On Thursday, Duke Realty Corp (NYSE:DRE) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Joshua Attie – Citi: Can you tell us – give us some more information on the termination fee, what it was related to, was it one tenant or several tenants?
Dennis D. Oklak – Chairman and CEO: It was several tenants, I would say it was a couple larger ones and one was in Raleigh, where we terminated a tenant and immediately backfilled it with another tenant, so that’s really why we did it because we have the opportunity to basically relocate an existing tenant into a larger space. The second one was the project I mentioned up in Chicago where we had existing tenant that we relocated and expanded and as part of that they actually provided a lesser buyout on some of their space that they were leaving. So, both the transactions were really good deals for us.
Joshua Attie – Citi: One more question. Can you talk about the acquisitions that you made in the quarter? I know the initial yield around 6.4% to those, do you have the opportunity to move that up over time, did some of those leases have escalations in them, and I guess how did you underwrite what the return would be on those assets over a period of time beyond just the initial yield?
Dennis D. Oklak – Chairman and CEO: Yeah, Josh, all of those assets have rental rate increases, pretty much annual, rental rate increase is built into them. I’ll just make a couple of comments on that because again we’re still finishing up our asset re-positioning strategy when you look at it, so we’ve got roughly 500 million, 600 million more of industrial growth to occur, we’ve got about 500 million of additional suburban office to dispose off and then about $300 give or take million of retail to dispose off. So, we’re still focused on getting to those targets by next year, which we have been saying for a long time now, but we’re being a little bit more selective as we go through and the volumes are lower because we’ve done some very large transactions as you know over the last few years. Again, when we are trying to do that, I think we run into some timing issues, so couple of things, we may be buying some things before we actually get our dispositions closed, but we really know where we are headed. So, again it’s all part of that process. So you may see us acquiring again a couple of stabilized assets that fit into our strategy before we’ve had a chance to sell some of our unstabilized assets, so it’s just looks a little different. I mean the truth is, we’re really using the proceeds from our ATM to fund the new development starts, which is as I mentioned we’re getting really good yields on those. If you look at our pipeline today, our average yield on those development projects is 8.25%. So, we think that’s really good accretive use of those fund. So, I think that answered your question, but I also just really wanted to give some color on our thought process.
Joshua Attie – Citi: I guess also what I was driving at a little bit is what’s the value creation story behind some of these acquisitions? It seems like they are fully leased and there are some embedded rent bumps, but the cap rate seems – it seems on surface to me to be a little bit full. Do you think the value creation comes from NOI growth or cap rate compression? I’m just trying to understand how the value of these assets goes up two, three, four years from now and where that increasing value comes from?
Dennis D. Oklak – Chairman and CEO: Yeah. So going back, there are two things. Yes. Clearly NOI growth in these, and again they are all in real strong markets, so we think we’ll get very good NOI growth there, but then my other point is we’re still selling some assets that even though they might not match up on a quarter-by-quarter basis, they’re going to match up, and as we’ve been saying and as we’ve proven, we’re not diluting our AFFO as we reposition the portfolio, so sometimes you will see us buy a stabilized asset that we think it’s a great long-term asset and it’s just not matched up, let’s say, a suburban office disposition, but again we’re still looking at it that way that it’s part of the non-dilutive repositioning that we’re still going through.
Medical Office Development Pipeline
Paul Adornato – BMO Capital Markets: Looking at the medical office development pipeline both existing and prospective, how much of that would say is repeat business?
Dennis D. Oklak – Chairman and CEO: A fair amount of the (college) repeat business, but we’re really pleased that we started a new relationship with Scott & White Healthcare in Central Texas this year. They had not been really a customer before and we’ve got in relationship and we’ve started two projects with them as I mentioned and we’ve got a couple more coming. So, that’s an example of a repeat business. But then again I think a lot of the other starts, we continue to start various projects for Baylor or Baylor-affiliated companies. So, it’s really been sort of a nice mix of repeat customers and now we’re also adding some new ones there.
Paul Adornato – BMO Capital Markets: Could you also just talk about just the overall environment for medical office development? Is it very fragmented like the industrial development landscape might be?
Dennis D. Oklak – Chairman and CEO: I would say it’s not anywhere near as fragmented as industrial, but industrial, as you know, is very fragmented when you look from market to market. But there is number of developers out there and I’ll just say number of high quality developers out there, but it’s certainly a lesser number when you look around the country than you find on the industrial side.
Paul Adornato – BMO Capital Markets: And has there been a shakeout among those developers over the last cycle like there has been elsewhere in real estate?
Dennis D. Oklak – Chairman and CEO: Yeah, I would say a little bit so. I think the number is down. There has been some consolidation and again a few of those private developers like in the other product types or at least that we’ve seen I’d say on the industrial and suburban office side really aren’t around anymore. So I think the number of folks out there is less.
Paul Adornato – BMO Capital Markets: Finally, just looking at the spec industrial development, maybe you could generalize and just tell us what your kind of qualitative and quantitative criteria for pulling the trigger on a spec industrial might be?
Dennis D. Oklak – Chairman and CEO: On a spec industrial?
Paul Adornato – BMO Capital Markets: Yeah.
Dennis D. Oklak – Chairman and CEO: Again I would say we’re obviously not doing a lot of it. We’ve only started one and now have just a couple of others in the pipeline, so we’re being very selective and again, I think that market rates and some of these markets have begun to move up market rental rates. So I think we’re seeing some ability to start these developments, but just on a bottom line basis I would tell you, our yield requirements on – spec developments probably – it’s somewhere between 100 basis points and 150 basis points above what we think the market cap rates are today. So, we’re still getting that spread. It’s just that today cap rates are pretty low and especially on the industrial side I would say in most of these markets, so our developed yields are a little bit lower than they would have historically been, but I’d tell you we’ll be getting about the same spread somewhere in that 100 basis points to 150 basis points range.