Q4 2019 Earnings Call

an actual results May differ

Shirley from our forward-looking statement additional information about these risk and uncertainties may be found in our earnings press release issued today and in the documents that we file with the SEC including most recent recent reports on form 10-K and 10-q. In addition. We will be discussing non-gaap Financial measures on today's call including SFO operating and same-store net operating income reconciliation of these non-gaap Financial measures to the most directly comparable gaap measures can be found in today's press release this wrong with our quarterly Financial supplement, and the accompanied slides may be found on our investor relations section of our website at site centers. At this time. It is my pleasure to introduce our chief executive officer. David looks good morning, and thank you for joining our fourth quarter earnings call. Our 2019 performance is a great start to the five-year Business Place.

We laid out our invest.

Your day a little over a year ago and I'm enthusiastic about our teams focus on execution fourth-quarter results Captain, excellent full year foresight centers with same store noi growth and o f f m a significantly ahead of our expectations key drivers for the quarter were better-than-expected property noi and lower G&A which were consistent themes throughout the year as our operations team on revenue and proactively managed expenses.

The fourth quarter also included a number of transactions including the announcement of of our expected JV from our teachers sale and $195 billion dollar Equity offering walk along with a significant repayment of our Blackstone preferred investment and three new acquisitions. Each of these actions are accretive to the company's long-term growth profile and position us well for 2020 and the years ahead. I'd like to put my comments on our fourth-quarter and full-year 2019 results into context with the three components of our faith your business plan leasing Acquisitions and Redevelopment. It's these three activities that underpin our 2020 guidance assumptions and the steady growth within the port phone number first. We releasing story. Our biggest opportunity for growth is to fill our valuable real estate with strong tenants at the top of the list are the 60 month.

Opportunities we've been highlighting over.

The past year we've now executed leases or l o eyes on 43 of those spaces at a blended 38% leasing spread our success over the past year off the primary driver of same store noi growth the largest component of our business plan, which was 5.1% for the fourth quarter of 2019 the acceleration from the third quarter was boosted by early anchor openings and outperformance versus our budget driven by a number of positive variances full-year growth of 3.6% was also well ahead of five year average. We laid out it invest your day supporting the most important part of this plan as anchors and shops recently signed start to open and pay rent. They'll provide a steady job growth for the next several years and are a key driver behind 2020 same store noi guidance of 2.5% and the midpoint of our range including Redevelopment dead.

And 1.5%

Excluding Redevelopment. I'm particularly pleased with the Outlook considering the difficult comparison the 2019 and several announced bankruptcies in the first weeks of the year off the second component of our business plan is Acquisitions as a reminder our five year plan calls for $75 million dollars of annual Investments funded Capital recycling a goal. We achieved in 2019 through the acquisition of three properties in the fourth quarter. I discussed our vintage Plaza deal in Austin Texas last quarter wage. I'm now excited to announce to other investments in Tampa and Portland both are consistent with vintage where we expect vacancy and Below Market leases to produce and cash flow growth. Well in excess of our portfolio average additionally despite different formats, both properties benefit from adjacent natural traffic drivers South Town Center in Tampa, Florida.

Is a collection of service oriented shops surrounded by top-performing sprouts and Publix grocery anchors in an affluent submarket. The blocks in Portland. Oregon is a bit more unique long as it's a collection of urban retail condos at the base of 10 different apartment buildings in the Pearl District this submarket at the footsteps of downtown Portland has seen significant population growth with 5,800 Apartments constructed since 2011 alone the majority of the leases in our properties, which are occupied by a mix of restaurants Banks and fitness users were sick prior to the population growth. I described providing a significant opportunity to increase cash flow upon lease expiration retail properties with true rent growth are challenging to identify, but our ability to use customer data gives us a much clearer picture of the economic demand for space and it allows us to be less concerned with the retail format and more FAQ.

traffic

Both of these recent Investments have very high customer traffic and approve and roll up in Market rents with a scarcity of competition and are measurable mark-to-market on renewals. We are confident that economics on these Acquisitions deliver a return that's high enough to Warrant our use of capital. We remain optimistic that we'll be able to Source additional Investments over the course of June 2020 all of which will highlight our bottom-up format agnostic approach while at the same time being mindful of our cost of capital.

Finally, we're continuing to make progress on the third component of our business plan Redevelopment. We started the second phase at West Bay Plaza during the fourth quarter and are seeing very strong demand for the remaining space which will complete the transformation of our Center tenants are also set to open over the course of 2020 at Venice and at the collection of Brandon Boulevard wrapping up those projects home finally work continues on our pipeline of large-scale entitlement projects and we remain focused on realising value on these sites, whether it means capturing profits early through a sale dedicating risk through a joint venture or executing on our own.

in

For a site end of the year with a much stronger portfolio of assets a better balance sheet and significant and bedded cash flow growth all of which supports our Five-Year Plan. I expect mm mm to be another successful year as we continue to benefit from an occupancy uplift driven by strong tenant demand and flexibility to invest opportunistically.

Lastly we were very fortunate to a point. Connor finnerty is our new Chief Financial Officer during the fourth quarter and on behalf of all of our staff and the board of directors. I want to welcome him to the executive team. Connor has a proven track record as an investor and has earned tremendous respect throughout our organization over the past three years with his leadership of our finance and fp&a departments. I also want to thank Matt osterbauer for his incredible contributions to this company and his friendship over the past five years. We wish him. Well at his next adventure and are sure he will make a successful impact like home here at site centers. And with that. I'll hand the call over to Mike makanan to discuss our operating results.

Thank you David. I'm extremely pleased with our operational results for the fourth quarter.

And so your 2019 quarterly on a while I was ahead of plan do to lower bad debt bankruptcy settlement claims higher overage and percentage rent and earlier rent commencements anchor and Shop like volumes remain robust, and we are encouraged about the prospects to backfill spaces occupied by tenants that have recently filed for bankruptcy since the RV I spin we have repeatedly demonstrated that we could get space back from tenants. We can release at a healthy mark-to-market to a diverse group of channels. We open for Consolidated anchors in the fourth quarter the majority of them earlier than expected and now he's twenty-five of the 60 anchor spaces identified other investor day open and rent paying another 13 are signed but not yet open and 5 are in advanced lease negotiation as David mentioned we expect these openings along with the backfill of 2019 and 2020 small shop bankruptcies to provide a multi-year Tailwind.

New lease spreads and matter of fact of rents for the quarter were right in line with our trailing-twelve-month averages since the spend renewal spreads were softer though due in part to several grocery anchors that exercise Faith options as well as two short term renewals of anchor tenants that Redevelopment properties which were included in our renewal spreads as I've mentioned a number of times previously are smaller denominator will create something on our operating metrics. The least rate for the portfolio is down forty basis points this quarter largely due to the Dress Barn closures strong leasing activity partially mitigated these move-outs with Iraq operations team completing the highest quarterly shop volume in two years demand for shop space is deep and I feel very good about our momentum finally are commenced rate was effectively unchanging and the 290 basis-point least occupied Gap provides confidence in our ability to achieve our five-year 2.75% Same store noi growth Target even with a 1.5% off.

annual average and

Reserve for tenant bankruptcies with that. I'll hand the call over to Connor. Thanks Mike. I'll comment first on our balance sheet discuss fourth-quarter and full-year earnings and then close with thoughts on twenty twenty guys first on the balance sheet our position remains very strong with pro-rata debt-to-ebitda in the quarter at five and half times compared to six and half times in the third quarter of 2018 despite the mid-quarter closings of Tampa in Portland Acquisitions. Our maturities also remain in great shape with a weighted average term of 5.2 years. We have significant liquidity as of year-end with almost full availability on our $950 credit and just three of our 70 Consolidated properties and comfort as of today. Additionally. We have three other sources of future Capital first is the hundred seventy million dollars of gross proceeds expect to receive from the closing the teachers joint venture in the coming weeks. The second is the $113 remaining preferred investment in our black to enjoy Adventure. We received almost forty seven million dollars of the birth.

In the fourth quarter with the sale of Eastland Center.

As a joint ventures continue to unwind the third source is the capital. We eventually expect to receive through the ultimate liquidation of RBI. We receive the second half of the original thirty-four million dollar eight people in the fourth quarter and have the $190 preferred remaining.

All of these sources proceeds from teachers the Blackstone preferred in the RV. I preferred along with growing ibadah position the company to remain well below are stated long-term leverage maximum of six times that the Buddha while strategically deploying Capital where we find attractive opportunities that said as David mentioned we are mindful of our cost of capital and don't expect to close anything in the near-term turning off quarter and full-year 2019 results for the fourth quarter as previously mentioned. We benefited from a number of positive variances versus our budget first operations were ahead of plan due to the factors outlined life which were fairly broad-based. Second bankruptcies had a much smaller impact than anticipated and we recognize $650,000 of revenues from dressbarn and Forever 21, which we did not expect to occur. Lastly GNA includes a 1.8 million dollar one-time benefit which positively impact the results by a penny

the significant outperformance in the 4th

Push star full year results to a dollar twenty cents per share compared to the top end of our guidance range of a dollar twenty two importantly results demonstrated measurable ofo growth from 2018 after adjusting for the impact that's been highlighting. This company's ability to execute and drive cash flow per share all turn out to our 2020 guidance. We are introducing ofo guidance of a dollar ten months to a dollar forty dollars per share driven by same store and Ally excluding Redevelopment of one to 2% and including Redevelopment of two to 3% The same store noi increase is driven in part by the anchor rent commencements David and Mike discussed partially offset by a 60 basis-point headwind from one point eight million dollars of bankruptcy Claims Settlement proceeds received in 2019 and bad debt off due to the adoption of the new lease accounting standard.

Guidance for 2020 JV fees of 16 to 20 million dollars is unchanged with the sale of our stake in the teachers joint venture the largest driver of the year-over-year decline. I would expect roughly a third of these to be recognized in the first quarter with the remaining quarters equally balanced in terms of rvi fees based on assets sales completed to date rvi fees will be at most $19 and twenty twenty assuming no other assets are sold that said we expect the company to continue to execute on his business plan to realize value so our guidance reflects additional asset sales.

interesting come

Also be lower and 2020 due to a lower average balance of our Blackstone preferred and the mezzanine loan repayment in the fourth quarter. Lastly. There are a number of moving pieces from the fourth quarter of 2019 to the birth of 20 21st weighted average shares will be higher at roughly $195 million due to the full quarter impact from the equity offering second GNA will be higher as we won't have the one time been a recorded this quarter third. Ancillary, and other income is expected to be lower by one point five million dollars due to non recurring Revenue received in the fourth quarter and forth in addition to typical seasonality that leaves the lower end aligned. The first quarter. We also will not not have revenue from dressbarn Bar Louie and Village Inn, totaling $650,000 as Mike mentioned. We are excited about the back prospects, but there will likely be limited revenue from these spaces and twenty-twenty with that. I will hand the call back to David for some closing comments. Thank you Connor in conclusion our first full year poem.

Ben provides evidence of

This organization's ability to grow take decisive actions and execute on transactions. We remain ahead of schedule and executing on the operational Redevelopment and opportunistic investing goals that underlaid plan to produce compelling growth over the next five years and expect another successful year in 2020. The operator we are ready to take questions. Thank you. We will now begin the question-and-answer session to ask a question. You may press star then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press star then Thursday at this time. We will pause momentarily to assemble our roster.

And the first question will come from Todd Thomas with keybanc capital markets, please go ahead. Hi. Thanks. Good morning. First question. So 2019 was a clearly, you know, a less impactful Year from closures and bankruptcies and I think last quarter you commented that in your view. It was more timing related and that you anticipate, you know, more transition. So, you know to start the year wage seen some announcements perhaps there's more to come but what's your updated view on the health of the retailer environment in general or conditions improving at the margin or they getting worse? What's your what's your sense around the edge of retail disruption that you're seeing?

Hey Todd.

Morning is David. Um, I would say that our opinion of the change is occurring in the Retail Landscape really haven't changed from what has changed is the ones that we thought were risky last month turned out to be less. So and some of the ones that we did not think were risky turned out to be more. So so if you take the surprises to the positive and the surprises to the negative, I think we feel like our stance on the continued changing of a tenant roster continues. The only thing I'd add to that taught is remember at our investor day. We included a hundred fifty basis points of the universe herb. So we're we're anticipating more closer range are we can be can absorb more closures of the course of a five-year budget and the exciting part is you'll see years like 2019 where we have very limited closures and you can see outperformance. But in years where there are more closures we can we can change that and and are at least occupied Gap helps us for this year on a front.

Got it. And then with regards to that hundred fifty basis points, you know, how should we think about this year, you know, if you could maybe help break out, you know a little bit of detail around sort of the budget for the year in terms of the property level budgeting that you've done relative to that additional cushion that that might be embedded in the guide dog shirt on I'll let Connor speak specifically to the budget but I I would kind of reference you back to our investor day conference, which was just a little over a year ago. And what we said at that point in time was that the disruption and Retail is going to give this company opportunities, but we should assume some churn and the churn that we that we have been witnessing allowed us to give a five-year plan that included a hundred and fifty basis points, which was the sum of credit loss and bankruptcy Reserve, but that was a blended average over five years if I were to kind of wage

You towards a thinking process. I think it's fair to assume that.

On average a hundred and fifty basis points a year is going to be our our budget and just I don't have top specifically for twenty. You know, it's David mention we're using assumptions consistent with The Five-Year Plan. So it's a hundred fifty basis points of combined bad debt and bankruptcy Reserves.

Okay, and you recaptured I guess a few restaurants. I think you mentioned Bar Louie specifically is that 10 in specific or are you seeing any concerns or changes at all in the restaurant sector?

This is like those two were somewhat surprising Village Inn & Bar Louie aggregate lie across the portfolio the restaurant business tends to be quite healthy.

Okay. Got it in just a quick last one the bills that's listed in the supplement The Last Tenant on your top 50 is that is that bills a separate entity from from the be found by Stage Stores or is that is that the the the bells that you're referencing is separate and unrelated to Stage Stores. Got it. All right. Thank you.

The next question will be from Christy McElroy with Citigroup, please go ahead. Hey, good morning. Everyone just to follow up on Todd's question in regards to the buffer and guidance. I think we're all in tune with some of the sort of major drivers there including the management and our VIP income and the interesting, and there was also the GNA impact. I just, you know, in terms of sort of reconciling and Bridging the Gap that $0.33 in in fourth quarter into you know, what's a you know, a much lower $0.28 quarterly Run next year. Just wanted to track, you know, gauge the level of conservatism here in that hundred fifty basis points. And you know Mike you mentioned that operations were ahead of plan, you know, are you being extra conservative here or you know more realistic I guess we're just I'm just trying to figure out of that thirty-three cents. You know, how much of that is sort of operations and and vacancy which I mean it seems like your same.

I grow space seems pretty good, too.

Just trying to reconcile those two. Hi Christy is David, you know, one of the benefits of only having seventy wholly-owned assets is that it's it's easy for us to do bottom-up budgeting a.m. Every single Suite with a lot of frequency. So I would say that any time we come out with a budget on a portfolio of this size. You can assume that it's based on individual sweets and therefore it's a realistic budget. Um, if you look at last year a couple of things happen number one the construction team at at the company were able to get a number of your tenants opened a little bit earlier than we had expected and a lot of that comes down to, you know, permitting and asking the tenant to open in their black out. And so I think we we pulled forward some Revenue that was a little bit unexpected but from a budgeting standpoint. It really is a realistic budget for 2020. The only thing I'd had Chris each your point on on the moving pieces the three biggest pieces for next year attributed. Yep.

The decline or rvi fees and interest income and those three pieces alone are about fourteen cents of headwinds. So that's really the the biggest driver of the year of your change to your point.

You know, it's February 13th where you know we have about that budget. We feel very comfortable budget today. But to David points are a number of other factors and assumptions could change our timing and estimates of the course of the year and and Connor you mentioned GNA next year, but I'm wondering if you could get a range of what's embedded in SFO especially in regard to the you know, how the r v i c income is changing and sort of your expectations around, you know, being able to lower G&A with you know, rvi coming off of sure. So we talked about nineteen as kind of the trough year for g n a and so we stopped riding disclosure on that because you think about the last three years we were company in transition there a lot of moving pieces and we're trying to provide investment Community as much clarity as we could provide for next year. You know, we're not a company in transition team or excuse me for this year. I would expect call it 58 to fifty million $59. Excuse me of Jeannie for the year. And again, we've kind of completed the handoff of rvi fees and lower berths.

And so what expect there to be, you know, the kind of breakdown or the correlation to be lower G&A and lower rvi fees to end in 2020.

Okay, and just lastly I think you mentioned he remarks that you do expect more decisions this year. You know, what how are you thinking about sort of the the asset sales that will continue versus Thursday. It's that you would sell in the wholly-owned side. Yeah. We don't we don't have anything budgeted to be selling. It doesn't mean that opportunistically we might decide to recycle a property but um wage are budgeting for wholly-owned dispositions on the JV side. It's a little bit out of our hands, you know, the the Blackstone joint venture continues to sell assets but really get under their their guidance and Direction and any of the other joint ventures that have dispositions it really has more to do with the partner than it has us, right? Okay. Thank you.

The next question will be from Rich Hill with Morgan Stanley, please go ahead. Hey, good morning guys. First of all, thank you for the transparency on same-store analog I'm with and without Redevelopment, but I wanted to go back to maybe the to 2.75% same store noi growth that you for your fiber plan that you disclosed investor day. I think that excluded Redevelopment and obviously redevelopments a big part of your story. So would you be willing to think about your five year plan for in a life with including Redevelopment and and light of the additional disclosure this morning Rich. That's a very good comment you are indeed. Correct, the investor Day presentation that presented a 1.75% average, uh seems to run a wide growth was excluding Redevelopment. The reason that we have not talked about A Five-Year Plan for including Redevelopment is dead.

It depends on whether we're going to invest.

In the Redevelopment assets, once we achieve entitlements or whether we're going to dispose of that land and an air rights and and use it to invest in other properties so far to date when we have entitled office mixed-use or multi-family property. We have selected to sell the property sell an out parcel or ground lease it and so those have different effects that are pretty dramatic on same-store off. And so that's why I don't think it's all that wise for us to look ahead over the next couple of years having said that on an annual basis when we come out with guidance. I I do think it's appropriate that we that we give you as much clarity as we can.

Got it, but but just to clarify that and add to that one way or another total gross should be going up though because you're either going to be redeveloping it which which should be a positive or you wouldn't do it. If you're going to be having proceeds you be able to reinvest those proceeds in other properties or pay down debt or something else. Is that sort of the Fairway to think about it? Yeah what I'm trying to quantify is there upside down. I mean, I I think of it as you know, if we entitled a piece of property that has real value if we ground lease it that's going to show up in same-store. If we redevelop it it'll take capex and it'll show up in in the Redevelopment inclusive same store. And if we sell the sell the land and reinvested in a new property, it's not going to show up in same-store because it's not in the pool the only home address on that last comment from David remember the 2.75 was the static portfolio that we owned at the investor day. So, you know, one of the things David talked about the three assets we bought this quarter were really excited about and one of the reasons were exposed.

We think it's added.

You have to our growth rate. So it will take time for those assets come into the pool et cetera. But you know, that's another factor to consider as you think through seems to run a line in a white growth for the whole portfolio. You got it and ended up going back to some of the prepared remarks and the significant amount of cash that you're coming that you have coming in. Can you just talk through you know how you might allocate that cash right now and how you're thinking about it versus you know, paying down debt buying new Properties or or you know, maybe other sources of use of the cash. Yeah, I'd love to we you know, we we do have an exciting tilt here where I I expect us to have some Capital if you look at the last year we paid down debt we paid down pref we bought assets and we bought back stock and I think depending on what we see in the open market depending on our debt maturity schedule depending on uh, you know, where where the stock is trading. I think we'll we'll make prudent decisions. The reality is, you know, we've tried very birth.

To be good stewards of shareholder.

Capital and the amount of shareholder Capital that's coming back to this company could be significant, which means we need to think very carefully about the Acquisitions and and where we put money.

Got it. Okay guys, that's it for me. Thanks. Thanks. Next question comes from Alexander Goldfarb with Piper Sandler.

Hey, good morning morning. So just a few questions here first. Just going to the guidance and the hundred and fifty of cushions that's you know for BK's and closings wage is is Pier One on top of that or is Pier 1 in that 150 Galaxy up here one nothing's been announced the day there was a publicly disclosed list where wage for wholly owned properties. But as it today, they're paying rent and we have leases with them. So, you know, it's kind of the status quo for Pier One today.

Okay, but but presumably Connor, I mean you guys budgeted something in your numbers, you know, I'm assuming that you know those for clothes just to be on the safe side. Correct? Presumably, you know, we're aware of all the announcements you'll Alex and you know, we've we've done this before and we're anticipating the worst or can anticipate the worst.

Okay.

Great, and then on the RV I you know, it seems like the is fine, you know on the liquidation side just curious the update on Puerto Rico. It sounds like it's pretty tough retail disposition Market, but maybe as you guys look at our dispositions for this year. There's you know, you don't need to sell anything from there to continue, you know at a healthy Pace liquid. So maybe you can just give us some framework around Pace a liquidation and how much of that depends on being able to Target the the Puerto Rican market for for asset sales. Hey Alexis David, good morning. I really don't feel comfortable commenting on rbi's business strategy or or execution. It has a separate board as you know, they do press release and the Press Lounge is I think you can look at the pace of asset sales and whether they've been Puerto Rico or us and I think you can make a reasonably judgment about the pace of dispositions in 2020, which is what we do is log.

You know we look at our internal budgeting.

Okay, and then just finally I appreciate your comments on you know that you're not really looking for any wholly-owned asset sales continue to focus on jv's but you've been acquiring assets that have you know, either all small tenant or predominantly small tenant to help Noy growth. So David is you look at what you're thinking about targeting for acquisition. Whether it's this year or next year. How do you think about these smaller candidate assets as improving the overall noi growth profile the company do you expect that through these Acquisitions you grow, you know twenty or fifty basis points of extra Noy that you'll be able to get in the Run Raider. How should we be thinking about that? And what you're looking at Alex? It's a really good question is you imagine, you know with the amount of capital we might have to invest we spend a lot of time thinking about how we want to deploy capital and you know, I've mentioned several times the fact that retail landlords have a lot more data than we all used to have even log.

years ago and

Um, if I look at the markets today, I see low construction deliveries High development costs High occupancy levels and you know scarcity of good space and Wealthy submarkets as this company site centers starts to get through our occupancy build in the next two years as you can imagine. We're going to become a renewal story off and when you're buying properties and in high-income submarkets that are highly occupied the renewal is really what you're depending on for and rent growth and that's why they were using a lot of customer data to really look carefully at what each tenant is paying compare that to other tenants that are similar in the market and and figure out where we can build and noi growth it's you know, arguably a lot higher than our internal core. We're not specifically avoiding anchor spaces. It's just that as we look to the mom.

And say where can we get real growth? The rent growth is is really coming for.

A smaller shops and Wealthy submarkets. The only thing I would just highlight Alex is as David mentioned is prepared remarks. We are format agnostic right? You'll see us by wide range of properties. You're absolutely right Thursday last quarter. We bought three assets that were were a majority of shops, but you're likely to see us by kind of across the retail Spectrum in terms of format. We are Bottoms Up form at Diagnostics.

Thank you.

And the next question will be from keep in Kim with SunTrust, please go ahead.

Thanks, I guess to go back to the answer. I know why guidance you guys mentioned your opening remarks that Village Inn & Bar Louie accounted for about $650,000 of rent is that in your five-digit and the hundred fifty basis points is on top of that or does that need to that I missed the first part of your question. You said the the 650,000? Yeah is that wage on top of the hundred fifty basis points Reserve or would that be ironic that reserved know? So the The Bar Louie the address bar and the Village Inn, that's income. We are no longer receiving that's in our budget that's not part of the reserve the reserve or if your future bankruptcies that haven't been announced a date. So again, just to repeat the point Bar Louie dressbarn Village in our in our budget in our one to 2% same-store and are not a part of our future Reserve.

Got it.

And can you just comment on any kind of cat packs transfer seeing as it comes to tenant negotiations and if there's anything noticeable?

I think a a portfolio of this size. It's hard to make any abroad comparisons, but I'll let my cancer that yeah, I mean as you can see by our reported net effect of rents, I mean the black box is remaining fairly consistent. The anchor tenants are still expecting similar packages that they were expecting over the last several years and on our own shop capex that remains relatively modest.

Okay, but when I looked at the the capex at least a 10 and allows part as a percent of the new rent value, it does seem like it's creeping higher. I know it's just one quarter. But yeah, I think you just said the answer is just one quarter and I think you're going to see a little bit of bumpiness quarter-to-quarter with a portfolio of this size. But aggregate Lee speaking. We're not seeing any substantial Trends or changes. I mean keep in one thing that we always we always like to remind people is that as long as we're in a a lease up scenario especially lease up of larger spaces capex is going to maintain a fairly complicated State once that starts to wear thin and the the lease to occupy Gap closes the company becomes more of a renewal story and on renewals in in high-income areas. You can imagine your your renewing with very little t i which is why our assumption is that our noi growth is Oscar going to flow through to a f f o Grove?

Okay. Thank you. The next question comes from Vince tabone with Green Street advisors, please go ahead.

Hey, good morning. Could you discuss how the Pier 1 closures are being negotiated? Are you expecting any lease term fees from this or are they using you know, maybe similar to dressbarn the Thursday of bankruptcy to get out of its leases early without paying anything to landlords dance. I would love to speculate and good morning. But I I think I'll I think I'll withhold simply because we're we're not under any knowledge that would help us shed any light on it.

Fair enough and then maybe just shifting gears. Are you able to share the cap rates on the Acquisitions or if you just talk maybe a little bit more broadly as well about what you're seeing in the you know private transaction market today. Yeah. Sure. Well as a reminder the Investments that we made last year were made possible by recycling Capital when we did a joint venture with a Chinese institution about a year off the proceeds from that transaction were used to pay down debt buy back stock and make some Acquisitions. So the the Blended return of all those activities was far in excess of what we think the the return is on. Our stock having said that that the Acquisitions on their own blend it to a six cap rate.

Okay, great. And then just like are you are you seeing any big shifts in the in the private transaction Market changes in debt availability or you know Capital interest or pretty similar to the last let's say six months or so long and I certainly in the last six months. I I haven't seen anything that's been noteworthy that the ability to to secure debt seems readily available and you know, we've sold a lot of properties out of joint ventures. And so I think we've got a pretty good window on the disposition outlook on the acquisition side, you know, it seems like the larger properties are are pretty actively pursued by large institutions and the smaller properties. It's it's a little bit more of a mixed crowd with some private and some some public but the demand is the demand for Acquisitions is is still pretty steep.

Okay, interesting one last one for me. Could you just share a little bit more additional detail in the Redevelopment projects? They're expecting contribute. This hundred basis points the same store this year and just to clarify want to make sure I understand all the major Redevelopment are excluded from same-store still that that correct so events that major Redevelopment would be included in the same store with Redevelopment. Got it. Okay. So the the assets contributing this year are the collection of Brandon Van Ness, and then the first Fay of phase, excuse me West Bay

Got it.

Okay. Just want to clarify that. Thank you. Absolutely.

The next question is from West with RBC Capital markets. Yeah, good morning guys looking at the reserve on the preferred Equity investment is that driven by a cap rate assumption changes in Hawaii at the property? So since you know each quarter, we marked to Market that that valuation Reserve, excuse me of the preferred balance and we go property by property working with our transactions and our funds team. I can't recall specifically what drove the three million dollar change this quarter. If your call last quarter we mentioned it was really just an anchor not renewing just given the size and that portfolio and thousands of our preferred is really sensitive to input. So it's a long way of saying I can't recall what what drove it this quarter but it's usually a you know, one or two items that move it to David's point. We it's really odd question. We haven't seen calibrate move. It's typically an operation change. Okay, that makes sense. And then looking at the 17 Acres of the 60 that you're still working on. Are you actively marketing all that space?

And then since the investor day, have you gotten any more Anchorage back? There's a good questions to answer to are we marketing all of that space? The answer is know. If you look at page Seventeen of our supplement, you'll see some of the major Redevelopment have a next to them.

In in those cases, we're sitting on boxes and we're holding them from being leased but they're part of that sixty that we mentioned at investor day because we're working on entitlements and thousands of how we got anchors back. Absolutely West and we there's uh a normal amount that comes back every single year. It's a it's a point that's not lost on us and it's it highlights the the relevance of the 6th Yankers dead, you know, we're excited about their tail wind for the next couple of years, but they're diminishing in terms of importance and there's other kind of more material anchors that we have that are either end lease up or baking today. So it's a long way of saying absolutely. Yes, sir other Bankers anchors that have come back to us in the last, you know, eighteen months and to invest your day and you know, that's kind of a port of our normal course of business and I guess a follow-up to that would be for those anchors. I expect you would continue to age I'm back is a new lease going to be comparable to what you do with the 60. Yeah. They be part of our same-store pool in our carpool for our spreads, right and you've seen our newly spread kind of hover in that load. Yep.

Did area and today be included in that pool was not included, but the the comparable level like again from the sixties you highlighted the big pop a certain number of boxes. Come back every single year. I'm okay. Thanks.

The next question comes from Hong sang with JPMorgan, please. Go ahead. Yeah. Hi guys. Just a quick question for me this looking at your footnote, but no GPS home games store excluding lost rent.

Well, they to lease terminations is that basically like a same-store excluding bankruptcy number? So how long the reference there is starting the third quarter of nineteen. We provided seems rental. I am and without the impact of lost rent from termination fees starting in 20 20 to be comparable to our peer group. We are excluding any impact from termination fees with that's lost rent over the term fee itself. And that's so that footnote was simply a call out to let the investment Community know that starting at twenty twenty again, we will have no impact from term fees with this loss rent or the term fee itself going forward. You look in 2019 the impact of the loss friend from trim piece was fairly immaterial. I think it's about fifteen basis points. But again, just to improve our comparability to the peer group. We exclude all these term impact for 6:20 and onwards.

Got cool. Thank you. You're welcome.

The next question will be from Flores Vantage. Come with compass point, please go ahead.

Great. Thanks guys for taking my question. Just question on the hundred and fifty basis points of of Reserve that you have. Have you guys what what the the bank down between rent lost rent as well as cam reconciliations?

How's that compared to Historic levels Forest? We haven't provided that level of detail. What I would just say is we focus on Lost Revenue. So what does that space rent with us percentage ran over Trent boult cam it it's it's all the same to us as lost Revenue the other piece that that David and I both mentioned is there's a bad debt component, right? And so our bad debt, we have a separate bad debt assumption. That is Renee to income or Revenue. Excuse me, which is Cam plus base rent as well. So again, I don't, you know, we're not going to provide that level of detail, whatever just tell you is we focus on Lost Revenue which includes all the facts identified.

Okay. Thanks. That's it.

Next up is Linda to sigh with Jeffrey's please go ahead.

Hi, what are your occupancy goals for twenty twenty and it seems like the least occupied narrow this quarter versus third quarter. Would you expect this trend to continue?

Linda David, we were very happy with the amount of leasing production out of the team. We had a fantastic year last year. I will say that our goals have more to do with leasing space to them right tenants and we don't have occupancy goals for the leasing team or for the company which is why we really don't mention occupancy goals in the guidance.

Thanks, and then on the renewal spreads understanding there were a couple one-time items and you're more focused on leasing up right now. What level would you expect to generate for renewals overall in 2020 understanding a pretty volatile? I would I would expect the overall renewal rate to be similar to what we've seen in the past several quarters. We did have some one-time events this quarter that tended to soften it a bit odd number for investor day. We talked about a blended spread of seven and half percent in the range of 5 to 10% So we're kind of consistent with that range on a trailing 12-month basis.

Thanks for that. And then just one final one. Sorry if this is an obvious question, but for your separate bad debt assumption, does that include spaces where you don't expect a tenant to renew and it might be hard to get that space right away. No, it's about bad. Dad is really just about Revenue recognition. Right? So that's tenants that are in place today that either two floors is point. Don't pay Pam or or don't pay base rent. So it's really a foundation of existing tenants. You see it on the income statement for rent paying tenants. The bankruptcy Reserve is a function of tennis that go bankrupt and just stopped hanging around.

Okay. I'm happy to if you want I'm happy to

Talk about that offline as well. Okay, great. Thanks.

The next question will come from Chris Lucas with Capital One securities.

Hey, good morning guys, maybe a little color on so we've got 25 or the anchors that have begun paying rent. What's your expectation for this year? In terms of opening of the Cadence of of of those anchor openings for 2020, you know typically as you know anchors like to open around the holidays, so you'll see those, you know back half waited or back-end weighted I should say in the fourth quarter that's consistent with the trends. We saw nineteen and eighteen, you know, absolutely you could have some some folks open midyear, but the the the majority will be kind of a back half or fourth quarter waiting any sense the number of actors that will open the sheer know. I mean if if we have a lease sign, you know, typically you'd open up in the same, you know year but there's always folks that have larger build-outs more complicated build-outs or permitting wage. They could push it to Twenty-One. So, you know, the other thing I'd say is you know, we're providing the anchors by count within that count. There's a wide range of breaths, right so you could have anchors that pay, you know, yep.

Tire Renton in a higher income area that could be more material than one that pays, you know, lower-income or lower rent. Excuse me. So again, I think you just see the impact likely in the fourth quarter, but you know, you could see the one slope as well but count is now what's going to drive growth.

Okay, and then David, I don't know if I heard the answer.

Did you provide the cap rate for the two assets you described in the in the investor presentation? I did but I had a long Soliloquy before I mentioned it. But yeah, the the Acquisitions last year all in aggregate Blended to a 6 cab. Okay, and then the the investment thesis behind the two assets that again you described here is it mostly below-market rent related or is it re merchandising opportunity what song over there for these two in particular the opportunity is renewal spreads. Okay. And then last question for me just last time you guys bought stock back was I think a stock was around eleven seventy-five or how do you think about the relative value today? Given the portfolio significantly D risk of balance sheets much better shape et cetera, et cetera.

Well, I agree the balance sheets in better shape and I think the company's been de-risked. I do think we do have some complexity still, you know, when when Connor goes through the sources of capital this year's there's a number of them and that complexity I think and sometimes you know show up in in the discount. So I think you know, we'll we'll we'll see what happens over the course of the next couple of quarters off, but we feel pretty good about the business plan. Okay. Thank you. That's all I had.

Thanks, Chris.

Next question is from Samir Kunal with evercore.

Hey, hey Connor. Good morning. I'm sorry if I missed this, but I know there's a lot of focus on same store noi growth. But when I look at your ffo, I mean, I mean, I know there's a lot of variability with fee income tax fees. I'm just trying to figure out what point can we start to see a bottom-up from an ethical standpoint is any color around that would be very helpful. Sure. So let me just walk through Thursday take moving pieces for 2020 vs 2019 and I think that provide some color on on the kind of future growth rate of the company. So as I mentioned to I think it was Christy jvc's our vip's and interesting, the 13th sense of of head winds on top of that. We've got the higher g n a and a higher Share account which are roughly two to three pennies as well and then lower other income in term fees your birth mother call to pennies that takes you from a dollar twenty seven to call it a dollar nine round numbers. And then from there we have within a line growth what you're seeing in 2020 and this is something we've tried to highlight over the last couple of years.

Starr investigation here is the kind of handoff from low.

For our vip's to the reinvest in the capital that both David and I have talked about so it's really going to be a function of when and and how we reinvest that capital and the back half of this year and into twenty Twenty-One Samir would just tell you as we feel really good about our five-year business plan in the 5% off. Oh growth that we outlined and so, you know, as you see three invest that capital of course of twenty twenty, I think you'll start to see a lot more visibility on Thursday and future growth.

So it's fair to assume that it's sort of twenty-twenty is is is the bottom and then you know that sort of you'll start to see the inflection this point. I think you'll start to see that growth profile develop with the course of your Samir, correct? Okay. All right. Thanks. You're welcome. Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to David Luke's for any closing remarks. Thank you all for joining our call ahead. We'll see you either next quarter or at the conference.

The conference has now concluded thank you for attending today's presentation. You may now disconnect your lines.

Thursday