Rithm Property Trust Inc.
Q4 2017 Earnings Call Transcript

Published: 21 Feb 2018

[Operator:]

Greetings and welcome to the Ramco-Gershenson Properties Trust Fourth 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 Dawn Hendershot, Senior Vice President of Investor relations. Please go ahead.

[Dawn Hendershot:]

Good morning and thank you for joining us for the fourth quarter and year-end 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 Cathy Clark, Executive Vice President of Transactions. At this time, management would like to inform you that certain statements made during this conference call which are not historical, may be 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 quarterly 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. 2017 was an interesting year in several respects. First, we set a goal of completing the transformation of our shopping center portfolio by year’s end. In the fourth quarter, we sold four centers including our large Michigan power center, bringing our total dispositions for the 12 months to $226 million. And as a result, we reduced our Michigan exposure to 20%. The cap rate for the last quarter’s dispositions averaged 7.6%, which included the Michigan power center sale that generated a capitalization rate of 7.8%. On the acquisition side, we had identified two attractive centers, which we purchased in the first quarter of 2017 for approximately $168 million. One, a dynamics town center in Nashville, Tennessee; and the other, an urban infill asset in Lincoln Park, Chicago. Our 2017 capital recycling program brings to completion our shopping center portfolio transformation which commenced several years ago. Interestingly, two-thirds of the shopping centers we now own were not part of our center roster in 2011. As a result of these efforts, we finished 2017 with a portfolio predominantly comprised of dynamic town centers, urban infill properties and strategic neighborhood centers located in affluent, growing submarkets in the top 40 MSAs. As we discussed with you at our Investor Day, our focused market strategy and roster of high-quality shopping centers with an emphasis on value, variety, convenience, experience and entertainment ensures that our properties will be the dominant consumer destination in their great areas. This evolved portfolio of shopping centers provides a solid foundation for our ability to prosper in retailing’s future as we continue our efforts to be the best in class shopping center REIT between the two coasts. Our second focus in 2017 was to grow our existing pipeline of redevelopments as well as to identify a healthy list of future value-add opportunities, all of which include either retail densification, placemaking and/or the ability to bring to our properties a variety of mixed uses. Many of these value-add generators were significant factor in our decision to acquire the shopping centers we purchased over the last 24 to 36 months. I am also pleased to say that we are realizing upon redevelopment opportunities in centers that we have owned for some time. Lastly, although we along with our peers have been impacted by a number of retail bankruptcies that have occurred over the last several years, the desirability of our centers have and are attracting those retailers who are in expansion mode. Thus, as a result of our market repositioning, a transformed portfolio and an improved anchored tenant roster, our management and leasing teams are energized to produce results which will position our Company to outperform, starting in the second half of 2018. I would now like to turn this call over to John for his remarks.

[John Hendrickson:]

Thank you, Dennis. Good morning, everyone. We have now completed our second full-year for this management team. And while there have been challenges in the developing retail environment, we are set up well to continue the three-year growth plan we outlined at our Investor Day in December. Let me spend a couple of minutes to highlight a few areas. First, on leasing. Conversations with our retailers during the end of 2017 and the beginning of this year certainly indicate that retailers are more confident coming into 2018 than they were a year-ago. They are starting to understand the consumers’ changing demand and are seeing the value of the physical store network in serving that demand and thus, they are once again investing back into their stores. As I mentioned at our Investor Day, 80% of our top 25 tenants added stores in 2017 and grew their store networks by 4% on average. While deals are taking longer now to complete, this demand is reflected in our reported results. Our square footage of new deals was the highest in the last 12 quarters. Also, this is now our third straight year with comparable rollover spread of over 8.5%. Our retention rate remained high as well at 80% compared with a five-year historical average of about 74%. This leaves us with 5% less square footage expiring in the next years than what we had at this point a year ago. While one or two outlier anchor deals may impact spreads in a given quarter, we generally expect the strong leasing results to continue in 2018. Our overall leased occupancy at year-end was 93.3%, 110 basis points lower than year-end 2016. This drop in occupancy was largely driven by three chain bankruptcies that occurred in 2017; Gander Mountain, MC Sporting Goods and rue21 that totaled over 200,000 square feet. While we are able to lease 40% of the space before the end of the year and are in active negotiations to fill the majority of these stores, the unleased space for these tenants alone resulted in nearly 100 basis points decline in our occupancy. Our plan was to sign more of these active deals before the end of the year, but as I mentioned, deals are taking longer to complete in this environment. Therefore, several projected fourth quarter deals have rolled into the first part of 2018. That said, this does not impact our new rents start forecast for the year and we still expect to finish 2018 with a physical occupancy of 93% to 94% and a leased occupancy 100 to 200 basis points higher than this. Driving small shop occupancy will certainly be part of this occupancy growth in 2018. And as we discussed at Investor Day, adding 300 to 600 basis points of shop occupancies is an important growth opportunity for us in the coming years. Even with this lower occupancy in 2017, same-center with redevelopment finished the year at 2.4%. This growth was driven by a 2.6% increase in minimum rent, largely driven by the $51 million of redevelopment projects completed in 2016 and 2017. Note however, the full-year same-center number was impacted by more than 250,000 of higher than expected bad debt and other tenant reserves at three properties in the fourth quarter which together resulted in a nearly 20 basis points decline in our final same-center number for the year. We expect 2018 same-center with redevelopment to be 2.25% to 3.75%. Remember, this growth is very much backend loaded as improved occupancy and the $74 million of redevelopment properties that stabilize in 2018 are skewed to the second half of the year. In fact, we expect growth in the first half of the year to be 250 to 300 basis points lower than the second half. One reason for the current wide spread in same center guidance is our reserve for tenant failure. We include in our guidance a range of bad debt assets as well as unexpected vacancy and rent relief that may occur related to tenants on our watch list. As I mentioned, we have and continue to aggressively re-lease space in impacted by 2016 and 2017 bankruptcies. The most recent bankruptcies of Charming Charlie and Toys R Us will result in short-term rent relief which is reflected in our same-center guidance. We expect our two Toys stores to stay opened through the year and expect to only lose one of six Charming Charlie stores. Our exposure to these active bankruptcies and all other identified near-term retailer risks which includes two Winn Dixie stores the most recent of our retailers to be rumored to file bankruptcy soon, represents just 3% of our total ABR. This is essentially a consistent level to where we had been at this point in last two years. So, as was the case in 2016 and 2017, this reserve is our largest variable in our current year forecast. While we expect our range of reserves to cover all exposure for the year, we should be able to tighten this range in the next two quarters. Finally, I wanted to talk about our redevelopment pipeline. As you know and as Dennis mentioned, execution of our pipeline is an integral part of our business plan to create sustained same-center growth and value creation. Right now, our active products add 230,000 square feet of new retail GLA that is substantially preleased, total $74 million in costs, and will create 35 to $45 million of value from 9 to 10% average return. This quarter replaced one project at service, a single tenant outparcel building in suburban Cincinnati. We expect to complete the remainder of these current projects in 2018. These projects not only generate returns on their own but also enhance the remainder of the assets. An example of this is the project we highlighted at our Investor Day, where we’re completing a three-building street side development at one of our premier open Oakland county, Michigan assets, Troy Marketplace. We are adding 13 tenants and 27,000 square feet including our curated mix of fast, fresh casual restaurants and specialty eateries which together pay an average rent of $35 to $40 per square foot. These rents were 63% more than our Company average for small shops space and will start to come on line in the second quarter and stabilize in third quarter 2018. In the next few quarters, we will be adding additional asset projects as we work through our multiyear 190 million shadow pipeline, an impressive 8.2% of our current enterprise value and place 45 to $55 million of projects into service on average per year. That’s all I have now in prepared remarks. And I’ll turn the call over to Geoff. Geoff?

[Geoff Bedrosian:]

Thanks, John. Hello, everyone. I’m happy to report we had another solid year of financial performance in the face of a difficult retail landscape. Operating FFO for the fourth quarter was $0.31 per share, down from $0.34 per share in the fourth quarter of 2016. The year-over-year decrease in operating FFO was primarily the result of higher G&A of $0.03 and $0.01 from other expenses, partially offset by higher cash NOI of $0.01 from same-store growth. During our earnings call in August, we discussed our expectations for G&A to finish the year at approximately $24 million, after considering severance costs. The increase in G&A expense in the fourth quarter was primarily a result of the outperformance of our common equity as it relates to a portion of our long-term incentive plan, requiring the Company to record almost three years of expense in the quarter as the plan moved out of the money during the year to in the money during the fourth quarter. For the full year, operating FFO was $1.36 per share, less than our results in 2016 as our operating team continued to maximize their performance in a difficult environment. Last night, we affirmed our 2018 operating FFO guidance initiated at our December Investor Day with a range of a $1.31 to a $1.37 per share. The guidance assumptions outlined at our Investor Day include $50 million of dispositions in the first quarter of 2018. Those dispositions were accelerated and completed at the end of December 2017 and our part of the $226 million of dispositions that Dennis previously mentioned. Our guidance assumptions do not contemplate any additional sales. Further, we feel confident that we can reduce G&A costs in 2018. Excluding severance costs and non-recurring costs, G&A was approximately $6.1 million for the fourth quarter. And adjusting for additional non-recurring costs in the quarter, G&A would have been approximately $5.7 million, which we feel is a good, stabilized run rate for the Company. Before I turn the call over for questions, I would like to take a moment to touch on our balance sheet. We have focused a fair amount of efforts to build flexibility into our balance sheet in 2017 as we use the net proceeds from our capital recycling of $51 million and our $75 million notes offering to reduce the outstanding balance on our line of credit, repay mortgage debt, and extend duration. The result of these activities has effectively eliminated our short-term funding needs with no debt maturing in 2018 and only $3.4 million maturing in 2019. And we enter 2018 with undrawn availability under our revolving credit facility of approximately $320 million. We plan to use our free cash flow and revolver availability to prudently execute our capital plan and drive value for our shareholders during the year. While we anticipate ending 2018 at 6.5 times to 6.7 times net debt to adjusted EBITDA, our intermediate leverage target remains in the low 6 times area. And we believe that asset level EBITDA growth will drive our leverage lower in the future. This concludes our prepared remarks. I would like to turn the call back over to the operator to open the line for questions.

[Operator:]

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question today comes from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

[Todd Thomas:]

Hi, thanks. Good morning. First question, John, the bad debt reserve that you talked about, sorry if I missed that, but can you quantify what that amounts to in 2018, what that was also in 2017? And then, can you just clarify, is the rent relief that you noted for the 6 Charming Charlies and 2 Toys R us boxes, is that in the reserve or is that outside the reserve, and what about the 2 Winn-Dixie stores?

[John Hendrickson:]

Hey, Todd, it’s John. Sure, I’ll try to hit all of those points. First off on bad debt. We basically are assuming a fairly standard run rate that we’ve seen in the last couple of years for bad debt, and we’re assuming that in our guidance range for ‘18. So that’s factored in. One thing I’d mention, fourth quarter from a same-center standpoint, came in a little higher than our forecasted expectation, but it’s only like $50,000 or so more in the fourth quarter. But obviously, that did have an impact on our same-center number at the end of the day. And so, your question about the rent relief for Charming Charlies and Toys, yes, that number now is in our guidance range. Obviously, it’s not completely resolved at this point, but that is in our range, and the same for Winn-Dixie, our two Charming Charlie stores. We actually do not know, it’s just a rumor at this point that they are going to be heading toward bankruptcy. And obviously, we don’t know what will happen if they do go into bankruptcy. I will tell you, those two stores that we have, have average rent of $7 a foot rent. So, we feel very good about our backfill opportunities of filling those back. So, I think I hit everything. Let me know if I missed anything.

[Todd Thomas:]

Yes. That’s helpful. So, the reserve, we should think about that as sort of a cushion in the budget for Winn-Dixie, anything sort of incremental that might happen regarding Toys R Us, and then anything else that sort of might surface throughout the balance of the year?

[John Hendrickson:]

Sure, absolutely. And that 3% that I talk about, people were worried about, I mean, we basically have some kind of form of cushion for each one of those in the range of our guidance at this point. Obviously, if some of those have no impact like the Winn-Dixie, if we end up with impact, that would be upside; if it ends up being more than our reserve, I mean upside in our midpoint, but if that is more, we would expect it to be covered in upside of range and our of our watch list. So that’s why -- at this point in the year, it’s a little too early to tighten at this point, but we should know more in the next quarter or two.

[Todd Thomas:]

Okay. And then, shifting over to the disposition. So, Millennium Park, the Michigan power center, can you just share some details there around the partnership and discuss the rationale for moving in that direction with the joint venture? You had cleaned up and wound down partnerships over the last several years. So, I’m just curious there. And then, how are leasing and asset management responsibilities being splint, will there be any fee income to Ramco?

[Dennis Gershenson:]

Todd, it’s Dennis. Good morning. What happened in that transaction is just a week prior to closing, our purchaser notified us that he had lost a significant investor and that he was going to put in additional dollars but he came in approximately $3 million short of the amount that he needed. Our preference would have been to have done a second mortgage, which is a mortgage he didn’t allow. But we do have an understanding with the buyer that at his earliest opportunity, we will be taken out of that interest. We thought it was prudent to sell the asset. And so, we proceeded with the sale. And this was the best way to bridge that gap.

[Todd Thomas:]

Okay.

[Dennis Gershenson:]

Just to finish the thought, again, we are not an active participant in the management of the asset. So, there are no fees associated with it. Obviously, we’re a knowledgeable investor. So, we get the monthly information on that. And there is upside in the cash flow based upon the leverage that is on the asset. But again, we expect to be a short-term holder.

[Todd Thomas:]

Okay. And just lastly then, it sounds like there’s no other dispositions in the guidance. But, can you provide an update on Jackson Crossing? You’ve pulled that from the disposition pool for the time being, just given the MC Sports vacancy and some other leasing initiatives. Any update there and is that still an asset that we should expect to be sold in the future?

[Dennis Gershenson:]

Over the long term, yes, it does not fit in our overall model portfolio. We are working on a number of opportunities to backfill the MC Sporting Goods space. But, it’s certainly not in our projections of the sale for 2018, at least at this juncture.

[Operator:]

The next question comes from Craig Schmidt of Bank of America. Please go ahead.

[Craig Schmidt:]

Great, thanks. I guess, on the two Winn-Dixie, if they were to close, would you backfill them with another grocer or would they work as a general merchandise replacement?

[John Hendrickson:]

Hi, Craig. It’s John. Yes, at the moment, we’ve been actively anticipating this issue with Winn-Dixie; we’ve been actively actually talking with other grocers who are looking to enter the market. So at the moment, I would think they would be backfilled with grocers.

[Craig Schmidt:]

Great. And then, if you could maybe outline the strategy driving up small shop occupancies, it seems like you’re giving yourself a pretty hefty goal there.

[John Hendrickson:]

Right. So, the near-term goal, the 300 to 600 basis points is a goal over the next few years. Our near-term goal is to try to drive at least 100 basis points a year there, so by the end of ‘18 adding at least another 100 basis points. Obviously, the biggest driver that helps that is to continue to drive our anchors that would end up being backfilling anchors and upgrading anchors, places like -- that we’ve done at places like we’re doing at River City and place back something Gander box there also as we backfilled the sports authority boxes, we saw that helped to drive small shop demand. When you can trade out of a failing retailer to a retailer that can be productive, it certainly drives demand overall. So, I think in general, the two -- occupancy overall will go up together. And just in general as we finish out, keep in mind, couple of our centers were in significant redevelopments like Woodbury and Deerfield where we’re finishing up the redevelopment, the upgrades, both at Woodbury adding anchors, at Deerfield adding significant placemaking that impacts all the small shop areas. Those two centers are really driving demand for shop occupancy. So that’s where I get comfortable that we will be able to really execute on that opportunity, which I see as the occupancy in general is a great growth opportunity over the next few years.

[Operator:]

The next question is from Collin Mings of Raymond James. Please go ahead.

[Collin Mings:]

First, just going back to prepared remarks on G&A guidance, can you may be just touch on -- it sounds like you are talking about maybe a little bit of core G&A savings, maybe talking a little bit more about what’s driving then. And then, going back to the long-term incentive comp that kind of weighed on Q4 results, how should we think about potential swings in that here in 2018?

[Geoff Bedrosian:]

Hey, Collin, it’s Geoff. I think, as it relates to the ‘18 guidance, yes, we’re going to be able to tweak out some core savings, like you said. Part of the bridge was really just trying to give you a sense of what the adjustments were and were we think our run rate is going to be. We’re very focused on that number for sure.

[Collin Mings:]

Okay. Can you elaborate a little bit more, maybe what’s driving that, again to what extent, any sort of variability in that long-term comp could impact that number, for modeling purposes?

[Geoff Bedrosian:]

So, I think part of it is the long-term comp. When you look at kind of the stabilized run rate, we had, as you pointed out in your note, we had some significant volatility in the fourth quarter. So, that’s a large part of it at the end of the day. Volatility will get reduced, because we’ve changed the composition of the LTIP. And so, the fact that we’re settling it in cash is the reason why we have the volatility. We changed our methodology last year and we will continue this year as well, lot less volatility and visibility into that G&A number.

[Collin Mings:]

Okay. That’s helpful. And then, as far as the quarter, just going back to the TIs, and again, I recognize this number can bounce around a little bit, but the TI number looked higher on renewals than it typically has been for you guys, John. If you can touch on are there any specific leases that are driving that or maybe a little bit more detail there would be helpful.

[John Hendrickson:]

Sure, Collin. There is -- I mean, obviously, I hate to look at any one quarter to dictate a trend associated with the size of our portfolio. But because that was -- that higher number was driven by, I think one deal at the end of the day, so that excuse the overall numbers. But, the one trend that certainly is the case, there are cases where we will be investing and we did this quarter but we’ll be doing it too, is we will be investing, doing -- possibly more investing in renewal, investing in capital, tenants to buy longer term renewal, and to upgrade it, lock in tenants longer term but also get upgraded stores there. So, you might see that number be higher than normal. I think, we end up getting paid for it. I think, if you look at our net effective spreads this year, again, I look at it from a yearly basis rather than any given quarter, if you look at those spreads this year versus the last year, you see that improved. So, I don’t think -- I think, it seems to be we’re getting paid for our capital, which I feel good about.

[Collin Mings:]

Okay. I appreciate the color there, John. And maybe just going back to some of the comments going back to the Investor Day and some of the prepared remarks again about no plans to make additional dispositions without making any acquisitions. Can you maybe just update us on what are you seeing in terms of acquisition opportunities, how aggressively are you looking at them right now, given kind of where the stock price is and just any sort of trends in terms of asset pricing as again you look at potential acquisitions?

[Dennis Gershenson:]

Let me start, Collin, by saying that our total focus at the moment is on utilizing our capital for leasing the vacant space and the delivery of our redevelopments. That is and will continue to be our primary focus. It doesn’t mean that we don’t still have an -- or the water as far as maintaining our finger on the pulse of what’s going on in the acquisition market. Interestingly, the assets that we find most desirable, may have begun to move, but as far as increasing cap rates, but it’s very slight, in part because there are lot of buyers out there buying those types of assets. But, at least at this juncture, our focus is, as I just mentioned, and we don’t see an on balance sheet acquisition in the near term.

[Operator:]

Our next question is from Vincent Chao of Deutsche Bank. Please go ahead.

[Vincent Chao:]

Just sticking with the investment markets, I think, there is a lot of concern about a number of strip players plan to dispose a lot of assets in the coming quarters. It does seem like there was some success in terms of getting some deals done. I was just curious, at a higher level, have conditions changed much on the sales side, are you seeing some stabilization of pricing and some maybe increased demand for assets today?

[Cathy Clark:]

Hi. This is Cathy. So, I think in ‘18, we will continue to see a fair volume of those kind of type properties. A lot of our peers have come out, they are going to be big sellers. And I don’t really see much change in the cap rate. It really depends deals in that space, it’s their growth, what’s the tenant risk depending on the market et cetera. But, it seems like to be kind of properties that stabilize maybe in the 7.5 to 8 or 8.5 range, just depending.

[Vincent Chao:]

Then that’s for power centers...

[Cathy Clark:]

That would include power centers under the category of now real estate is created equal. I think, there are some capital formation around power centers. Our people are looking at buying those for yield, but I think that that is in that range.

[Vincent Chao:]

Okay. Thank you. And then, maybe going back to the same-store performance for the quarter, John, you mentioned a couple of headwinds and the bad debt expense and things like that. But, it looks like comparable expenses were down quite a bit year-over-year. Can you just provide some color on what was driving that? It doesn’t seem like that carried through into the reimbursements coming down on an equivalent basis.

[John Hendrickson:]

So, the recoverable operating expenses on a comparable basis, the one thing you will see -- I mean, to your point, the operating expense recovery, you remember it was the timing of true-ups, you will see our recovery rate is substantially higher this quarter versus same quarter last year because of basically the fact that we trued up recoveries in the fourth quarter of last year. And if you remember, last quarter, I said that was part of our issue the last quarter and we’re comping against that comp. Recoverable operating expenses this year, I think also include basically the timing issue and the fact of lower expenses and repairs and maintenance generally; that was more one-time items last year less so than go forward trend. One thing we did mention on the Investor Day is the fact from an expense control standpoint, we have been able to keep expenses at a basically flat to negative basis over the last couple of years. And we do expect to maintain basically flat going forward from an expense control standpoint over the next couple of years. So, I think, you have some expense control there and also some of the benefit from some one-time expenses last year.

[Vincent Chao:]

Got it, okay. And then, just maybe question on the delays in the leasing that you mentioned that’s been pushed out into the first half of ‘18. Is there any sort of broader themes that are driving that, anything particular or just more lease to lease?

[John Hendrickson:]

Yes. I don’t know necessarily that there’s any trends. I mean, I think generally, tenants are more cautious. And this is something I’ve mentioned a couple of times, since the recession, I mean, since the recession when a tenant went into real estate committee, it used to be before the recession, it was basically a slam dunk going into real estate committee, nowadays it’s more 50-50 and operations is definitely a dictating thing. So, you end up having to have several running parallel paths a lot more than you used to. And tenants are just slower to get into document deals in general to do both internal approval process and I guess things done. Now, in our case, there’s a couple larger deals that impacted us from an occupancy standpoint, lease occupancy standpoint. So, we do definitely have a couple of deals specific items that I should expect you to see in 2018, you’ll see that benefit, but we just didn’t get it done at the end of last year.

[Operator:]

The next question comes from George Hoglund of Jefferies. Please go ahead.

[George Hoglund:]

Hey. Good morning, guys. Just looking at the two Winn-Dixies, I guess those are in the Miami MSA. Why would market rents be on average in those two centers?

[John Hendrickson:]

George, it’s John. So, I mentioned the fact that there -- in place rent for Winn-Dixie is actually in the mid single digits, I actually said 7, it’s actually closer to 6 on a base rent standpoint. And I would expect it to be in the low teens based on market standpoint, obviously it depends on how much capital you end up putting into the deal. But, generally, you would hope it’s low teen.

[George Hoglund:]

Okay. And then, also, are there any other grocers in your portfolio that are faced any issues? I don’t think you guys have any tops in your portfolio, do you?

[John Hendrickson:]

No, we do not. No, besides Winn-Dixie that’s the only one that really comes to mind from a change standpoint. So, we just -- we sold two Jewels. I mean, obviously, there is just news about Albertson this week but, we just sold two Jewel-Oscos, so at least this was one Jewel. But generally, no, I can’t think of any grocers that I’m concerned about today.

[Operator:]

The next question comes from Floris van Dijkum of Boenning and Scattergood. Please go ahead.

[Floris van Dijkum:]

Dennis, maybe if you could give an update on your replacement search and where the Board stands at this stage? And whether that’s going to be potential someone from the outside or an insider or anything sort of information would be helpful?

[Dennis Gershenson:]

Well, Floris, this much I can tell you. When we announced the search commencing in December, it really begin in earnests after the first of the year. As we articulated, John is the internal candidate, and we are vetting the market for potential external candidates. And I would like to think that the opportunity that exists here and that we’ve articulated this morning with what we believe is a strong portfolio, good up side, will be attractive both the John and to potential additional candidate. That’s about as much as I can tell at this point. As we make progress, I will certainly be more than happy to update you.

[Operator:]

[Operator Instructions] Our next question comes from Christopher Lucas of CapitalOne Securities.

[Christopher Lucas:]

Just one question for me. John, you’ve mentioned earlier in the call about rent relief related to the Toys and the Charming Charlies. We’ve heard from others that besides rent relief, there were also duration -- shortening the duration of the leases to essentially out one year. Did you guys go through some of that as well?

[John Hendrickson:]

Yes. So, this will be a fair consistent approach they are taking. There tend to basically two-year terms that we’re looking to have with two-year fixed terms which from our standpoint is a good opportunity then to find backfill, replacement tenant during that time period. But yes, that’s been basically same terms that we’ve been talking to them about.

[Operator:]

Our next question comes from Hong Zhang of J.P. Morgan. Please go ahead.

[Hong Zhang:]

Hey. Sorry, this got mentioned earlier on the call, but did you guys provide an updated cap rate on the dispositions done in Q4?

[Dennis Gershenson:]

Yes. We talked about an overall disposition cap rate of 7.6% and we specifically called out the power center in Michigan at 7.8%.

[Operator:]

[Operator Instructions] We have a follow-up question from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

[Todd Thomas:]

Hi, thanks. Just a quick follow-up on the capital recycling. I think, at the Investor Day, so you had talked about of $50 million of incremental dispositions that would match fund $50 million of acquisitions. Just some of the commentary on the call, I just want to make sure I understand. So, the dispositions that you anticipated in the first quarter were accelerated a little bit and they closed before the end of the year. What’s the update with regard to the $50 million of acquisitions? It sounds like there is nothing in the pipeline right now. And I just wanted to check on that and also see how that might impact the guidance?

[Dennis Gershenson:]

You’ve got it exactly right, Todd. To complete the capital recycling, we had the opportunity to move the $50 million in dispositions that we talked about into the fourth quarter of 2017, which we moved on. As we look at the landscape today, never say never as far as an acquisition is concerned. However, at this juncture, our feeling is our capital is most intelligently used in the areas of our existing operations which includes leasing-up a vacant space and completing our redevelopments.

[John Hendrickson:]

And I think, Todd, just not doing the acquisition is in our guidance range. And so, right now, our guidance reflects our current outlook on our business. And I think as Dennis says, if we end up finding something or pursue something, then, we’ll update appropriately.

[Operator:]

There are no further questions at this time. I would like to turn the call back over to Dennis Gershenson for closing remarks.

[Dennis Gershenson:]

As always, ladies and gentlemen, we thank you for your interest and your attention, and look forward to speaking to you at the end of the first quarter. Have a good day.

[Operator:]

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