. Thanks for the question. To simplify it when I was speaking to the demand there's operating portfolio demand, number one. So when I was identifying demand, that was current activity looking to lease space against current vacancy. So we have about 1.2 million square feet of vacancy across our portfolio, we're 93% plus leased. And we have at least that much activity against all of that vacancy. So that's the operating portfolio side of the equation. So the stats that I identified were tenants that are actively looking between 6 and 18 months to occupy space in that in our current portfolio. So the 1.4 million square feet was what we raised our development leasing target for the year and did not include the -- in addition to that is the shadow development pipeline of 2.8 million square feet for new development. So…

And the shadow of development really looks at a two-year window, probability of 50% or better over a two-year window.

Right. So where we are is 900,000 square feet of development leasing right now. We obviously raised our target 0.5 million square feet and have a pipeline that -- the shadow pipeline of 2.8 million to achieve that new goal. Does that answer your question?

Yeah. That was helpful on clarity and color. So I do appreciate that. And then with regard to kind of any movement in rent, I mean, are you starting to see with kind of this incremental demand and just even on the operating side, any movement in rents that would get you more excited about the underlying economics?

Well, I mean in a few select locations Navy Support we're raising rents a little bit. But in truth, the overall market and the overall market fundamentals are flattish, and it's still a pretty competitive market. The two areas where we are seeing some up there obviously in Huntsville with our new development and leasing of our spec buildings I think we're setting new rental rate records, high watermarks with our deals down there. And so there is upward pressure in Huntsville clearly for obvious reasons. And as I mentioned Navy Support has more demand than we have vacancy. So we're certainly, in that situation, starting to incrementally raise rates. I will say that in Tysons Corner rents are improving slightly too. It is still a very competitive market. But, I alluded to the demand that we have for our Pinnacle buildings. So in the last year, we've probably seen an 8% increase in the rental rates that we were achieving in Tysons Corner.

That's great and helpful. And then maybe just a quick follow-up for Anthony. The same store NOI growth in the first quarter obviously I think it was above your full year target on a cash basis? Did you kind of comment on anything that might have been in those numbers? I don't know if it was just some expense reimbursements. But just any clarity you can add to that and kind of how that trends into 2Q?

As it trends into 2Q, our guidance is 2% to 3% for same property cash NOI growth. It was a bit outsized in the first quarter because we had some rent commencements in the second quarter of last year that we got the benefit of in the first quarter year-over-year comparison for this year.

Got you. That's helpful. Thank you.

Thank you.

Thank you. Our next question comes from Chris Lucas, Capital One. Your line is open.

Good afternoon, everybody. Steve, just a question on the potential opportunities with the excess land. I guess the question I have is how does that excess land factor in sort of the return on cost expectations? Does it matter or how has that been allocated to the stuff that you've already got in place?

It's allocated fairly by on a square footage basis. So the returns will be consistent across all the assets on a given parcel.

And then on the potential for -- I guess, JV-ing data center shells, your initial stuff was done on a 50-50 JV. Any thoughts as to how you think about the allocation in a potential future deal and how you think about what assets might make sense? Is that a longer duration lease situation or things [indiscernible]? What sort of determinants are you looking at in terms of what you would contribute?

I think I'm going to blatantly duck that question until our next call. We will be wrapping up the transaction that we're in the process of finalizing and I think I'd be more comfortable giving you some clarity at that point in time.

Sure, that's fair enough. And then I guess my last question, just when you guys talk about the shadow development pipeline of 2 million to 2.8 million feet, I guess the question I have is just sort of what sort of the time frame under which decisioning would be made on that? I mean is it stuff that's kind of in the next year or two that you've tracking or is it stuff that has sort of a five-year visibility to it?

It's really -- we track all the discussions we have. And then we qualify for the shell development pipeline based on a up to two-year decision and through projects that we think we have a 50% likelihood or better of winning.

Okay great. Thank you. Appreciate the time.

Sure, Chris.

I would now turn the call back over to Mr. Budorick for closing remarks.

Thank you all for joining our call today. We're in our offices this afternoon, so please coordinate through Stephanie if you like to have a follow-up call. Thank you.

Thank you for your participation in the Corporate Office Properties Trust first quarter conference call. This concludes the presentation. You may now disconnect. Good day.