VEREIT, Inc.
Q4 2014 Earnings Call Transcript

Published: 30 Mar 2015

[Operator:]

Good morning and welcome to the American Realty Capital Properties’ Fourth Quarter and Full Year 2014 Earnings and Business Update Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Bonni Rosen, Director of Investor Relations at ARCP. Please go ahead.

[Bonni Rosen:]

Thank you. Good morning everyone. Thank you for joining us today to review the American Realty Capital Properties’ fourth quarter and year-end 2014 earnings and business update. Joining me today are Bill Stanley, Interim Chief Executive Officer and Chairman; and Mike Sodo, Chief Financial Officer. Today’s call is being webcast on our website at arcpreit.com in the Investor Relations section. You can also find today’s presentation posted to our website. There will be a replay of the call beginning at approximately noon Eastern Time today. Dial-in for the replay is 18-77-344-7529 with a confirmation code of 10062990. Before I turn the call over to Bill, I would like to remind everyone that certain statements in this earnings and business update call which are not historical facts will be forward looking. ARCP’s actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our SEC reports. In addition, as stated more fully in our SEC reports, ARCP disclaims any intent or obligation to update these forward-looking statements except as expressly required by law. Let me quickly review the format of today’s call. First, Bill will provide a short introduction and business update, followed by Mike presenting our fourth quarter and year-end financial results. Bill will then conclude the call with a recap of recent activity and accomplishments before opening up the session for questions. Now I would like to turn the call over to Bill Stanley. Bill?

[William Stanley:]

Good morning. Thank you, Bonni, and thank you for joining our investor call today. As I mentioned during our last call, we intend to provide transparency and visibility to our investors and stakeholders, along with the commitment to provide regular business updates as to our strategic progress. This call along with future communications from our new incoming CEO is part of this ongoing commitment. It has been less than a month since our last call with you, but we believe we have made progress on the goals outlined March 02. The filing of the 2014 10-K has been one of the highest priority items for the Board of Directors following the restatement of the 2013 10-K and the 10-Qs for quarters one and two of 2014 along with the filing of the company’s 10-Q for quarter three of 2014. With today’s filing, the company is current with its SEC periodic reporting requirements and we are able to provide you with fourth quarter and year-end operational results which Mike Sodo, our CFO, will discuss in greater detail in a few minutes. Another of our priorities was to appoint a permanent Chief Executive Officer which we did effective April 01 when we announced Glenn Rufrano as the incoming CEO on March 10, achieving yet another of the Board’s stated goals. Glenn brings diverse skills and unique experiences that the Board believes makes him well suited to address the needs of stakeholders and strengthen the company’s position in the marketplace. Glenn is a consummate real estate professional and well qualified to oversee the company’s high quality and diversified portfolio during various investment cycles and environments. He has successfully navigated companies with unique challenges, some of which are similar to our own and created value for shareholders. Additionally, he has managed one of the largest and most prolific sales organizations at Cushman & Wakefield, and that experience will be invaluable for overseeing and rebuilding Cole Capital. We have made significant progress in the reconstitution of the Board, another high priority for the company with Glenn’s appointment to the Board effective April 01 and the ongoing process of recruiting two additional independent directors, in addition a Non-Executive Chairman. We expect to make announcements on these appointments in the near future. As previously announced, Leslie Michelson and Edward Rendell will step down from the Board effective April 01. On the Cole Capital front, I am pleased to announce the addition of Bill Miller, a proven leader in the financial services industry who will head Cole’s sales and national account teams. While Bill’s time with Cole has been brief, his positive impact and contributions are already being felt throughout the organization as he positions the Cole sales force for the future. We have experienced some departures from the Cole Capital sales team during the past month. Fortunately, Cole has a great reputation in the market, a long history of creating best of class products and strong relationships with the broker-dealer community. We are confident that Cole’s leadership team will maximize the talent we have and add personnel as appropriate as we move forward. One important step forward is Charles Schwab resuming its processing of Cole-sponsored products. Furthermore, during our outreach efforts in the past few weeks, many of our clearing firm and broker-dealer partners have indicated an intention to reinstate Cole Capital following today’s filing of our 2014 10-K. Our team looks forward to resuming normal operations with these business partners. In the mean time, we actively are managing approximately $6 billion of assets on behalf of Cole Capital, which generates a regular fee stream. As you will see on slide 10 of the deck, Cole was an important contributor to the company in 2014 with revenue of $52.3 million for the quarter and $203.6 million for the year, and AFFO of $0.01 per diluted share for the quarter and AFFO of $0.08 per diluted share for the year. Perhaps the most important item to report to you is further indication that ARCP’s real estate assets continue to perform and that our debt remains manageable. Key real estate portfolio and balance sheet metrics reflecting the sale of the multi-tenant portfolio include the following

[Mike Sodo:]

Thanks, Bill, and thank you all for your time today. Our fourth quarter 2014 consolidated revenue was $418.8 million and our 2014 total consolidated revenue was $1.58 billion. FFO for the quarter was a negative $0.06 per diluted share and $0.18 for the full year. AFFO for the quarter was $0.22 per diluted share and $0.90 for the year. We reported a net loss of $350.6 million for the quarter and $977.2 million for the year attributable to the company. Included in the quarterly net loss is approximately $406.1 million in non-cash impairment charges. These impairment charges include $223.1 million related to goodwill associated with Cole Capital, a total write-down of $96.7 million on five office properties and $86.4 million related to the intangible asset value associated with the dealer manager and advisory contracts for Cole Capital. Let me give you a little background on the Cole Capital related impairment charges. We evaluate goodwill for impairment annually or more frequently if events or circumstances arise that could be indicators that the carrying value may not be recoverable. In light of the previously disclosed investigation and restatements, executive changes, and the ensuing impact on Cole Capital’s recent equity raise activities, a third party analysis was undertaken to determine the impact on Cole Capital’s value, including goodwill. Additionally, the company experienced adverse changes to the Cole Capital business some of which included the suspension and/or termination of selling agreements. The company determined these events warranted an assessment of the recoverability of the intangible asset value associated with the dealer manager and advisory contracts for Cole Capital. In order to determine recoverability of such contracts, the company prepared a cash forecast, which included expected cash flow specific to the dealer manager and advisory contracts that were included in the initial valuation of the intangible asset when acquired in the first quarter of 2014. The Cole Capital related impairment charges that I previously mentioned were the results of these assessments. Turning back to our real estate activity as Bill briefly mentioned, in the fourth quarter, the company acquired $21 million of net lease real estate, which brought the total acquisitions for the year to $3.8 billion. Further, we invested $942.8 million in properties on behalf of the managed REITs in the fourth quarter. For the year, we invested more than $3.3 billion on behalf of the managed REITs. As previously noted, on October 17, 2014, we completed the sale of our multi-tenant portfolio for approximately $1.9 billion to a joint venture between Blackstone and DDR. Adjusted cash NOI for the fourth quarter is approximately $310 million, after taking into account our acquisition and disposition activity including this transaction. The full reconciliation can be found on slide 24 of the investor presentation. Additionally, on December 04, we announced that we had entered into a settlement agreement with RCS Capital Corporation that resolved the dispute over the sale of Cole Capital with RCS. The company received consideration of $60 million for the termination of the Equity Purchase Agreement in all related agreements and documents. Subsequent to year-end on January 29, the company announced that Cole Corporate Income Trust, Inc. has successfully closed its previously announced merger with and into a wholly-owned subsidiary of Select Income REIT, bringing total assets under management for Cole Capital to approximately $6 billion. Additionally, as part of our ongoing active portfolio management, we sold the Apollo Corporate Headquarters in Phoenix, Arizona for $183 million on February 24 of this year. At the end of 2014, we had approximately $3.2 billion outstanding under our unsecured credit facility, which is comprised of our term loan and revolving line of credit. These amounts continue to be outstanding today. Once Glenn has had the opportunity to analyze the business and develop a business strategy, we will establish our 2015 operating plan and we will then be in a position to provide guidance on 2015. With that, I will turn the call back over to Bill.

[William Stanley:]

Thanks, Mike. While much progress has been made, the company continues to maintain an active pace in fulfilling our stated goals. We expect to provide the following updates in the near future. In May, we will report first quarter 2015 results, file our Form 10-Q and host an Investor Call with Glenn Rufrano, which will return the company to a normal financial reporting schedule. As mentioned earlier, we expect to announce additional new independent Board members and a Non-Executive Chairman. And following the development of Glenn’s business plan, ARCP will host an Investor Day later this year to present an updated company vision and strategy. In closing, I want to reiterate that the Board while pleased with the progress it has achieved to date remains focused on multiple initiatives going forward, including the following

[Operator:]

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Anthony Paolone of J.P. Morgan, please go ahead.

[Anthony Paolone:]

Yeah, thanks. Good morning guys. First question I have is on the Cole G&A, I’m just trying to get a sense as to how much it costs to run Cole at this point if it wasn’t raising incremental capital?

[William Stanley:]

Mike?

[Mike Sodo:]

Well, thanks Tony for the question. Obviously there is a variable component to the Cole Capital structure and inclusive in the numbers that you see within the K itself is a non-cash compensation component. I would say, on a go-forward basis, we are continuing to assess the efficiencies and really the necessary staff and personnel to continue to have Cole be a profit center for the company. And would ask for a little patience now with Glenn coming on Board on Wednesday as we completely get our arms around this and what we see SG&A on a go-forward.

[Anthony Paolone:]

Understand, but maybe I would ask a little bit differently. If I look at page 12 where you have $31 million in the fourth quarter outlined as Cole related G&A, is there a way to think about just purely the piece of that $31 million related to asset management. And then obviously like how much money you raised and stuff in all those other variable pieces I guess would move along with what you do with the business, but I would guess that at least a piece of that $31 million is related to just managing the AUM, which would just be more or less fixed.

[Mike Sodo:]

Yeah, Tony, I think as you look at Q4 obviously we were in a normalized capital raise environment for the first month and month and a half of the quarter itself. So, as you look, as you compare to prior quarters, I would take that a consideration for the variable component of it, the remainder of it would largely be pertaining to fixed costs and the cost of the portfolios that are already in place.

[Anthony Paolone:]

I’m sorry, I am not sure I followed that in terms of what that means for the number.

[William Stanley:]

This is Bill Stanley. I think your question is how much of the G&A at Cole is attributable to the PCM business versus the wholesale broker dealer, the selling, is that kind of what you are getting at?

[Anthony Paolone:]

Yeah, like if you are raising anymore money how much would it cost to just kind of run the AUM that you have right now?

[William Stanley:]

Right. I’m not sure that we’ve really focused on that because our intent is to continue to raise money and we think that we are going to re-enter the marketplace pretty vigorously after today’s call. So, while it’s a good hypothetical question we believe that it’s one that’s a very, very low probability event. So, at least for this call you’ll have to excuse me we have not focused on that metric.

[Anthony Paolone:]

Okay, got it. You also wrote down some real estate in the quarter, can you talk about what that related to and whether it was particular deal or a vintage of transactions or tenant or whatever?

[Mike Sodo:]

Sure. As was disclosed in the press release and I briefly touched on, there was $96.7 million of impairments on five office properties in the fourth quarter. We did give some early warning disclosure within our Q3 10-Q that there could be impairments of various compositions whether it’s goodwill or real estate itself. I would say in these situations, Tony, facts and circumstances of Q4 as it pertains to our new management’s decisions as well as certain communications and intentions of tenants have changed and caused us to ultimately impair these assets. We looked at a broader subset of assets for impairment, this was the ultimate result. These largely would be tenants hit properties but that are vacant with near term lease expirations.

[Anthony Paolone:]

So the $96 million was related to five office properties?

[Mike Sodo:]

Correct.

[Anthony Paolone:]

And was that related to the Apollo headquarter sale or?

[Mike Sodo:]

No.

[Anthony Paolone:]

Okay. So these are just other office properties and you said they are vacant right now or they?

[William Stanley:]

Tenanted, but vacant.

[Anthony Paolone:]

Okay. And when does that cash flow stream go away like when do they – when is the lease actually set to expire?

[Mike Sodo:]

They are all over the place, Tony. I would say all on average, you’re looking at probably weighted about three year lease expiration, two to three years.

[Anthony Paolone:]

Okay. And then just last question, on your – just looking at your AFFO reconciliation, it looks like your amortization of debt premium discount flipped from 3Q to 4Q. What was that and I guess if we are just looking at the year-end debt balance, what rate would we multiply it by to get a cash interest run rate?

[Mike Sodo:]

As it pertains to flipping from one sign to the other, I need to see the Q3 in front of me, give me one second on that. Yeah, I think that would just be pure timing of those premiums and discounts, Tony. I mean they couldn’t be lumpy in particular with our 2014 debt activity. There could be material changes. As it pertains to weighted average interest rate, I believe that is in the investor deck itself. It’s 3.5% all-in cash.

[Anthony Paolone:]

Okay. And so that accounts for any changes in the line cost due to the change in credit rating and so forth, like that’s as of right today, that’s still pretty valid number.

[Mike Sodo:]

That’s correct. That’s as of December 31 which was post downgrade, so it brought into play an incremental interest rate spread on the credit facility.

[Anthony Paolone:]

Okay, great. Thank you guys.

[Mike Sodo:]

Thank you.

[Operator:]

The next question will come from Mitch Germain of JMP Securities. Please go ahead.

[Mitchell Germain:]

Good morning. So just back on to Cole, the topic if I may ask a couple of questions, what’s the buying power in that organization today?

[William Stanley:]

You mean the buying power of assets or the - help me?

[Mitchell Germain:]

How much dry powder do you view? How much can you invest today assuming call it around 50% leverage?

[William Stanley:]

Based on funds that have already been raised inside of our non-traded REITs, assuming zero run rate going forward, Mitch, is that where you’re going?

[Mitchell Germain:]

You’re absolutely there, exactly.

[William Stanley:]

Yeah, okay. I think we estimate that to be about between $200 million to $300 million.

[Mitchell Germain:]

Great. Thank you. And you had mentioned Bill, Schwab had resumed.

[William Stanley:]

Yeah.

[Mitchell Germain:]

I guess maybe just a better update as to where do we stand in terms of how much you guys had in terms of advisors or broker dealers locked in? And then what has dwindled the way since the accounting issues have risen and then where do you stand now today? Maybe if you can just give an update on how much is resumed?

[William Stanley:]

Yeah, I can’t put it to a percentage but you could certainly take a look at the differentials between the monthly rates and you will see that actually in February, we had a pretty good relative to the prior months, relative to January raise. We’ve had two issues with respect to Cole. We needed to get the processing firms, the Schwabs, the NFS’ back on line to process any business and additionally we needed to reinstate our relationships with our broker-dealers. The vast majority of them hadn’t terminated as it just had frozen subject to us getting our financial statements out. So the Cole team, Mitch, has been going literally almost daily back and forth helping our broker-dealer partners and due diligence teams understand the, first the ‘13 K and the ’14 three Qs and after today we will be going out. We believe from indications is that many if not most have been waiting for this ’14 10-K as the event to reinstate the selling agreement. So we believe beginning going forward, we will start to see fairly robust activity with broker-dealers coming online and our cash raise incrementally going up.

[Mitchell Germain:]

Okay, great. And then if you could just remind me what is the CCPT IV? Where does that stand, is that pursuing strategic alternatives or is that just been terminated closed and then it’s just a waiting game at this point?

[William Stanley:]

Yeah, CCPT IV still has some cash to invest. So the acquisition team is actively out in the marketplace trying to deploy cash it’s paying, its return to its shareholders. I met with the Board last week and the Board is a well seasoned attuned Board and they were talking about the various options and opportunities for the fund, where it stands in the investment cycle, where it stands relative to opportunities given the activity in the marketplace. And so I am confident that that Board really has its finger on the pulse, but at least for the moment I think job one is investing the cash and getting the assets fully deployed on behalf of the shareholders.

[Mitchell Germain:]

Great. And then last question for me, I saw that you obviously announced the sale of the Apollo headquarters. And I know I just have seen there have been some Red Lobster assets here and there that have been sold. Is there any kind of broader sales program or is there a number of assets out in the market today or is that really a wait and see for Glenn to come in and assess the portfolio?

[William Stanley:]

Yeah, this is really for Glenn and we have heard multiple opinions on how the portfolio might or could or should be repositioned to enhance shareholder value. Certainly in my role as Interim, I have taken a lot of those inputs – good input from shareholders. Glenn is trying to get his arms around the assets and portfolio. Red Lobster we believe from our discussions with Golden Gate, they seem to be a very well qualified capable operator of this type of franchise property and we think that those assets are trending in the right way. So I think the short answer is that, Glenn is going to come on, I think I’ll be able to with the existing team may be help him get there a lot quicker and understanding the business, the assets, the views of the shareholders but I think that’s going to be a Glenn call once he is in the seat.

[Mitchell Germain:]

Thank you.

[Operator:]

Our next question will come from Juan Sanabria of Bank of America Merrill Lynch. Please go ahead.

[Juan Sanabria:]

Hi, good morning. Bill, I was just hoping you could speak to your intentions with regards to staying on the Board kind of once Glenn steps in and once you guys find a new Chairman and two new independent Board members. And if you can comment also the level of input or participation existing shareholders are going to be able to have with regards to the Chairman announcement and the new independent Board members?

[William Stanley:]

Sure. Juan, first, I’ll take them in reverse order if that’s okay. In terms of shareholder input, we actively invite and we have solicited opinions from our major shareholders on the reconstitution of the Board what the membership should look like. We ask and invite inbounds for names of potential Chairman Candidates and we have gotten very, very good input. And as you are probably aware, we hired Korn Ferry to help us in identifying management and Glenn came through that process. And so a combination of inbounds from the investor community, from our shareholder community and from the professional search firm, we’ve been getting a lot of good names, lot of great resumes, a lot of great skill and talent sets. So the short answer to your question is, we listen to our shareholders and we put a high premium on their point of view as it relates to a candidate. In terms of my particular intentions as soon as we hire a new Chairman which I hope and believe will be relatively soon, I will become simply a Board member. I think I bring some value at least for the short term in helping the Board, the existing management team through the transition process. Once I’m beyond that, I’ll assess to what degree I add value to the company and then react accordingly. So I’m really not one beyond the transition phase I think getting the Board in place, helping Glenn get in the chair and then after that, we will come up for air and we’ll take a look and figure out what’s the best thing to do for shareholders.

[Juan Sanabria:]

Okay. And just a couple of quick data questions, what was the cap rate that Cole headquarters, the Apollo building, was sold at?

[Mike Sodo:]

Juan, I don’t have the cap rate in front of me. In terms of a book basis, you can expect it to be about a GAAP $20 million loss in the first quarter.

[Juan Sanabria:]

Were you guys accruing any rent associated with that or you guys were the tenant and therefore not looks like a intercompany, how does that work from an NOI perspective with the run rate?

[Mike Sodo:]

We are the landlord, so we are collecting and accruing rent up until the point of sale.

[Juan Sanabria:]

Okay. You don’t have a cap rate even though you are accruing rent on it?

[Mike Sodo:]

I’m sorry. I don’t have in front of me.

[Juan Sanabria:]

Okay. And for the fourth quarter, what came in via the dividend reinvestment plan with regards to inflows into Cole?

[Mike Sodo:]

I think that is within the supplement itself. The – sorry, for 160 you are referring to Juan?

[Juan Sanabria:]

Yeah. Of the total, what was the dividend reinvestment and what was regular inflows that may?

[Mike Sodo:]

Juan, I’ll circle back and I'll get you that number. I apologize. I just don’t have in front of me.

[Juan Sanabria:]

Okay. And just last question. Have you guys thought of when you are going to hold your annual shareholder meeting and any incremental thoughts from last time we talked on MUTA and I know you previously – the previous regime had talked about opting out, what should we be thinking there?

[William Stanley:]

Our priority is of course to get Glenn on boarded, which we think is priority one, probably equally as important as to identify a new Chairman, two independent directors. We expect that shortly after that we will begin to focus on when the annual meeting should be and MUTA is an important topic for this Board to address given the feedback that we have heard from our investors on this particular issue. So, I think you will hear in kind of ordering independent Board members, Chairman, business plan, then the announcement of shareholder meeting and some position on MUTA.

[Juan Sanabria:]

Okay. Thank you.

[Mike Sodo:]

Thanks, Juan.

[Operator:]

The next question will come from Chris Lucas of Capital One Securities. Please go ahead.

[Chris Lucas:]

Yeah, good morning, everyone. Maybe just, Bill, following up on little bit of the last questioning. As it relates to the status of the non-executive chair, is this search been narrowed down to a singular individual or is there still a pool of folks that you are evaluating or how – where do we sit there?

[William Stanley:]

Yeah, the search has gotten relatively narrow and except there are several limiting factors that prevents me from answering it more directly, Chris, but obviously we’ve been working very hard to try to find the right person as we – as you saw with Glenn. Glenn was somewhat of a unique candidate. He has managed companies during turbulent difficult periods of time. He is a real estate guy, yet he’s overseen a high powered sales organization and we thought that his unique package of skills was really a great find for this company. We’ve been approaching the Chairman role in somewhat of the same way. We think that there are just some unique checkpoints that this person has to bring and when you go down the road with these process, you have to weight, measure, compare, so I can’t be more direct on whether we are down to a shortlist or how many, but I can tell you that I would suggest that you will be hearing some movement on that in a relatively near future.

[Chris Lucas:]

Did the list shift at all once the announcement that Glenn was coming on Board, was there any shift in that list once that announcement was made?

[William Stanley:]

No, not really. Other than – no, not really at all. I don’t think we waivered on the qualifications, capability, market experience, stature in the marketplace, acceptance by the community. I mean all the things that we felt were important for the non-executive chair have remained important through the process. And I guess maybe your question could be going to – or if given the fact that Glenn has certain strengths and skills in his resume, did that put less importance on finding that skill set in the form with the non-executive chair and that simply hasn’t been the case. Things that we felt were important day one still remained important as we come hopefully towards the end.

[Chris Lucas:]

Okay, thanks. And then just thinking about the cash balance, $417 million at the end of the quarter, you’ve sold some assets, you didn’t have a dividend – or you didn’t pay a dividend in the quarter, so there is additional cash flow that accrued. How are you guys thinking about utilization of the cash balance at this point in terms of that? Is that something we should be thinking about that you utilized pay down debt in the near term or have used to pay down debt or is there something that you will continue to accrue in the near term until a strategy is fully laid out?

[William Stanley:]

Yeah, I think at least for the moment, bear in mind, that we went through fairly – we went through a series of bank negotiations and we thought at least at that time that we should accrue some cash to protect assets and to provide some optionality for the company as we were working through our bank negotiations and restating our financials. Now that we are there, I think that changes the landscape a little bit and I think that something Glenn is going to come in and assess and whether those assets are used for reducing, reformatting debt, purchasing new assets, certainly at some point in time we know we have to pay a dividend to our common shareholders, that’s what – that’s why investors buy REITs, we are acutely aware of that. So I think at least for right now, the need for that cash and the optionality for deploying that cash has changed a little bit with the filing of the 2103 and 2014 10-Ks. So I think that that will be more of a deliberate part of Glenn’s business plan. So I suspect that as part of the business plan, you will hear a little bit more on the deployment of the cash.

[Mike Sodo:]

And to piggyback off of Bill’s comments subject to our filing this morning, we are finally back in a position where we have access to the availability on our revolving credit facility. So I would anticipate subject to Glenn’s desires, operating more efficiently with our cash position, but we will be addressing that in short order.

[Chris Lucas:]

Okay. And then, Bill, you did mention a little bit about the dividend, any sense as to whether the reinstatement would be something that happens in the first half of the year or is it just because of timing and getting Glenn up to speed on a lot of the issues that you guys are having to work through that it’s more likely a second half issue?

[William Stanley:]

Yeah, I really can’t predict when because again – job one is to get Glenn up to speed, which I think you will find and see that is a very quick study. So I think it’s going to take may be less time than it may have taken with somebody else less experience than Glenn. And I’m simply going to leave any speculation sizing and framing of the dividend to Glenn, which I think is appropriate.

[Chris Lucas:]

Okay. And then my last question relates to Cole, you talked about some of the areas where you have gotten some resumption and some of the relationships. As it relates to kind of what you need to get done in order to sort of get back to where you were October 28 or something that approaches that in terms of just the selling agreements and the full access to that network, how much work is left?

[William Stanley:]

Yeah. I think we have many of our broker-dealer partners kind of at the starting gate. The indications – and this is something that I probably know a little bit more about because I participated in many of their outreach efforts, I physically been on the phone speaking to the Schwabs, the Pershings, some of our broker-dealer partners, because I knew how important it was to get a sense. And the general view that we get from the broker dealer community is that they – that we won Cole, we’ve had a long term relationship, we need the Cole product line. Cole fulfills an important niche and please get your financials filed so that we as due diligence officers in good faith can begin to put your product back on our shelf. So I think you are going to see a fairly active resumption and additionally with the hiring of Bill Miller and plans are being laid to increase not only go back and get the old broker dealers, but to expand the network we believe that there are many, many people out there that are potential Cole clients. So I think you are going to see a lot happening down there.

[Operator:]

And ladies and gentlemen, this will conclude our question-and-answer session. I’d like to hand the conference back over to Ms. Rosen for the concluding remarks.

[Bonni Rosen:]

Thank you and thank you, again, everyone for joining us today. If you have any follow-up questions, please contact our Investor Relations team at 877-405-2653.

[Operator:]

Thank you, Ms. Rosen. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.