Wheeler Real Estate Investment Trust, Inc.
Q3 2015 Earnings Call Transcript

Published: 10 Nov 2015

[Operator:]

Greetings and welcome to Wheeler Real Estate Investment Trust Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Ms. Laura Nguyen, thank you. You may begin.

[Laura Nguyen:]

Good morning, everyone, and thank you for joining us. On the call today will be Jon Wheeler, Chairman and CEO of Wheeler Real Estate Investment Trust; and Steven Belote, Chief Financial Officer. Following management's discussion, there will be a question-and-answer session which is open to all participants on the call. On today's call, management's prepared remarks and answers to questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For a more detailed discussion related to these risks and uncertainties, we encourage listeners to review the company's most recent filings with the SEC. As a reminder, forward-looking statements represent management's view only as of the date of this call. Wheeler Real Estate Investment Trust assumes no obligations to update any forward-looking statements in the future. Definitions and reconciliations of non-GAAP measures are included in the company's quarterly supplemental package, which is available through the company's website. With that, I would now like to turn the call over to Jon Wheeler, Chief Executive Officer and Chairman of Wheeler Real Estate Investment Trust. Please go ahead, Jon.

[Jon Wheeler:]

Thank you, Laura. Good morning, everyone, and welcome. I would like to thank you all for joining us for our third quarter 2015 earnings call. This November is Wheeler's third year as a publicly traded company and the 16th year for the firm's existence combined prior to going public in 2012. I'm extremely proud of the growth we have seen and would like to take a moment to thank the wonderful team of associates we have in Virginia Beach in Charleston. Thank you all for your dedication and hard work. We had a very exciting third quarter highlighted by strong acquisition activity with approximately $86 million of necessity based retail focused properties acquired during the quarter. The 14 properties was included the three Food Lion anchored shopping centers from the Barnett Portfolio and 13.5 acres of land added over 930,000 gross lease per square feet to our property portfolio. All these properties have a stable mix of retailers and restaurants with the majority of tenants either nationally or regionally known. These assets are located in growing communities such as Colombia, South Carolina, The Eastern Shore of Virginia, and Lehigh Acres, Florida, and have an average occupancy rate of 92.8%. We secured these assets at a discount replacement costs and we continue to deploy capital raise from an equity financing during the first quarter. We are confident these properties will general solid NOIs and are yet another example of Wheeler strategically deploying capital in an effort to maximize return and drive value for our shareholders. To further these efforts and streamline our property portfolio, each single-tenant assets were [illicit] for sale during the period. Three of these properties were sold under separate contracts to [allow] our capital for combined purchased price of $28.2 million at a weighted average capitalization rate of 7.26%. Please keep in mind, we purchased these properties just over two years ago at an average cap rate of 7.7%. By monetizing non-core assets was due to the sale of these eight freestanding properties as in line with our business model an acquisition focus of applying multitenant properties. Leasing activity remained strong during the three-month period. We experienced an average rent spread of 12.6% on renewing 16 of 60 renewals equals to 76,980 square feet and maintain an occupancy rate of 94.3%. The result is from the export lease and services our team is able to provide the negotiations of rental contracts, the reposition of stores to maximize sales and the quality of long-term relationships we develop with all of our tenants so we view is our customers. We continue to make significant progress to simplify our balance sheet and completed an exchange offer for our Series A and Series B preferred stock during the third quarter. In total, approximately 69% of the Series A preferred stock and 54% of Series B preferred stock were tended for exchange. We are pleased with the results and believe that with a new simplified capital structure and significant available credit from quality resources, we are best able to take advantage of the strong pipeline and necessity based retail focused properties that are available. Now I would like to brief touch base on our new business developments. Having secured a number of properties during the quarter, we also want to note that our Company continues to view other opportunities at a much larger scale. During the quarter, we are in discussions for a transformational event that was double the size for asset base. To the course of evaluating each property, we ultimately decided to not to move forward with the transaction. However, it was successful in terms of understanding the available market for such an event. More importantly, it demonstrates the capability of our platform to under grow this type of acquisition that could have had the potential for WHLR to quickly expand its brand nationally and achieve our goal of quickly achieving proper scale in an effort to accelerate profitability. I'll now turn the call over to Steven Belote, our Chief Financial Officer for a review of our financials for the third quarter. Steven?

[Steven Belote:]

Thank you, Jon, and good morning everyone. I will begin by reviewing our financial and operational results for the third quarter followed by a balance sheet update. Total revenues from continuing operations for the three-month period ended September 30, 2015 was $7.2 million, an increase of approximately 104% when compared to the same quarter last year. Same store property revenues for the third quarter of 2015 were approximately $3 million compared to $2.9 million for the prior year, while property revenues from new stores was consisted of 23 shopping centers acquired since January 1, 2014 contributed approximately 57% or $4 million to our total property revenues for the period. Property net operating income from continuing operations for the third quarter of 2015 were $4.9 million, an increase of approximately 102% or $2.5 million when compared to the NOI of $2.4 million for the same quarter last year. Same stores contributed $2.1 million to the 2015 third quarter NOI while new stores generated $2.8 million of our total NOI. Adjusted funds from operations available to common shareholders and common unit holders for the three months period September 30, 2015 was $1.4 million or $0.02 per common share and common unit representing an increase of $2.4 million as compared to the 2014 third quarter primarily resulting from AFFO generated by the 23 shopping centers acquired since January 2014. Net loss attributable to Wheeler REIT common shareholders for the three months ended September 30, 2015 was $22.1 million or $0.35 per basic and diluted share compared to a net loss of $4.6 million or $0.62 per basic and diluted shares in the same quarter of last year. The increase in the net loss was primarily attributable to the $13.1 million non-cash deemed dividend related to the beneficial conversion feature on the Series A and Series B Preferred stock tendered offer. Additionally, increases in general and administrative expenses as a result of the internalization of the REIT in October 2014, non-recurring expenses related to acquisitions and capital activities, legal matters and other corporate activities, and increases in depreciation and amortization and preferred stock dividend payments during the quarter contributed to the year-over-year increase in net loss attributable to Wheeler REIT common shareholders. Adjusted earnings before interest, taxes, depreciation and amortization were $4.2 million during the three months ended September 30, 2015, compared to $1.5 million for the prior period. Leasing activity remained positive for the third quarter. Sixteen renewals were signed during the quarter, totaling approximately 77,000 square feet and weighted average increase of $1.15 per square foot, representing an increase of 12.6% over prior rates. Now I'll turn to our balance sheet. Our net investment assets including assets held for sale, totaled $263 million as of September 30, this year, with cash and cash equivalents of $8 million. Total assets were $339 million as of September 30, 2015, compared to $205 million at September 30, 2014. Total outstanding debt at September 30, 2015 including debt related to assets held for sale was $208 million compared to $141 million at December 31, 2014. Our weighted average interest rate on fixed rate debt at September 30, 2015 was 4.8% with a weighted average term of approximately 7.1 years. Our debt to total asset ratio for the quarter improved to 61.4% compared to 70.6% as of the year-end 2014. I will now turn the call back over to Jon for his closing remarks.

[Jon Wheeler:]

Thank you, Steven. In the third quarter of 2015, we continue to invest in quality assets and the discount replacement costs secured under favorable terms that will grow the business while simplifying our balance sheet disposing of non-core assets and exploring opportunities to accelerate growth increased value for our shareholders. We will continue to explore new opportunities for growth as well as continue to pursue quality assets and are currently conducting due diligence on several potential acquisitions. We believe the pipeline of necessity based service and retail focused properties is strong throughout the secondary and tertiary markets and intent to capitalize on this opportunity. We will continue to strategically draw on our existing credit facility and seek attractive financing options as we remain committed to raising capital accretively to the benefit of our shareholders. In the months ahead, we intent to maximize profitability by leveraging our existing assets to [such] activities as a development of outparcels, maximizing real increases, and expansion projects for existing tenants and through the utilization of our development, management and leasing services by third-party vendors. I would like to thank all of our shareholders for the continued support. And with that I'm now ready to take any questions you might have. Operator?

[Operator:]

At this we will be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Wilkes Graham from Compass Point. Please proceed with your question.

[Wilkes Graham:]

Hey, good morning. Jon, I have few questions. You mentioned that you put eight assets up for sale and we know you sold three. Do you still have the other five for sale?

[Jon Wheeler:]

Good morning, Wilkes. Absolutely, we are working with various other interested parties and what was a nice representation on that is that, that interest was really nationwide. And the Sands Investment Group out of California is the ones that we picked to list those. So the three half sold as we noted and another five were in different levels of either under contract and negotiations.

[Wilkes Graham:]

Okay. Do you have an expectation of timing or like a gross dollar amount at those marginal rates?

[Jon Wheeler:]

Yes, I think starting of the gross dollar amount, we still look at the eight together, we're looking at the ability to pick up somewhere between $12 million and $14 million of basically net proceeds. We have about $10 million invested in them and we really think and hoping to closing that $14 million or $4 million scrape on those invested dollars. And from a timing standpoint, you probably recall there is a REIT rule as it relates to two years of ownership in Pure Point in West Virginia, Morgantown, West Virginia, it's where we have the Ruby Tuesday and the Outback that two-year rule applies there. They are under contract and those actually will sell in 2017 or actually the fourth quarter.

[Wilkes Graham:]

So, okay. You said, you hope to generate $12 million to $14 million from the all eight assets. And if I got it right, the three that you sold in October, you cleared about $10 million. So is that suggesting that the three that you sold had the majority of the equity in them?

[Jon Wheeler:]

That's exactly right. As a matter of fact, those three again were the Bixby Reasor's, the Jenks Reasor's and the Harps and [grow], and again those were the cap rates that we worn out in cap rates. We sold them as it was not 50 bps strength if you will.

[Wilkes Graham:]

Okay. And then just be clear, all five of the remaining assets will be sold closer to 2017?

[Jon Wheeler:]

Actually, one in the fourth quarter of this year and that's the Starbucks Verizon and then we're still negotiating LOI on Amscot and then you had the Pure Point that we referenced at Morgantown, and I think that's the last one.

[Wilkes Graham:]

Okay. I'm just curious if you have any sort of general timing expectations for when you might start generating material now with development piece from the development business the third-party business? I'll stop with that.

[Jon Wheeler:]

Yeah, and that's a good point. A lot of Lightbridge transaction that we've been working and we've referenced in past quarters. Those are actually under contract now and some are going through the feasibility and due diligence process. The one that's really significant for us is a Wheeler Legacy Asset and we've referenced in the past and that's the former name [indiscernible] station and we renamed to see total marketplace, and that's down in Hilton Head Island in South Carolina, that will provide not only a fantastic asset, and I'll give you a couple names that we've signed contracts with, but also to provide significant development fees, lease commissions and so forth, and it's a good representation of how we can take an asset completely redevelop it and take a 35, 40-year-old asset and that particular case returning down 75% of the GLA leaving Starbucks and Stein Mart and then we have folks like West Marine, PetSmart, [indiscernible] if you refer them as a group at Germany that's come in and write it as well and those are all assets or tenants in that shopping center that actually signed contracts and it's going forward.

[Wilkes Graham:]

Two more questions for me. Do you have an update on how many assets you have under letter of intent now in the pipeline?

[Jon Wheeler:]

Right now we have about, there is four and let's call, we have a $51 million total acquisition value, but as you know in the past, we're consistently looking and working $75 million to $100 million literally every week. And you heard us reference the CMBS maturities and so forth that are coming due. '15, obviously we're winding up and I think you will see even more of a significant [tsunamis] coming in 2016 and 2017, but consistently we're looking at $75 million to $100 million, right now we have about $51 million that are under contract or negotiating contracts and again those will close periodically over the next three, four, five, six weeks.

[Wilkes Graham:]

Okay. And then last question, do you have any general timing expectation for you when AFFO might cover the dividend? I mean you just reported basically an $0.08 number against the $0.21 number versus negative last quarter, so it's a nice step up to a positive $0.08. So I'm curious how you think about the ramp of that?

[Jon Wheeler:]

Yes. And of course, we don't want to establish forward-looking information, but I think what is this last quarter is a great example of what we can do quarter-over-quarter, and I really feel with what is on our plate now, what's in the horizon that each quarter is really going to be instrumental as we get to the fourth quarter -- as we nearly get to the first quarter of '16. So not giving you a specific date Wilkes, but we're getting very close.

[Wilkes Graham:]

Okay, thank you.

[Operator:]

Your next question comes from the line of Mitch Germain from JMP Securities. Please proceed with your question. Q - Mitch Germain - JMP Securities Good morning. Jon, you mentioned this transformational transaction, at the end of the day, was it a pricing issue? Was it just negotiations kind of sell through, what was the cause of the breakup of that transaction?

[Jon Wheeler:]

Well, first of all, good morning, Mitch. Thanks for calling in. As we go through our prototypical I'll give you a 40,000 foot level and I'll drill down. As we go through our your prototypical due diligence of the 40,000 foot level, we have a three-page checklist with 100 points on it, all the way down to joining the local Chamber of Commerce is the last one number 100. And as you can imagine, we're looking not only at the real estate locationally or the credit tenants or opportunity in sales, we're looking to make sure that the properties on the right side of the town, the town hasn't shifted and of course we're working with economics development office and making sure that highways are not switching and changing, and of course you drill to specific demographics and so forth. What was problematic on this particular transaction that in some cases the particular assumption process was not perfected correctly and it gave us a little bit of angst, was it manageable possibly, but basically what we made a decision is there is a quite a few that made us feel uncomfortable and we basically said, those taking care of correctly and we'll come back and revisit. And matter of fact we all are in weekly conversations with them, so really wasn't negotiations broke down because we agreed on price, we agreed on the number of assets. It would have taken us from 11 states to 14 states, and it really was in line with our investment profile of secondary and tertiary markets and will refer as blue and low blue, and really which strengthen us and diversify the credit more or so. So it really wasn't anything overly negative about pricing. It was more the assumption process that they need to kind of clean up a little bit.

[Mitch Germain:]

Great. And looking at the deal pipeline today, is pricing consistent still with what you're closing and what you've been seeing over the last six to 12 months?

[Jon Wheeler:]

Yes. Remember when you and I first met our models that nine, six, 12, our projection is to buy in average of nine cap finance of 6% and lastly deliver 12% return of the trust. We're kind of right in the middle of that right now. We're probably 8.5 cap, let's say 84 to 86 cap and the raise has been great. I know people have fear of interest rates rising. Two months, three months ago, we closed to deals at 397 and that was spread above the 10-year swap and here most recently world 465. So we're really in a good spot where 300 basis points to the cap rate on our interest rate. We can deliver return at 300 basis point above our cap rate, so again if we're buying on 8.5 and we're financing at 4.5, we are beating that, which gives us the ability to deliver a 13% and sometimes up to a 14% return on actual cash invested.

[Mitch Germain:]

Great. Last one, I think Peter has got one.

[Peter Martin:]

Hey guys. Just curious I know what you said at the end of this summer, you'd [indiscernible] kind of work on long-term incentive plan with about 60 days to report. Just kind of curious, what is the stand to that and what kind of metrics are we looking at as far as performance measurement. Thanks.

[Jon Wheeler:]

I'll let Steven Belote to answer that our CFO.

[Steven Belote:]

We've made great progress on that. The discount of the comps actually made they have recommendations as not going to the floor board yet, but we expect that plan to be -- the file plan to be adopted for 2016, so just I guess that tide to something I can tell you that with these we completed our analysis as we are in the composition committee and board [hands] right now.

[Jon Wheeler:]

When you look at different percentiles as it ranges from different companies and one of the things that we struggle with is based upon our market cap size, let's say $125 million to $130 million booking include the OP units, UPREIT shares to say 140 million. There's not back many comps when you relate to a microcap company that's moving to a small cap and really most of them are almost a $1 billion cap, so you have to kind of ratch it back a little bit and then you work on a 50% or actually a 25 percentile, a 50% to 75%. And just to kind of give you some indications, it looks like our senior management salaries are in line with the percentiles that [mostly] recommended, but the overall incentive plans really are non-existent, and that's something that we'll work on in the future as Steven said, and again I'd said this before in the past I'm not driven by a significant salary, I'm more driven by the performance and a success of REIT and the associated share price and I won't mind to be really success oriented and that would be for the foreseeable future.

[Peter Martin:]

Great, guys. I appreciate the color.

[Jon Wheeler:]

Thank you.

[Operator:]

[Operator Instructions]. Your next question comes from the line of Kent Engelke from Capitol Securities. Please proceed with your question.

[Kent Engelke:]

Hey, Steve, hey Jon, how you all doing?

[Jon Wheeler:]

Good morning, sir. I know you would be here again today.

[Kent Engelke:]

Hey, there is no insurance like self insurance. Can you comment a little bit more about the use for transformational again, we use that I guess about six to nine months ago in regards to when you did the private placement at $2 a share? Last conference call, I think you both commented somewhere along the line that you would wait for your price or stock to increase before going back to the equity markets to raise more money just because it's kind of expensive at the levels where you are right now. Can you comment about this next hypothetical transformational process and how you're going to fund it?

[Jon Wheeler:]

Absolutely. So first and foremost, the answer is still consistently, yes. We will only raise money as an accretive benefit. And again what we did with the Series C and the related converts that took place that our shareholders meeting in June and taking stock price down to $2 as you know was like a pre-IPO, but we felt it was in the best interest of the shareholders and me. As you may recall, I had 25% of the Company between the stock and OP units and now I have somewhere around 5%, so I was diluted down as well, and of course the $0.42 impacted me just like it did to the investors going to $0.21. So we felt it was the right thing to do at the right time for the right reasons, and as evidenced by almost $138 million in acquisitions since we've done that, and again we feel that based upon what we have on the plate now we can get that number maybe up to $185 million, $190 million by year-end. So literally taking those dollars, the gross 90 or the net 84 and buying $175 million, $185 million of the real estate utilizing 55%, 60% LTV. And as you may recall pre-IPO, we're at 80%, and in post-IPO we're 65% to 70% and currently with the [indiscernible] dollars that we raised we're at 55% to 60%. So what that does also, Kent, it gives us the ability to do interest only for 10 years fixed when assets you prepay in the amortization versus putting down 65% or 70%, you get two years of interest still in the balance that has amortized over 25 to 30-year period. So with what's on the table now, what's out in front of us and what we're consistently looking at, we're also, that's important to note, other than the large transformational acquisition that we're looking at, and also it's important to note that we have the ability to utilize OP units on that, which really had minimal cash other than closing cost. There are other portfolios that we're reviewing now, we'll have the ability to do just that. Matter of fact, I would like to is 7.5 cap cash deferred, a 9 cap cash exposed, yes, because that's -- if you look at the relationship with the cap rates and protecting your taxes and you don't have to recapture a depreciation and exposure capital gains, really give us a 9 cap or 7 cap, how cap at this tax deferred. The answer is yes. So some of these OPs that we're talking about, we're actually getting them to consider a higher OP price than the current prevailing market stock price, so for example, if our stock is at $2, we actually have people considering 225 to 250 share price because about 7.5 versus 9 cap range. And I think what you're see coming into the first, second, third quarter of 2016 and because of debt maturities, you're going to see a tremendous amount of product that's coming our way, where the owners just don't have the equity. And you heard me say this before is that the equity gap will be equal to are greater than what the original equity was in the deal. So for example, they put $1 million, $2 million just to get a refinance because LTVs have dropped, cap rates have risen and that's where we come in, so whether it would be combination of cash and/or OPs. That's where we're currently as you know. And some of these older generations that have lack of succession, that's about taxes, they had a zero basis or negative basis and we given them a vehicle not only to refinance, but to not have been exposed to taxes and also when they pass away their stay get stepped up basis. And it's very similar to what I did with my ownership and my entities and my partnerships here for me and my family, why have tax exposure when you can defer it as you can.

[Kent Engelke:]

The other question is, again, I think I'm just saying this hypothetically you're doubling the amount of shares that are outstanding and now concern if you come with $65 million share offering. It's not going to be done at a $90, it's going to be done at some discount to that? And secondly, if it' been some discount to that. Your dividend yield be significantly higher which then hypothetically is that you're not going to be given a sustainable which we've been generally battling for the last three years?

[Jon Wheeler:]

Yeah. We wouldn't do that on the common side. First of all, we're not going to do anything that's not accretive and it has to be accretive number one. And number two when I was referring to the Ops. If you have a coin on the left hand side is your common that gets 1099 on the right hand side of your OPs or UPREIT shares and again that's our own currency and they still have a capital account. As you know, they are locked up for a year by law, by design under REIT rule. And again you wouldn't convert those to common unless you had to sell because the conversion of loan will trigger a taxable event and you just wouldn't do.

[Kent Engelke:]

Yeah. I'm familiar with the transaction now I did that with hotel REIT and worked out quite well actually.

[Jon Wheeler:]

Absolutely, so those two groups I'm talking about is that, again, we wouldn't be issuing shares for cash and you wouldn't have the dilution because they are on the OP side, the one actually was going to take a 100% OPs on the larger one and the smaller one, we're still in consideration which I think about 25% in OPs and then 80% cash. But the point is that, it gives you a nice next year, and it gives them the ability to startle several tax year, so they are not hit in any one year and then who knows what's going to happen to the tax rules going four, five years now, what changes take place that could even save them more money in fact they want to convert those OP to common. It's a wonderful lovely financing strategy and I have used it for my benefit and again on a legacy assets about 75% of our investors have chosen the same thing, OP units versus cash, and now that they are going through the cycle with us post-IPO and the second year as you know we're finishing up our third year now as a public company. So again if we try to drill down a little bit more on your question, it has to be accretive period and each asset is accretive. And of course, as we have a transformational bank, guess what happens, the whole G&A question is non-existence. So if we were to taking down the large acquisition or G&A it would drop below 10% in or around 6% or 7% range and as you know the more assets that we add then you're spreading that foundation and you're spreading that G&A exposure over those assets. And again, Kent, just as you know, you are there with a stay one. We only start off with eight assets at $15.8 million IPO on our market capital and look where we are today. Quite frankly, I think we are probably two years ahead of schedule I thought we would be at the end of '17.

[Kent Engelke:]

I understand what you're saying and I'm just obviously booking up for the initial shareholders and those that were involved in the secondary as well and simple fact of the matter is, yes, Jon, I understand that you have got dilutive from 25% down to 5%. You took a hit. You sold your management company for stock. I understand all that and alike and I think that it actually was a great defense on something. My greatest concern is Mrs. Jones, she bought a stock without the share at five with a $0.42 dividend or Mrs. Smith had bought 1,000 shares four on the secondary and that's what my greatest concern is and I'm here in transformational event and I appreciate you've given me more color in regards to the operating units and alike, I appreciate that, but my greatest concern is the people that funded you in the year in the original aspect and no one really cares about you. We're more concerned about Mrs. Jones and I think the Board of Directors often knows. Their primary concern is not their money, but the other shareholders money and most specifically Mrs. Jones who stressed you and me of buying 1,000 or 2,000 shares at $4 or $5 a share.

[Jon Wheeler:]

I can clearly understand and what I like to address that, Kent, and I respect your comments. What is good for the investor is good for me and what is going to…

[Kent Engelke:]

Like self insurance, so I understand what you're saying and that's one of the greatest things, their percentage of the ownership and more specifically on the management side, to own your Company at the management side, for stock we're at a much considerably higher price and again there was no insurance like self insurance and I think it's that you're still invested like you are, but just to reiterate our concern is not the Board of Directors or management, it's Mrs. Jones who bought a couple 1,000 shares.

[Jon Wheeler:]

Understood, and I completely believe on what you're saying and so I would like to say also this is not sprint, it's a marathon, and I've been doing this for 33 years specifically closing up 16 years of this firm. And absent what you just said, our prospects are fantastic and our growth model is there, the business plan is there. And nothing has changed publicly versus privately. It's the same principles and disciplines. And again each quarter I used to always like to say that annually we would have transformational events and then it became bi-annually and then it become quarterly. Now these transformational events are happening literally every month. And if you look at the third quarter alone is a great example of where we've been and where we are, where we can go, and I think a little patience and a little perseverance like I have. Again this is a marathon and we're going to do just fine.

[Kent Engelke:]

I appreciate your comments, thanks.

[Jon Wheeler:]

Thank you, Kent.

[Operator:]

Your next question comes from the line of Wilkes Graham from Compass Point. Please proceed with your question. Q - Wilkes Graham - Compass Point Hey just a couple of follow-ups, Jon. On the discussion about funding acquisitions with the OP units, are you suggesting -- I get the idea that they are locked up because the sellers want to defer the taxes, but is there a suggestion there, for stocks on [$3] would be issuing them at $2?

[Jon Wheeler:]

No, we would be still want those OPs to be issue at a higher price, so any issuance we have either on common or OPs would always be an accretive benefit.

[Wilkes Graham:]

Okay. And then as you think about the cash you have available, the capacity you have left on your line, the LTVs and you can get on mortgages and then your capacity user do you have a calculation of how much buying power you have left to buy assets relative to maybe $51 million of pipeline that you referenced.

[Jon Wheeler:]

Yeah, so everything you said between cash on hand, selling assets, recycling capital that we've done with those initial three. We have a significant KeyBanc line of $45 million as accordion feature up to $100 million. We had some assets that are currently unincumbent, for example like Chesapeake Square and Lumber River that we'll use as collaborative drawdown on our KeyBanc line to fund future acquisitions and then when you throw the OPs into it, it becomes a great mixture if you will. And we feel confident that with the resources that we have, the cash on hand, capital recycling that we will have enough cash to be able to buy the appropriate amount of total acquisitions, again we need to do over the next fourth quarter and first quarter of '16. But again, as you know, we're a growth Company with growth needs and the best thing that we have if in fact we can't lay common stock accretively as our OP units accretively. And I really believe in 2016, there is going to be a tremendous amount of opportunities to use our OPs to get to where we want to go.

[Wilkes Graham:]

Okay. Do you have a specific amount of buying power, there were certain amount of assets that you can buy with your current balance sheet? I know the number can be a little lose given that you can use as many OP units as you like, but I am curious if you have a level of assets that you feel comfortable buying without needing additional common.

[Jon Wheeler:]

Well, right now we that $51 million on our plate as you know, so I feel real confident with that. And I think once we get up to about, let's say another $20 million that's where the OPs will be really beneficially and also using those proceeds in the KeyBanc line. So yeah, I would say, if you give your range, I would say for sure that $51 million and I would say after $60 million or $65 million and then based upon how many OPs we use it could be a little bit more.

[Wilkes Graham:]

Great. Thank you.

[Operator:]

It appears that there are no further questions at this time. Management, would you like to make any closing remarks.

[Jon Wheeler:]

Absolutely. I want to thank everybody, and these questions are great questions to have, and this type of dialogue is a great dialogue to have in a transparent environment. And as you can imagine on a day-to-day basis, we live and breathe what we do from the standpoint of acquisition, disposition, leasing, property management, and as you all may know, there is 20 disciplines in our business, we feel very strong about this. 18 of those are in-house and the only two that we buy on an as even basis or architect and engineering. So from construction, development and everything I just referenced. So we are a completely fully integrated Company and we are positioned with a scalable, manageable management platform that without having to hire really anymore significant upper level management versus leasing and property management, lease accounting and so forth, lease administration. We are in a great place for a scalable management team going forward. So I look at our prospects in the first quarter and in the second quarter and throughout 2016 and everything we talked about today, so what's most important is, again Kent and Wilkes and Mitch and the folks that have invested with us and followed us over the last three years, as we complete 2015, it's important to know that we feel that we're in a very good position currently and for future growth. And on behalf of the team of Wheeler, I'd like to thank all of those who dialed in for the call, and we look forward to talking to you again in March when we report fourth quarter results. All the best and have a great weekend.

[Operator:]

This concludes today's conference. Thank you. You may disconnect your lines at this time.