Question-and-Answer Session
Operator
[Operator Instructions]. We’ll take our first question from Irwin [Guvnin] with Citi.
Mark Montana
This is Mark Montana on behalf of Irwin, a couple questions. Regarding your leverage do you guys have an internal limit based on either debt service coverage or debt to under-depreciated assets? I know you quote that often. Or is there really no hard and fast limitation?
Mitchell Hersh
Certainly there are limitations with respect to the covenants and the investment grade rating and the bank line covenants but we don’t have internal limitations. We operate in a relatively conservative fashion. We’ve always been a very modestly levered company from all perspective; debt to market cap, debt to un-depreciated book and coverage ratios, where we post 3.1 or so interest coverage and 2.7 plus or minus on fixed rate coverage.
That’s how we operate; that’s our mantra but there are no specific hard and fast internal guidelines beyond being cautious, careful with a view towards always understanding that there’s a degree of uncertainty in the marketplace.
Mark Montana- Citi
Given some modest retracement in spreads over the last month at least in the indexes do you believe that the 7.3% rate on the mortgages you obtained in January is sort of commensurate with what rating you think you could achieve in the market today?
Mitchell Hersh
If you look back on the Harborside lease, which was almost a quarter of a billion dollars at 6.8% and then what we did in January, which was in the seven handle I would say that that is the market plus or minus a couple basis points either way. But as I said, with respect to secured financings the leverage is quite limited. You’re looking at potentially 50% or less loan to value and value is a big unknown determinant in this unclear environment that we’re in. Generally speaking, these transactions take a long time to complete.
So I would say we’re delighted with what we have done and we think that plus or minus the interest rate is market.
Mark Montana- Citi
Finally, at the mid point your net income guidance increased about 10% quarter over quarter. Is this primarily due to a better than expected first quarter or a bit of a modest uptick in our outlook for the rest of the year?
Mitchell Hersh
You’re talking about net income, not net operating income and that’s a metric that is really based on depreciation and the adjustments there are based on the amount of depreciation.
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