Rithm Property Trust Inc.
Q1 2017 Earnings Call Transcript

Published: 3 May 2017

[Operator:]

Greetings and welcome to the Ramco-Gershenson Properties Trust First Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Dawn Hendershot, Vice President of Investor Relations. Thank you. You may begin.

[Dawn Hendershot:]

Good morning and thank you for joining us for the first quarter 2017 earnings conference call for Ramco-Gershenson Properties Trust. With me today are Dennis Gershenson, President and Chief Executive Officer; John Hendrickson, Chief Operating Officer; Geoff Bedrosian, Chief Financial Officer and Cathie Clark, Executive Vice President of Transactions. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical maybe deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Additionally, statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks that could cause actual results to differ from expectations are detailed in the first quarter press release. I would now like to turn the call over to Dennis for his opening remarks.

[Dennis Gershenson:]

Thank you, Dawn. Good morning, ladies and gentlemen. Rather than take your time today to review our observations on the state of the retail marketplace, I would merely say that retailers and retailing in general are experiencing significant changes that are separating the irrelevant and the obsolete retail models from those vibrant retailers who are either presently immune to these changes like T.J. Maxx and Ross or are ones who are restructuring their strategies to meet the changing pace and times. In light of these changes and challenges, we want you to take away three conclusions from this call. First, based on the steps that Ramco has taken over the last several years and the transformation of our shopping centers that we are completing this year, our portfolio is strong. Our shopping centers are located in healthy growth markets. They're truly the dominant retail destination in their trade areas. The overwhelming majority of our tenants are the most desirable and creditworthy national retailers, who not only continue to thrive, but are open to grow their store counts. Our leasing efforts continue to pay dividends through solid rental increases and based on the strength of our originally thousand locations, those retailers who have stumbled, won't prevent us from maintaining and growing our earnings, but instead, their departure will afford us the opportunity to replace them with even more desirable retail uses. Second, our capital recycling plan is accelerating. In addition to the two-center sold in the first quarter, we are in contract for or in the midst of taking final offers on a number of properties that will generate approximately $90 million to $100 million by the end of the second quarter or soon thereafter. And third, in this evolving retail landscape, our company is focused on owning a portfolio of properties in key growth markets, which include both regional dominant and urban oriented infill shopping centers, each of which have built in value-add opportunities. By owning large regionally dominant centers, we have positioned our assets to be the properties of choice as successful retailers, rationalize their store counts and store sizes as they choose to close moderately profitable and unproductive stores or conclude that they can generate the same sales volumes from fewer physical locations as they pursue an omnichannel approach. Both the successful retailer and the modern shopper will gravitate to our regionally dominant shopping destinations, leaving behind those properties that although reasonably sized and located, do not provide the breadth of merchandise, value, convenience or experience that our properties do. Our focus on urban infill shopping centers, which are supported by a large population base, respond to the changing trends and lifestyles of the up-and-coming generation who favor an urban environment and the immediate availability of quality restaurants, entertainment and value shopping. This dual philosophy is reflected in our first quarter acquisition of two shopping centers, which represent both aspects of our portfolio approach. Providence marketplace an 800,000 square feet, represents our regional dominant focus and Webster place in the Chicago neighborhood of Lincoln Park is a true urban oriented shopping and entertainment destination. At both of these properties, in addition to aggressively pursuing our recent goals, our value add redevelopment plans are taking shape. The goal of our 2017 capital recycling plan was the geographic diversification of our portfolio, achieved through the acquisition of shopping centers that reflect the characteristics of the two aforementioned types funded by the sale of non-core properties, primarily those located in the State of Michigan. It is our stated intention to reduce our Michigan presence to 20% or less of average base rents. We're on track to achieve both our acquisition and disposition objective as all the Michigan properties we've identified for sale are presently in the market and we've already acquired two high profile, well located regional dominant and urban infill shopping centers. Thus, we feel that our plans for 2017, our belief in the future direction of retailing and the insightful retailer as well as our appreciation of the changing consumer tastes and trends positions our portfolio and company to deliver consistent operating FFO and same-center NOI growth, which in turn will drive our earnings as we move into 2018 and beyond. I would now like to turn this call over to John for his prepared remarks.

[John Hendrickson:]

Thank you, Dennis. Good morning, everyone. 2017 is certainly shaping up to be a transitional year for retail real estate, but the headline tenant failures have produced no surprises for us today and are in line with our projected business plan. In fact, our first quarter operating results reflect our high quality stable portfolio poised for growth and our expectations for the rest of the year remain consistent with the goals we laid out last quarter. Same center NOI grew 4.1% during the quarter, driven by favorable comparable bad debt and strong minimum rent growth of 2.7%, which is 40 basis points above our average quarterly minimum rent growth for the last two years. Note that our same center pool now only excludes two JV properties and three recent acquisitions and thus is a very good indicator of the strength of our portfolio. While there might be additional quarterly choppiness due to year-over-year comps and the timing of new lease starts, we still expect to achieve our guidance you the 2.5% to 3.5% for the full-year 2017. As we discussed last quarter, our forecast for the year does anticipate that downtime related to closures of tenants on our watch hold including Gander Mountain, rue21, Gymboree, Halus and others. Growth elsewhere in the portfolio, including from the more than 15 acres additions in 2016 and $45 million of completed redevelopment expansion projects combined with good operational execution more than offset the impact in 2017 of these watch list tenant. Regarding leasing, during the quarter we completed 70 comparable lease transactions with a role over spread of 7.7%, while this quarter's spread is lower than last quarter a more relevant number is a trailing 12 months spread of 8.9% from 261 transactions, which is right in line with the trailing 12 month results we have achieved since 2015. As we look forward to the rest of the year, we still expect to maintain transactional quality while we achieved high single digits spread and leasing volumes consistent with last year. We finished the quarter at a leased occupancy of 94.3% generally in line with last quarter despite the closures that typically happen after the holiday season. Our value, entertainment and food tenant still have significant open to buy. So, looking forward, we expect new leasing to largely offset to forecasted watch list impact and thus we're projecting to finish the year at a lease occupancy of between 94% and 95%. The business is certainly changing and there will be more changes in the next 12 to 24 months or longer. However, when we finish our significant portfolio repositioning this year, will have a solid mix of regionally dominant infill and grocery centers, which are well leased to best in class acres but also, they are expected to dedicated to small shop tenant, thus providing the right balance of stability and growth. Also, more than 90% of this portfolio is both in high quality and growing sub markets of the top 40 natural markets. This combined with our creative, energetic team within a focused operating platform allows us to succeed where others may not. I am still confident in our 2017 operating results will demonstrate this strength. That concludes my comments and I'll now turn the call over to Geoff.

[Geoff Bedrosian:]

Thanks John and hello everyone. I'm happy to report another solid performance by our operating team. Operating FFO for the first quarter was $0.35 per share up from $0.34 per share in the first quarter of 2016. The year-over-year change in operating FFO is a result of higher cash NOI from our same property pool of $0.01, lower interest expense of $0.050 and higher non-cash items of $0.050 offset by higher G&A expense of $0.01 as a result of one-time items we had incorporated into our guidance. As John mentioned, same property NOI for the quarter increased 4.1%, driven by higher minimum rent and lower bad debt expense. The combination of solid leasing spreads, contractual rent increases and accretive development projects, generated approximately 280 basis points of same-store rent growth. Lower bad debt expense contributed an additional 130 basis points of growth on a comparable basis as we recorded an reserve in the first quarter of 2016 that the sport authority bankruptcy. As a reminder, a majority of the TSA reserve was reversed in the second quarter of 2016. During the quarter, we completed $168.3 million of acquisitions and two property dispositions, generating net proceeds of $26.1 million. The acquisitions temporarily being financed on our revolving credit facility and proceeds from our asset sales will be used to reduce the outstanding balance on our line. Additionally, we did recognize an impairment of $5.7 million in the first quarter, primarily related to three properties in our disposal pool. The impairment is added back for purposes of deriving operating FFO. We are reaffirming our operating FFO guidance of $1.34 to $1.38 per share and our expectations for our investment activity remain unchanged at this time. Turning to the balance sheet, net debt to adjusted EBITDA was seven times at the end of the first quarter, up from 6.3 times at the end of last quarter as a result of our year-to-date investment activity. Additionally, proceeds from our first quarter dispositions have been deposited in a 1031 Escrow account to facilitate a tax sufficient execution of our capital recycling strategy. Adjusting for any cash escrow balance, our net debt to adjusted EBITDA would have been 6.8 times and as dispositions are completed over the remainder of the year, we anticipate net debt to adjusted EBITDA ending 2017 in the 6.5 to 6.7 times range. Before we open the call for questions, I want to mention a few changes we made to our supplemental reporting package this quarter. First, we've included information around our covenant calculation to our revolving credit facility. Second, you modified the reconciliation of same property NOI to net income to include a calculation of total cash NOI and the third change was the classifier portfolio by Metro market rather than state. We believe that grouping our properties by metro market provides better insight into the quality of our portfolio. Finally, I want to highlight that our balance sheet is in good shape and our very manageable maturity schedule gives us the flexibility needed to execute our capital recycling program. Our core portfolio is performing well and the Ramco team is working diligently to position the company for long-term growth. With that, I would like to turn the call back over to the operator for questions.

[Operator:]

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator instructions] Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please state your question.

[Todd Thomas:]

Hi. Good morning. First question Dennis or maybe Cathy, can you just shed some detail on how far along you are with the other assets that you are in the market looking to sell. Dennis, you noted $90 million to $100 million is either under contract or where you're taking final offers. How much of that is under contract and then how comfortable are you with the $250 million guidance for the full-year?

[Dennis Gershenson:]

Good morning, Todd. I am going to let Cathy answer the questions for you.

[Cathie Clark:]

Good morning, Todd. So, we've good interest in that sales properties and so far, we're maintaining our cap rate guidance. In terms of the numbers in round numbers, so we quote then around $28 million we have under contracts right now and other $20 million we have under LOI and another about $50 million and we're taking offers now on another $27 million. So, call it $125 million about 50% of our guidance and I think based on that, we feel we're on track for what we've projected.

[Todd Thomas:]

Okay. And in terms of pricing can you just remind us what the average cap rate on the sales is projected to be for the year and then maybe can you just talk about the profile of the buyer for some of these assets, particularly those in Michigan where you're looking to reduce some exposure and how demand for these assets has been?

[Cathie Clark:]

Sure. I think on the midpoint of our range it was probably right about 8 and then what we've closed and have under contract and under LOI, we are I would say grounded at about seven and three quarters. The buyer pool that we're seeing that's generally private buyers some cash, some leasing debt depending on properties they buy, the one change that I think that we've noted this deal that we're taking and in some cases a little bit longer to get done by doing a little bit more handful deals because of the finish line, but we're getting there.

[Todd Thomas:]

Okay. And then John, shifting gears to Gander Mountain, any sense there what the expectation is for those two stores just in light of the acquisition I guess by Camping World and do you expect both stores to stay open, are you anticipating any lease modifications and then of that $3.8 million I think it was of bad debt expense and unexpected vacancy loss or NOI loss that you budgeted for the year, how much of that has already been utilized or I guess how much is left as a cushion going forward throughout the balance of the year?

[John Hendrickson:]

Sure. So first off starting with Gander, just to remind we have two Gander locations and the acquisition of Campers World appears that they're just looking to operate a handful of the stores and we'll actually continue to market the remainder of the leases. So, we don't expect at the moment that Campers World will actually operate either of our two locations, but we do know that there has been interest at least in one of the two from other operators. We would expect them to continue probably to bid on the location, but to be honest in both cases, we have -- we've been working to backfill them. We're currently assuming that we get both of the spaces back and we're actually working on leases at or above current rents. So, we think we can actually increase some value there over time, and asking about the overall watch list, I think we've covered -- we've assumed a lot of headline risk in our forecast right now. We've talked about Gander, I mentioned about Gymboree and Halus and rue21, we're assuming to get at least some of the stores back later this year. So, we think -- we certainly think in our guidance number that we're in very good shape as it relates to watch list.

[Todd Thomas:]

Okay. Great. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Collin Mings with Raymond James. Please state your question.

[Collin Mings:]

Thanks. Good morning. Just going back first to Todd's question just if you could talk a little bit about the latest thinking as far as the timing and maybe potentially pricing assign enclosed mall you referenced on the last call, just trying to get a sense of high volume to the year.

[Dennis Gershenson:]

Hi Collin, it's Dennis. We certainly have that specific asset in the marketplace. There was a tenant in the mall that was MC Sports. MC Sports filed for bankruptcy and that kind of put a damper on the immediate disposition of that asset. We're reassessing that did that dispositions in light of our overall plans, but whenever we do it is our goal to reduce Michigan to 20% or less of our AVR.

[Collin Mings:]

Okay. And then maybe Geoff if you could expand on what drove the impairment during the quarter?

[Geoff Bedrosian:]

Yes Collin, I think from an impairment standpoint, we look at impairment on a quarterly basis and if you look at our estimate of whole periods with respect to certain properties and as we went through the quarter and finalized our disposition pool and did our quarterly impairments, that's what the impairment was driven by.

[Collin Mings:]

Okay. So overall just to make sure I understand this correctly it sounds like again the overall disposition plan is unchanged but maybe some of the moving pieces might change a bit but ultimately, it's still going to be obviously Michigan focused, is that a fair way to characterize it?

[Dennis Gershenson:]

Absolutely yes.

[Collin Mings:]

Okay. And then just going back to some of the comment about the same-store NOI and given obviously the strong numbers here albeit somewhat fueled by the bad debt number, just Geoff it sounds like there is going to be a pretty meaningful deceleration into 2Q as far as that comp, is that a fair way to think about or is there any other color you can provide on trajectory.

[Geoff Bedrosian:]

Yes Collin, I think you're right and the way we're thinking about it for the second quarter it's going to be about 100 to 120 basis points kind of what we're thinking about right now as far as second quarter of deceleration yes.

[John Hendrickson:]

And that's related to the fact that if you remember last year, we had a benefit -- we had a bad debt related to sports authority in the first quarter and then had a benefit in the second quarter just to, but as I mentioned, this is John, as I mentioned in my prepared remarks, we're still very comfortable with our 2.5% to 3.5% guidance for the year.

[Collin Mings:]

Okay. And then one last one for me and I'll turn it over, just as far as the acquisition plan for the year obviously made a lot of progress on that in the first quarter and you talked a lot about that on the last call, but just anything else under contract, I think it's about $80 million or so to hit the guidance number for the year, anything else again under contract and how is that pipeline looking again knowing that you guys have kind of a help may be towards some of those urban infill locations in particular.

[Cathie Clark:]

Yes, hey this is Cathie. So, we were happy to be able to close out two great acquisitions in the first quarter. Since then, deal closed a little bit late and I didn't expect that to pick up either at the midpoint of the year or later and so we're still looking, we don't have anything under contract right now, but we still have a couple things we're looking at and we would like to get it couple of the sales under our belt before we execute on them.

[Collin Mings:]

All right. Appreciate all the color, thanks everyone.

[Dennis Gershenson:]

Thanks Collin.

[Operator:]

Thank you. Our next question comes from the line of Craig Schmidt with Bank of America. Please state your question.

[Craig Schmidt:]

Great. It sounds like that there is going to be a greater focus on food, dining and entertainment in your properties. If that's true, do you anticipate an increase in capital expenditures on tenant improvements?

[John Hendrickson:]

Hi Craig, this is John. Right now, entertainment food is about 15% of the total portfolio as we have talked about last quarter and previously, we certainly view that as an important part of the future of the business and so we certainly -- and as I've said as 30% to 40% of our small shop tenants over the last couple years has been food already factored in. So, I'm not sure that you necessarily see over the last couple years, but going forward I am not sure you would see much of a change in the make-up of GIs etcetera related to that since we've basically been doing that over the last couple years already.

[Craig Schmidt:]

Yeah, I noticed you had an increase in the first quarter so, that's possible and then just the reduced exposure, reduced exposure to Detroit, is there a sense of what markets might grow in importance on your top Metro penetration?

[Dennis Gershenson:]

Well we -- as you know Craig, we purchased the National Center. So, we continue to look in that Nashville area. We certainly like the Denver market and we would move ahead in that area as well and we have our eye on one or two other markets that would be possibilities, but the assets that we're going to pursue will have to really weigh in similar to either the Providence or the Webster asset that we like. Remember however that any centers that we buy will be focused on growth markets.

[Craig Schmidt:]

Great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of George Hoglund with Jefferies. Pl state your question.

[George Hoglund:]

Hi. Good morning, guys.

[Dennis Gershenson:]

Good morning, George.

[George Hoglund:]

Just in terms of the enclosed mall that had the MC Sports, what's the plan there for potential backfilling that space?

[Dennis Gershenson:]

We already have a prospect for that space and we are negotiating a deal with them now, that's not to say that the transaction will ultimately be concluded, but we feel pretty good about this tenant taking it and it's a very similar ilk.

[George Hoglund:]

Okay. So that means the plan would be to essentially market it once that space is filled?

[Dennis Gershenson:]

At this juncture, that's the plan.

[George Hoglund:]

Okay. And then just looking at overall tenant demand when you're looking at your ICSE schedule coming up, how does your schedule look this year relative to last year?

[Dennis Gershenson:]

Every bit is full this year as it was last year. We're looking for a very energetic group of tenants coming to talk to us and our people are very enthusiastic about the tenant interest that we've been receiving. Just remember George and anybody who is listening on the call, we have moved our booth, so please look for our new location.

[George Hoglund:]

Okay. Thanks.

[Operator:]

Thank you. And our next question comes from the line of Vincent Chao with Deutsche Bank. Please state your question.

[Vincent Chao:]

Hey. Good morning, everyone. Just wanted to clarify a couple things, so I know you guys have done a good job of prepping for this environment that we're in today by reserving not just bad debt but also preserving some occupancy loss, can you just repeat the numbers, the $3.1 million for the year is that what I heard?

[John Hendrickson:]

Yeah hey Vince, it's John. Yes, what we talked about last quarter was a number of $3.6 million, which was basically in line with last year's overall reserve even with fall out in sports authority. So, there's obviously a lot of moving targets within that, but in general as I said, we still feel based on the names I mentioned and other names out there, might have near-term risk. We think we're very well covered for the full watch list including downtime for the year.

[Vincent Chao:]

Okay. And then just for a guidepost perspective, if you think about just the retailers that have declared bankruptcy already, what's your total exposure on an occupancy level? I know that they're not all going to close every single store and everything, but your analysis?

[Dennis Gershenson:]

Right. Well so if you think about those names that we have and that are still in occupancy there is Family Christian, which we only have three locations. Gander that we talked about, MC Sports that we mentioned, which only have two locations and then Payless which we have seven locations, the total is actually 227,000 total square feet, but as you say, most of that obviously only the Gander are anchor size. And so, as I already mentioned, we have very good interest for that. So, from a leased occupancy standpoint, none of that worries me at all, but obviously there might be choppiness, but again the choppiness, the downtime we think we have it covered in our guidance.

[Vincent Chao:]

Okay. And beyond the bankruptcy declarations I guess a number of stores announced additional closures, rue21 is coming to mind, is there an exposure there?

[Dennis Gershenson:]

Yes, absolutely but again, we factored it in, like rue21 they’ve already announced store closings. We have 12 locations totaling 61,000 square feet. They’ve already announced of those 12 that they expect to close eight of ours. Now if they don't file bankruptcy, there would be economic impact to us because they will continue to pay rent, but I think as everybody has heard, we're expecting a filing any day now there. So, in that guidance that we talk about, we're expecting to get those eight stores back from them. Gymboree has also been mentioned is out there and again we factored in some reserve for them, and so in all of that I think again we're covered and we also see these as we've mentioned in the past, we see those as opportunity to trade our whole performing tenants with higher performing tenants and great value overall in the portfolio.

[Vincent Chao:]

Right. Okay. And then since some of these are still it sounds like you're assuming that rue21 declared bankruptcy at some point. So maybe you didn't book anything on this front, but are you also assuming some elevated level of lease termination fees to correspond to some the closings in the guidance?

[Dennis Gershenson:]

No, we're not. Our expectation is that they’ll terminate some leases via the bankruptcy court.

[Vincent Chao:]

I didn't just mean rue21 just in general I guess just as…

[Dennis Gershenson:]

No in general, but we're not expecting any accelerant -- not this year, we're not expecting any higher level from anybody.

[Vincent Chao:]

Okay. And then just maybe switching topics a little bit on the asset sales, I think Dennis I heard you say that all of the Michigan assets that you want to sell are now in the market, but I guess if you were to sell all the Michigan assets at prices that you find reasonable, roughly how much of the $250 million does that account for?

[Dennis Gershenson:]

Well as a matter of fact, we either approximate or maybe slightly exceed the $250 million.

[Vincent Chao:]

Okay. So, all you do is sell the Michigan assets in your number.

[Dennis Gershenson:]

That's correct.

[Vincent Chao:]

Okay. Thanks guys.

[Dennis Gershenson:]

Thank you.

[Operator:]

Thank you. [Operator instructions] Our next question comes the line of [Debeli] with JPMorgan. Please state your question.

[Nikita:]

This is Nikita for Michael Mueller. Good morning, guys. Just a quick question on the redevelopments, just looking at this quarter compared to last quarter not tremendous amount of changes. So, can you just talk a little bit about that the pipeline, which you're seeing are you expecting that to grow and how meaningfully? And then maybe a little bit more broadly, how would you look at opportunities for acquisitions versus redevelopments in today's markets?

[John Hendrickson:]

Sure hi. This is John Hendrickson. Just to hit on the redevelopment pipeline at the moment, so we $69 million of active projects right now that is unchanged as you point out from last quarter. We certainly are working to stabilize several projects as they're indicated on the schedule and so as we do that, we do also have several in the pipeline that we'll be adding over the next few quarters. So, we still expect to stay within the range we talked about $65 million to $80 million is typically a range that we've been talking about. So, I think you'd expect at the end of the year to certainly stay within that range of those active projects that we're working on.

[Dennis Gershenson:]

Just do add to John's comment, just relative to redevelopment versus acquisition, hopefully as we look at the landscape they're not mutually exclusive, but obviously we can reap as we have in the past somewhere between 9% and 11% on average on redevelopment. So, they are truly much more accretive than making a new acquisition.

[Nikita:]

And then just one last one, thank you for that on new leases and new lease spreads were a bit below -- quite some below the fourth quarter and the trailing 12 months. Is there anything unusual that drove that?

[Dennis Gershenson:]

I don't think there's and we can take any trend from that at the low number of leases. It's just the timing of when we're dong leases. I am still comfortable overall to stay at the high single-digits. If you'll note this quarter our renewal spreads were I think probably the highest since the fourth quarter of '15 and our overall capital or net effective rents overall this quarter were very strong compared to our historical averages. So, I don't take anything. I don't think you should take anything from those the new tenant spread this quarter and just look out for the rest of the year.

[Nikita:]

Okay. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Floris van Dijkum with Boenning & Scattergood. Please state your question.

[Floris van Dijkum:]

Good morning, guys. Hey Dennis. I had a question on your same-store guidance, does -- that would obviously one of the things that we always try to parse through this is look at your same-store excluding redevelopment because it cost money to get the redevelopments and to get that additional growth. So, your same-store guidance that you put out of 2.5 to 3.5, does that include just like in the first quarter 120 basis points of redevelopment boost to that?

[John Hendrickson:]

Yeah Floris, it's John, if you remember our guidance, the guidance we gave was 2.5 to 3.5 for same-center with redevelopment and our guidance for without redevelopment is 0.5% to 1.5%. Now keep in mind it depend on what's in the bucket for redevelopment and there are several anchor repositionings that would be in the redevelopment bucket. So, if you were to add those back to the without redevelopment, you'd be more -- you're probably add the 120 basis points that you're talking about and the same center without redevelopment guidance would be 1.7 to 2.7.

[Floris van Dijkum:]

Okay. Okay. Great. Thank John, the other question I had for you and maybe this is something for Geoff, obviously your debt has ticked up a little bit but at what point would you consider buying back shares because you're trading at a pretty decent discount to underlying NAV, rather than buying that…

[Geoff Bedrosian:]

Yeah it's Geoff, Floris, thanks for the question. I think we look at stock buyback as our capital allocation alternatives and when we think about stock buyback, we need to think about impact on balance sheet, impact on liquidity and the relative risk and return related to it are alternative investments and when we think about it from creating a long-term shareholder value perspective, it's in our analysis, that would obviously be a Board decision capital and we're in dialogue. We have had dialogue with the Board with respect to that. So, we're thinking about it

[Floris van Dijkum:]

Okay. Great. Thanks Geoff.

[Operator:]

Thank you. The next question comes from the line of Chris Lucas with CapitalOne Securities. Please state your question.

[Chris Lucas:]

Hi. Good morning, everybody. Hey Dennis, you mentioned that the mall had change plans based on the MC Sports box that went out there. As it relates to the overall disposition pool, are there other assets that were impacted by anchor issues during -- that have occurred so far, this year that has changed some of the disposition pool that you booked at for this year?

[Dennis Gershenson:]

Thanks for the question Chris. The Michigan assets have stayed very steady and really with the exception of the Gander box in Oakland County which as John referenced either there was dialogue with a suitor who was bidding on the Gander space and as John also mentioned, we have immediately behind that and we're actually negotiating an LOI with another tenant not waiting to see how that specific situation plays out so that we are ready to move immediately if indeed the lease is rejected. So, our Michigan pool has stayed very steady as I know I've said to you, the assets that are in that grouping are ones that for under other circumstances that we like, but we just realize that the concentration in Michigan is just too significant going forward.

[Chris Lucas:]

Okay. Thanks for that and then I guess just curious if you're getting any color from any of the potential bidders, buyers for assets as it relates to the availability or underwriting that's being done by debt providers in this environment if that's changed become more challenging proceeds rates coming down. Anything along those lines that you might be able to provide some color on would be helpful.

[Cathie Clark:]

Yes, this is Cathie. I think we have seen a little bit more concern from the lenders, proceeds are still there, but maybe higher rollover reserves or something like that. The money is still there but there has been a slight change I think, which is why I referenced before that some deals are taking a little bit longer, but in the end, they're getting done.

[Chris Lucas:]

Okay. Great and then last question just any update on or change maybe to the expected rent commencement or the boxes that you back those and/or and to remind me are all of the sports authorities and bulk of the stores that will vacate are they leased at this point and then I guess there is an update just on the rent commencement with these that are leased.

[John Hendrickson:]

Sure Chris, this is John Hendrickson. First off, the 15 acre repositions that we talk about last year those are all commenced before the end of last year. The four sports authority boxes that we had, we have three out of four have been leased, one has already, the one down in Florida has already commenced and commenced at the end of the first quarter. The other two that are leased for open in the fourth quarter and potentially one will open in the first quarter of '18. So, the fourth one we're still working on alternatives there has not -- we would expect in 2017 to commence. The other tenant you mentioned was Golfsmith. We have two Golfsmith locations. One was assumed by Golf Galaxy which is there. So, there is no downtime there. The other is we were working on a couple of alternatives there and are projecting I think probably at this point the first quarter '18 opening for them, as well. I think I hit that. All right, sure.

[Chris Lucas:]

Appreciate it. Thank you. That's all I have.

[John Hendrickson:]

Okay.

[Operator:]

Thank you. And our next question is a follow-up question from Vincent Chao with Deutsche Bank. Please state your question.

[Vincent Chao:]

Hey guys. Just I want to go back to the acquisition side on the Providence place, did you guys share a cap rate on that, I just back on the envelope on the ABR, it looks like maybe mid-6, low 6 cap.

[Geoff Bedrosian:]

Yeah, the cap rate for Providence was approximately 6-1 cap.

[Vincent Chao:]

6-1 okay. And then how do you guys think about the longer-term return on that it's 99% leased or maybe an IRR basis if that's how you do it I guess how do you think about that?

[Dennis Gershenson:]

Well we brought the center, the statistic at that specific moment in time doesn't really talk to the amount of leasing that we're going to be able to do through the balance of '17 and into '18 where there is a number of opportunities to mark-to-market. We will be including in our roadshow for the ICSE and Nairete a site plan of Providence that will demonstrate where we can add value. So, between the value add opportunities and the ability to not only lease but to release at the center plus instituting our healthy community first program, we see a very bright future for that asset.

[Vincent Chao:]

Okay. Thank you.

[Operator:]

Thank you. There are no further questions. That does conclude our question-and-answer session. At this time, I'll now turn it back to Mr. Dennis Gershenson for closing comments.

[Dennis Gershenson:]

Thank you, Audrey. Just a word if I may, we believe that our portfolio including our new acquisitions is in great shape. Our disposition program is proceeding at pace. We feel that all of our plans for the 2017 acquisitions, dispositions and operations are proceeding on track and please look forward to great things to come. Talk to you next time.

[Operator:]

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.