Good day everyone and welcome to today’s EastGroup Properties Fourth Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call is being recorded. It is now my pleasure to turn today's conference over to Mr. David Hoster, President and CEO.

Good morning and thanks for calling in for our Fourth Quarter 2014 Conference Call. We appreciate your interest in EastGroup. As usual, Keith McKey, our CFO will be participating on the call. Since we will be making forward-looking statements today, we ask that you listen to the following disclaimer covering these statements.

The discussion today involves forward-looking statements. Please refer to the Safe Harbor language included in the company's news release announcing results for this quarter that describes certain risk factors and uncertainties that may impact the company's future results and may cause the actual results to differ materially from those projected. Also, the content of this conference call contains time-sensitive information that's subject to the Safe Harbor statement included in the news release is accurate only as of the date of the call.

Thank you. The fourth quarter was another productive one for EastGroup. Funds from operations per share represented a strong 8.3% as compared to the same quarter last year. We have now achieved FFO per share growth as compared to the previous year’s quarter in 14 of the last 15 quarters. For the full year, FFO per share grew 7.4% as compared to 2013. This represented a 14 year in a row of increases in FFO per share as compared to the previous year's results. Continued good leasing activity resulted in a year end occupancy of 96.3% which was our highest occupancy since 2000. Same property operating, operating results were positive for the 15th consecutive quarter. We continue to expand our development program and we acquired an asset in Chino, California. At quarter end, we were 96.3% occupied and 96.7% leased. As a result, we have now extended our record of occupancy at 95% or above for the sixth consecutive quarter and we expect this trend to continue through each quarter of 2015. At December 31st, our California markets continue to be our strongest at 97.7% leased, followed by Texas at 97.3% leased. Houston, our largest market with over $6.2 million square feet was 97.6% leased and 97.1% occupied. In the fourth quarter, we renewed 94% of the overall 1.4 million square feet that expired in the quarter and signed new leases on another 4% of the expiring space for a total of 98%. We also leased $297,000 square feet that either determining at early during the quarter end was vacant at the beginning of the quarter. In addition, we have leased and renewed $295,000 square feet since December 31st. For the quarter, GAAP rent spreads were up 7.6%, which was the seventh consecutive quarter of being positive, while cash spreads…

Good morning. FFO per share for the quarter increased to 8.3% as compared to the same quarter of last year. Our growth in FFO continues to be from development, acquisitions, same property results and debt refinancing. An additional factor was the lease termination fee income, less bad debts increased FFO by $397,000 comparing the fourth quarter of 2014 to 2013. FFO per share for the year increased 7.4% compared to 2013. Lease termination fee income, net of bad debts increased FFO by $982,000 compared to 2013. Same-store NOI increase for the year was 2.3% for GAAP 1.8% if you exclude termination fees and 3.4% for cash, 2.7% if you exclude termination fees. During the fourth quarter, we sold 301,852 common shares under our continuous equity program at an average price of $66.26 a share with gross proceeds of $20 million. Page 13 in the supplemental package details our sales of common shares through the continuous equity program during the year. Our outstanding bank debt was $99 million at year end and with bank loans of $250 million we have $151 million of capacity at December 31. Debt-to-total market capitalization was 31.4% at December 31, 2014 compared to 33.3% at December 31, 2013. For the year, our interest in fixed charge coverage ratios were 4.1 times and improvement from 3.8 last year. The debt-to-EBITDA ratio was 6.4 for the year and adjusted debt-to-EBITDA was 5.5 times and page 21 in the supplemental package shows the adjustments. We have a mortgage note payable due April 5, 2015 that we can prepay with no penalty on March 5, 2015 and those had a balance of $58 million at December 31, 2014 and has an interest rate of 5.5%. We reached an agreement to borrow $75 million from the bank and it is expected…

As most of you know I have been talking about retirement given that I will be 70 this summer. Our press release on CEO succession two weeks ago finally made it officially that I will retire as CEO at the end of this year. I do plan to stay very much involved with each group as Chairman of the Board of Directors, subject of course to shareholder and board elections. As announced in the press release both the board and I are extremely pleased and excited to welcome Marshall Loeb back to EastGroup where we began as real estate career. He will become President and Chief Operating Officer on March 1st and then Chief Executive Officer and a Director as of January 1, 2016. I personally believe his return helps to mature the consistency and continuity we are seeking through this transition. I look forward to working directly with Marshall again over the next 10 months and then as Chairman for many years in the future. He will be an excellent addition to our team and its culture. Keith and I will now take your questions.

[Operator Instructions] We will take our first question from Jamie Feldman with Bank of America/Merrill Lynch. Your line is open.

Great, thank you and good morning.

Good morning.

I guess now I am speaking with the CEO succession plan, can you just provide a little bit more color on the decision process and to merit Marshall and what you think will make him a good CEO going forward?

This process well I have been talking for many years about that I was going to work two more years after that year and two years ago I finally said I mean at this time and we had many discussions at the board level about it but at that point the corporate guidance nominating committee became - there is a primary driver in the process but I mean it is important to note that our board has been involved with every step through we looked both internally and externally review Marshall halfway in between I guess and at beginning with the process, a number of candidates decided that we're not interested in the job and that they like doing what they were already doing better than being CEO and being the face upfront of the company. As the process continued we believe that Marshall met everyone with a criteria that we have written out initially and he rose from an Asset Manager at EastGroup to a Senior Vice President and went to Phoenix and opened our Western Region office there and then eventually moved on to be both the CFO and a COO with other entities and I think picked up a valuable experience not only an easy situations there. And almost importantly having worked at EastGroup for nine years Marshall certainly is part of our culture, understood at fully and employees that and awful lot of employees today remember him well and look forward to him coming back and joining us again. I'd pointed out to a lot of people, he is a whole lot nicer than I am so I think he'll enjoy working with them.

Okay, great. Thank you for the color. And then I guess just trying to the guidance, I think you said average occupancy is 95% but you are at 96.3% now and I think you said in your comments you don't seem to think below 95%. So can you just give us some color on just how conservative these numbers might be especially on the same store and with the minus 2.5% that you guys are projecting for Houston and the occupancy as I mentioned?

Let me describe that process a little bit. 96.3% is a great number but you certainly can’t when you have a multi-tenant portfolio project that going forward because and all you have is downside on your numbers and so I think most people needs to remain 5% is a stabilized number and so we expect same property occupancy to be lower in 15 and it was in 14 just because that's that the only way you can shift conservatively project it, so that's just part of how we view it. In terms of rental increase, we expect that to be positive over the year especially in GAAP numbers and in our renewal leases but the way we calculated we could always have a down fleet on cash in one of the quarters but I think another factor to keep in mind there as Keith pointed out and in his remarks for the year on guidance that I mentioned in the fourth quarter yet unusually large number of big termination fees in 14 and so just for that the numbers are higher and maybe this is a point I would just, may we worry about fundamentals obviously, we're trying to have, we work towards full occupancy ranging rents with every point that we can give and what’s going on and sub-markets with individual properties but even on our overall projections. I think, it's important to look at when our bottom-line comes out, we use the merely definition which we do for our guidance and our actual numbers, our FFO growth even with conservative guidance is 4.3% and as Keith mentioned if you add back the transition cost were at 6.6% and our guidance we assume no combination fees of both bad debt in 15 so if you look at the same numbers for 14 and add that back and again under all things make us look better obviously but you add that back our FFO growth guidance in 57.9%. So I think some of those bottom-line numbers need to be kept in perspective. As people focus on just fundamental sometimes too much but I don't like to say that our guidance is conservative or overly conservative but if you look at 14, our original guidance there with $3.42 a share and primarily based on occupancy but some other positive factors like financing, we get in a year $3.47 again just trying to put some of it in perspective on how we do guidance.

Okay, thanks. I appreciate it and I appreciate that Houston page and the supplemental too

Thank you.

I'll let some others to question. Thanks.

Thank you. We'll take our next question from Emmanuel Korchman [ph] with Citi. Your line is open.

Good morning, guys maybe just a follow on Jamie’s question, do you have identified move outs that you know are going to be coming out or is this strictly that you don't think that these sort of mid-96% occupancy numbers are sustainable?

Both, I mean we create our guidance not of off averages or formulas, we look at every suite, every space and determine what we think is going to happen during the year. The real subjective part come is when you try to determine how long they can see is going to exist or how long it's going to take existing vacancies to be leased. So we look at the numbers and I personally look at all our assumptions for every property and as I think will be an overly optimistic because everybody thinks they are good enough to lease up a building between now and the end of the year if the occupancies at the end of the year look unrealistically high go back and plunged some vacancy because you just never know which customers might unannounced move outs for one reason or another so I am going to say it’s a combination of both.

So just for modeling purposes if we wanted to look at the trends for the year how do you think that occupancy would trend down I guess for the year?

We think that every quarter is going to be 95% or slightly above. We historically have dropped and that's quarter end numbers, we have historically dropped in January and February and we don’t see that happening as much this years in the past, we had some big drops historically and don't see that this year.

Thanks David.

Thank you.

Thank you. We'll go now to Gabriel Hilmoe, Evercore ISI.

Thanks. David just sticking with Houston I think there is some large move outs heading this year that you've talked about in the past but just provide a little bit more color just on expectations for backfilling some of that space just getting same store outlook for Houston?

Well, as I mentioned before we're over 97% occupied and given the no move outs and just expecting there should be some slowdown in leasing now we haven’t seen it yet. This is how we come up with the negative same property operating results for Houston. The move outs we have were primarily non-energy related and for reasons that have nothing to do with what’s happening with the price of oil. These move outs have been known for a while. We are losing a 3PL to [indiscernible] or using a cellular company, or using a hi-tech company in some of the bigger move outs. So far out, as I have been saying nothing is related to energy.

Do you have the square footage of what you know today that’s actually going to be moving out of the portfolio this year?

Yes, but I mean that I am not going to get into the detail of each one of the move outs or expected move outs just for competitive reasons.

Okay. And just final one from me just on the development starts guidance for this year I think you're running at a similar rate to what you did last year, is that a reasonable run rate in your mind for the next couple of years just in terms of expected starts of the development pipeline?

We generally hope so and with a little bit of luck it might be higher from our original numbers. We think some of the Houston starts might be slower in terms of timing because we are going to look for, little more lease up of the existing building in that part before we start the next phase. But we're expecting and seeing some pick up in our Florida markets and San Antonio we're hopefully we will make up for that.

Thank you.

Thank you.

Thank you. We'll go now to Alexander Goldfarb from Sandler O'Neill. Your line is open.

Good morning. David I don’t know if Brent understood or not but if he is and if he is not than obviously we'll differ to you, but if you can just give us some color on what the tenants are talking about as far as leasing activity from call it Thanksgiving timeframe to now I mean your answer to the prior question was that none of the move outs are energy related in that all of them were known. So it sounds like things are fine, it sounds like you guys are being conservative on the occupancy and yet we still read all the nasty headlines and you hear about drillers cutting back which sounds like may be that would pressure some of their warehouse needs in Houston. So just sort of curious what the chatter is now versus call it Thanksgiving time when [indiscernible] made the decision?

In talking to brokers in Houston and I spoke with Brent earlier this morning anticipating some of these questions, I am wondering up to date response is so far nobody has experienced the push back and prospects I have been talking to or an existing customers who have been talking about expansion or lease renewals, what he don’t know and are except to throw counter and what he don’t know is what companies that could be prospects in the six months you never hear about. But so far I mean we're in negotiations with both for new developments space for both energy and non-energy related entities and so we are keeping our fingers crossed, but so far so good.

And what is your sense on the brokerage they're telling you that as these negotiations go tenants are going to and presumably they are going to beat you up more on rent or more on lead on leasing incentives or like how should we think about it manifesting itself so that if we see something that we say oh, this was anticipated versus oh my God this is a surprise we weren’t expecting this impact to that impact.

It’s too early to tell on those details I think on those different things you've mentioned it’s all of the above. Nobody seems to be panicking as the landlords either with existing space or new construction. We're not hearing people immediately starting to offer incentives that work there before or anything like that. I think a number to look at is the overall vacancy in industrial space at the end of each quarter and so far that was very good for the fourth quarter of course there wasn't much time in there for to drop looking at each quarter of year end and I think the other factor will be in our portfolio or any other is how long is it taking to lease the new development space, we always perform at 12 months. We've been spoiled as I said before and amazing amount of lease up during construction and we've expected all along for that to slowdown and in many cases to take to full 12 months. So I think those are statistics to look at going forward and see what the effect might be. I think two positive things that people are talking about already is some spec developers using other people's money have put new industrial developments on hold and construction, general contractors were saying that they would expect some of the construction cost to start coming down because they really exploded in Houston to start coming down in second half of the year. Again we'll seek what happens there.

Okay. And then a question for Keith, Keith on the CEO transition cost. Is all of that ratable through the year or is there I'm guessing Marshall's component maybe ratable but David's acceleration maybe year end.

We've got it's pretty much ratably through the year and so little lower in the first quarter, but it all rounds about $0.02 each quarter.

Okay, great. Thanks a lot.

Thank you.

Thank you. We'll go now Brendan Maiorana from Wells Fargo. You line is open.

Thanks. Good morning. David you mentioned there was a little slow from a leasing perspective, just the first couple of weeks of the year picked up so I guess later in January. Is that attributable to anything or is it just kind of sort of slow to start the year.

Every year is a little bit different, but in hindsight I think it was just slow to start the year. And my level of optimism, a regular leasing call. We can go - jumped from where it was three weeks before given say that significant pickup in new development leasing. Not selling and leasing yet but prospects that are looking and asking for detailed proposals.

And just as your portfolio is very heavy occupied and been that way for a number of quarters. How are you guys approaching rent growth outlook for 2015? Are you able to push more now than maybe a few quarters ago? Or are the markets statistics still have enough vacancy and if that you guys can't be quite as aggressive as maybe a 95% or 96% occupied portfolio would suggest.

I think it's the latter. What we can do with rents it is a very localized thing and you look at an individual sub marketer and how many good alternatives the prospects has. And we are always pressing on rents. And then the other factor in there is on how we give that statistics is what the previous user in that space was paying. And Houston had a down quarter in rents because we had a 77,000 square foot tenant that had moved out we re-leased the space, the previous tenant had been in a hold over rent from year and a half or two years. And so that's the story, the Houston number for one quarter. So we're still not so big we're not going to give some individual space extortions [ph] to individual markets. But we don't build in a specific rent increase into our guidance, it all just comes down to our final same property operating result comparison.

Sure. And then Keith so Houston energy tenants are 25% of your Houston portfolio I guess that's about 5% of overall. Is there any credit concerns among your tenants there or do you feel that they are all pretty well healed even with energy prices dropping significantly.

We certainly follow very closely a longer term lease with any company, we're reporting in, in order to manner of improvement or anything like that and we are not worried about any of our energy customers today and again I think it's way too early to jump any kind of conclusions on the energy business is not going to come to screeching halt.

Understood. Last one so just ATM issuance so $50 million down from where it has been but it seems like your net investment activity is about the same. How are you guys thinking about issuing stock, do you feel you've got a little room to move leverage up and how do you sort of balance stock issuances or the outlook for this year versus and maybe some asset sales which I think are pretty low for fleet into lease for 2015.

All the above, when we get down to, we look at the pricing the stock, we look at what we see is in timing of new development starts and of acquisitions our debt and its ratios are historically probably the best ever. So we've got a lot of room to maneuver on all those.

Okay, alright great. Thanks guys.

Thank you.

Thank you. We'll go next to Ki Bin Kim with SunTrust. Your line is open.

Thanks. Just going back to the CEO succession topic. Just curious why not an internal candidate or there is some other a candidate internally that were hired open totem pull themselves out of the running.

Ki Bin, I'm not going to get into the personnel issue running over that what I've already said I mean we have a well park out extended process that considered internal and external and we couldn't be more pleased with result and our internal team has been part of that process from the very beginning and we are all committed to continue the very track record we've had and the culture that is made EastGroup what it is.

Okay, great. And I mean if I think about EastGroup and your stock over the past several years. One of the things that really made it work with the management team obviously is your past track record and capital deployment and balance sheet management and I'm just comparing from like 2013 about a year going forward your NAV per share increased 17% and while GRT. I know Marshall wasn't the CEO at GRT. But at that same time period decreased about 9% and part of that was the capital deployment rate. So when I, from the outside looking in, it does seem like there is a little bit on the aura of maybe the premium that was attached to EastGroup stock starting to ever slightly receipt right just now by looking at. So I guess my question is what is it that I don't know and the market doesn't know about Marshall and the merit that you and obviously you know way better than I would, that gives you confidence that EastGroup doesn't change price all going forward.

I've known Marshall well since 1991, our senior people, our 6 other 5 senior people knowing for not quite that long but an extended period of time. We have capped in close touch while he was with other entities and I say now it's an easy situations and certainly not controlling situation as the CEO. So I have all the confidence in the world of visibilities it's all accomplished for us with EastGroup previously. Secondly, is we had in the press release and I just reiterated I'm not going away I might not be doing the conference calls hopefully but I'm going to be Chairman for the foreseeable future subjected to course to both of the shareholders and the board and the majority of my network and Keith’s network are niche with shares, so we certainly don’t plan on having anything wild or crazy occur at EastGroup and understanding all that with a major factor in our choice for my successor.

Okay thank you.

Thank you.

Thank you. We’ll go now to John Guinee with Stifel. Your line is open.

Alright, thank you. First David in all of seriousness we really want to thank you for all of the years of service at EastGroup you’ve done a stunningly good job and we hope you will remain active at a board level.

Thank you. Appreciate that.

And then the flipside I’ve got to ask you, you’ve said that Marshall who is also very well regarded is a whole lot nicer, how tough is that?

There is a low bar I will agree to that.

Okay. Well, I have great confidence, your team is exceptional and your strategy will remain without much modification. Hey Keith on a just sort of a curiosity point you refinanced or you add a $58 million of debt pay-off at a 55, you refinanced this $75 million 3.03, seven year term why not go 10 or 15 years given the current situation that’s in the debt markets?

Well as you know we’re not doing the $250 million bond index so perhaps from the 10 year money you have to go outside of the banks to hire replacement guys and we’ll expand in that rates on the seven year money were so much better than the 10 year money that it just pushed us to the seven year.

Okay.

But the 10 year would have been great to get but the seven year worked in our maturity schedule and look good.

John I would also add that one of the sets of numbers that we ran internally was to say it makes the difference between the seven and 10 year rates with seven years and then how high it is to put the additional cost or refinancing the additional three years how is that compared to what you’d say for seven years and there was really no comparison.

Okay. Alright, very fair. Then second another curiosity question Keith it looks to me like your earnings per share was a $1.08 in ’13 a $1.52 in ’14 but your guidance actually results is up $1.21 to a $1.31 why would earnings per share decline year-over-year?

Gains are the biggest thing in that property sales, we take those out in FFO and so the FFO has depreciation and gains taken out, but earnings per share has both other than they're mix that very…

Officially high earnings per share in ’14.

Yeah we had gains.

It was just under $10 million, 9 plus million and we've not projected any gains for ’15 because we haven’t totally identified what we might sell.

9.2 million gains in ’14.

Got you. Okay, thank you. Good luck, David.

Thank you. I'm sure we’ll be talking in the future.

Alright, be nice.

I’ll try.

Thank you. We’ll move now to Eric Frankel with Green Street Advisors. Your line is open.

Thank you. Within your development pipeline for this year could you actually breakout how much of those starts were probably designated for Texas and Houston more specifically?

I'm not going to get into the timing of each one because they slide up and back depending on the leasing that we do with the previous building in that Park but in our guidance is about just over a third with the Huston and but I don’t want to give any more detail because what we originally projected in ’14, a couple dropped out because of slower leasing and we picked up Dallas which was a three building development that was almost $20 million that pushed it up. So that's one of those things that's always changing based on the leasing it's done or the opportunities that we identify.

Thank you. Have you seen any changes in property in Houston or any trade that have come up in last couple of months that are more interesting per se than the last year or so?

No, we - there is very little that I am aware of its transacted in Houston since price of oil started down and in talking to some income property brokerage, the rest of this is just an estimate from talking to buyers and sellers, is that the cap rate in Houston might move up 25 or almost 50 basis points to bring it closer in line with what is being experienced in Dallas. So instead of a four, seven, five for really strong property it might be a five but we will address that again in next quarter and hope we will have some experience to report.

Great, thanks. My final question is regarding your Houston tenants obviously appreciated additional disclosure this quarter. Can you define what an oil and gas tenant is and specifically do you include 3PLs in that category that have an oil and gas customers?

No, because we don’t include 3PLs because there is no way for us to know whether none of their business or half their business is related to energy. We had discussions with our team in Houston and come up with what we think are directly related energy companies and if the price well goes to $10 there certainly going be a bigger domino effect as we saw with the housing crash for the last recession or part of the last recession, so, it's just directly related companies that the pre-release of World Houston 42 is with a Valve Company that’s clearly 100% energy so, that’s how we have identified.

Okay, do you know what proportion of your tenant base is 3PLs in Huston?

I would have to get back to you on that I don’t have that statistic.

Okay, thank you. I’ll jump back in the queue.

Okay, thanks.

Thank you. We'll take our next question from Vance Edelson with Morgan Stanley. Your line is open.

Great. Thank you. When you think about your own prospective development it’s geographically dispersed which states would you say seeing the most appetizing now assuming the Texas which I think accounts for four out of the eleven projects listed as prospectus moves further down the list just duly uncertainty there which of the others become more of a priority?

I think clearly Orlando and Tampa and Florida just tied up another piece of last small piece of land in Phoenix so we see as I mentioned earlier a pick-up in demand for our type users there so we're optimistic of what we thought we can achieve in that metro area and we're still very optimistic in San Antonio I mean it’s somewhat affected by the Eagle Ford Shale play but it has a steady growth before the energy taking off and we looked at our entire portfolio there and only two customers are directly energy related at Dallas we have one energy related customer so we think those are still the good cities for us.

Okay, that’s helpful. And then just shifting gears could you give us a feel for the latest trends in terms of private demand across the broader portfolio not just taxes, what type of buyers are you getting the call from and if you can differentiate between Class A versus the Class B and C bids in the markets that would be great?

In the last quarter I don’t have any good Class A statistics for you but there seems to be a pretty strong demand or I should say continued strong demand for industrial space for both A and B users. There is just a lot of capital out there, the bigger transactions that I read about recently have been more B space but those are all of course in the eyes of beholder. To answer your question on previous question on 3PL is about 25% of our Houston portfolio as 3PL and that’s tied to more of Houston because we're around the airport and with the good freeway access.

Okay, got it. And then it sounds like there haven't been too many land transactions and it’s too early to really tell us if there is an impact but I think the last quarter you had mentioned that in Texas there had been higher land prices any chance given your past experience with that plateaus and maybe even drops given what’s going on with oil and then perhaps 2015 could be seen as an opportunity to grow the land bank there do you think that’s realistic?

I think it’s way too early to tell what’s going to happen with demand for industrial land, sellers of industrial land tend to be pretty sticky with their prices and determine what they think they should get and are willing to wait for the market to come to them I have not heard of any land transactions that have occurred since Thanksgiving with the price of oil going down. So I think we don’t have any definitive details on that. My guess is that I say that the land prices will probably stay where they are, it shouldn’t be scared sellers and the positive for development will be in the lower construction cost but not lower land cost.

Okay. Thank you David.

Thank you.

Thank you. We will take our next question from Craig Mailman with KeyBanc Capital. Your line is open.

Hey, guys. Just one quick one on Houston, the rent spreads there were kind of flattish last quarter and negative this quarter is along with the no move outs there, is this the bigger piece of the negative same for you guys are expecting or is this just space just vacant more in the year and it's just lumpy

One of the space I mentioned in the fourth quarter we had a customer 70 some thousand square feet that had paid holder the rent for well over a year so we've compared to that number and we'll have one of those in 15 also a large tenant precluding to a build the suit in another location so that’s part of that big year but it's not due to anything happening with the market it was that customer rent went way up because they were short term user.

Great. Thank you.

Thank you.

Thank you. We'll move now to [indiscernible] from Credit Suisse. Your line is open.

Hi, Good morning guys.

Good morning.

Just a couple of questions on leasing for your developments. I know you are starting project ParkView in Dallas 275,000 square feet. Can you just talk about sort of the tenant demand of that market and what made you comfortable starting 276,000 square feet bounce back?

If you take a step back we are a spec developer and we’ve just been spoiled as I mentioned over the last couple of years coming out of recession and unusual amount of pre-leasing so we're comfortable with market we're comfortable building spec what makes us a little more comfortable normal in that location in Dallas is this whether there is three buildings in this complex that are geared as to our business distribution type user are multi-tenant setup. And most of and I don't have the statistics right in front of me of the new development in request Dallas in particular up in great volume and prior amount for our development is our geared with the bigger users. So we think that we will have a niche in the marketplace and so when you look at a market study, we think there is an opportunity for our small to medium sized user.

Got it. And then turning to Houston Penn west can you just talk about sort of why you feel comfortable taking more leasing risk in Houston again?

It's the tight building Penn west the one that we've just started is they wouldn't sent names all get mixed up but as West Road that 65,000 square feet and it's mirror image next to it West Road I is 67% leased and we have several prospect, good prospects to take it to 100%. West Road IV is a front part load multi-tenant design. And so there is I think good demand for that type of space out in Penn west Crossing out in KD - buildings are designed for a little higher office finish above our normal 15%. They have extra parking, extra glass and we continue to have good activity out there. Our last building there in number eight, we will not be starting until we're much farther along with 6 and 7 from the leasing standpoint.

Got it. Thank you very much.

Thank you.

Thank you. And we'll move now to [indiscernible] with Evercore ISI. Your line is open.

Thanks David. Not to be the dead horse on the oil in Houston but oil and oil prices have definitely bounced during the last couple of days and some of the oil indices are up maybe 10%, 15% and I'm just curious when you think about demand and as you talk to tenant. Is it the potential issue more about the volatility in the price, the absolute level? And if it's more about the absolute level where do you think that number would lead to settle out in order to sort to get the market back on the street.

Well I've read about 100 different articles with about 100 different opinions on that. So I'm not the good one I think to put out a number. I think the positives are as you say that oil bounce back a little bit. So the other factors that are positive and now we just trying to look for good things and bad news is that the price the cost of running a rig is down, cost of labor is dropping through workers and the technology with hydraulic fracking is improving every month. It takes half as long I think now to drill a well that did a year or two ago. So that the economics are always changing. It is always is going to be probably the marginal operators whether their manufacturing parts of the drilling or the marginal rig owners or drillers they're going to yield the effect of a slowdown for others. I mean we certainly believe there is going to be a slowdown to some extent and that's why we've build our numbers that where we have. But we're not assuming any kind of crash or significant drop that will affect what's going to happen to the rest of '15 which is a nebulous answer but I wish I knew more of that I'll give you a better one.

Thanks.

Thank you.

Thank you. We'll take our next question from Bill Crow with Raymond James & Associates. Your line is open.

Hey good morning David.

Good morning.

David as you think about the - I am sorry about this, just one more Houston question, but upstream is the area that’s generally in the negative headlines, downstream is very active including jobs do you have any exposure to downstream or is your portfolio too far west where all that activity is going?

The downstream that I read about is basically with petrochemical business and because the price of energy is down that’s a big cost for those companies that their business is supposed to be very strong in ’15 and what I have read is that, that tends to be a blue collar business and that’s on the west side of Houston, white collar and white collar is going to be more effected, but as long as there is job growth to some degree in Houston which is generally predicted and economic growth which is predicted slower than what it has been historically. Houston is not going to be where it was, but is still going to be a good place to own industrial real estate.

Thank you.

Thanks.

[Operator Instructions]. We have a follow-up from Eric Frankel, Green Street Advisor. Your line is open.

Thank you. Just one more from me. Can you David talk about the firework [ph] for markets out that of Houston and in terms of competition?

Orlando has started to have a pick in development Dallas of course being sort of self what we have already said, it’s still very little in competition and really none of them our type building in San Antonio and Tampa, it’s picking up with the smaller users, the competition in Phoenix, but so far it’s not been a negative for us. So it’s still too early to talk about I think over supply other than what might happen in Houston if there is a major slowdown in the energy business. So, we are still very optimistic about what’s going to happen in our other development market, I'd say Orlando, Tampa, Dallas, Phoenix, San Antonio.

Okay, thanks. It’s been a long call. Appreciate you, I have taken time.

As always Keith and I will be available for questions for the rest of the day, if we didn’t probably answer what was asked to your satisfaction or didn’t touch on some of the topics you would like to touch on, so please give us a call. Thanks.

I would like to thank everyone for your participation in today’s conference. You may now disconnect and please have a good day.