Acadia Realty Trust
Q4 2014 Earnings Call Transcript

Published: 18 Feb 2015

[Operator:]

Welcome to the Fourth Quarter 2014 Acadia Realty Trust Earnings Conference Call. As a reminder, this conference is being recorded. At this time all audience lines have been placed on mute. We will conduct a question-and-answer session following the formal presentation. [Operator Instructions]. I will now turn the call over to Amy Racanello, Vice President of Capital Markets and Investments. Please proceed.

[Amy Racanello:]

Good afternoon and thank you for joining us for the fourth quarter 2014 Acadia Realty Trust earnings conference call. Participating in today’s call will be Kenneth Bernstein, President and Chief Executive Officer; and Jon Grisham, Chief Financial Officer. Before we begin, please be aware that statements made during the call that are not historical, may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties including those disclosed in the Company’s most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, February 18, 2015 and the Company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures including funds from operations and net operating income. Please see Acadia’s earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller to give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue and we will answer as time permits. With that I will now turn the call over to Ken.

[Kenneth Bernstein:]

Thanks Amy. Good afternoon, thanks for joining us. Today I’ll start with an overview of our fourth quarter as well as our 2014 accomplishments; Jon will review our operating results and our 2015 guidance. During the fourth quarter, we continued to make steady progress across our dual platforms

[Jon Grisham:]

Good afternoon. I’d like to go over our 2014 core portfolio performance; then turn to 2014 earnings; and lastly, our 2015 guidance. Starting with the core portfolio, the overall strength of our 2014 performance was consistent with our expectations for a quality street urban and suburban retail portfolio. Throughout 2014, our occupancy has been stable. We started the year out at 95.6% and ended the year at 95.9% and at year-end, we were 97% leased. Same property NOI for the fourth quarter was up 4%; for the full year, up 5.2%, which exceeded our initial 2014 forecast. Redevelopment primarily at our Crossroads property accounted for about 130 basis points of this annual growth with primarily increases in rent across the balance of the portfolio accounting for the rest. Turning to earnings, for 2014, our earnings grew by $0.09 or 7% over 2013 from $1.26 to 1.35 which are both before acquisition costs. Almost all of this growth, $0.08 of the $0.09 was in the core. This was driven by both, the $450 million of 2014 core acquisitions and the full year impact of our 2013 acquisitions as well as by the 5.2% NOI growth, which translated through as approximately $0.02. And for 2015, we expect the core to again generate about 8% earnings growth. And whereas for 2014, the funds were not a significant driver, for 2015 as we move towards the monetization of Fund III, we expect additional growth from the fund platform on top of the core growth. But I’ll discuss 2015 in further detail in a few minutes. Back to 2014, one thing worth noting is when we compare our full year 2014 FFO at $1.35 against our initial forecast of $1.30 to $1.40 is that there was $0.04 of short-term earnings dilution in the second half of the year which when adjusted for would have put us at the top of our original guidance. This dilution was from the sale of Fund III and Fund IV’s Lincoln Road portfolios which we’ve previously discussed and the fourth quarter equity issuance for the acquisition of 840 North Michigan and City Center. All are long-term accretive transactions with the dilution from the fund sales temporary until the redeployment into future fund investments and importantly better positioning us to increase our 20% co-investment interest to 36% in the funds due to our carried interest. Looking at the balance sheet at the end of 2014, we’re in great shape going into 2015 with low leverage and strong liquidity. We were disciplined in funding our 2014 investments, consistent with our long-term strategy of match-funding and maintaining overall low leverage levels. We sourced our equity through ATM, OP units, block trades and recycled capital in a cost effective manner with a focus on NAV accretion. And in terms of liquidity for the core, we have no amounts drawn on our line and we’ve recently renewed our ATM for $200 million. And in the Funds, specifically Fund IV, we funded and/or allocated 40% of the committed capital which leaves us with another $300 million of future equity. With this backdrop of a solid 2014 performance and healthy balance sheet, I’d like to now turn to our earnings expectations for 2015. Again, consistent with prior years, our guidance is before any potential acquisition related expenses. We’re forecasting a 2015 FFO range of $1.48 to $1.56 which when compared to 2014, represents a 10% to 15% increase in earnings. As I mentioned, core acquisitions and core property NOI are expected to account for about half of this or 8% growth. And of this 8% or $0.11, $0.08 is expected from external core growth and $0.03 from non-contractual NOI growth. The fund platform is expected to contribute more meaningfully to 2015 growth on a net basis. We expect 11% earnings growth primarily as a result of the monetization of fund assets. Counter balancing this fund growth is a deliberate 4% decrease in income from our first mortgage and mezzanine loan portfolio, which is in part from our successful conversion of loan coupon into NOI such as at our 152-154 Spring Street location in SoHo during 2014. Some key assumptions for our 2015 projection are as follows. In the core, 2015 acquisition are projected between $300 million and $400 million. An additional driver f or the core will be NOI growth in the existing portfolio with projected same property NOI growth of 3% to 4%. And while this is certainly consistent with our goals and our expectation for a stable high quality portfolio, three things to keep in mind as it relates to this are one, unlike last year, we don’t anticipate any incremental contribution from redevelopment activities; two, our current same property pool is not reflective of the total current core portfolio. Given our significant acquisition volume in 2014, approximately 25% of our current in place NOI is not included in the same store pool. As a result, less than half of our 2015 same property pool is street and urban retail, as contrasted with as Ken just mentioned; the 70% of our current portfolio value that is street and urban. And then three, the majority of our fund investments are value add. And although we capture this value elsewhere, the increase in NOI in the funds is not reflected in our same property NOI. One last item to note for NOI growth for ‘15 is due to anticipated tenant rotation and the related downtime at a few collocations, we expect NOI growth for the first half of ‘15 most likely to be below the average annual range while the second half, above the annual average. Examples of this rotation are tenants that are trying backup property at 120 West Broadway; our 17th street property at Union Square and Warby Parker replacing the former tenant at 851 West Armitage. Although this downtime impacts the 2015 metric, the significant increase in rents obviously benefits us 2016 and beyond. Turning to the funds. We’re projecting fund acquisitions of $250 million to $500 million. As our fund platform is a capital recycling model, a primary earnings driver for ‘15 will be from the sale of fund assets, both in Funds III and II. In Fund II, it will be from the sale of air rights at our City Point project and at Fund III, projected net promote income from the continued monetization of assets. On previous earnings calls, we discussed there was $80 million of unreturned capital in Fund III, after which Acadia’s promoted share would be 36% of all remaining distributions and we also walked through the math whereby we estimated about $200 million of profit after the return of this capital and that would generate $29 million to $33 million of gross promote income. And after the associated dilution, represented primarily by the operating and fee income associated with these sold assets, the annual net FFO contribution would be, depending on the period of time, on average $3 million to $6 million per year or $0.05 to $0.10 per share. Although 2015 could be less assuming we don’t get to the carry until the second half of the year. So fast forward to 2015, we continue to make progress on this. Following the sale of the Lincoln Park Center in the first quarter of 2015, we returned another $30 million of capital and this leaves us only $15 million away from starting to collect our carried interest in the fund. And though it’s subject to the amount and timing of fund asset sales, we currently expect net promote income of $0.02 to $0.03 for 2015, most likely starting in the latter half of the year. So in summary, we believe we have a scalable model which should continue to generate superior NAV growth. And our dual core and fund platforms together should allow us to achieve stable and sustainable high single-digit, low double-digit year-over-year earnings growth. With that, we’ll be happy to take any questions. Operator, please open the lines for Q&A.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. And the first question comes from Christy McElroy from Citi.

[Christy McElroy:]

Hi guys, good afternoon. Just with regard to City Center, maybe you could describe the asset – t he specific asset a bit more; is City Target anchored but is there any small shops base there and when is the Target lease up? Just trying to get a sense for the potential upside in the NOI and maybe what was the cap rate on the deal?

[Kenneth Bernstein:]

So, City Target is the main anchor; they are a relatively new lease past couple of years, so fairly long dated. There are small shops, space as well as some new additions that are coming in shortly and we’ll be talking about that in the next few months as those leases get signed. There is also a Best Buy that -- it will be upto them. They have options to renew but that may also create potential upside in the future over the next three to five years. The yield has been consistent in general Christy with what we’ve achieved over the past couple of years that is that within the first 12 months or so with a few exceptions, we’ve been able to get to about a 5% yield and then have growth and opportunity beyond there.

[Christy McElroy:]

And then just thinking about sort of that same initial yield on the $300 million to $400 million of core acquisitions projected in 2015; what should we expect in terms of sort of an average initial yield on those deals, in terms of the impact to 2015.

[Kenneth Bernstein:]

And I’m always a little hesitant because we’re really focused on long-term value creation, total return over an extended period of time, less so is what is the ‘going in yield’ on any given day or week. That being said, when tallied things up at the end of the year 2013, 2014, we’ve seen them hovering around that 5% range. The goal on, I think I’ve been hopefully pretty clear about that is to make sure that we are putting together a portfolio that will provide us the opportunity over 3, 5, 10 years to have superior same store NOI growth as various different leases roll and then also more downside protection in light of just all the different shifts out there. So, I think that’s what you should expect to see as we pick the different markets we’re going to be active in, pick the different assets we’re going to acquire. And frankly that’s more or less where the market is provided that you don’t have to do $5 billion of acquisitions and move that market.

[Christy McElroy:]

Understood. Thanks for the color.

[Kenneth Bernstein:]

Sure.

[Operator:]

And the next question comes from Todd Thomas from KeyBanc.

[Todd Thomas:]

Hi, thanks. Good afternoon. Just continuing with that acquisition, City Target; Ken, you commented about the dumb tax incurred to move into a new market. And in terms of the dollars, it’s a big investment but it’s still just one asset and I’m curious if this investment alone provides you with the scale you feel is necessary to really enter into that new market or is there more to come in San Francisco; what’s the opportunity like there?

[Kenneth Bernstein:]

So, I think it falls somewhere in between, Todd. And then, you’re absolutely right, we spend a lot of time thinking about which markets to enter; when; how. And we’ve been very deliberate about when not to go somewhere. So, this is an asset that we have been intimately familiar with. Four; five; six; seven years, we watched the West Coast team do excellent job of taking what was once a Mervyns and now bringing it into the 21st century. At $150 million, it’s large enough that we can afford to be patient but at $155 million it’s also large enough that we can afford to spend as much time as is needed to make sure we are seeing all the interesting potential opportunities out there in San Francisco. And as I mentioned in my prepared remarks, there is only a handful of these great markets where we think over the next 3; 5; 10 plus years, we’re going to see the potential for outsized rental growth. And we want to be in enough of those markets. Now that being said, if we never enter another market again, can we meet our five year growth? Absolutely. But given that, we’re getting on an airplane. Whether we go to Chicago, whether when we flight out to Miami, there are only a handful of markets, once you’re on that airplane that are worth going to, San Francisco is one of them. So, I would be very disappointed if we didn’t see additional opportunities out there but to be crystal clear, we can be as patient as we need to be. This is going to be a great addition and we’re very excited about having this asset and then one step at a time from there, as was the case in Chicago, as has been the case elsewhere.

[Todd Thomas:]

Okay. And then, in terms of dispositions, Jon, you talked about what’s in guidance from an acquisition standpoint. I was just wondering, what are the current thoughts on recycling capital in the core portfolio and how much of that suburban portfolio would you sort of estimate does not check the box long-term and sort of what’s the current thinking around selling some of that that long-term might not be a good fit for the Company?

[Kenneth Bernstein:]

Yes. So, the bottom 5% of our suburban portfolio would not check the box. Now that being said, because I’m certain that some of my colleagues here at Acadia are listening, does not excuse them from fixing the few things that they promised to fix. Now, in one case, we are talking about Burlington, Vermont, we are confident that our partners at Shaw’s are going to do a good job of turning around as that supermarket chain is part of Albertson’s. So, that’s not within our bandwidth, but -- so Burlington, Vermont should go. And yes, you could point to Bloomfield Hills, Michigan and say Ken, great suburb. Detroit, very strong asset, probably doesn’t belong long-term. We have one or two moving pieces there as that we’re going to get done one or two more assets like that. And they can go. The harsh reality though is not going to meaningfully move our needle; it will just eliminate this piece of the conversation which is probably worthwhile over the next few years.

[Todd Thomas:]

Okay, thank you.

[Kenneth Bernstein:]

Sure.

[Operator:]

And the next question comes from Craig Schmidt from Bank of America.

[Craig Schmidt:]

Thank you. Good afternoon. Manhattan is about to receive three new urban anchors in Nordstrom, Neiman Marcus and Saks Fifth Avenue; how is that going to change some of the upscale shopping communities in New York and how does that plan into your figuring when you are acquiring?

[Kenneth Bernstein:]

Craig, it’s true for many of the different cities; similar kind of conversation you could have in terms of Miami and some other markets. In general, we think that the addition of new or additional flagships -- Saks is clearly already here in New York City, but whether it’s into Southern Manhattan et cetera, it’s all good. There is different type of shoppers in different submarkets. And so, it does cause us to be careful about which streets do want to own more on. It might cause us to be concerned if we were in that specific box business, but we’re not. And I think what you’re seeing is more and more retailers recognizing that whether it’s New York or San Francisco; whether it’s Chicago or a handful of these other gateway markets, the need to be here and they need to be here with state-of-the-art best formats. And that’s what you’re seeing. And then the follow-on will be positive, other than for a few very unique submarkets that might get negatively impacted.

[Craig Schmidt:]

So, just the overall positive that you see from these people taking space in urban markets outweighs any kind of dislocation?

[Kenneth Bernstein:]

Yes. We could sit there on a very micro level, say gees, would this impact our Vineyard Vines store on Third Avenue and I doubt it. In fact, I think Vineyard Vines would welcome the opportunity to able to present both in their own store as well in these department stores. Might this impact a store or two in Tribeca or SoHo? Sure, but almost in every one of those instances in Tribeca, we really have more what I consider to be neighborhood retail. It’s not a tourist driven and it’s not a fashion shopper driven. So, to our existing portfolio, it is not a concern at all. In terms of prospective investment, it might impact a couple streets here and there and watch that stuff closely.

[Craig Schmidt:]

Great. And then just finally, is there any update on Savannah?

[Kenneth Bernstein:]

It’s coming along very nicely. It’s interesting as we look at the dollar strengthening, we think about tourism differently in each submarket. Savannah has a great tourist market but it’s primarily domestic. So, so far we’re seeing real good leasing traction from a bunch of our retailers that we have whether it’s in M Street in Georgetown or Rush Street et cetera and so that’ll I think play out nicely over the next 12 months to 24 months.

[Craig Schmidt:]

Okay, thank you.

[Kenneth Bernstein:]

Sure.

[Operator:]

And the next question comes from Jay Carlington from Green Street Advisors.

[Jay Carlington:]

Thank you. Hey Ken, I don’t know if I missed this or not, but did you say if there was any incremental G&A associated with City Center?

[Kenneth Bernstein:]

Jon, where you think…

[Jon Grisham:]

Yes, we added a couple of hundred dollars for a plane ticket for Cranberry, West Coast.

[Kenneth Bernstein:]

Yes, it shouldn’t be. The nice thing about these larger -- and there is half a dozen tenants. So, it’s not insignificant but compared to the olden days of 40 or 50 tenants in a suburban center, it’s just not there.

[Jay Carlington:]

So, I guess as we look forward into next couple years, are the funds going to be looking to grow on the West Coast as well?

[Kenneth Bernstein:]

Certainly have that opportunity. And it seems cause it’s so much information we put out there, I think we’ll just do another high five, a 57 IRR on our last fund sale certainly creates that high class problem of our fund investors getting money back and then what are you going to do next. And we have shown a willingness to try a bunch of different heavy lifts but have been very profitable whether it’s Chicago. And so, it certainly could be San Francisco as well. What we have tried to do over the past 10, 15 years that we’ve been doing this is make sure when we pick our spots, we pick them carefully whether it’s the funds or for the core.

[Jay Carlington:]

Okay. Maybe switching gears to City Point, what’s the update on Phase 3 on the sale there and then the leasing progress you’re seeing?

[Kenneth Bernstein:]

So, Phase 3 is moving along the joy of doing anything in any of these major cities as there is a bunch of I’s to dot and T’s cross. And we’re in the process of doing that. Needles to say, even though it takes time, it feels great to see the momentum in Brooklyn. So, everyday that we wait to announce or we wait to sign a lease, things are continually and only getting better. We’ve had a fair amount of strong retailer interest, should be no surprise strong interest from different food market concepts. So, in fact what we decided last quarter is we’re going to reintroduce the retail [ph] marketplace which was open air food in -- after we had demolished the Albee Square Mall and that was successful and bringing that into our existing retail footprint. While it’s going to cost a few bucks, it’s going to be really well received. So that being said, we are in closing the physical asset, thank goodness. And thus our retailers are going to be able to see our new Prince Street; they’re going be able to walk and really appreciate how unique this asset is relative to the other opportunities on Fulton Street. And with that we expect that our street level retail will start to really get the traction we wanted to see over the next three, six months keeping in mind that we don’t get to open with the City Target and with Century 21 for about another year which is on time and as forecasted. So, that’s our goal is to get the rest of this retail leasing done along those lines.

[Jay Carlington:]

Okay. And maybe just a final quick question, when does the Michael’s lease expire at the Newton, Mass. location that you just bought?

[Jon Grisham:]

It’s a long-term lease; it has ten years of term on it.

[Jay Carlington:]

Got it. Okay, thank you.

[Kenneth Bernstein:]

Sure.

[Operator:]

And the next question comes from Paul Adornato from BMO Capital Markets.

[Paul Adornato:]

Thanks. Good afternoon. I was wondering if you could talk a little bit about your Off Madison collection. Are you guys kind of pioneering that -- the Off Madison market? And I was wondering if you could talk a little bit about pricing On Madison versus Off Madison in terms of rents and cap rates? And are the same tenants interested in Off Madison as well as On Madison?

[Kenneth Bernstein:]

So, it varies. Are we pioneering it? No. I’ll let someone else take credit for that and I have no idea who that is. Do we think that there is a unique opportunity given where rents have gone on Madison Avenue? Certainly, well north of a $1,000 a foot. And the opportunity to provide a bunch of different retailers, now this is more townhouse and boutique and flagship oriented. Yes, it’s less expensive but we were thrilled for instance that The Row wanted to put their flagship location there. You’re talking about 100 feet off of Madison, 50 feet off of Ralph Lauren store, so it’s not exactly there is a huge stretch but slightly more affordable and the opportunity to really have a unique boutique space. We’ll see how many of these we can get done. But it only makes sense that for a certain number of retailers, this will be a better option. Again, I don’t want to stress more affordable but more affordable. And then for other retailers, they’re going to demand and need to have that flagship Madison location and we think that’s great too.

[Paul Adornato:]

Great. And I guess related question is, do you see other markets kind of expanding along the edges and what do you see in terms of opportunities for you guys?

[Kenneth Bernstein:]

Yes. And it’s interesting because different markets have a different level of tolerance. Lincoln Road in Miami for instance, the retailers were really hesitant to embrace our Lincoln lane, even though, it was again that same kind of 100 feet away. So, in some places, they’re really much more fixated and others, they’re willing to go around the corner. There are other markets that we’re currently working on, stay tuned. What I would say is one or two assets and the cap rate On and Off Madison will be good but if we could add 5 or 10 more of these, then you have a real powerful collection and that’s what our team is focused on because then you have more diversity of fashion retailers, more diversification of rent rolls et cetera.

[Paul Adornato:]

Great. Thank you.

[Operator:]

And the next question comes from Rich Moore from RBC Capital.

[Rich Moore:]

Hi. Good afternoon guys. Ken, I guess you have the G&A from the plane ticket to the West Coast, so you probably got G&A for a train ticket up to Boston. So, will you use that to expand, maybe beyond Newton and look at, I don’t know, Newberry Street something like that?

[Kenneth Bernstein:]

Sure, right time, right place. Just to clarify, Jon made me use frequent flyer mile to San Francisco. And they don’t accept them on the train. So, it in fact could be more expensive. But seriously, there are certain streets, Rich, that make sense for us to get to at the right time when the pricing permits. What we have found is in many instances, our entry is along the lines of an OP unit transaction where there is someone who has master bunch of assets is looking for a tax deferred transaction. That’s a good entry point for us or some other catalysts. We have not found that yet for Newbury Street which we had, we’re working on it; so, stay tuned.

[Rich Moore:]

Okay, good. Thanks. And then I’m curious guys, Jon, maybe on the promote that you guys are anticipating. I mean you are looking at about $30 million in total and only a very small part of that second half of this year, so -- and I realize that’s gross; so maybe what should we think of in terms of net and the timeframe used to be a couple years, three years, whatever, but how are you thinking about that now?

[Jon Grisham:]

Yes, you’re exactly right. So, $30 million is gross. The net is somewhere between $15 million and $20 million let’s say. And in terms of first on 2015 and this is important to go over, in our guidance, when you look at other fund income of $14 million to $15 million, the promote in there is gross about $4 million to $5 million. But in other line items, fund NOI; asset management fee income, there is this what we call this positive event dilution associated with that promote such that the net promote for ‘15 is $0.02 to $0.03. So, I know I saw one report where someone took the $15 million and said that’s $0.20 that’s obviously not quite right, that’s looking at the promote only on a gross basis. In fact in that category, the total contribution is $0.15. In terms of timing and amounts beyond ‘15, it really is a factor of when the sales occur and volume of sales. So, on the low end the $0.05 would be over four-plus-year period and then on the high end if it’s quicker, then I mentioned upper end of $0.10 per year, that would be two to three years. So, again, it’s a function of the timing of these, could happen even faster than that. But those are the amounts. And obviously we’ll see as we make progress through 2015, we’ll keep everybody posted on our expectation as it relates to the timing of that.

[Kenneth Bernstein:]

And let me just chime in that it’s important not to lose sight of the important core portfolio growth contribution which Jon walked through with the majority of our solid earnings growth for last year…

[Jon Grisham:]

Correct for ‘14.

[Kenneth Bernstein:]

And then, it’s also going to make a significant contribution 2015, as projected.

[Jon Grisham:]

About half of our growth, that’s right.

[Kenneth Bernstein:]

We work too hard in the fun business to call it icing on the cake but if our core portfolio, both internal growth and keep in mind, same store NOI does not correlate the earnings growth, but the core portfolio internal and acquisition, if we can achieve the level that we have been in the past few years, that’s pretty darn good in and of itself. When this profit making machine which helps keep the lights on, helps us punch above our weight, provides us with additional capital recycling and carry, all of that, I don’t want to call it gravy, I don’t want to call it icing on the cake but it’s a nice addition. It’s going to be very lumpy; it will come exactly on the quarter that you don’t want it to because it’s going to blow up all of your models, I guess that. But as long as it’s very profitable, we love it.

[Rich Moore:]

I agree, Ken. That sounds great. And I just want to make sure I understand. So, each time you guys sell an asset, once you’re in the promote phase, so to speak, once you get your promotes, then each time you sell an asset, you recognize it kind of right then when you sell the asset?

[Kenneth Bernstein:]

Exactly. Once we cross that line of being in the carried interest having returned all the capital, each incremental sell as you’re saying, generates from immediate promote income that’s recognized at that time of sell.

[Rich Moore:]

Okay, great. Thank you guys.

[Operator:]

And our final question from Michael Mueller from JP Morgan.

[Michael Mueller:]

Yes, hi. I was just wondering, is there a dollar size investment for the core that you would think of as a ceiling? So, you made an investment for $150 some million, but say you wouldn’t want to put more than $250 million into a single asset or something like that. I mean are you thinking about the core investments in that way at all?

[Kenneth Bernstein:]

Yes, a few different ways Mike. So first of all, and I mentioned it that our sweet spot seems to be $20 million to $200 million where when you see us go below $20, chances are there is deal in that pipeline to justify it. And then what we have found is for a variety of reasons as we get above, and today it’s $200 million, as the Company gets bigger, it might shift a little bit, a few things happen. One, there is a concentration issue. We’re able to capital recycle, raise the capital we mentioned in a very efficient basis. Once you get to larger transactions, there is a capital markets issue; there is also a what I would view as a transformational issue as if -- if any deal is too big, could it become too much of a distraction. And also what we are seeing certainly in New York City but in many of these markets, once you get above let’s say $300 million or $400 million, the price per unit in that goes up because the big boys come out and we don’t need to be playing in that market as aggressively. That being said, we look at a wide variety of transactions. And if it’s larger than that $200 million or $300 million; it’s not that we wouldn’t, it’s just that we need to then price in that thinking from a asset diversification perspective. We think about it, not just on the asset acquisition but then also on each geography. So, we’ve been very deliberate. Five years ago we said you know what, street retail is what our retailers are telling us is going to be a growth opportunity, let’s grow that. Which markets do we want to grow? We decided Chicago, we decided New York, we continued to add assets in Greenwich, Connecticut; as well as M Street in Georgetown. But then we look at the weighting of each of those markets and make sure that we’re not too disproportionate one or another. So, we’ve doubled that portfolio. Street retail has gone from 15 to 50. We now have a nice balance as we think about things prospectively. A $200 million addition in any one of the markets we’re currently in will not throw our metrics off but a $2 billion transaction would. And so, that’s kind of how the thinking then narrows into that $20 million to $200 million range.

[Michael Mueller:]

Okay. That’s helpful. Thank you.

[Kenneth Bernstein:]

Sure.

[Operator:]

We have no further questions. And now, I’d like to turn the call back over to Ken Bernstein.

[Kenneth Bernstein:]

Thank you all for listening. We look forward to seeing you again soon.

[Operator:]

Thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.