Pennsylvania Real Estate Investment Trust
Q3 2015 Earnings Call Transcript

Published: 28 Oct 2015

[Operator:]

Good morning. And welcome to the PREIT Third Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Heather Crowell, Vice President of Investor Relations and Corporate Communications. Please go ahead.

[Heather Crowell:]

Good morning and thank you all for joining us for PREIT’s third quarter 2015 earnings conference call. During this call, we will make certain forward-looking statement within the meaning of federal securities laws. These statements relate to expectations, beliefs, projections, trends and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the Company’s SEC filings. Statement that PREIT makes today might be accurate only as of today, October 28, 2015, and PREIT makes no undertaking to update any such statements. Also, certain non-GAAP measures will be discussed. PREIT has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC. Members of management on the call today are Joe Coradino, PREIT CEO; and Bob McCadden, our CFO. It is now my pleasure to turn the call over to Joe Coradino.

[Joe Coradino:]

Thank you, Heather. Good morning, and thank you all for being on the call. We had a nice turn out this morning that's exciting, we think the renewed interest in PREIT is a result of the fact that we’re not the same company we were when I became CEO, and it’s apparent in every aspect of our business. We spend a lot of time talking about portfolio quality, but it’s much more than that. We've built a quality organization focused on unlocking value through execution and performance. We’ve improved the quality of our properties, the tenant base, our anchor mix and our people to the transformation of our portfolio, and you’re seeing the results. The fundamentals of our business are strong and the metrics many of which are leading indicators are evidenced of this. In 2012, we had 14 properties generating sales under $300 per square foot compared with only two today following the sale of Voorhees Town Center. The comparison to 2012 continue; in 2012, we generated same-store NOI growth of 1.8% compared to 2.7% in 2014 and 3.4% year-to-date in 2015. Sales per square foot were $372 compared to $428 today, and impressive 16% improvement. 2012 renewal rent spreads of 1.8% compared to 5.3% year-to-date and 9.1% for the quarter. Leverage in 2012 was 62.4% and is now just over 50%. A common concern raised by investors is portfolio exposure to Sears and JCPenney stores. It’s noteworthy that we have reduced our exposure to Sears from 29 stores to 16 today, almost in hand, JCPenney from 29 stores to 23 today, and Bon-Ton from 12 to 6 today. These improvements differentiated us from our peers and have altered our dialogue with retailers as we are presenting a compelling platform and generating increased retailer demand. The pace of change is accelerating. On the remerchandising and re-tenanting front, we've also made tremendous progress. Over the year, we have executed first to portfolio transactions with Field & Stream, Toomey, Lululemon, Vera Bradley, Topshop, Windsor, Yard House, Adidas, Century 21 and LEGO, quite an impressive roster of tenants. Similarly, when looking at the expanded presence sought-after tenants since 2012, we’ve increased the number of Dick sporting goods in our portfolio by 50% to 12%. Have grown from 1 to 3 Michael Kors stores, had doubled the number of all Ulta stores to 8, have added one Apple store, added nine new Francesca stores, and have recently announced our second Whole Foods transaction. Since the beginning of the year, we’ve executed five new leases with H&M, two more in the pipeline. So in 2012 we had four H&M stores in our portfolio. And we will have 13 by the end of 2016. In addition to our remerchandising and repositioning initiatives, we had continued success disposing of lower productivity and lower growth assets. Last night, we announced the sale of Voorhees Town Center, a transaction we hadn’t previously discussed, we are pleased to have completed. Voorhees Town Center had the lowest sales in our portfolio a $261 per square foot. We were unofficially informed that one of the anchors plans to close their store and believe it was an opportune time to respond to an unsolicited offer and execute on this sale. We continue to make progress on the balance of our dispositions. The three mall [indiscernible] transaction we announced last quarter continues to progress. Our buyer is in discussions for financing, and the due diligent period expires in November. While [Indiscernible] has fallen out of contract we're in advanced discussions with other buyers and are optimistic we will be able to put it under contract in the near future. Both Washington Crown and Palmer are actively being marketed with interested buyers for both. Our portfolio sales growth continues to outperform, driven primarily by remerchandising. We included in our earnings release a reconciliation of the growth, we’ve generated the highlight that this is more from organic growth than from disposing the lower productivity malls or closing bankrupt tenants. We fundamentally changed the tenancy in our shopping centers and is producing results in the form of increased sales. Sales have organically grown by 6.8% in the last year. Cherry Hill mall is inching closer to $700 per square foot mark; Willow Grove is in shouting distance of $600 per square foot, and every single one of our properties experienced growth in sales over the prior year. Non-anchor renewal spreads were 9.3% for the quarter. When we exclude direct pass-through expenses and average the rents, these spreads will be over 19% likely a more comparable calculation to those of our peers. To provide a little color on our future growth, Springfield Town Center continues to exceed our expectations. We have over 50,000 square feet of space under construction with 46,000 set to open in Q4 including Dave and Busters. Additionally, we’re negotiating leases with tenants for 53,000 square feet of space and look forward to announcing some of the exciting tenants when we’re working. We're pleased that sales are trending above $500 a square foot for the first year of operation. We expect NOI delivered from this property nearly double in 2016. Regarding an update on the fashion outlets of Philadelphia, we’ve completed the majority of work with the city with the remaining public financing request pending with the state. We’re underway with an aggressive leasing program. Macerich just attended the value retail conference where the project was well received and one of the most sought after being marketed at the convention. Our priority right now is solidifying the anchor mix. During the quarter, we announced that we executed a lease with Whole Foods at Exton Square. We’re on track to start work on this space next year for spring 2017 opening. We are pleased with the portfolio we've crafted and are enthusiastic about the work to be done. We’ve spent busy quarter touring investors and analysts through our properties and without fail when people see our assets they exceed their expectations. We have carved out a new niche with a portfolio comprised largely of major market assets with superior demographics, primarily in a densely populated Northeast Carter, which will allow us to deliver NOI growth reflective of our uniquely positioned portfolio. To repeat a line from the earnings release for emphasis; we’ve claimed the unique position within the mall REIT universe. And while we have a distance to go our path is clear and there is a bright light in our future. Now, I will turn it over to Bob McCadden.

[Bob McCadden:]

Thanks Joe. Strategically, operationally and financially we’re in much better shape today than we were just a few short years ago. With a smaller higher quality portfolio, we are laser focused on creating value in our assets and closing the NAV gaps. We’ve made tremendous progress in all areas of the business, but still see opportunities to improve. I’m going to briefly touch on operating results, review our capital plan and cover changes to our earnings guidance for the balance of the year. Concerning operations; same-store NOI of $64.5 million was up $2.5 million or 4% when compared to the prior period. The results included $1.4 million of lease termination fees from four RGA concepts and one large format store at Wyoming Valley that was terminated in order to provide swing space for a remerchandising plan that we have underway. Tenant bankruptcies from earlier this year continue to impact the results for the third quarter. The NOI contribution from spaces previously occupied by these tenants was $1.5 million or $0.02 per share lower in the third quarter this year compared to last year's quarter. These bankruptcies also impacted our same-store non-anchor occupancy by 141,000 square feet or 126 basis points. Regarding replacement tenants, we presently have permanent tenants in 20% of the space as specialty leasing tenants occupying another 30%; 22% is in the deal pipeline and prospects have been identified for another 14%. Same-store non-anchor mall occupancy was down by 20 basis points from last year, reflecting the impact of store closings from tenant bankruptcies. However, we have a robust pipeline of new deals. Excluding Springfield Town Center, Gloucester and fashion outlets of Philadelphia, we currently have about 371,000 square feet of executed leases for future occupancy. These leases are expected to generate annualized revenues of over $11 million when they open in the fourth quarter of this year and during 2016 and 2017. Approximately $5 million will come on line in Q4, another $5 million in 2016 and the balance in 2017. We believe that the improved sales performance environment will continue to allow us to deliver strong renewal spreads and attract new retailers to the portfolio. I want to clarify a point raised regarding five large format tenants leases that are included in our leasing activity report in the supplemental. We reflect that large format leases with rent that don't appear at the surface to offset the capital investments. The leases are structured as a percentage rent transactions with the floor to provide us with downside protection. For disclosure purposes, we only included the floor rent. Based on sales projections for these tenants and how they perform elsewhere in the portfolio the pay back in these transactions will be essentially shorter. Our capital allocation strategy has been at its lower quality assets and we’ve cycled the proceeds from asset sales into reducing our leverage to make investments in properties with significant value creation opportunities such as fashion outlet of Philadelphia, targeted bank replacements such as Whole Foods and Exton Square and selective other redevelopment opportunities. Since January of 2013, we have sold eight malls, four power centers; a half interest in the Gallery and a number of outparcels generating total proceeds of $484 million. Including the proceeds from the sale of Voorhees Town Center the other six non-core malls being marketed for sale and a land parcel and gains that we have on the contract, we anticipate gross sale proceeds in excess of $200 million with net proceeds reduced $61 million of mortgage debt on two of these malls. At the end of September, we had over $368 million of liquidity including undrawn amount debt outstanding under our revolving credit facility. Our current estimate of capital expenditures for our shares at fashion outlets, the addition of Whole Foods to replace Kmart at Exton Square, another large format retailers or anchor replacements is approximately $200 million to $225 million. We believe we have ample liquidity to fund these expenditures by replacing proceeds from asset sales supplemented by credit facility borrowings. At the end of September, our leverage is 50.2%, our effective interest rate was 4.27%, a 74 basis point reduction from a year ago and our debt balances are well matured – I’m sorry, our debt maturities are well latter. In light of our current discount to NAV, we will consider the sale of our joint venture power center interests with joint venture properties in our core gross category to raise additional capital if necessary to create additional liquidity or reduce leverage. Concerning earnings guidance; earlier this month we completed reduction course with most of the reduction occurring in the corporate office. We expect to record a charge for employee separation expenses during the fourth quarter of approximately $1.8 million to $2 million or about $0.025 per share. We also decided not to fill the number of recently vacated positions as part of a corporate re-organization and thus creating efficiencies within the new portfolio and reducing our G&A costs to below 7% of revenues in 2016, the lowest in our recent history. As a result, we adjusted our forecast of GAAP net income and FFO earnings guidance for this charge. We anticipate adding this expense back to arrive at FFO as adjusted. The sale of Voorhees Town Center yesterday would result in approximately $0.015 of dilution for the balance of the year. Regarding our Outlook for 2015; we have revised our previous estimates of FFO as adjusted to be in the range of $1.83 to $1.88 per share, after giving – the dilution from the sale of Voorhees Town Center. We’re tightening our range for same-store NOI growth to 2% to 2.7%. We now expect the GAAP earnings per diluted share will be a net loss between $1.17 and $1.23, reflecting the addition of dilution from asset sales, the impact of the quarter's impairment charges and anticipated employee separation expenses. Finally, I wanted to call your attention to a presentation of our mall portfolio in the supplemental. In addition to our existing premier group, we’ve reorganized malls formerly in our core growth category into two new categories to provide better clarity into the characteristics of these properties, malls located in major markets generally defined as top 50 MSAs and market dominant malls generally located in other MSAs. We moved River Valley Mall into our core growth category as economic activity in the Marcellus Shale region creates a new opportunity for that property. We've moved Wiregrass Mall from core growth to non-core based on our plans to divest that asset. Finally, we eliminate the opportunistic category based on our determination that malls in that grouping have either moved up or are moving out. With that we’ll open it up for questions.

[Operator:]

Our first question comes from D.J. Busch with Green Street Advisors. Please go ahead with your question.

[D.J. Busch:]

Bob, I just wanted to follow up on your last comments regarding the kind of the re-categorizing of the malls. What is the criteria now because it looks like there is a little bit of overlap in sales per square foot, it’s certainly not the only criteria to qualify as premier, I guess in your guy’s view. What is the criteria, or growth profile you’re looking for when you put something in the premier mall category versus the core growth categories?

[Bob McCadden:]

So the premier group would be looking to lead our NOI growth, so we would expect to see NOI growth in the 3% to 4% range coming from that group of assets.

[D.J. Busch:]

And then just as it relates to the two different core growth categories, major markets, top 50 MSA, how do you look at the growth profile for those – a little bit higher occupancy cost ratio than the market dominant? I guess how do you view those different growth trajectories within those because it seems like the market dominant malls may be a little bit – have a lower risk profile than the major markets or is that not necessarily accurate?

[Bob McCadden:]

It could, but to the extent, at least the major markets I think we really wanted to highlight the fact that we have a concentration of assets both in Philadelphia and Washington DC’s fee, the top – two top 10 MSAs, clearly there is going to be growth characteristics that may not be able to generalize for each of those two categories. There is certainly going to be some assets in the market dominant category that may outperform growth rates for the major markets, but I think the major markets really have been started to really characterize the concentration that we have in the top MSAs.

[D.J. Busch:]

And then just as it relates to the asset under contract, you said that buyers are seeking financing, what does the financing market look like for that quality of asset, who are the lenders, is it available, can you add any color to that?

[Joe Coradino:]

Hi DJ, it’s Joe. Obviously from a CMBS perspective probably for a $300 a square foot and less property that doesn't exist, so much of our buyers, many of our buyers if not all are doing with traditional banks. They usually come bank in hand if you will and there is a couple of -- clearly the loan to values of going in the wrong direction from the buyer’s point of view, as well as increased points and fees. But having said that we closed the deal yesterday and we think we have a continued pipeline of buyers who can secure financing and can close. Look selling lower quality malls has never been a walk in the park.

[D.J. Busch:]

You guys have certainly made progress. Thank you.

[Joe Coradino:]

You’re welcome.

[Operator:]

Mike Muller with JP Morgan has our next question.

[Mike Muller:]

Couple of things; one, I guess on the comments relating to G&A, I mean would – I know you’re going to give guidance later on, but what’s the rough ballpark number that we should thinking about for a more normalized go forward G&A run rate?

[Bob McCadden:]

Yeah, I think Mike, we’re not prepared to give a number yet, but the target is to get 7% of our real estate revenues, under 7% of our real estate revenues.

[Mike Muller:]

Okay. And then, I guess as it relates to 7%, can you give a little more color on where exactly you made the changes organizationally?

[Joe Coradino:]

Just to further comment on that under 7%, it would be, again in recent memory historic low for us. And we think one of the – we want to do that because we’re confident that we can scale down this company, create a gem of a company and operated with a downsize G&A efficiently. In terms of what we did, we essentially – we did a number of things. We consolidated several departments from administrative and IT perspective, but one of the key things we did was to go from three regions to two, given the reduction in our inventory, our properties. We downsized from three regions to two, which provided us with some opportunities for reduction in force.

[Mike Muller:]

Got it. Okay. And then one last, what – I heard the asset sale commentary about financing and everything else, but what exactly is left to be sold over the near-term? How many assets?

[Joe Coradino:]

We have remaining on the market three assets with – what I would characterize as an institutional buyer. And in addition to that, we have both – so that would be by the way Wiregrass, New River and Gadsden. We also have on the market Lycoming, Palmer and Washington Crown, a total of six assets. Again, the three with the institutional buyer are under agreement and they have their in due diligence right now and they have secured a financing source. I think as it relates to the other three I would say that we are in various stages of moving towards an agreement of sale with various buyers for those three.

[Mike Muller:]

Okay. And if that rating lines up, do you think those – you would be finished with those six say in the first half of next year?

[Joe Coradino:]

Certainly the goal that – I live in anxiety, so that’s way too late.

[Mike Muller:]

Okay. And then once these six are finished, is that pretty much wrap up all the near-term stuff?

[Joe Coradino:]

I think for the time being that we’ll take a breath at that point, that means we will have sold 14 non-core malls if you will. And when I think about it from the remaining portfolio, sales at that point should be north of $450 a foot and should really put us in a position from a retailer perspective that have a very compelling portfolio. About 50% of our assets will be neither the Philadelphia or DC Metro.

[Mike Muller:]

I was going to say just – actually one other question. I think in your comments you were talking about the leasing spreads and I think you said on an expense pass through basis, so I’m assuming, were you saying on a gross basis the spreads were about 20% and was that year-to-date number, is that a quarter number, and just a little more color on that?

[Bob McCadden:]

Yeah. Mike, the number that Joe cited was a number for the quarter. And essentially what we did was to – the fact that pass-throughs are reimbursed, whether our expenses go up or down, we really want to highlight the elements of the fixed rent, which would include the main rent and to the extent we have any fixed CAM, so it’s really an average rent compared to the ending rent for the expiring lease. I think that’s the way most of our peers are reporting. So historically, our reported numbers appear to be a lot lower than the peer group, but I think we are reporting on a different basis, so this is really our attempt to begin to get it back into the mainstream.

[Mike Muller:]

So you’re not – is this is the GAAP number or cash number then?

[Bob McCadden:]

That is a GAAP number.

[Mike Muller:]

It’s a GAAP number, got it. Okay. Okay, thank you.

[Operator:]

Our next question comes from Ki Bin Kim with SunTrust. Please go ahead with your question.

[Ki Bin Kim:]

Can we first start off by giving an update on the leasing activity at Springfield because I believe in the footnote you show physical occupancy, not on a leased percentage basis, so maybe an update on where the pro forma leasing is at that center and of course this is always helpful to understand how much NOI is in the third quarter run rate and how much we should expect I guess on a – maybe next couple of quarters going forward, and similar question for FOP?

[Joe Coradino:]

Today the in-line at Springfield is approximately 80%, I’m sorry – is probably 87% occupied right, 87% leased I might add. It’s 79% occupied, about 87% leased. There is additional prospects, et cetera, to get us into the low 90s in Q1 2016.

[Bob McCadden:]

So Ki Bin, in the third quarter we had about $3.7 million of NOI from Springfield Town Center and we would expect that in the fourth quarter to ramp up to about $3.9 million. And as Joe mentioned in his remarks, we expect – on the nine months that we would've owned Springfield’s for the year call it about $10.5 million and then we expect the number in 2016 to be about twice that amount, so little over $20 million. And with respect to FOP, the NOI from – essentially what the left as often tenants and a few retail in running at about $1 million a month, I’m sorry $1 million a quarter, and we expect that level to be maintained until we start with – up to the grand opening date of revised property. So think about it as $1 million a quarter until the fashion outlets redevelopment is completed.

[Ki Bin Kim:]

I know you have given official numbers on the dollars and the yields, but how should we think about this, is it the yield on incremental devolving cost that you’re – that we’re thinking about it or is it yield on incremental development cost plus current yield on the I guess the base value of the asset?

[Joe Coradino:]

I think at this point we’re – let me take a step back and just finish the leasing question on fashion outlets of Philadelphia, because I think you mentioned that in your point. We're – right now it's a real anchor focus. We have a very robust pipeline of anchors that we are in discussions with. Some summer and lease negotiations, letters of intent, et cetera, and that's our first priority is really to solidify the anchor transactions. And our sense is that's going to get concluded by – in the next quarter, that’s where the leasing effort is for fashion outlets of Philadelphia. Because if you think about the balance of the lease up, it’s really going to occur over the over the next several years, grand opening is two years away. I think from a – I think in terms of the returns both ourselves and Macerich have talked about a return in the 8% to 10% range and that's incremental.

[Ki Bin Kim:]

Okay. And thanks for the opening remarks regarding the new leases for bigger spaces that looks like it was upside down on the supplemental. So if I look at your company, what you've done over the past year, and you’ve gone through the bankruptcy era and you’ve released some of that stuff and you’ve improved the quality of your portfolio pretty significantly. But I guess what I get concerned about looking into next year is that, maybe we go through not the same level of volatility, but maybe something similar to it and maybe you lose some GAPs and Abercrombie stores. And I guess my question is when you look at your loss lesser things that you’re worried about next year is that a much more manageable smaller pool of things that you’re concerned about? Or is it – how do you – how would you describe that?

[Joe Coradino:]

Well, we think to an extent, we have sold off a good deal of the problems right. So that’s sort of step up number – that’s sort of point number one. And many of the properties where we had problems with tenants like GAP, Abercrombie, Aeropostale, American Eagle, et cetera, we don’t own any more, right? That’s sort of one point. I think as it relates to bankruptcies or store closings going forward, I mean certainly we – because we’ve transformed the portfolio, we don't expect a significant level of store closures. We’re paying close attention to the children's operators, the junior's categories that I just mentioned, but we don't think that is a difficult to manage situation. If you look back at the bankruptcies that occurred in Q4 2014 and Q1 2015, we’re about over 70% through the lease up of that. And again, you think back they were performing, there's tenants who were performing sales at about $168 a square foot in sales and I think the rent they were paying was probably 50% of our portfolio average. So again, as the portfolio has improved the impact of bankruptcies and store closings ends up being a positive one, not a negative one.

[Ki Bin Kim:]

Okay. Thanks Joe.

[Joe Coradino:]

Thank you.

[Operator:]

Our next question comes from Christy McElroy with Citi.

[Christy McElroy:]

Hey, good morning guys. Just a follow up on the last question regarding that re-leasing of the bankruptcy space. I guess, the table that you have in your press release regarding the impact of sales per square foot is really helpful, but if the store closings favorably impacted by sales per square foot, if they favorably impact the sales per square foot by $11 and you’re about 70% of the way through the re-leasing, can you quantify the impact that the re-leasing of that space will have. So I guess what’s the average sales of the replacement tenants you’re working with relative to the portfolio average, and will it have sort of a neutral impact on the sales productivity number or will it enhance it?

[Bob McCadden:]

I think it's hard to quantify sales for tenants that, many of which haven’t even open yet. But our expectation is that the tenants that we’re replacing, some of them are large format tenants, so it wouldn’t be reflected in our comparative metrics, but we’re replacing some of the backup tenants with the smaller shop tenants. We’re generally improving the quality of the tenancy and we would expect an increase in sales from those replacement tenants, but at the point we haven't quantified that impact.

[Joe Coradino:]

So we have done – Christy, hi this is Joe. We have done some sensitivity modeling around that where we've looked at as for instance what H&M moving into a center does to overall sales performance. And I would say that it is positive in a significant way, right, in terms of the result of it. And also, again, to that point in many cases we experience store closing in our core group of asset assets, so we’re going to be bringing those H&M stores into if you will our core assets and in many cases there's not a H&M for 50, 75 miles within that – near that property. So we see it as a real opportunity to be an anchor to the property, not just a tenancy.

[Christy McElroy:]

Okay. And then, sorry if I missed this, could you disclose what the cap rates where on Uniontown and Voorhees? And then specifically to Voorhees, what were those the credit issues to the buyer related fee?

[Joe Coradino:]

First off, we don’t disclose cap rates, but qualifier, always when I answer that question is the fact that in a number of these instances we sort of avoid it what could be a problem where we needed to make a significant investment in a lower quality asset in the case of Voorhees Town Center and the pending anchor closing. So we’re probably less cap rate sensitive than some sellers, but we think it's the right decision to make.

[Christy McElroy:]

And then just on those three malls that are under agreement, given that they have secured financing at this point, I think back in July that was still a consideration, what’s your confidence level that the deal closes at this point as you’re very sensitive?

[Joe Coradino:]

It depends when you ask me. I would say – I’d say look, they’re very sophisticated buyer and this is a name you would know. They’re a sophisticated buyer and these are always difficult transactions to bring home, but we feel good about them.

[Christy McElroy:]

So these assets are under agreement, not under contract, right?

[Joe Coradino:]

I’m not sure what the difference is, it’s under contract.

[Christy McElroy:]

Just trying to get sense for how firm it is?

[Joe Coradino:]

Yeah, they’re under contract.

[Christy McElroy:]

Okay. Thank you.

[Operator:]

Our next question comes from Linda Tsai with Barclays. Please go ahead with your question.

[Linda Tsai:]

Yes hi. For the Philadelphia outlets, what are occupancy cost ratios like for these stores? Do retailers view it more as urban street retail in terms of the branding opportunity and therefore willing to pay more or are the occupancy cost more to a traditional enclosed mall?

[Joe Coradino:]

Well, it depends on the location within the property. I mean, clearly the way in which the leasing is intended to occur, we’re trying to minimize the street front retail that a store takes by creating either a two floor store going up, in one case we had a three floor store going up r in some cases going down into the concourse level. But clearly frontage on Market Street is quite valuable. Philadelphia has from a rent per square foot has made some huge strides in the in the past five years or so. So street retail is quite valuable and I would say generally, the answer to that question is higher than a typical suburban mall.

[Christy McElroy:]

Thanks. And then in light of Whole Foods coming to Exton Square, do you think there is an opportunity to add grocer component to any of your existing properties, either on out parcel or maybe there is an opportunity to replace the traditional department store?

[Joe Coradino:]

Well, this is our second Whole Foods, we did had one at Plymouth Meeting Mall. We like the co-tenancy. I think for us tenants like Whole Foods or Fresh Markets or some of these more natural organic work a lot better really in terms of their size and scale. Wegmans would be, probably be very difficult to configure into a mall environment. But we certainly continue to look to bring food, prepared foods, grocery into a mall environment, working with one other deal right now, not a Whole Foods, it’s a little more unique. But I think it's a win-win.

[Christy McElroy:]

Thanks.

[Operator:]

[Operator Instructions] There are no additional – this concludes our question and answer session. I would like to turn the conference back over to Joe Coradino for closing remarks.

[Joe Coradino:]

Thank you for participating on the call. We strongly believe we are well on our way to transforming PREIT, and that we will begin to consistently perform in the 3% or 4% same-store NOI range, consistent with our higher quality portfolio. Our post disposition portfolio presents a compelling opportunity for retailers, which allow us to continue to drive our rent spreads and build our leasing pipeline. And we’d like to invite you to join us for a deeper dive into the company and our future at the planned investor day on January 20 and 21. We’re going to be sending details out today. And thank you again, and have a great day.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.