Q4 2019 Earnings Call
Realty Group Trust earnings Conference call.
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I don't know what they have a conference over to your speaker today Mr., Brian Mccarthy Senior Vice President marketing and communications, Sir you may begin.
Thank you and good morning, everyone welcome to take Realty group's fourth quarter earnings call.
Almost today's comments contain forward looking statements.
Based on assumptions of future events that are subject to inherent risks and uncertainties.
Actual results may differ materially from these days.
More information about the factors that can adversely affect the company's results, we see our FCC filings, including our most recent 10 kit.
Today's remarks also includes certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for reconciliations of these non-GAAP measures to our GAAP financial results.
On the call with me today from tight real for our Chairman and Chief Executive Officer John.
President and Chief operating Officer, Tom Mcgough.
Executive Vice President and Chief Financial Officer G fear.
Executive Vice President portfolio management, Wade Pocketbook, Senior Vice President and Chief Accounting Officer, Dave fuel and senior Vice President capital markets and Investor Relations Jason Cool.
Ill now turn the call over to John.
Thanks, Brian Good morning, everyone.
Thanks for joining us today, we appreciate your time in consideration.
For many of our investors and analyst 2019 is squarely in the rearview mirror and you are understandably focused on 2020 and beyond.
But I believe I owe it to the hard working KRG team to briefly look back on the year.
2019 was a phenomenal year for us.
Getting with a bowl promise and ending and flawless execution.
We sold 23 noncore assets to 20 different buyers for total gross proceeds of $544 million.
Approximately two months faster than we anticipated.
We also acquired two assets for a combined $59 million, including Nora Plaza whole foods anchored diamond in the rough, which we believe has great potential.
On a net basis, our transactional activity for 2019 produced $485 million and proceeds we paid off nearly $400 million of debt.
Most of its secured increasing our unencumbered and why percentage from 66% to 74%.
The balance of the proceeds will fund our remaining big box spend and identified Redevelopments in 2020.
Our net debt to EBITDA has improved from 6.7 times to 5.9 times and our fixed charge ratio improved from 3.3 times to 3.6 times as a reminder, we have no prefers.
We have a strong investment grade balance sheet and extremely manageable debt maturity schedule.
Project focus was an exercise of addition by subtraction intended to de risk and further concentrate our portfolio.
In our target markets.
The noncore assets, we sold had an AB are a $14 at 64 cents compared to our current hbr of $17.83.
The over 20% improvement.
By the way that's an all time high for KRG stands in Stark contrast to $16.84, where we started 2019.
For some context at our 2004 IPO, our Hbr was $10.57.
At the outset of the program, 60% of our Hbr came from target markets now that number stands at just under 70%.
To add a supporting the national migration to warmer in cheaper states is undeniable and the trend will only continue as the tax burden from the salt legislation takes its toll on states with high cost of living and often precarious budget deficits.
We see data supporting this thesis nearly a daily and more details can be found in our investor presentation posted on our website later today.
During the course of 2019, many investors asked us that project focus would serve to distract the organization.
As Tom and wait till the test it had the exact opposite effect.
During 2019, we executed 302, new and renewal leases for over 2 million square feet.
Which is a 19% increase over 2018.
As a result of our leasing effort leasing efforts our anchor lease rate stands at 97.8% 160 basis point year over year increase.
Small shop lease rate stands at a sector, leading 92.5% 130 basis point year over year increase and yet another all time high for KRG.
Leasing spreads for 2019 on a comparable GAAP basis were 44.8% for new leases.
7.5% for renewals.
14.5% on a blended basis.
Cash spreads for the year worth 35.5% for new leases, 3.3% for renewals and 9.2% on a blended basis.
As compared to our peers, we have the second highest anchor lease rates the highest small shop lease rate one of the highest recovery ratios one of the highest and why margins and one of the largest 2019 cash lease spreads.
Our big box search program has been a huge success, we leased 22 boxes in 18 months to 17 different tenants.
Finally names such as five below old Navy Ari I total wind and support to give you. Some context, we did a total of two box deals in 2017.
Parable cash rent spreads were over 21%.
The estimated total capital costs associated with these leases is $43 million and the return on that cost is over 16%.
We believe these are exceptional returns, especially on a risk adjusted basis.
We have a total of approximately 280 boxes in our portfolio and only seven of them are currently vacant once again, it's clear that demand for our real estate deep and diverse.
The share price appreciated nearly 40% during 2019, resulting in a total return of approximately 50%.
While this movement in our share price served to reduce our absolute and relative discounts, we still have work to do and plenty of room to run.
Our discounts to consensus NPV persist at approximately 21%.
Our plan to maintain our momentum and close these valuation gaps is as follows.
We'll continue to highlight our true NPV and we will return to earnings growth 2020, as our trough year, and we expect to inflect into 2021.
While we while we view our capital allocation activities through the lens of net asset value. We also acknowledge that the equity markets reward consistent and predictable earnings growth.
To that end project focus was not the beginning of a multiyear disposition program.
This is not to say, we will sell assets in the future Prudence and proper portfolio management dictate otherwise.
Rest assure rest assured the proceeds of any sale will be reinvested with the goal of maximizing and Avi.
Minimizing any short term dilution and improving our long term growth and further concentrating our portfolio in our target markets.
We'll continue to counter the retail a possible apocalypse narrative by providing factual evidence of a growing retail Renaissance.
For example, the most profitable sale for a retailer is when a consumer buys online and picks up in the store.
The customer has acted as their own cash year and as the last mile delivery driver and in the vast majority of these cases the customer will also make additional purchases in the store.
This holiday season saw over a 40% increase in the buy online pickup in store or BOPUS method and some experts believe BOPUS could account for up to 50% of digital traffic.
The open air sector is uniquely positioned to benefit from this trend.
Evidenced by the Omnichannel success of our hallmark tenants such as target at Walmart just to name a couple.
Bottom line margins matter in physical retail is a core component to success.
As evidenced by the scores of digitally native brands that now embrace physical locations.
We will also continue to educate our stakeholders as it relates to the quality of our real estate and the vast changes that have occurred not only since our IPO been since our merger within one diversified we're no longer a Midwest focused power Center company.
We're proud of our deep Midwestern roots and values, but the fact remains the power centers comprise less than 20% of our portfolio and 77% of our Hbr comes from the south and the west.
In reality the average size of our shopping centers is approximately 140000 square feet well below the size of an average power center.
Our 2020 guidance is a testament to the fact that the headwinds in our business have not fully subsided, but we remain unfazed.
Our recent success with the big box search demonstrates our ability to rise to those challenges.
On a year over year basis, those boxes will produce nearly 240 basis points of same store growth, which is over $4.5 million, but Fortunately this growth is being offset by a handful of actual and potential bankruptcies and store closures.
Including Dressbarn Earth fare AC more bar Louie in pier one.
To combat the loss, we have signed new leases and are far along in discussions to backfill the spaces with more productive relative tenants.
Furthermore, we're cautiously optimistic that the majority of or the 2020 tenant fallout has been revealed.
It's important to note one of the collateral benefits of project focus is that we have significantly increased the durability of our cash flow by decreasing our exposure to watch list tenants.
At the beginning of 2019, we made a bold promise and we delivered him supremely confident that where we convene a year from now we'll have the same message to report as it relates to 2020.
And now I'd like to occur turn the call over to Keith to discuss the details of the fourth quarter and our full year guidance.
Thank you John and thank you to the entire KRG team for an outstanding 2019.
I'll briefly address our strong fourth quarter and full year results before giving some additional color on our 2020 guidance.
During the fourth quarter, we generated FFO as adjusted of $34.7 million or 40 cents per share.
The 12 months ended December 30 Onest.
FFO as adjusted was $143 million or $1.66 per share.
As a reminder, the sole adjustments for 2019 were limited to the impact of the early extinguishment of debt.
We grew same property NOI by 3.2% compared to fourth quarter 2018.
This uptick is consistent with our prior messaging and reflects the narrowing gap between our leased and occupied rates.
For the year, we grew same property NOI by 2.2%, which is at the high end of the initial same property NOI guidance, we provided a year ago.
The main contributors to our 2019 growth were increases in base rent of 150 basis points and increase in net recoveries of 60 basis points, a slight increase in other income of five basis points and a slight reduction in bad debt of five basis points as for our balance sheet, our 600, our $600 million revolver is and.
Drawn, allowing us to satisfy all front debt maturities through 2025.
The strength of our balance sheet affords us incredible optionality to time of uncertainty. While we are hopeful that 2020 will come and go without undue volatility we are more than prepared to survive any disruption. In fact, we are poised to take advantage of it.
Moving to 2020 guidance.
Energy's, providing 2020 Navy FFO guidance of $1.48 to $1.52 per share, including same store NOI growth ranging from 1% to 2%.
It's important to note that the midpoint of our guidance assumes we we received no additional rent from any tenant that has vacated were filed for bankruptcy, including Dressbarn Pier one.
Our Louie AC more earth fare and Fracs theater.
These named tenants net of expected Backfills equate to lost NOI of $3.6 million, which is 190 basis point drag on same property NOI.
Furthermore, on top of all the known disruption.
Our guidance assumes an additional $3 million bad debt expense, which represents 1% of total revenues and 1.4% of company and a wide.
2.5 million to that bad debt expense is attributable to our same property pool, which represents 90 basis points of same property revenues and 1.3% of same property NOI.
I'd like to highlight that our bad debt assumption of 3 million for 2020.
Equal to the total bad debt, we experienced in 2019.
The fact that we have 23 less operating assets.
While we're not anticipating outsized tenant disruption in 2020, we feel that the current environment warranted height measure of conservatism.
Our guidance does not assume any material transaction activity.
A breakdown of the assumption surrounding our guidance can be found in our earnings release from last night and as always Jason and I are available offline to answer any of your modeling questions.
Thank you everyone for joining the call today operator. This concludes our prepared remarks. Please open the lines for questions.
Thank you ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or you wish or move yourself from the Q. Please press the pound key once again to ask a question. Please press Star then one now.
And our first question comes from Craig Schmidt from Bank of America. Your line is open.
Thank you.
And thank you for some of the details.
The guidance, but maybe just visit a little more on same store NOI you finish to two two and you ramped up to a three to in fourth quarter and the midpoint for 20 Twentys one five.
It sounds like yours is assuming no releasing of any of the vacated space.
As.
Part of the reason for the drag are there any other reasons why you're guiding to that Thats 70 basis points lower from last year.
As I described my remarks that we have.
$3.9 million of disruption just from those named tenants. So that it was 190 basis point headwind.
As John mentioned in his remark, yes, we had a really nice ramp up from the boxes of.
235 basis points, but again Thats 190 basis points basically took all the all that.
A window sale so.
Listen, it's it's 70 basis points.
Letter as you described but I think we've built in a fair measure of conservatism.
We're going to look just like last year room to do whatever we can to outperform.
Sort of the shape of the growth, you'll see us sort of moderate into the first half and again as some of those additional boxes come on line, you'll see our same store NOI growth.
Continue to grow in the back half of the year, but again credit listen we hit the high end of the range last year, we're going to do whatever we can to outperform so yes, it's 70 basis points lighter, but we have we're feeling very bullish over here.
Craig fully thing I would add is.
Just said this is the very beginning of the year.
We happen to get these guys at the end of the year in the beginning of this year closing couple of surprises.
For example, with Earth fare.
Bar Louie.
So couple of these are surprises so I think based on that.
And building in.
The conservatism to the guidance I mean, if you look I hope you picked up on the fact that the $3 million the absolute amount that we have in bad debt reserve. The is the same amount. We added 19, although we have 20% less properties. So clearly, we're taking a conservative view, but in an.
Election year at everything else, we have going on I think thats prudent do we think that thats.
That's conservative absolutely, but thats the prudent thing to do right now and I think we've demonstrated vis-a-vis phenomenal results that we had in 2019 that were up to that task.
And we will execute on that tests, just like we always do.
Okay and then just.
Is it possible that you could then the you even higher with same store NOI given the success with the Big box version as you leverage that against the smaller shops I.
Let me look I think with the guidance that we gave between one to two and when you look at the bad debt Reserve, Yes, I think it's possible if we split us, especially since it feels as though we've set aside.
Kind of.
A double reserve in the sense that we've taken everyone out and put on a large reserve. So yes, I believe that thats very possible, but hey, it's early in the year and whats stay tuned.
Okay. Thank you.
Thank you.
Thank you. Our next question comes from Christy Mcelroy from Citigroup. Your line is open.
Hi, good morning, guys. Thanks.
In regard to your future pipeline projects in Indianapolis, how should we think about the timing of project commenced and capital spend over the next few years associated with that and John just in that context to your comments about.
So inflecting positively in 2021.
Is there any downtime associated with these locations that we should be thinking about and I think as we think about that.
Longer term growth rate.
Well as to the let's start with the second part of the downtime I mean.
When you look at these projects that are in the supplemental.
You've got a situation, where you've got no income coming at all.
From one of them you got extremely small amount of income coming from the second one so the first wouldn't be the quarter, there zero income coming from that.
The Hamilton crossing there's a diminimus amount of income and then Glendale is a little different because were doing two things there were backfilling the Macy's box with.
Junior anchor retailers and then we're adding apartments in the parking lot, which obviously has no income associated with that portion. So I don't think this creates a lot of drag in that sense. The the idea is to the first part of the question. Our objective is to minimize the capital spend on these vis-a-vis the park.
Our ships that were doing.
Because the multifamily components of them would be in partnership.
So I think as we said in the call. The majority of what we think we're spending in 2020 is coming from what Weve Prefunded Christie.
So I think that we feel like we have that in hand quite frankly there.
They are moving pretty quickly.
One of them as moving pretty quickly in particular.
And so that could be interesting for us to see a terms at the start times, but bottom line is our objective is to the extent that these are retail very much limit what capital, we're putting in but and we have definitely attributed for that in 2020.
Okay, then sorry, let me comment that little bit Krissy. The only thing I was going to that as all three projects for pursuing economic incentives. So thats why exact timing in terms of starts as a little unclear but.
Hopefully hopefully we will be at least one by the end of the year in terms of starting.
Okay got it thanks, and then just in regard to leasing Capex just looking at the numbers.
On a trailing 12 month basis.
There's definitely been definitely trended higher and thats, causing more upward pressure on your AFFO payout, what's sort of your expectation for further growth Capex in 2020, and how should we thinking.
Sure well I mean, I think again as we've said as you know and we've said before based on our size.
And number of deals done in a particular quarter that can certainly swing and in this particular quarter. We had two or three deals out of 45 deals that were higher than what we would project typically so I wouldn't view this as like a consistent run rate I think it's going to move around.
No one of the things to make sure that everyone realizes we're getting strong returns on this capital and were merchandising the properties. The way we want to merchandise. So I think it's probably more of a gradual move that occurred here Christie, but even when I look at the quarter that we're in right now.
Although it's early.
The spend is significantly less than what it was of the past quarter.
So we'll continue to update you guys on that but when you have two or three deals that can move the needle it's tough to kind of say these are run rates.
Okay.
I'll just add the reminder, also that the box deals were generally more expensive. So in general the cost us up just by the sheer volume on the box activity.
And if you look back historically and that number was more sort of the mid fiftys than it where it sits right now and so we anticipate as we get these box deals. The remaining few that we have done as we normalize that that number should drift back down towards historical average.
Mid Fiftys to 60.
So I guess just a follow up on that I mean would you expect the pier one boxes. The replacement just given their size to be less.
Thanks, just given that you're not breaking up as many or you're not making any of those sites, which is less capex associated with us.
I mean, it's very dependent on who were putting in their christy because those peer even if you just look at pier one and Dressbarn. Those are both what youd consider like many many many anchor size right here between 810000 square feet. So if we're putting in a guy that's going to take the whole space yet.
For sure we could also break that into two users pretty effectively so I think it depends on.
What we're putting in and again I to reconfirmed everybody when I look at being a mass volume of stuff that we've done in last couple of years. The capex expenditures when you look at on a percentage of vento why.
In 2019 in 2020 assist significantly higher than what we have historically seen and what we will see in 20 122 and 23.
As I look out in our models.
And it just is what it is we're getting great returns, we're increasing the NPV of the properties.
So I wouldn't over I think it quite frankly, I know people want to focus on this and I get it but I think it's a transition period and it has to do with the returns that were generating in the quality of the tenants that were put in.
Okay. Thanks.
Thank you.
Thank you. Our next question comes from Todd Thomas from Keybanc Capital markets. Your line is open.
Hi, Thanks.
Just first following up on that discussion a little bit can you just talk a little bit more broadly about the leasing opportunities or or expectations, rather to backfill. Some of those early 2020 move outs and closures in terms of the timing and the potential mark to market and and.
Just maybe discuss what's embedded in the guidance with regards to those those spaces.
Well as erase the first part of the question I think Tom and I can both touch on as far as the demand there's plenty of demand there and even if you just carve it into what we're looking at between pier, one and dress barn.
I mean as it relates to dress barn.
I think we only have one or two of those that were not actively negotiating leases or app haven't already signed leases because I think we've already signed four leases in there.
The eight so all of the seven that we have remaining so that gives you an idea that the demands there.
And as it relates to pier, one I mean quite frankly, there is still in the spaces.
And we've got tenants, calling us trying to get us to make stuff happens so that that's a sweet spot size wise.
Tom you want to pickup on that yes, and then on the box side, we have seven boxes, the remained vacant and or R&D negotiating on three of them.
And the fact that we have 280 boxes and only seven vacancy negotiating three.
I think our our history over the last 18 months shows that we're going to be successful on that and I think as we move to the second half of the year will have.
Yes.
Regarding guidance I mean, as he pointed out.
Other than what we've already leased for example, like Dressbarn, we don't have anything in our numbers.
Relating to those vacancies so thats the conservatism that we took in addition to the bad debt reserve on top of that that we were pointing out earlier.
Last little piece of information so for the Dressbarn deals that we have we have five signed two negotiation spreads are those on a cash basis around 10%. So theres, a nice mark to market opportunity on those boxes.
Okay got it Thats helpful. And then yes Heath. So some of those I understand are making and you're signing leases actively today.
But I think you said the midpoint assumes no additional rent from from the six the six retailers that you mentioned is you don't receive rent is that beyond February is that right and then of those six tenants that you mentioned I guess, what's still open and rent paying at this time and the only one still open to rent paying top tier one and we.
Soon that we don't get anymore, right past February which I will tell you is probably a fairly conservative assumption because given a pure volume were to change from reorganization, which it appears and is to a liquidation it's going to take them three or four months just to conduct going out of business sales I will tell you that are four locations are not in the closure.
Unless there is there still on the website, which leads us to believe that there will ultimately be part of the reorganization plan, whether or not tier ones able to pull off a successful reorganization will see operating at a little more conservatism that leads and we just took threat.
Beverage met and be zero in the base budget for the rest.
Okay, Great. That's helpful. And then just shifting over to sort of the balance sheet and disposition. So project focus is complete you came in towards the high end of the leverage range that you laid out.
Mid to high fives on a debt to EBITDA basis, So you're right. There 5.9 times, but you did have a desire to perhaps drive leverage slightly lower and I'm just curious what the updated view around leverages today.
So at the beginning of last year. When we gave our guidance. We said that we would be between 605 nine when the dust settle so we're at five nights were pretty pleased that we hit sort of our internal goal with respect to the end of year 2019 guidance, but to your point are sort of our anchoring leverage point is mid to high fives and sometimes.
I will float above it and sometimes will fall below it I will say as I'm looking out into our model.
You're going to see that number continue to drift down just as we naturally grow EBITDA, which will give us closer to that mid fives.
Mid to high Fives, we want to want to reside in the long term basis.
Yes.
I guess, the only thing I'd add is.
We're extremely comfortable with the strength of our balance sheet today, and obviously debt to EBITDA is a important metric, but when you look at our fixed charge coverage you look at our debt maturity schedule.
And our cash on hand, I mean, we're in the best shape, we've ever been so as it relates to either taking advantage of an opportunity or weathering the future potential storm, we can do we could do both.
So and look as we don't think about this in one year increments. We think about this in three to five year increments more for likely and we look really good over that period of time and he's point.
Are we going to freak out whether its 575, a 59615 for no. It's in that bandwidth that we can operated and particularly with the way we've kind of skillfully managed the maturity schedule.
And our cash position so.
Feeling very good about that into one thing I'd add listen we worked really hard to get the levers, whereas and.
We're going to do whatever it takes to keep it in that range is this is not an exercise and lets de lever and just glad lever backup so again.
We think this is a good comfortable number and we're going to stick there.
Okay. Thank you.
Thank you.
Thank you and our next question comes from Florida.
And Jim from Compass point your line is open.
Great. Thanks for taking my question guys.
John you touched upon any the.
As I look at consensus cap rates for KRG.
Basically risen appears like by about 50 basis points over the past 12 months to the range of.
Seven to seven.
0.1 quiet.
You sold.
Hopefully some of your worst assets or your the your noncore assets over four 540 million of that.
Can you provide any evidence that cap rates.
It should be lower than where the market.
Ascribes your values right now.
Yes, great question, absolutely for Us I mean, I think look.
What I could say the couple of things.
The first part of that yes, we sold our lower tier assets at approximately an eight cap in fact, if you look at 2018 in Hawaii slightly below an eight cap.
And the remaining assets that we own our of a significantly greater quality evidenced by tons and tons of data, we've given you but.
Not at least of which is 20% improvement in our average base rent from before when this program began.
So when we go out and.
Look at assets in the market force for sale like we have recently.
Multiple deals that we've looked at we absolutely could not add anything that is complementary to our portfolio at a cap rate that's higher than six right now.
The majority of the deals that we see that we think are complimentary to our portfolio.
Basically trade in the fives and low six range.
A seven is funny I mean, this is not even theres no way the only way you could do that is in a situation like let's say, even a high six.
Where you're buying an asset that has significant.
Capex deferral.
Quite frankly, similar to what we bought with Nora where it's a good asset, but we've got to spend a lot of money to bring it up to where we wanted to be so I think it's a very important question I think people are missing it tremendously and obviously our stock has moved a lot in the last year, but weren't we're not even close to where we think that should be right.
Right now and I think if you talk to any of our peers.
That are similar in asset quality. They would tell you. The same thing that you. If you want to buy something you think is complimentary that doesnt have a lot of work to do in other words capex to spend to get higher NOI.
No.
Being higher than a six I just don't see it.
Great. Thanks, Thanks sound that that's helpful. So.
The other question I have for you guys is.
If I look at your development pipeline and I compare it looked at it both on an absolute and relative basis compared to your peers.
It seems smaller.
And can you maybe give us some some background into your thinking on on development and redevelopment and and why you pursued this approach.
Sure in terms of why Weve.
And have taken the approach a lot of it has to do with the fact that if you look at 2015 16 17.
18, we were actively engaged particularly 16 through 18 at a significant amount of redevelopment in the portfolio. So frankly some of it we just got to earlier than others.
And then the second part of it is the balance sheet management that we want to be in a position to manage our capital expenditures. We spent a great deal of capital on the big box surge and still have.
16 million yet to spend there, which we view as a de facto redevelopment program in the sense that the returns are higher and have less risk associated with them I think it's a combination of all that and then also we've talked a lot about we're interested in adding value to assets like the three that we mentioned which would be.
Mixed use style development, but we're not interested in doing it just for the sake of doing it.
And when you look at the returns you generate there you have to be very careful. So overall this is definitely part of our strategic plan.
And were based on our size, having two or three of them that we're working on at one time is plenty.
We don't want to overextend, either so I think of the combination of all those things floors.
Thanks appreciate it thank you.
Thank you and again, ladies and gentlemen to ask a question. Please press Star then one now.
And our next question comes from Barry, Oxford from D.A. Davidson Your line is open.
Go ahead, John to build off of that question when you're looking at PC development site, which emmis phase are you like look.
If I could get some raw land in this I must say.
I think that make sense.
Sure Barry I May look right now it just happens to be the three that weve highlighted our in our in our home market.
And they have all they all have mixed use attributes relative are associated with them I think we've been pretty clear that our target markets. You know would be those markets that we deem to be the warmer cheaper markets in the south and west.
Where we would be looking to actively engage we're not as you know we're not actively out looking for raw land and I don't know, Tom we haven't done that and spend years, we were definitely.
With that.
So so I think right now we don't we made a pretty clear that we we've got a certain amount of target markets. You know 15 to 20 markets. We're we're moving in the direction of having the majority of our end and why come from those markets I think we're going to do a lot more education within bester commute.
Entity in the next year about that but I mean look the data is pretty clear when you look at markets like Raleigh in Dallas, and Houston in Orlando and to name a few people are moving there in droves the cost of living is exceptionally lower than the high tax dates.
And we just happen to be positioned to take advantage of it.
Perfect. Thanks for the color guys.
You.
Thank you.
Our next question comes from Chris Lucas from capital One Securities. Your line is open.
Good morning, guys.
Just wanted to get a little.
A better sense as to what the spread is right now between leased and commenced and just sort of understand sort of what the tailwind looks like too.
Rent growth this year.
Yes, so its 230 basis points now and so you'll see sort of at the beginning of the years, you'll see it.
For a little bit more as some of those other boxes are getting side and then you'll see us start to skinny through the through the balance of the year as as more of those boxes open. So it'll it'll still be elevated throughout 2020, but not nearly as l. visit was towards the back half of this year.
Okay. Great. Thanks season, then on the AC Moore's can you remind me how many sites you add and if there's any progress on backfilling. Those locations. Yes. There was just one site and we are in very deep negotiations for backhaul for that site.
That's that's a nice size and.
Location, we feel like we're going to be successful.
Thanks for that and then last question for me just.
John you keep pushing the.
Well up in terms of shop occupancy.
Or shop lease rate, obviously, you'll take a hit with the Dressbarns and then to the degree that theres any anything else that comes through but just big picture.
92, and a half is the new high watermark is their ability to push beyond that or where do you feel like thats kind of where the frictional point is for for shop space.
I don't know Tom shaking his head, yes, we can push.
Yes.
Look we've actually is you know Chris we've talked about this and it. It is an interesting thing to think through and.
At what point do you reach some sort of frictional vacancy on on just locations.
But we're very focused on continuing to push forward.
We will take a couple of hits that and as far as our guidance goes we've been very conservative around what we would lease up but when it comes to small shops, you can move faster and frankly, even in that eight 9000 square foot range like pier, one and Dressbarn, we can move faster than you, Canada 20, 30000 foot box, so I'm optimistic that.
Our team will continue to to overachieve in a pound for pound Chris you look at what we've accomplished is kind of why wanted to look back a little on what we accomplished in the year because.
Accompanies the trade at significantly higher.
Multiples and lower cap rates did not achieve what we achieved and have not laid out guidance that they would achieve more than us this year, but yet we trade where we trade. So we'll reduce continue to kick butt and do what we do.
And we take that as a great challenge so.
I will never say that we that we will be happy going backwards.
As watch out, we'll see where we get to I'll add to things like 92.5%.
Leased it really gives an opportunity to drive rents. So thats one of the benefits of being so highly occupied and the other thing and Toms five tons leasing folks, yes, 92.5% high, but we will not capitulate the other 7%.
So what we'll do our best.
Great. Thank you appreciate it.
Thank you.
Thank you.
I'm showing no further questions from our phone line I'd now like to turn the conference back over to John tight for any closing remarks.
Just wanted to thank everybody for being with us on the call today. Thank everyone for the support and we look forward to continuing to meet with you going forward. Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect everyone have a wonderful day.
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