Greetings. Welcome to the STAG Industrial Incorporated Fourth Quarter 2013 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brad Shepherd, Vice President of Investor Relations. Thank you, Mr. Shepherd. You may now begin.

Thank you. Welcome to STAG Industrial’s conference call covering the fourth quarter 2013 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company’s website at www.stagindustrial.com under the Investor Relations section. On today’s call, the company’s prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actually results to differ from those discussed today. Examples of forward-looking statements include those related to STAG Industrial’s revenues and operating income, financial guidance, as well as non-GAAP financial measures such as trends from operation, core FFO and EBITDA. We encourage all of our listeners to review the more detailed discussion related to these forward-looking statements, contained in the company’s filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company’s website. As a reminder, forward-looking statements represent management’s estimates of as today, Thursday, February 13, 2014. STAG Industrial will strive to keep its stockholders as current as possible on company matters but assumes no obligations to update any forward-looking statements in the future. On today’s call we will hear from Ben Butcher, our Chief Executive Officer; and Greg Sullivan, our Chief Financial Officer. I will now turn the call to Ben.

Thank you, Brad. Good morning, everybody. And welcome to the fourth quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to telling you about our fourth quarter results and some significant subsequent events. We’re happy to report the 2013 was a good year for STAG and its properties. Presenting today in addition to myself, will be Greg Sullivan our CFO, who will review our fourth quarter financial and operating result. Also with me today are Steve Mecke, our COO; Dave King, our Director of Real Estate Operations; and Bill Crooker, our Chief Accounting Officer. They will be available to answer questions specific to their areas of focus. Our fourth quarter operational results provide continued validation of our investment thesis, with significant acquisition and leasing activity by the company. During the fourth quarter the company acquired 10 buildings. The 3.1 million square feet acquired represented approximately 8.7% increase in the square footage of the company’s real-estate assets over the previous quarter. On a year-over-year basis, the square footage of our own properties increased by 30%. The 10 buildings were acquired for all-in purchase price approximately $96.9 million. Total acquisitions for the year were $346 million. The acquisition totaled for the fourth quarter of 2013 was $17 million higher compared to the fourth quarter of 2012 when excluding the large portfolio deal acquired in 2012. The 10 buildings acquired in the quarter are located in eight different states. The tenants reflect diverse industries including automotive, containers and packaging and logistics, and varied lease explorations. In addition, our pipeline of deals that will meet our investment criteria continues to be robust with approximately $900 million, including small portfolio transactions, a potential acquisition is being reviewed and considered by our acquisition teams. We expect to be…

Thanks Ben. As Ben mentioned, we had another solid quarter from an acquisition and operations standpoint. Our cash NOI was up 43% over the fourth quarter of 2012. This growth was driven primarily by our strong acquisition activity. Our core FFO increased by 35% over the fourth quarter of 2012. We think these non-per share metrics are important because they convey our ability to grow the business while their more typically cited per share metrics are heavily influenced by our financing and liquidity decisions. Having said that, our core FFO per share grew meaningfully by 12% over Q4 of 2012 while maintaining our low 32% leverage. Our AFFO for the quarter increased 38% over the fourth quarter of 2012. This is one of our key valuation benchmarks as it reflects the low CapEx nature of our portfolio. Because of the single tenant focus of our business, our leasing and CapEx cost continue to be quite modest. I should note that TI costs were a bit higher this quarter due to a couple of factors. Under new lease signed in the fourth quarter was a 60,000 square foot lease in a legacy office building, so excluding that the industrial property renewal TI and leasing commission was only $0.03 a square foot on the other 74,000 square feet of renewal leases signed. Also the grants to replacement tenant in the Sun Prairie, Wisconsin building signed a 10-year lease so that leasing commission was larger than normal and the tenant had some above standard building improvements which are being repaid to us in the rent. Otherwise the CapEx cost for this lease were normal. Our occupancy was 95.6% at the end of this quarter compared to 94% at the end of third quarter of 2013. Sequential same-store occupancy was up from 93.6% to…

Thank you Greg. Let me take a moment here to again thank Greg for his service to the company over the past 10 years, through our IPO and through our first years, three year’s of public company existence. He leaves the company well prepared for future growth and success. Another busy and successful fourth quarter has set the table for what we expect, will be a great 2014 for STAG. We will continue to move forward with a low leverage strategy for the execution of our differentiated investment thesis. STAG continues to benefit from a combination of factors to provide a significant volume of quality and accretive opportunities for acquisitions, both on a relative value and spread investment basis. General market conditions remain favorable with relatively and stable low interest rates, a further strengthening leasing market and relatively stable capital environment. In particular for our differentiated investment thesis, the past year has provided significant valuation of the lease ability of our assets where vacancy should occur. Thus, we continue to be optimistic about the future for our company for our owned assets and for our investment thesis. We believe that our business plan to aggregate and operate a large portfolio of granular and diversified industrial assets will produce strong and predictable returns for our shareholders. Our fourth quarter operational results again provide validation for this contention. Going forward, we will maintain our investment discipline and focus on shareholder returns. We thank you for your continued support.

Thank you. (Operator Instructions) Our first question is from the line of David Toti of Cantor Fitzgerald. Please proceed with your question.

Good morning, guys. Just a couple of detailed questions. Greg mentioned or did you mention the source of the termination fees in the quarter?

It was from one building that was a Creedmoor building and what happened was the tenant was no longer in occupancy even though they were paying rent. And we had user buyer who was interested in the property. So we cut a deal where we got a $2.5 million termination fee and then at the same time sold that building to a user buyer for more than we paid for the building back several years ago. So obviously, it was a pretty attractive transaction and we just want to point out because I know a couple of the analyst’s reports this morning mentioned the termination fee. We obviously take that out of our core FFO because that is a non-recurring item.

Okay. And then sort of a bigger picture, as we look at various industrial reports it seems that fundamentals across the country are improving modestly. Are you seeing that reflected in transaction cap rates in the pipeline? Are you seeing any compressions? You generally view cap rates as being sort of somewhat stable at current levels. What’s the dynamic in that space or model?

Yeah, David. Thanks for the question. I think that we view cap rates certainly in the markets that we focus on has been relatively stable. It has been relatively stable over the past year. It’s a feature generally of the markets that we focus on and is more stable than the primary markets, which had a lot more cyclical variations in cap rates. So we haven’t seen that much in the way in a change in the cap rate environment over the past year.

Okay. Thanks for the detail.

Our next question comes from the line of Sheila McGrath with Evercore. Please proceed with your question.

Yes. Good morning. Ben, I was wondering if you could talk about the competitive landscape in your niche. Are there any new players that you are bumping into more often on the acquisition side?

Good morning, Sheila. Thanks for the question. We are seeing some names that we haven’t seen before. Over the past year, we’ve probably had (inaudible) a few times. We’ve seen a new private people maybe more often. But I don’t think that generally speaking, the competitive landscape for us has changed markedly. We are still primarily competing with small and local owners, people that own multiple assets on an principal allocation. Most of the public companies continue to be focused on primary markets, foot markets, et cetera. We think, obviously to the definite of there return characteristics, we are still not seeing much significant organized platform competition in our markets.

Okay. And, Ben, you mentioned in your prepared remarks that the pipeline is about $900 million. Could you give us some insight how that compares historically?

Yeah, Sheila, last year at this time, we were commenting of the fact that we were surprised our pipeline had expanded. It was easier in this quarter. On that quarter last year, our pipeline expanded from where we typically have run that in $400 million to $500 million range. Again, this is a dynamic pipeline. The assets are coming on and often on a weekly basis either because we’ve -- the assets are coming on because they are coming to market we’ve identified opportunity and coming off because either we bought them, someone else’s bought them over to determine that for some reason that without further pursue. A year ago, that pipeline was running -- a little more than a year ago running $400 million to $500 million. We have noted. Again, I think with this quarter last year, it’s going to pass up to around $600 million and now we are reflecting a pipeline of around $900 million, which is because of our teams existence as a -- or improvement of our profile has been known and reliable buyers. I think they are very important component of our success in the market is that our transaction certainty reputation remains high. So we’ve talked with somebody. We are going to do something. We don’t have obviously no capital constraints on it, but some of our smaller buyer competitors said that people can take confidence on that and we also understand that it’s important for us to perform. As we’ve indicated, we are going to perform in individual transaction. But we are not looking to go out and work those individual transaction, maybe to garner some slight benefit through taking advantage of perhaps some buyer weakness or whatever. We perform based on what we say we’re going to do, based on understanding. Obviously if things change during the transaction that they indicate some change in pricing, it should be true if that happens, but we are very conscious of our profile in the market. This transaction certainly helps us a lot to see deals, had deals awarded to us, etcetera. So the uptick now to $900 million again is reflective of our position in the marketplace, to some extent just more assets available, but mostly I think it’s just we are seeing more assets. And also, I think we are seeing more of these small portfolio opportunities that perhaps we didn’t see in the past.

Okay, thanks. One quick question for Greg. Greg, you mentioned the 7 and 10-year term loan, could you just give us a rough idea of approximate pricing for those two tranches?

Yeah, sure, the 7-year benchmark, it’s interesting, it’s been somewhat thin traditionally and it looks like there is a fair bit of demand in the marketplace for that from lenders and so the last year we did was priced at 250 and over. We are looking at pricing on this new deal, that’s probably about a 175 over. So with LIBOR, you are under 2% on a floating rate basis and it would at about 4% on a fully swapped out basis. And 10-year unsecured money probably somewhere between 5 and 5.5. So reasonably cost effective particularly given where we are buying assets at the cap rates we are.

Thank you.

Sure.

Your next question comes from the line of Dave Rodgers of Robert W. Baird. Please proceed with your question.

Hey, good morning, guys. Maybe for Ben, you commented in your prepared remarks about rent growth and kind of cyclical growth above average for the long term over the next couple of years. I am interested to hear your comments about what you expect to see in your own portfolio, your own ability to maybe drive more rent growth, you have been very cautious in the past about talking about the ability to drive rent kind of above the 1% level. So maybe any color on kind of spreads and/or just kind of market rents in the secondary, tertiary market that you are feeling more confident about as well?

Yeah, we’ve obviously experienced some of the prior quarters rent growth above sort of our some of 1% to 2% long term expectations and we’ve reached out to CBRE Econometric Advisors to get some of their updates on what they were seeing and their expectations are for rent growth at -- is varied by years by the next 3 to 4 years, more like 3% to 4% per year. Again a combination of recovery from the global financial crisis and also there is supply/demand dynamic that you’re seeing demand greatly outstripped new supply. And frankly, the economic, we don’t believe that the economic, especially in secondary markets, we don’t that the economic incentives are there for supply to jump up and meet that demand simply because there is not demand at prices to justify new construction. So it’s a good time to own existing industrial assets at good values such as we do and we’ve demonstrated I think quite well over the last year the contention that we’ve had all along that our assets are fungible and leasable. So it’s a good time to own industrial assets at good values.

Do you see any ability in the near term to put a greater level of annualized rental rate increases or rent bumps into the leases as you are negotiating today?

Certainly, it’s a lot better than it was in 2009 and 2010. You actually have tenants competing in our space which obviously didn’t occur during those dark days back in the global financial crisis and its aftermath. So there is some investment there. I mean again we view our assets in the markets we operate and is relatively static, so we are not going to see the kind of rent growth that for instance you might have where you might have 20% or 30% per year, that’s because you had a 50% down year a few years back. So again just less volatile, so the upside surprises will be smaller as well as the downside.

And maybe second question focusing on some turnovers you mentioned again in your comments and as we saw in the fourth quarter, the turnover obviously above or lower retention, turnover higher than you’ve seen historically. Is it fairly typical kind of earlier in the cycle as we begin to see rent growth, as we begin to see more economic growth that you will see more businesses make these decisions should retention stay relatively low over the next several years and be backfilled by kind of the growing economy or should we expect that number to normalize and how should we think about that?

Well, I mean, we are obviously industry observe when that number normalize, so I think there we talked a little about this heightened corporate change activity period that I think is continuing and I think will diminish over time. But one of the important things I think to look at is in terms of cycles is, this is the global financial crisis was a credit issue, not a recession. And so the recovery from that is much most credit, real credit crisis is to recover from that. Recovery from that historically has been much longer and slower than for instance of recession. So I think to look at recent recessions the ’98 to 2001 recessions, etcetera aren’t necessarily informative to the experience we have at the day. What is probably more important is looking at ’99, the ‘89, ‘90 credit issues that occurred to then. So we are not surprised that it has taken a long time, longer than normal for this period of higher corporate chance activity to come to the floor. Looking at the year 2014, there is a variety of factors that will come into play, renewals, non-renewals, new leasing activity and obviously, acquisition of acquired buildings. I think the sum total over the year we would be surprised or we would expect that our occupancy at year end will somewhere around where it was at the beginning of the year, somewhere in the 95% or so category. We cannot feel that the equilibrium occupancy rate if with what’s going on in the general market with again this large mismatch between demand and supply, so many different change that we might trend above that but we cannot feel like 95% kind of equilibrium number.

All right. Thank you.

The next question comes from the line of Jamie Feldman, Bank of America. Please proceed with your question.

Hey. Thanks. I guess, first Greg congratulations it has been pleasure working with you.

Thank you. Hi.

Because we think about the CFO role, can you guys talk a little bit more about the search process? And then, I guess for Greg, just kind of talk a little bit more about your decision at leave, what you’ll be doing as a consultant over the next year or so.

Sure. Maybe I’ll go first. I think the press release pretty clearly explain that what transpired just as a bit context you have obviously been involved with STAG since we have started it from a Yellow Pad about 10 years ago. I have been around the board for a number of years when we were a private company. I sort of look at my time at STAG and I feel like I have accomplished all of the things that I planned to accomplish. I came in as an employee to try to ensure successful IPO back in 2011, sort of run the financial side of the house for three years and we have had pretty good results no surprises and so obviously the company is a great company, its stronger than ever. I just feel personally, its time for me to find new challenge. Having said that I am going to say on for an extended period of time to make sure that there is a smooth transition between myself and the next CFO, and I am very optimistic about the future of STAG. I have no plans at the present time but I am sure I can find something intriguing to do when the time comes and thank you perhaps.

So, Jamie, we have engaged a search firm. We are going to do a thorough search to identify a CFO and move forward. Frankly, more the challenges may be that the as Greg says he has already done most of the work and we are -- we have Bill Crooker is here on the call with us today runs accounting reporting side of house and we are happy with the capability and capacity of that group. We are frankly a pretty boring capital markets company because we are so simple. You know we don’t have joint ventures. We don’t have any really complicated things going on. And in terms of our balance sheet the acquisition we are seeing basically is that machine that runs much as we all could think very important to run it sort of run. It will keep running without the input of any individual. It is a deep bends and systems and processes set up to ensure that they continues to acquire assets for the benefits of our shareholders. So we have, with the expectations I have been able to find a good candidate to replace Greg and frankly, we are over the next couple of months as Greg is here in transitioning, we feel very confident about the ability of the company to continue to do what he is doing.

Okay. Thank you. And then can you talk a little bit more about the vacancy in the quarter, I think there were three leases that moved out, just a little bit more color on those specifically and your thoughts on backfilling?

Well, I mean, eventually those are, there are three very small leases, individual corporate is making decision, independent of other, is not in any common theme, it is just company is making decision. As I alluded to you in the remarks, this was our largest leasing core for new leasing activity about I think 580 -- 590,000 square feet of new leases executed on vacant space. Again, reflective of the overall market condition, there is demand for space and there is demand for space at pricing that frankly new constructions can’t meet. So we feel very confident about our tangible assets continuing to be attracted to new users.

Okay. And along the same lines, I know you have mentioned before in the Q&A, the tenant retention somebody asked how that trending? But, I guess, you comment on the call was that you think kind of retention will improve as the economy improve? But we have seen the economy already get better and certainly the warehouse market to be getting better. Is it something else, any other trends you are seeing in this cycle versus last cycle that are…

Yeah. I mean, again, I think it’s, perhaps, as the economy improves, this is not exactly the accurate, what its really as the economy settled into sort of the coming out of the post-financial -- out of the financial crises. It is, we believe that there are lot of things that have been occurring over the last year that were sort of pent up that didn’t happen because people were sure about corporate credit available it from banks, won’t sure about where their business was going, et cetera. So those decisions that haven’t put off are now happening or have been happening over the past year and continue to happen. We expect over the some period of time that pace of corporate change will slowdown. We believe that there is correlation between increased economy activity and corporate change, that retention probably have in the long run at slightly inverse correlation to general economic activities but we do expect that number to diminish as we move forward.

Okay. So as you think about the move out, is this at this point of cycle, is it -- is the tenant upgrading their space to new product or is it tenant really shutting their doors…

We have -- I don’t know that we have anybody who has left to go to the same size building that was newer or at it hired clear and things like that. Generally when the tenants leave, they leave because they are looking for more space or they change to the different pattern and are moving to a different market or to different pattern for meeting their logistical demand. I know there are some people in the industry that why don’t you believe the tenants move out of 26 (inaudible) to get into 32 (inaudible), we don’t see that. I don’t think you have ever seen an example of that. So it’s not a, generally speaking a desire for a new building or a different capacity for the building. If because the building is not big enough or because their change the logistical patterns.

Okay. And then finally there is a lot of talk this year about capital flowing into some of the secondary markets, how do you differentiate your products in your markets from that trend and it sounds like you are still, I think you have mentioned (inaudible) but I. overall it sounds like you are still not seeing capital flow in, is your product that…

Yeah. Jamie (inaudible) if you, I talked to a lot of folks who have sort of organized capital to other public companies, et cetera, say we are going to start doing but you do and then you ask them about specific example that would you buy this, no, we would buy that. There is still -- there is a lot of talk about secondary market but being able to get down in the trenches, identify, acquire and manage these assets is not as (inaudible), perhaps, for instance some of the (inaudible) guys would want that, it requires our industry expertise, it requires contacts and it requires lot of hard work. So we are not simply looking at streams and been able sort of pick of assets. We are out in the market, interacting with brokers, understanding the market. We have spend a long time developing this transaction certainly replication of chances in good step. It’s just saying one operate at secondary market and buy smaller buildings is not really putting your hand there and say you want to do that classification to be successful and execute on the basis.

But I just wonder is that capital that we’re reading about, is it even looking at your type of assets that you guys are still on a bit of a different class?

I would say we’re in a different class because again it’s not easy to do what we do. You can’t go to CBS and say I want to buy 100 stores and though they had your contract for $500 million had they done, we’re buying buildings $6 million, $7 million and $10 million at a time and they are highly differentiated in the rest of life from each other, part of the value propositions that are risk by portfolio but it also makes it difficult to execute.

Okay, all right. Great, thank you.

Thank you. Our next question comes from the line of Michael Salinsky with RBC Capital Markets. Please go ahead with your question.

Good morning, guys. Just to go back to the retention question, as we look to 2014, any reason why or any large vacates that are known at this point? Any reason why we wouldn’t see [ADA] 5% retention ratio?

I really don’t know the answer for that. Specifically, I mean, we can keep on working with tenants. I don’t think we know any large move-outs, I mean significant move-outs of like famous footwear. All you know looking forward, we’re very confident that our occupancy at the end of the year will be at or around or perhaps even higher than it is today. But the individual tenant negotiation that center, we don’t see any reason to believe other than that occupancy will remain 95 or perhaps slightly above.

Okay, that’s helpful. I believe to your previous question you talked about seeing a little bit better rent growth potentially in your markets over the next couple of years relative to the traditional 1% underwriting fueled across the portfolio today where market rents are versus where in-place rents is, have you started to see that gap widen a bit?

I mean obviously we just entered into the space with higher growth and I don’t know how long it’s actually being going on but maybe last six months or year or like that. And we’re rolling relatively small amounts of our portfolio. So the overall impact is if you roll 8% to 10% of your leases and they go up 2%, obviously on a portfolio basis that’s a pretty small impact. But if you have rent growth of again 3% to 4% a year for 3 or 4 years obviously the second year is you had that rent growth has been ongoing and underlying that. So I think the bigger impact will come out, will come as we roll leases further into this cycle.

Okay, that’s helpful. Third question, you mentioned the pipeline I believe the $900 million, that’s up from kind of $600 million run rate you talked about throughout much of last year. How much of that is related to portfolio opportunities versus individual one-off assets?

That’s probably a couple $100 million in portfolio, something like that. And these are portfolio, they are as small as $25 million, $30 million and up to as big as $70 million or $80 million.

Okay. And just a final question. Can you give us a G&A run rate there, how much incremental overhead are you even going to take on in ’14 to kind of complete the 25% growth plan there?

Yeah, on the last conference call, I believe I gave a little bit of guidance, not that we give that much guidance, but we do give guidance on a couple of things. One is acquisition volume which we continue to expect 25% asset growth. And the second one was on G&A where I gave guidance, so we would expect to spend about $21 million in 2014.

Okay. Thank you very much

Sure.

Our next question comes from the line of Dan Donlan of Ladenburg Thalmann. Please go ahead with your question.

Thank you and good morning. First off, start to see you go but had a couple quick questions for you and then that I have some for Ben. The spike in intangible amortization and rental income, is that just related to the Sun Prairie asset that you leased up in the quarter?

No, it’s really from acquisitions. Every time we do a valuation, you have to do basically a component valuation. So you allocate value to rent and empty building and then various components of the income stream, including the potential for future renewals. They call that customer value. So every time we buy an asset as opposed to in the past, we just book the asset, now you have to book these components including a fairly sizable amount that goes to intangible assets. So that’s really what’s happening every quarter. There’s a component of each of our purchase prices which get allocated to intangibles and it relates to customer value and other things that are part of the valuation process.

Yeah, so the 20, I forgot about that, the $22.1 million is the good run rate there, right?

Yeah, that’s a good run rate. The increase or decrease depending on what types of assets we acquired during the year and whether we have global market leases related to that. As Greg alluded to this component real, this is just the above and below market lease amortization and not necessarily the other components, that is depreciation and amortization.

Okay. And then the recurring CapEx you explain that, what was your total CapEx for the quarter or your total CapEx for the year/

Yeah, we really don’t have that. What we tried to do is give people a sense of the new leasing TIs which were in our supplement, our renewals TIs and then our recurring CapEx. We really don’t get into our total CapEx which could include sort of non-recurring items like a roof here and there, obviously roofs last years 20 to 25 years. So we really don’t that figure, that’s publicly available.

It’s probably not that material, it’s not that much more than you’re recurring, I mean it’s not 5 million or something like that, is it?

No, and keep in mind that the non-recurring CapEx item is on fairly simple industrial building, and relatively few and far between you have a roof which is something we inspect very carefully when we buy our assets. There are so many things that landlord is responsible for so they tend to be relatively episodic.

Okay. And then Ben on the Sun Prairie asset that you guys released. Just kind of curious, how that played out versus your expectations for that property in it. This is kind of a model for other potential vacancies that may occur. In other word, is it your plan as vacancies come to try to get a 10-year lease term and maybe not as much rent increases as you would saying on a 5-year type of new lease or how should we think about future vacancies and how you manage rent growth versus lease term, what’s time?

We react to every opportunity to lease a building. What we think is the best long run answer for our shareholders, and that’s evaluating a 5-year versus a 10-year versus a 3-year. There are variety of options that may come up in the tenants. Depending on what their motivation is maybe willing to overpay for 10-year commitment and maybe sometimes maybe willing to overpay you for a 3-year commitment. So we just have to evaluate what best. I don’t think if there is consistency. We obviously lifelong took long leases but we're not willing to analyze our return to our shareholder returns overly in order to garner our long-term lease. If we think that the economics for the asset over a long period of time are better by signing the short-term lease.

Okay, that's helpful. And then on the pipeline maybe this has more to do with single tenant retail than industrial or office, but they -- but there is talk of volumes still being strong this year in 2014, but potentially starting to peter out in ‘15 as folks that acquired have really good cap rate in '09 and '10 and '11 that stop kind of selling properties. It kind of run out of their existing stock. Are you worried at all about volume in ‘15 and clearly your pipelines have gone up from 600 to 900. But is there any type of similar dynamics happening there or it's just complete different story all together?

Yeah, one of the thing that is nice about our business is that the niche and it’s a large niche that we target and they order hundreds of billions of dollars. It is owned by probably tens of thousands of people. The largest owner of industrial real estate in United States, for largest, probably owns about 2.5% of some of the fungible assets. Dupont maybe 1% of the fungible assets. So most of the assets are owned by again the kind of people that we buy from that the guys that own one to 10 assets. And frankly there are -- again there is tens of thousands of them selling across the table from us it's potential sellers and they are a non-highly correlated -- we don't believe they're highly correlated. So the reasons that they had to sell assets which has been given reasons like their toddler ones go to school, they hate their partner, they have debt coming due. They are 65 years old and decided they don’t want to manage buildings anymore, there is a variety of reasons that are relatively uncorrelated. So we believe in examining and participating that's market over the last 10 plus years, there has always been a supply of assets coming to market again because of it's low correlation among sellers. If we were trying to buy something like say regional malls, that might only be sort of 10 people on the other side of the table and that will highly correlated in why they're buying and selling assets. So we believe that the target that we're focused at, the combination of there not been tremendous amount of organized competition but also more importantly there are very low correlation among all these potential sellers in the large number of potential sellers will mean there is always a steady supply of assets for us to buy.

Okay. Thank you. And just last question on the dividend. How should we think about increases on the going forward basis and when? Are you going to stick to policy of maybe one raise a year or something you guys repeat quarterly or monthly or how should we think about modeling?

I'm very thankful that I'm sitting two sits away from my General Counsel so she can’t kick me. Now we are -- she is going to -- she looked at me. We are -- our goal is to pass out 9% of our AFFO as a dividend policy. We’ve in the past done one increase a year because of the growth, the rate of growth that are net per share metrics, one increase a year maybe haven’t been able to keep up with our growth. So our board has noted that and suggested they will look at our dividend on a quarterly basis to make sure we try to keep up with our per share metrics. What that means going forward isn’t setting stone in anyway to perform, but as far as growth in per share metrics continue, it will -- they look at that dividend more frequent than once a year.

Okay. Thank you so much.

Thank you. Our next question is from the line of [Anil Salnya] with JP Morgan. Please proceed with your question.

Hi, good morning. In terms of new leases and surges, are you seeing a pickup in demand from any specific industries whether it's e-commerce or housing?

Well, I think at the margin e-commerce, housing, logistics, automotive the industries that are growing and succeeding are at the margin taking down more space. So we are seeing that we've seen our portfolio concentration and automotive has increased over the last year, year and a half. Still within -- well within our guidelines for industry, our internal guidelines for industry concentrations and the category automotive include both different manufacture Tier I and Tier II suppliers. So there is a lot of variability and diversification within that category. But we're seeing growth in as you've suggested the prices you've expect to see growth.

And in terms of these internal guidelines, are you able to disclose what they are, so just as a percentage of revenue or square footage?

We basically are trying to maintain guidelines that broadly we'll make sure that we are not introducing undue correlation across the portfolio. I think we've be uncomfortable if we have say if automotive gone over 15%, that would probably mitigate, acquiring the other automotive assets.

Okay. Thank you.

The next question is from the line of Gabe Hilmoe of UBS. Please go ahead with your question.

Good morning, thanks.

Good morning.

Maybe kind of a broader question. I guess it seems like the North Carolina sales was maybe kind of a similar situation at Fuller Brush where you, had to move out of vacancy in subsequent sales? Is that -- I guess given the geographic exposure and typically single tenant assets. Can you just talk a little bit about how you think about retaining versus selling out of assets and you do have vacancy or move outs?

Yeah, we’re trying to be agnostic as to solutions to vacancies. We are not agnostic into return. So if the users shows up and will give us economic returns that are similar to or in sometime better than we’ve seen the assets, we'll sell the assets. And then certainly our users out there that preferred are own rather than lease. So the Creedmoor assets that Greg just described in situation 0before that was the situation. We had probably got at least and probably would have been in fewer economic result to us overall It could have been in fewer economic results to us overall as that worked out better as a sale. So we’re agnostic. Any assets that we had, is vacant is available or sales or lease. We lead with leasing because generally speaking that can provide better economic results for our shareholders. But we're always open to sales and to provide similar results for the shareholders.

Okay. Greg, good luck with everything. Thanks.

Thank you.

(Operator Instructions) The next question comes from the line of Brendan Maiorana of Wells Fargo. Please go ahead with your question.

Thanks, good morning. Ben, your acquisition pipeline is up to $900 million and you talked about the increased interest that you are getting more looks as a buyer giving your reputation, your share prices at an all-time high and you’ve got a very attractive cost to capital. So, I guess and if I look at your track record of acquisitions, it exceeded 25% threshold over the past several years since we have been public. So I guess the question is, is the 25% target pretty conservative given what the pipeline looks like and certainly given the attractiveness of acquisitions relative to your cost of capital because it's here early in the year?

Brendan, I think you even told us just to under promise and over deliver. So we would definitely want to -- straight from your interaction to us and only getting it. We feel very confident about our ability to grow 25%. And looking forward to 2014, that there is a little bit of wiggle modestly in our estimations because we don't know what happened during the year. We feel very confident because of the higher diversified nature of the selling date if you will, but the number of sellers out there that there will be assets reflective obviously of the $900 million pipeline. But there will assets to allow us to acquire that 25%. I personally would hope we can do better than that. But that's a number we are comfortable with and obviously, our asset-based growth every year of that 25% growth every year. So we feel quite comfortable in making that assessment and we hope to surprise both ourselves and you more but that's why we are comfortable today.

Yeah, I was just testing you on how much you are going to stick to that conservatism so.

Brendan, I knew.

I’m glad. So, I guess I just wanted to draw on a little bit on the comment that you mentioned where you're getting your reputation is driving more interest from sellers. And is that sellers or brokers that are reaching out here, or can you just provide a little bit more color on exactly what that means and does that help you in terms of yield?

I think it helps us probably more in terms of the yield. We frequently are awarded deals where we're not the high bidder. So we're going to get a better yield on transaction because of our transactional certainty. I think that it’s important to understand the dynamics of the market. These small sellers, again, have one to 10 assets is not in the market everyday, so they're not conversions that necessarily would, who the right buyer is or what the right financing source might be. So they are almost always going to relay on a broker to give them advice and help them through the process. And so our relationships primarily are with brokers even on the limited marketing transaction. It's the broker’s advice that persuades the seller’s decision as to who to take as a buyer. So we're very careful and positive of our broker relationships. And one of the reasons our pipeline is growing is that our broker relationships are being further enhanced upon, and obviously with the payment of fees. Brokers like people that are frequent transactors and deals get done and brokers fees get paid.

Okay. That's helpful color. Greg, just last one for you. As you guys have talked about the retention that's happened in 2013 and maybe how that drove the CapEx. You have given us some pretty good color on that. Historically, you guys have had very low CapEx. It's been in that sort of 1% of 2% of NOI levels. If retention gets back to more normalized levels, is there any reason to think that the level of maintenance CapEx, the leasing commissions won’t go back to where it’s been historically?

No, I think we would expect it to run just about the same and that is spend.

Okay.

Great. Thank you, guys.

Yeah. To that point, Brendan, I think we're not -- we haven't changed our attitude about trying to buy leasing or buy lease rate. We believe that our stand that we’ve had and we'll continue to have with regard to CapEx is that we are, we have tangible assets that don't need to be -- we don't need to go out and buy leasing or as needed during the past and don't expect in the future.

Yeah, I mean, it clearly is different than a CBD office. Our leasing strategy, you can put -- we are well above standard improvements and we get a higher face rate, the CapEx and then industrial property is very little. Other than the roof, the office space is typically about 5%. There isn’t much money you can spend. So people really just focus on the rents. And as a result, it has been suggested our CapEx strategy really is unchanged to those retention.

Yeah, I mean just for a clarification. So, I think historically you guys have done a very good job of keeping that number really well as I mentioned that you were kind of in that 1% to 2% of NOI level. I think your target is to kind of keep it at 5% or below, is that right?

Well, it's a little bit of the example of that suggested it, under promising and over performing. Like first, we are going public people suggested that we were going to run 10% to 12%. We certainly put 5% out there as a number that was incredible compared to what their expectations were. We expect to continue to operate well below that number.

Okay. Great. Thank you, guys.

Sure. Thanks, Brendan.

Thank you. There are no further questions at this time. I'll turn the floor back to management for closing comments.

Thank you all, for joining us this morning and thank you all for your support and continued interest in the company. We obviously continue to like our strategy and continue to like our position on the market and look forward to a very successful 2014. I'll close with -- this will be the third thank you. But thanks, Greg again for obviously his participation in the call today and helpful for the knowledgeable comments he made today, but also for 10 years in our private existence, in our public existence and his support in the preparation of the company to the level of preparedness and strength it has today. Thank you, Greg.

This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.