Q4 2019 Earnings Call
Good morning, and welcome to the Weingarten Realty Inc. fourth quarter 2019 earnings call for February 26, 2020.
Branded it will be our operator for today at this time all participants are in listen only mode. Later, we will conduct a question and answer session during which you can tell star one if you ask the question. Please note. This conference is being recorded and I will now turn it over to Michelle Wiggs, Michelle you may begin.
Good morning, and welcome to our fourth quarter 2019 conference call. Joining me today, It's drew Alexander Johnny Hendrix Director and Chair Shaffer as a reminder, certain statements made during the course of that's called are forward looking statements within the meaning of the private Securities Litigation Reform Act. These statements are based on management's current expectations.
They are subject to uncertainty and changes in circumstances actual results could differ materially from those projected in such forward looking statements due to a variety of factors more information about these factors contained in the company's SEC filings also during this conference call management may make reference to certain non-GAAP financial measures such as.
Funds from operations are at that though but coronary, which we believe help analysts and investors to better understand Weingarten operating result reconciliation to these non-GAAP financial measures. This available in our supplemental information package located under the Investor Relations tab of our website I'll now turn the call ever to drew Alexander Thank you Michelle.
Hello, and thanks to all of you for joining us I'm pleased to announce another great quarter sitting close to a very successful year same property NOI growth remained strong rental rate increases were outstanding and occupancy was up nicely. We bought three great properties investing 165 million disposition proceeds.
And our mission excuse properties are progressing nicely the portfolio is stronger than ever and consumers continue to frequent are great centers.
Our 2019 disposition program close strong $452 million a property sold since 2011, when our transformation strategy was announced we've taken advantage of the arbitrage between the public and private markets selling $3 billion at retail property. This was about two thirds of our existing retail.
Oh portfolio sold when our stock was trading at a discount to anybody.
I realize we often spoken about the transformation reflect for a bit on the magnitude two thirds that's quite significant.
We significantly improved the overall demographics of the portfolio.
Reduced our exposure to power centers improved our operational efficiency by exiting eight states, including Arkansas, Louisiana in Kansas and significantly reduced our exposure to watch list tenants. Our properties are primarily grocery anchored urban infill locations geographically concentrated in stronger markets. These.
Improvements to our portfolio had this resulted in a significant decline in tenant fallout with reduced exposure from the larger bankruptcies, we've reduced our leverage and invested in great quality acquisitions and new developments. There has been some pressure on assets so from our transformation, but in a long run we're much better positioned.
Moving to our specific new developments central Arlington are mixed use project in the DC market is coming along exceptionally well the 366 residential units or 50% leased and around 44% occupied with good rental rates leasing activity for the retail space is strong Harris Teeter opened 80 per se.
End of the total retail space commenced.
At West Alex also near DC, We're just beginning leasing activities and have 38 residential units leased and move ins are underway. The leasing of the retail portion of the center is progressing well with over 75% already leased including Harris Teeter, which is expected to open in 2021.
Most of these projects benefit from a quality supermarket anchor they're close proximity to Amazon HQ too.
<unk>, Northern Virginia market and strong barriers to new construction.
At the Driscoll at River Oaks construction is ahead of plan and we should have residential units available in the second half of 2020, we had many other redevelopment projects in the pipeline that will provide excellent returns on invested capital.
Weingarten Realty has also remained focused on sound DSP practices in 2019, we improved our grass be score over the previous here and created in implemented a tenant engagement program, we called Green for where tenants, where we communicate with our tenants on being sound stewards of the environment. This program car merely spoke.
This is on four areas energy management alternative transportation water management and recycling. We've also been a green lease leader since 2015.
Great progress on new development, and a terrific quarter in here, Steve the financials.
Thanks drew good morning, everyone. Our balance sheet remains amongst the strongest in our sector at quarter end net debt to EBITDA was a solid 5.17 times and debt to total market capitalization was a very low 29.9% supported by well Laddered maturity schedule that has no significant maturities until.
2022.
Our current leverage positions allows us to fund, our new developments Redevelopments and acquisition programs, while still maintaining capacity to pursue future growth even without reduce disposition activity.
This great liquidity and our strong credit metrics provides significant long term stability for our shareholders and the flexibility to pursue opportunities.
During the quarter, we amended our 500 million dollar unsecured revolving credit facility and extended the maturity date to March 2024, with an option to extend for two additional six month periods I would like to thank our syndicate of outstanding banks for their continued support of our company.
As to our operating result core FFO for the quarter ended December 31, 2019 was 53 cents per share down from 55 cents in the prior year.
The decrease from the prior year was primarily due to dispositions of 242 million in the fourth quarter of 2018, and an additional 451 million and the year ended December 31 2019.
Also contributing to the decrease was an additional two cents per share in general and administrative expense as a new lease accounting standard prohibited the capitalization.
Indirect leasing and legal costs in 2019.
This more than offset the increase in same property in a lot of 2.5% for the quarter as well as the same store NOI.
From our 2019 acquisitions up 246 million.
Additionally, the adjustment to the fair value out of deferred compensation plan results and increases in interest income DNA and operating expense. However, as you will note on page seven of our supplemental there is no F O impact.
For the full year core Epo was $2 than 10 cents per share for 2019 compared to $2.28 per share and for 2018.
A reconciliation of net income to navarrete FFO and core FFO is included in our press release.
As to guidance for 2020.
We expect that navarrete, F. FFO and core FFO will be in the range of $2.06 to $2, an 11 cents per share.
This assumes acquisitions up 102 150 million, primarily in the latter half of the year and new developments and redevelopment investment that range from 75 to 125 million.
We're budgeting dispositions in the range of 102 150 million.
So the existing portfolio same property NOI with redevelopment is expected to be in the range about wanting to have to 2.5%.
Tenant fallout and strong comp from last year will result in lower same property NOI growth in the first half of the year.
FFO will also be affected and will pick up nicely in the second half of the year and beyond as rents began to commence from our 2019 fall outs and additional new development revenue comes online.
Included in our 2020 business plan is 130 basis points of credit loss.
This 90 basis points relates to specifically identified tenants, where we have knowledge of upcoming closures are expect tenants to fall out and 40 basis points as is on the identified fallout Johnny will give more color lighter.
Additionally, the full year dilution and 2020 from the 2019 dispositions is 13 cents per share of in Hawaii and interest income will but will decrease between one and two cents per share due to reduced excess cash balances 22 money.
As drew mentioned the lease up of our to DC development properties is well underway and leasing for the residential portion of the Driscoll and Houston will commence around mid year, we expect the new development projects to generate in Hawaii between three and four cents per share in 2020.
However, this increase will be offset by a reduction in capitalized interest of between three and four cents per share.
All the details of our guidance are included on page 10 of our supplemental along with the roll forward of our 2019 Epo to 2020 FFO guidance Johnny Thanks, Steve Weingarten is excited to meet the challenges of a new decade.
As we look at the changing landscape of retail we remain confident our platform and our transform portfolio our position to continue delivering strong results.
80% of our average base rent comes from shopping centers anchored by supermarkets, those supermarkets averaged $691 per square foot and sales that translates to about 100000 people Omar.
Along with our supermarkets, we have 62, TJX and Ross stores generating tremendous traffic for our shop tenants. These traffic generators supermarkets and discount clothing stores are really the sweet spot of shopping centers today before we get to the quarterly results were excited this morning to announce our last call.
Hey, Mark lease at six work shopping center in Raleigh, North Carolina was assigned to target who will open later this year.
Target will pay rent, while the remodeling and as part of our negotiations will be able to add about 10000 square feet of shop space and a freestanding pad in the parking on.
Now to our fourth quarter accomplishments occupancy rose to 95.2% with shop occupancy at an all time high of 90.8%.
Rent growth for new leases was 16% and total rent growth was 12%.
Same property NOI was 2.5% in the quarter and 3.3% for the year.
Leasing production was strong we executed 86, new leases representing $6.7 million in base minimum rent. This is the best quarterly leasing production, we generated in a couple of years.
Our redevelopment program continues to produce strong risk adjusted returns.
As Steve mentioned, we're guiding our 2020 same property NOI to be in the range of 1.5% to 2.5%.
As we start 2020, we have high occupancy and relatively strong leasing momentum.
We have 240 basis point spread between sign and commenced occupancy.
That represents 510000 square feet or tenant a half million dollars in rent that will come online over the next five quarters.
At the same time, we'll have some drag from store closings that will mute our 2020 same property NOI.
As Steve mentioned, we have 90 basis points of specifically identified fallout and credit loss in our budget.
We've broken that into the following three components.
He basis points related to women's apparel 15 basis points of strategic fallout and 55 basis points of other specific closings.
First specific closures related to women's apparel, which includes dress barn Route 21 Avenue and a couple of Rainbow stores.
We have relatively small exposure to any one of these retailers, but collectively they are closing 13 stores, resulting in a loss of 20 basis points.
Second we're strategically retenanting spaces that will generate 15 basis points of loss and same property NOI in 2020.
We'll see significant improvement in credit quality and potential from these transactions. For example, we're terminating a couple of office depot's early in order to deliver spaces to Ross in Burlington.
We're also replacing a former bank at River Oaks in Houston with the restaurant, replacing gap with a new home furnishing store also at River Oaks, and replacing rent a center with Orangetheory fitness in Denver. These are good examples of our strategic releasing where we are protected proactively improving our income stream.
Yeah.
Finally, we're budgeting other specific closings, we anticipate might occur during 2020, and they represent 55 basis points of same property NOI.
This compound it includes four of our five pier one locations, we're budgeting all but the river Oaks location to close after the first quarter.
We're keeping river Oaks online for all 2020.
We have also included stage as a specific fall out we have six stage stores, representing $1 million in annual NOI.
The budget has all six locations closing after the second quarter.
Our budget does not include the fall out of our single Forever 21 store. While there is some risk. This unit closes it's a great store with high sales. So we're budgeting for rent through the entire year.
We except we expect same property NOI to be a little lumpy over on a quarterly basis lower in the first couple of quarters, where we have stronger comps and improving through the second half of the year as some of the newly leased space comes online.
In spite of the headwinds we've highlighted our properties continue to produce strong and consistent growth.
Our redevelopment program continues to deliver great risk adjusted returns excluding river Oaks, we have 11 redevelopment projects underway.
We expect to invest $74 million in these projects with returns around 10%.
The majority of these are outparcel buildings, five to 10000 square feet.
We invested $246 million in seven very good assets during 2019.
In the fourth quarter, we purchased three strong properties as Safeway anchored center in San Jose with incredible demographics 260000 people with an average household income over $141000 and a three mile radius.
The center also includes marshals and total line.
We purchased a Kroger anchored center here in Houston shops at Hillshire village Bolsa with very strong demographics, 135000 people and three miles with incomes of $117000.
Finally, we purchased Covington Esplanade eight at home depot anchored center with high barriers to entry into Seattle Metro.
We continue to look for great centers in our target markets that will further improve our portfolio.
Cap rates held steady over the last half of 2019.
Tier supermarket anchored properties are trading for cap rates of foreign a quarter to five in the quarter in coastal markets in 5% to 6% and other primary markets.
Power centers are trading 100 to 200 basis points higher depending on tenancy.
Our team and our properties are prepared to meet the changing needs of consumers as we look forward to the future drew thanks Johnny.
Our job is positioned the company to maximize the long term value for our shareholders and we remain focused on that goal.
We will continue to invest capital and those growth opportunities that make sense from a risk reward perspective, especially redevelopment.
A return to more normalized disposition activity significant investments in mixed use new developments coming online and 20, and 21 and a much improved portfolio of primarily grocery anchored centers will positively impact our results in 2020 and beyond.
The current retail environment remains challenging and we see these conditions continuing through 2020, our transformation strategy has resulted in a resilient portfolio with a highly diversified tenant base great locations.
And reduced exposure to watch list tenants, however were not immune to the tenant disruption that characterizes the current retail market.
We feel the 130 basis points of credit loss built into our 2020 guidance is adequate in this environment our balance sheet remains very strong and we're very well positioned to fund our capital requirements, while still maintaining the dry powder necessary to react to other growth opportunities when they arise great people great properties and.
Great platform equals great results I. Thank all of you for joining the call today and for your continued interest in Weingarten operator, we'd now be happy to take questions. Thank you. We'll now begin the question answer session. If you have a question. Please press star one of your telephone keypad, if you'd like to be removed from the Q. Please press the pound side or the hash key if you are underway.
Speakerphone, please pick up your hits at first before you dialing once you get if you have a question. Please delstar one on your telephone keypad.
And from Scotia Bank, we have Greg Mckenna. Please go ahead.
Hey, good morning.
Johnny I appreciate the detail on the credit loss embedded in the same store NOI metric could you also give us the contribution from rent escalators rent spreads in redevelopment.
You know we.
Generally look at around.
3% for rent steps.
I'm not certain in terms of renewals what that would that number is.
So that'd be for 1.5% to 2% of same property NOI increase from rent steps.
Okay, and then the redevelopment contribution this year.
The about 20 Bob.
25 basis points, Okay. Thank you and switching over to lease spreads a little bits of the Q4, new lease spreads really healthy at that 16%, but landlord costs were particularly high you talk about kind of what drove that impact.
Others, there's potential for further spend at that level considering.
And you had retailer issues Yep, Yeah, Greg that's that's a really good question fourth quarter was a bit of an anomaly.
First of all we were more heavily weighted towards the boxes. So the ti for that is a little bit more one of those boxes that we did was like fitness and in order to get that lease done we needed to raise the roof and the shopping center. So that was that was quite expensive, we see la fitness as a strong.
Tom tenant and really a great traffic generator. So we felt like it was the right thing to do if we eliminated that particular lease T I would've been $38 a square foot.
More in line with the last several quarters.
Okay makes sense.
And then just final question, Steve on the balance sheet, which is in good shape clearly, but curious you can be leading on debt a bit fund development this year and redevelopment.
Just curious what the expectation is on leverage levels throughout this year and I believe that you've previously mentioned, there's no specific target leverage metric in mind.
But I'm curious what your thoughts are as to a reasonable level to maintain there.
Hi, Good morning, Greg in terms of of the capital for the year, we still have some excess funds a little bit leftover from dispositions that we have to fund probably somewhere in the neighborhood of 40, 50% of our Capex for the New development program. This year.
Obviously, we have the full capacity of our 500 million dollar credit line that we also just renewed this this quarter so liquidity wise, there and with no maturities until 22 were in great shape from a capital perspective.
In terms of the guidance are giving a policy or a target for we I think the market generally looks at net debt to EBITDA as a typical metrics.
We are very conservative where we are we like our position. We don't think that we don't give a specific target, but I think as long as if something is is in the mid six range I think we're fine.
Having said that we've got lots of room and lots of capacity.
To seek out opportunities.
Great. Thank you.
From city, we have Christian Eklira. Please go ahead.
Hi, good morning, Thank you.
Johnny I just wanted to follow up on some of your comments about I guess more detail on sort of that acceleration of growth into the second half you talked about the spread between the lease in the country.
And a half million of rent, but then that's offset by the assumed fall out.
Your commenced occupancy rate was flat year over year in 2019.
And so given those factors how should we think about sort of the cadence of the rent commencements that you're expecting this executed but not yet commenced and then that fall out.
Yeah, our the Commencements more backend loaded and the fall out isn't more front end loaded how should we think about that.
Christy that's that's.
That's really where we are you know a lot of that fall out has already occurred in the fourth quarter.
2019, so it's pretty significant impact on us in the beginning of the year.
We had really strong leasing over the last six months and that well those tenants won't be open on into the third and fourth quarter. So, yes, that's exactly where where we think it'll Italy.
And you have a good degree of confidence at this point in those rent commencement occurring and just a point of clarification is 130 basis points is that on and Hawaii or is that on rent.
Yes, that's only and I want to Hawaii.
I would I would say I have.
Significant confidence there is always a chance that in construction that things slow down in permitting things slow down and one of the big changes that we've seen over the last several years is how long it takes to get a tenant open.
The vast majority of all of the.
Income that we have budgeted is already signed and so.
The only thing that would stop us from meeting that would be construction delays or entitlement issues.
Okay, and then as I think about capital recycling and the additional impact from 2020 activity.
In 2020, the three cents.
I.
When you're thinking about doing dispositions.
Why why do the definitions right your balance sheet isn't really good shape why do you feel like you still have to match fund.
On the acquisition side and if some of that dilution related to the cash that you had sitting on the balance sheet.
Good morning, Chris fees drew I would say that we look at a lot of different factors.
As you know and as we've talked about we've come through.
Several years of strong dispositions, taking advantage of the.
Difference in the stock price to the.
Underlying assets and selling lower ranked properties.
At or in some cases above our internal and navy when the stock was at a discount to anybody.
We have reached the point and Thats, where hopefully we've been very clear that our 2020 disposition plan is much less in that range of 100 to 150 million. So we still have some smaller centers were trying to hone.
Watchlist tenants that we think we can sell it at good prices some some improvements to the map.
But at the same time, when we look at the development and redevelopment opportunities as well as the acquisition opportunities.
We expect to be approximately capital neutral but.
If we find some good acquisition opportunities, we could spend some money invest the money and as Steve mentioned.
Before we certainly have the balance sheet capacity to do that but.
We will be disciplined and see if we can find good.
Risk reward things that.
Have modest amounts of risk, but still some reward so excited about 2020 and a lot of the growth opportunities that we see.
Thank you.
From Bank of America, we as Craig Smith. Please go ahead.
Yes. Thank you.
What percent of the leases in 2020 have already been completed.
I would say the vast majority of about 90%, 95% probably somewhere around that in terms of new leases.
In terms of renewals were in terms of renewals were about 65% of leases that don't have an option.
Great and then I know that you thought is that you'd like to hold off on new additional mixed use projects, how long would that period of where you review. Your your initial mixed use projects before you might step up in.
Start reinvesting in them.
Good morning, Craig It's driven that's an excellent question fleet, we discussed that at the board meeting yesterday, and I think it's fair to say, we're in the preliminary evaluation phases of some things.
Because we're so excited after all.
The time that we've spent that we are leasing space and making some good progress on the big three projects. So.
As we look at our River Oaks Center, we see multiple towers there. So yes, we're still.
Several quarters away from any specific discussions because we want to get more market intelligence there, but we're also starting some of the preplanning at our Cambrian project.
In.
In San Jose, California, we pretty well have a plan that the city us both both like and we're actively.
Moving forward and would hope to be under construction, there before too long at palms at town and country.
We're in discussions with some residential developers looking at some different structures, there, including some ground leases.
Actively negotiating a ground lease for residential at a project in.
The Scottsdale areas so.
Very pleased with what we're seeing pleased on the progress in the Bicsthree still some time away from specific announcements, but but we are starting to look at some opportunities.
For the future.
Thanks for the color.
From JP Morgan, we have hung Zhang Please go ahead.
Hi, guys I was wondering.
Thanks occupancy to be I guess at the end of second quarter and at the end of the year.
Hey, how long this is John and good morning.
We would anticipate occupancy trending down in the first quarter couple of quarters, probably reach a trough by by mid year, and then depending what happens with the bankruptcies. After that we would we would expect it to be more flat or rising slightly.
[music].
So again a lot of those vacancies that occurred in the fourth quarter.
For instance, dress barn, and maybe the pure ones will actually not hit the occupancy until after the first quarter. So we will see a fall in occupancy in the first quarter and then a little more in the second quarter, and then kind of troughed at at at that time.
Okay. Thank you.
From Jefferies. We have site. Please go ahead.
Hi.
Expect any accretion to SS NOI growth from capital recycling activities and is that factored in tier one half to two and half percent guidance.
It's something hey, good morning. This is true it's something that we certainly look at and yes, it might move it a little bit, but but I don't think it will be significant.
We more look at the.
Specific merits of selling a specific center at.
The pricing if we think it's a good price. So it's hard to say if that would hurt same property NOI or help it.
At this time, because we're always working on more dispositions than we expect to do.
And we're going to make the right long term decision, but I don't think it will move it very much.
Thanks for that and I know you just spoke about this little bit earlier, but how do you feel generally about your small shop at 90.8% any view of how much higher that could go over time.
So I'll speak first and then let Johnny.
Add on after I commit him to something he'll he'll probably resist but.
Yes, as Johnny mentioned as we continue to hone the portfolio I think we can.
Continue to improve occupancy of both shops and boxes.
When we looked at the demand, especially the shops of service tenants. So while we're pleased that it's over 90%.
This is two quarters in a row that we've we've set a record and.
Cautiously optimistic we can continue so Johnny now that I've committed you already thanks.
I agree with you.
I you know I think I land I think we do have some room to go we are seeing really strong.
Demand from shop tenants America's Best all the service tenants Bath and beauty five below restaurants, and we've been really excited to see the sort of reaction that we've gotten from the pier one dressbarn an avenue spaces. These are good quality spaces in really good shopping centers and frankly, it's.
Always fun to be able to lease.
In that sort of that sort of atmosphere.
Thanks.
Once again, if you do have a question. Please tell star luck on your telephone keypad.
From Compass point, we have Floris van Dijkum. Please go ahead.
Good morning, Thanks, guys for taking my question.
Can you.
Drew maybe.
So little bit about the.
The growth expectations on the assets sold versus the capital that your redeploying into new acquisitions as well as.
So your developments and highlight.
Why.
You think this is a prudent way too to allocate capital.
Good morning, Florist excellent question and.
To some extent, but the question is is.
You know sort of explains itself that the big reason for.
Most of the dispositions is.
When you look at the risk reward.
And over a portfolio. If you can sell a watch list tenant you probably maybe not in all cases, but you probably over some amount of portfolio. Some numbers of sales have avoided.
A very significant problems so again.
It's not a certainty that all these tenants are going to close stores or anything, but it's about more thinking about it at the individual level and blending that with the risk reward in the probability that.
We are looking at.
CLO selling these centers, where there is that risk. So the growth is there for less.
We also continue to hone the map, which produces some operational efficiencies, but more importantly continues to focus us in areas that have good supply demand.
Barriers to entry, but we're in markets, like California, and Texas, Florida, Georgia, and North Carolina that see population migration, so theyre going to continue to grow and the amount of new retail space built is going to be very very limited.
Loan lot more mixed use a lot more densification. So it helps the supply demand.
So thats the basic thesis of the transformation that we've been working on two to look at all elements of risk and reward.
Development. We think is also a nice mix to it that.
We look at.
At River Oaks, the ability to defense densify and just how much it changes look and feel that tenants who are interested in the center some of the exciting things going on.
That Johnny talked about it River Oaks.
Definitely are influenced positively by the Densification efforts there and then in the did see DC area, we see great upside.
From those projects, especially the residential part as more and more Amazon HQ two jobs come online. So no development is risky to be sure, but there is nice profit in it.
We see great upside.
From those properties given the strong locations.
And that growth is more than enough to offset that 200 basis points spread between disposition cap rates and.
Acquisition cap rates, so I guess in the redevelopment cap rates are actually quite quite high but the the mixed use development or and similar similar range. So the growth is sufficient in your view to to offset that 200 basis points.
I think you have to look at the long term clearly there has been some short term pressure.
For the long term benefit and it is one of those things that if you.
Think about it from a portfolio theory as opposed to any one shopping center.
If there is if there is a one and for chance.
That a tenant closes and really hurts your an ally in on one particular center, it's not likely.
You know that you get hurt, but if you have 10 centers each with that one in four chance. The likelihood you don't have some big problem throughout the portfolio is.
You are going to have that problem, so you'd have to look at it.
Over an extended period of time look at the the short term pain and there will be long term gain from the avoidance of risk and that's where as Johnny said, we have I think a very strong list attendance, we do have some issues to work through in the portfolio.
We're not immune but the strength of our tenants the diversity of our tenants.
You know is one of the great strengths of the company and the portfolio.
Thanks drew can I ask you. Another question maybe in terms of the maybe this is more for Johnny but the residential rents at your mixed use developments how are the.
Looking relative to what's what youve.
Underwritten and relative to your expectations and and is that one of the key things that is.
I want to see more evidence before you press ahead with some of these other potential mixed use projects.
So yes, we have said that we absolutely want to digest a lot of what's on our played in the mixed use projects before we add anything to our plate and as I as I said before we're getting close to that period, but we're still couple of quarters away, but but we certainly want to have.
Demonstrated before we do more.
The we Havent started leasing it at river Oaks, yet, but the two DC projects are trending very well as mentioned in the prepared remarks were a little over half leased it Centro.
Right at pro forma two a little better there.
Improving the concessions from where we started and very pleased.
In the very beginning days and weeks.
At West Alex.
But very pleased with the leasing activity there. The 38 leases we've done very pleased where we are relative to rent and look forward to a bright future. When the supermarket opens next year the amount of activity that that'll bring to the center the convenience for.
The residents and as I said is more Amazon HQ two jobs come on line, so very pleased with.
The results so far in what we see as the future on all three projects.
Great.
Last question for me, if I noticed you sold and asset in Vegas, you have four assets left.
Are you planning on exiting that market or or will you continue to have those properties there.
Going forward.
Good question and I'm not sure I can give you a definitive yes or no. We don't have any immediate plans to to the exit Vegas, but I don't know that will be there forever is it is it conceivable that we would find the shopping center to buy in Vegas, it's possible, but I'd say, it's very very unlikely it's quite frankly, one of those classic.
Public private things that Vegas has really been a very good market for us it's performed nicely it has much stronger barriers.
Entry than than a lot of people realize but I don't know that it's ever appreciated by wall Street. So so the ability to.
Take some chips off the table on very much intended.
And sell from things that really good prices there seem to us to be the right thing to do.
So it's it's not something we're likely to add too, but nor will we get out real soon.
Great. Thanks.
Okay. So what we have Chris Lucas. Please go ahead.
Good morning, guys.
On on the development.
I guess.
Steve maybe if you could help me understand a little bit what do you guys in your guidance, assuming as it relates to sort of monthly unit lease up that each of the projects Centro West Alexandre School, and then sort of where is the breakeven sort of assumptions for you in terms of where in Hawaii goes from.
The for the property is running.
And a loss versus breakeven.
Good morning, Chris This is Steve.
In the prepared remarks, we gave the 3% to 4% three to four cents of in ROI.
For the three projects as as drew mentioned, where we see some good momentum and both of the two DC projects the leasing builds throughout the year. Obviously the summer is the kind of the sweet spot in the leasing cycle.
And then but the big issue as I think your indirectly.
Driving at is the interest kept pace said I think the interest cat where.
We have a certificate of occupancy plus 45 day policy of when we stop capping.
Without getting into a lot of the specifics most of that cap is stopped by the end the of the Q1.
For the residential part of these projects so.
That all tied together and as we articulated we think that that's the kind of an offsetting three to four cents a foot I mean, a three to four cents us I have in Hawaii.
Well that offsets that so that's kind of the way we're seeing the mixed use the two projects and then as drew mentioned in his prepared remarks. The river Oaks issue will commence leasing kind of mid mid year.
The one other point out that would note is that we included in our anti why guidance of three to 4.3 to four cents of in NOI that also includes the operating costs that have come on at the two DC projects. In total so you have that initial drag that's built into that.
Okay and then.
With why hotel what is the expectation for them to sort of commenced their lease at Centro and is that factored into your three to four cents event Hawaii.
It's actually factored in they've already commenced and in fact, we were actually reducing.
We're sort of the leasing is going so well, we're preparing them back and not only to do as many units for as long as we thought but it's treated differently and guided technically there is no revenue coming in for the why hotel its without getting into the accounting issue is it incidental operations.
The way they accountants talk about it thats a reduction of costs. So why hotel really does that play into the three to four cents of in Hawaii.
Just a reduction of cost on your basis, that's correct.
Okay.
Interesting Okay. That's all I had any thank you.
Great Thats one other point on the whole why hotel, it's very immaterial and as drew talked about they're taking we're delivering half of the initial projects that are ma'am. The rooms are the units that were projected so at the end of the day, the while tail effect will not be significant at all.
Great. Thank you.
What's going to feed you asked a question. Please press star one we do have a follow up Greg Nicholas. Please go ahead.
Hi, It's just a quick follow up here.
So.
On the transactions despite similar magnitude between acquisitions dispositions. This year as an expected three cents drag could you just help us understand what's generating drag that timing cap rates and then.
How much of those transaction ranges, whether acquisition or disposition is already identified.
So this drew I'll take a stab and my colleagues Ken can chime in my guess is the bulk of that's driven by dispositions at seven acquisitions and four and a half so it's.
The bulk of it yeah, I think I think thats. The biggest issue that the dispositions are kind of averaged spread out equally over the quarters and as we mentioned the the acquisitions is more backend loaded. So you have a little bit of difference there as well, but I think the big issue is just the dilutive effect of the difference in the cap rates.
Thank you.
Hi, no further questions at this time I drew will turn it thank you for closing.
Thank you brand and appreciated and thanks to all of you for your attention and interest in Weingarten appreciate it.
Were around if other questions and happy to chat with you and look forward to seeing many of you next week at a wonderful conference have a great day and thank you so much.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.