Industrial Market Report
3Q’14
HOUSTON, T X
The Market
“
Given the recent drop in oil prices over the past few weeks, I am a little concerned about what OPEC is doing. There is a direct correlation between the price of oil and the Industrial real estate market in Houston. If oil prices stablilize the positive absorption, low vacancy rate, and strong demand will continue into 2015.
“
Chris Caudill SIOR | Partner, Industrial Division, NAI Houston
The Houston Industrial Market
Economic Outlook
From the second to third quarter of 2014, vacancy rates of the industrial market declined from 5.3 to 5.0%, consistent with a corresponding 40% increase in net positive absorption. This decline is in spite of the fact that there were >3,000,000 square feet in deliveries of new space. With another 6,000,000 square feet of industrial construction in progress, market supply should begin to reach its demand.
The U.S. economy, while continuing to
Net absorption of industrial space reached a positive 2,989,991 square feet in the third quarter. Just under 2,200,00 square feet of deliveries occurred in 27 newly constructed buildings. In contrast, the second quarter of 2014 saw a net absorption of positive 2,759,375 square feet, with 3,093,55 square feet in deliveries. With such continued net absorption and deliveries, the vacancy rate of industrial market has dropped to 5.0%, compared to 5.4% a little over a year ago.
The positive outlook on the national economy is supported largely by numbers for gross domestic product (GDP), unemployment, business spending, and housing. GDP is anticipated to be 3.5% growth rate for the third quarter of 2014 (compared to -2.1% from first quarter 2014), with a 3.0% growth rate for the fourth quarter of 2014 and into early 2015. Unemployment continues to decline, dropping to 5.9% in September 2014, and is anticipated to hover around 6% in the near term and possibly drop toward 5.6% in late 2015. Job growth in Texas continues to be among the highest across states, with unemployment in August 2014 at a projected low of 5.3%.
Flex projects reported a vacancy rate decrease from the end of the second quarter of 0.8%, down to 7.1%, with a year-to-date net absorption of positive 743,660 square feet. While warehouse project vacancy decreased to 4.8% over the quarter, with a positive net absorption of 2,594,104 square feet, it was not able to keep up with the 6.9 million square feet in deliveries year-to-date. Rental rates for the third quarter of 2014 remain largely unchanged since the last quarter, at $5.95 per square foot for the industrial market. Rent requests for warehouse and flex properties were $5.60 and $8.90 per square foot, respectively, over the third quarter. The total Industrial inventory at the end of the third quarter of 2014 was 532,572,953 square feet across 17,557 buildings. Contributing to these figures were 483,710,713 square feet across 15,631 warehouse buildings, and 48,862,240 square feet across 1,926 flex buildings. Currently under construction in the Houston area are 6,349,474 square feet of industrial space in 113 buildings. Houston’s market has been consistently absorbing 1 - 2 million square feet per quarter. Of this new space currently under construction, ~25% (1,603,529 square feet) is already preleased, up 8% since last quarter.
positively respond from the downturn, is showing signs of looking better than previously thought. Positive outlook is carried largely by improvements in the gross domestic product, unemployment, and business spending, while a slightly negative outlook is carried by energy and trade, and slowdowns in other world economies such as Europe, China, Brazil, and Japan.
Business spending is now picking up by a gain of about 4.5%, but is anticipated to increase by 7% in 2015. Both increased manufacturing and new equipment purchases to support production are underlying increased business spending, though businesses show a general sentiment to spend more to expand their capacity. As of late September 2014, the Houston Business Cycle Index shows the city’s economic growth up by 4.7% from last year. Housing recovery continues, though irregular, with low inventory driving pent up demand. Energy and trade dominant the negative outlook on the U.S. economy. Export trades continue to make small increases, though slowdowns in other world economies will likely hamper this in time. The trade deficit this year will increase slightly from last year to ~$500 billion. While projections are for U.S. dependency on foreign energy to decline, the U.S. will not be a net energy exporter for a decade or more. Though the U.S. is seeing key advances in the domestic oil and gas industry, declines in oil prices as measured by West Texas Intermediate (WTI) are not likely to reverse in the near term.
Industrial Space: Changes in Class A and B Year-over-Year: 3Q13 vs. 3Q14
NET ABSORPTION
VACANCY RATE
CONSTRUCTION
ASKING RATES
Absorption 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0
2013 3Q
2013 4Q
2014 1Q
2014 2Q
2014 3Q
Rental Rates $6.00 $5.95 $5.90 $5.85 $5.80 $5.75 $5.70 $5.65 $5.60 $5.55
2013 3Q
2013 4Q
2014 1Q
2014 2Q
2014 3Q
Vacancy 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
2013 3Q
2013 4Q
2014 1Q
2014 2Q
2014 3Q
Select Largest Deliveries Tenant
Industrial Under Construction
Rentable Percent Building Area Leased
10565 Greens Crossing Blvd 8303 Fallbrook Dr 3505 Pasadena Freeway 19802 Imperial Valley Dr 8039 Humble Westfield Rd 121 Esplanade Blvd 3750 Highway 225 16245 Port NW 11220 Ella Blvd 13627 W Hardy Rd 11951 Spectrum Blvd 525 Century Plaza Dr 7330 Langfield Rd 16501 Central Green Blvd 16507 Central Green Blvd 350 Century Plaza Dr 13615 S Gessner Rd 5737 Brittmoore Rd 433 Plaza Verde Dr 545 Plaza Verde Dr 3700 Hwy 225 Rd 7390 Northcourt Rd 14646 Kirby Dr 71 Esplanade Blvd
600,750 400,250 400,000 328,020 250,200 244,550 185,168 171,850 162,780 151,339 150,000 149,500 132,470 129,143 129,143 125,000 123,300 122,500 120,159 120,159 118,500 113,065 110,000 106,700
Recent Lease Transactions
83% 0% 100% 0% 0% 0% 100% 87% 0% 100% 100% 100% 100% 81% 0% 0% 0% 100% 0% 0% 57% 100% 100% 0%
Tenant 777 Highway 90A W 11810 N Gessner Rd 8401 Fallbrook Dr 11717 Windfern Rd 20710 Hempstead Rd 971 N Sam Houston Parkway E 4800 W Greens Rd 660 Greens Pky 11747 Windfern Rd 300 Airtex Dr Beltway 8 & Highway 225 8401 Fallbrook Dr 9254 Park South Vw 11720 N Gessner Rd 18945 Kenswick Dr Greens & Aldine Westfield Rd 14820 North Fwy JFK/Kennedy Greens Blvd 20702 Hempstead Rd 10401 S Sam Houston Pky W Beltway 8 & Highway 225 8401 Fallbrook Dr 5737 Brittmoore Rd 8770 West Rd 22240 Merchants Way 8790 West Rd 8401 Fallbrook Dr 14155 W Hardy Rd Bammel Rd Bammel Rd 25311 Kingsland Blvd Katy Hockley Cutoff & Cla Dr 18400 Kieth Harrow Blvd 19720 Aldine Westfield Rd 27603 Commerce Oaks Dr 9370 Kirby Dr 105 Riley Rd
Tenant
Building
Gulf Winds International* DB Schenker Gulf Winds International Lennox International Gemini Transportation* Team Alloys Office Furniture Connection American Tile & Stone Geodis Wilson USA, Inc.* NDLI ERA Industries Coredyne Premium Oilfield Technologies N2It Containers Performance Contracting Group Interstate-McBee G&H Diversified Manufacturing
411 Brisbane DCT Airtex Industrial Center 5300 SH 146 (B-T-S) 11717 Windfern Rd. 1815 Turning Basin Dr. Wallisville Rd. Industrial Park 13101 Almeda Rd 8760 Clay Rd. Point North One Sam Houston Business Park 6028 Navigation 11973 FM 529 5727 Brittmoore Rd. 6002 Murphy 221 Beltway Green Blvd. Central Green Business Park 10930 Brittmoore Park Dr.
Rentable Building Area
Percent Leased
650,000 441,000 362,320 362,180 357,887 352,000 350,820 350,000 320,430 225,360 199,680 197,917 193,741 155,400 150,000 147,112 126,568 120,000 114,800 90,000 87,880 86,747 86,250 77,987 64,313 63,000 62,061 42,600 37,500 33,000 31,000 30,000 30,000 29,500 27,603 26,250 26,100
100% 0% 0% 53% 0% 0% 0% 100% 0% 0% 0% 0% 0% 0% 100% 0% 0% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Size (SF) 345,100 267,170 243,000 190,000 139,630 136,928 125,278 121,795 61,790 45,675 44,000 41,626 39,000 33,000 32,140 25,600 25,000
Submarket Reports Flex Market Statistics Market Austin County Ind
# Blds Total RBA
Total Avail SF
Vacancy YTD Net Percentage Absorption SF
Under Total Average Const SF Rate ($/SF/YR)
0
0
0
0.0%
0
0
$0.00
CBD Ind
175
3,748,862
312,723
8.3%
17,274
0
$5.90
North Corridor Ind
369
10,662,193
833,647
7.8%
138,131
0
$7.78
Northeast Corridor Ind
64
774,295
38,169
4.9%
14,730
0
$8.35
Northwest Corridor Ind
530
15,875,444
1,037,029
6.5%
194,533
70,250
$9.65
San Jacinto County Ind
0
0
0
0.0%
0
0
$0.00
Southeast Corridor Ind
205
3,163,643
291,069
9.2%
52,451
0
$9.87
Southern Corridor Ind
116
2,456,291
186,594
7.6%
64,447
0
$9.32
Southwest Corridor Ind
467
12,181,512
787,847
6.5%
266,094
26,250
$10.20
1,926
48,862,240
3,487,078
7.1%
747,660
96,500
$8.90
Totals
Warehouse Market Statistics Market Austin County Ind
# Blds Total RBA
Total Avail SF
Vacancy Percentage
YTD Net Under Total Average Absorption SF Const SF Rate ($/SF/YR)
23
1,540,395
2,400
0.2%
(500)
0
$0.00
CBD Ind
1,933
55,820,626
2,624,623
4.7%
26,760
0
$4.61
North Corridor Ind
2,773
77,114,133
5,528,696
7.2%
2,601,590
1,944,543
$6.48
Northeast Corridor Ind
871
33,275,512
598,191
1.8%
380,367
50,560
$4.94
Northwest Corridor Ind
3,913
130,113,099
4,690,374
3.6%
2,338,688
3,081,717
$6.38
San Jacinto County Ind
4
34,464
0
0.0%
0
0
$0.00
Southeast Corridor Ind
2,155
81,359,162
5,348,087
6.6%
474,515
138,784
$4.60
Southern Corridor Ind
1,802
46,811,991
1,690,852
3.6%
877,356
237,882
$5.33
Southwest Corridor Ind
2,157
57,641,331
2,784,325
4.8%
134,186
799,488
$6.29
15,631 483,710,713
23,267,548
4.8%
6,832,962
6,252,974
$5.60
Total Avail SF
Vacancy Percentage
Totals
Total Industrial Market Statistics Market Austin County Ind
# Blds Total RBA
YTD Net Under Total Average Absorption SF Const SF Rate ($/SF/YR)
23
1,540,395
2,400
0.2%
(500)
0
$0.00
CBD Ind
2,108
59,569,488
2,937,346
4.9%
44,034
0
$4.73
North Corridor Ind
3,142
87,776,326
6,362,343
7.2%
2,739,721
1,944,543
$6.68
Northeast Corridor Ind
935
34,049,807
636,360
1.9%
395,097
50,560
$5.02
Northwest Corridor Ind
4,443
145,988,543
5,727,403
3.9%
2,533,221
3,151,967
$6.84
San Jacinto County Ind
4
34,464
0
0.0%
0
0
$0.00
Southeast Corridor Ind
2,360
84,522,805
5,639,156
6.7%
526,966
138,784
$4.82
Southern Corridor Ind
1,918
49,268,282
1,877,446
3.8%
941,803
237,882
$5.55
Southwest Corridor Ind
2,624
69,822,843
3,572,172
5.1%
400,280
825,738
$6.98
17,557 532,572,953
26,754,626
5.0%
7,580,622
6,349,474
$5.95
Totals
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Arrangement in which a tenant leases rental property to another, and the tenant becomes the landlord to the subtenant.
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Square foot/per square foot, used as a unit of measurement.
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All physically unoccupied lease space, either direct or sublease.
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Overall Vacancy
Blvd
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S Main St
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Space currently available for lease directly with the landlord or building owner.
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Direct Vacancy
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Pearland Sites Rd
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Rental rate as quoted from each building’s owner/ management company. For industrial, a NNN basis.
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Average Asking Rental Rate
Underwood Rd
N Main St
Almeda School Rd
Sc
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Net rentable area considered available for lease; excludes sublease space.
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Available Square Footage
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The change in occupied space in a given time period.
Center St
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Mykaw
Almeda Genoa
Chocolate Bayou Rd
Sycamore St
Sheldon Rd
Uvalde Rd
Rd
Blv St
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W Dallas St
6
W Fairmont Pkwy
Sp
Mchard Rd
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South Acres Dr
Anagnost Rd
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Sycamore Ave
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Anderson Rd
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Garner Rd
Allendale Rd
All
Martin Luther King Blvd
288
Dr
Bellfo
Blvd
Cullen Blvd
Hiram Clarke Rd
S Post Oak Rd
Airport
225
Broadway St
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W Orem Dr
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Long
Reed Rd
St
Main St
Maine
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Blvd
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N Richey St
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Telephone Rd
Stella Link Rd
Greenbriar St
tone
Jacin
8
Reveille St
Yellows
Grig
10
Clinton Dr
My
Jones Rd
Woodforest Blvd
Bandera St
Federal Rd
45
Holland St
St
Maxey Rd
Lathrop St
Lockwood Dr
Arcadia St
et Rd
Highlands Rd
610
Ave
St
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Mesa Dr
N Wayside Dr
Hirsch Rd
Span
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W Fuqua St
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Lockwood Dr
Irvington Blvd
Kirby Dr
Greenbriar St
Buffalo Speedway
Chimney Rock Rd
Fondren Rd
ton
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Dr
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Prairie
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Mchard Rd
Cartwright Rd
Absorption (Net)
SF/PSF
Montrose Blvd
Weslayan St
Post Oak Blvd
Indian Trl
Hillcroft Ave
S Gessner Rd
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Navig
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Bellfort St
W Fuqua Dr
Al
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Studewood St
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Hillcroft St
Fm 1092 Rd
Rd
Piney Point Rd
Murphy Rd
Pecan Point Cir
Dulles Ave
Thompson
Gessner Rd
Wilcrest Dr Dr
Louise St
36
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Levee Rd
59
Airport Ave
Mons Ave
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Houston St
Clay St
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Homeward Way
Sartartia Rd
ALT 90
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F-M Rd 359
Ow
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Old
Evergreen St Beechnut St
Clinton
Alabama St
610
B
Airport Blvd W Airport
6 er Kempn
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W Bellfort St
Stiles Ln
Eldridge Rd
Farmer Rd
Beadle Dr
S Kirkwood Rd
Boss Gaston Rd
Synott Rd
99
Beechnut St
t tS
Collingsworth St
Washington Ave
San Felipe Rd
Richmond Ave
Patton St
Dr
Woodway D r
Westheimer Rd
Bellaire Blvd
Howell Rd
Old Richmond Rd
Fm 1464 Rd
Fm 723 Rd
Spring-Green Rd
Clodine-Reddick Rd
Beechnut Rd
W 11th St
Memorial
San Felipe St
S Dairy Ashford St
Rd
Addicks-Howell Rd
Addicks Clodine Rd
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Eldridge Rd
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SOUTHWEST CORRIDOR IND (7)
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610
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Daco
Voss Rd
SP Beeler Rd
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Briar Forest Dr
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Memorial Dr
Kingsland Blvd
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W Crosstimbers St
Rosslyn Rd
Long
W 34th St
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Silber Rd
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Highland Knolls Dr
Wheatley St
Hollister St
Groeschke Rd
Hammerly
mp
Tidwell Rd
Crosb
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Houston Rd
Fairbanks N
Gessner Dr
Blvd
Brittmoore Rd
Franz Rd
W 43rd St
He
59
E Tidwell Rd
BUS 90
SOUTHERN CORRIDOR IND (6)
Little York Rd Parker Rd
SOUTHEAST CORRIDOR IND (5)
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Fry Rd
N Mason Rd
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Clay Rd
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Garrett Rd
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ton Pk
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Mount Houston Rd
45
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S Diamondh
NORTH WEST CORRIDOR IND (4)
Aldine Mail Rd
W Mount Houston Rd
W Tidwell Rd
Clay Rd
Clay Rd
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Hollyvale Dr
W Little York Rd
6
Blvd
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N Houston Rosslyn Rd
Henry Rd
Lauder Rd
F-M Rd 529
W Little York Rd
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NORTH EAST CORRIDOR IND (3) 8
West Rd
249
Foley Rd
NORTH CORRIDOR IND (2) De
Aldine Bender Rd
Antoine Dr
Huffmeister Rd
8
Fairbanks N Houston Rd
West Rd
CBD IND (1)
Greens Rd Gears Rd
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Rankin Rd
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Bammel North Houston Rd
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Lee Rd
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Grant Rd
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Methodology | Definitions | Submarket Map
249
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Grand Pkwy (Proposed)
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Sublease Space 6
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Total square footage being marketed Copyright © and (P) 1988–2012 Microsoft Corporation and/or its suppliers. All r Certain mapping and direction data © 2012 NAVTEQ. All rights reserved. The D for lease by the tenant. America are trademarks of Tele Atlas, Inc. © 2012 by Applied Geographic Solu
Sublease Vacancy
Space currently available in the market for sublease with an existing tenant within a building acting as the landlord.
RBA (Rentable Building Area)
Expressed in square feet, this area includes the usable area and its associated share of the common areas.
3Q’14
MARKETING & RESEARCH TEAM
Industrial Market Report J. Nathaniel Holland, Ph.D Chief Research and Data Scientist
Steven Cox Director of Property Research
Nuance Stone Sr. Director of Marketing and Research
1900 West Loop South, Suite 500 Houston, TX 77027 tel 713 629 0500
www.naihouston.com Sources: NAI Houston Research, CoStar, Federal Reserve Bank of Dallas, Greater Houston Partnership, Houston Chronicle, Houston Association of Realtors he information contained herein has been given to us by sources we deem reliable. We have no reason to doubt its accuracy, however, we T do not make any guarantees. All information should be verified before relying thereon.