Rithm Property Trust Inc.
Q3 2016 Earnings Call Transcript

Published: 2 Nov 2016

[Operator:]

Greetings and welcome to the Ramco-Gershenson Properties Trust Third Quarter 2016 Conference 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 turn the conference over to Ms. Dawn Hendershot, Vice President of Investor Relations for Ramco-Gershenson. Thank you, Ms. Hendershot. You may begin.

[Dawn Hendershot:]

Good morning and thank you for joining us for the third quarter 2016 earnings conference call for Ramco-Gershenson Properties Trust. With me today are Dennis Gershenson, President and Chief Executive Officer; John Hendrickson, Chief Operating Officer; and Geoff Bedrosian, Chief Financial Officer. 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 third 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. The end of the third quarter marks the successful completion of our 2016 capital recycling program which focused on the disposition of non-core properties, a number of which are in non-strategic markets. The sale of two Michigan properties during the quarter brings our total dispositions for the year to $122 million, which is at the high end of the range of the guidance we provided in the spring. We also accelerated our disposition schedule completing a number of sales earlier in the year that are originally planned. Our continuing goal is to own a portfolio of high-quality shopping centers with an ever increasing net asset value, which in turn will generate consistently strong same center growth is insulated from the risks of economic volatility and is reinforced by a focused market strategy. Our actions in 2016 are consistent with this goal, including the sale of non-core Michigan properties, while almost simultaneously purchasing subsequent to quarter end, the Centennial Shops in Edina, Minnesota, an affluent submarket in the Minneapolis MSA. The two Michigan centers had average base rents of $13.85 and $11.11. The Centennial Shops which was acquired for less than the proceeds we received from our Michigan sales is a high-quality upscale infill shopping center. The average base rent for Centennial Shops approximates $32 per square foot [indiscernible] a five-mile population base of 107,000 people and the average household income is $95,000. In addition to its strong location and unique anchor drop, Centennial Shops shows a healthy 3% to 5% compounded annual NOI growth rate for the first 5 years as we bring leases to market. We are also investigating a number of long-term value add opportunities at the shopping center. The swap of assets from non-core properties to a high-quality shopping center is part of our process to drive the portfolio’s NAV. As we look beyond the end of the year, we will continue to focus on driving the value of our portfolio by selling non-core properties selectively buying high-quality centers, upgrading our tenancies, pushing rental increases and actively pursuing strong value-add redevelopment opportunities. With these goals in mind, I would like to take this opportunity to inform you that we will be outlining our 5-year business plan at an Investor Day in New York City at the end of February next year. I would now like to turn this call over to John who will provide color for our operating results.

[John Hendrickson:]

Thank you, Dennis. Good morning, everyone. In addition to executing on the transactions that Dennis mentioned, it will set us up for future value creation and growth. I think the third quarter also demonstrated continued solid operational execution. Same-center NOI, including redevelopment grew 2.8% during the quarter and 3.1% year-to-date. For the full year of 2016, we still expect to achieve our original guidance of 3% to 4% although likely at the lower half of the range due to the lost income above our typical reserves for our four Sports Authority locations and cost us 80 basis points of growth. We are nearly complete with releasing most of our Sports Authority boxes. I will discuss this further in a moment. Offsetting the short-term income loss both long-term quality improvement, same-center growth over 2015 continue to be driven by our redevelopment pipeline, higher rents, lower operating expenses with higher recoveries, increased ancillary income and accrued small shop occupancy. We ended the quarter at a fiscal occupancy of 93.6%, 60 basis points below last quarter driven entirely by 3 vacant Sports Authority boxes totaling 128,000 square feet or 90 basis points of occupancy. While anchor to leased occupancy declined, small shop leased occupancy increased 40 basis points to 88.2%, 140 basis points increase over third quarter 2015. We expect very little additional fall out in the fourth quarter with steady strong demand and thus we continued to expect we will achieve our goal to increase small shop leased occupancies 100 basis points to 200 basis points during the year. As we have discussed during the last couple of quarters, our small shop occupancy continues to be helped by improved anchor merchandising improving the 15 anchor leases totaling 375,000 square feet that were signed prior to the end of 2015. Of this group, 13 have opened through third quarter with Nordstrom Rack at West Oaks, Ross and Shoppes at Fox River and all [indiscernible] center each opening during the quarter, in addition to the active anchor repositions we have initiated, our Sports Authority locations and the third quarter bankruptcy of Golfsmith will provide for our additional upgrades to our assets. During the quarter we executed a new 10-year lease with Dicks for a TSA box at Treasure Coast in Jensen Beach, Florida in which Dicks had taken designation rights. While there would down time in rack through the end of 2016 and first quarter 2017, Dicks now has position of this place and will open in early second quarter 2017. At the other three locations, we are very close to finalizing backfill leases with multiple retailers at our Wisconsin and Michigan locations and expect new income to start in late 2017. For our Fort Collins location, we are in active discussions with a number of traditional box retailers. However, we are being deliberate in our approach since we are also considering using the TSA lot as the part of the larger planned redevelopment of the center. While not unexpected, during the quarter, Golfsmith filed Chapter 11. We have two locations totaling 67,000 square feet at an average rent of $14 per square foot. Both of these are at dominant centers for us, one at Troy Marketplace in Metro Detroit and the other at Mission Bay Center in Boca Raton, Florida. While Dicks appears to be seeking designation rights on some of the 90 remaining Golfsmith locations including one of ours, we currently don’t expect either of our locations to fit for a Dicks concept. Nonetheless, as has been the case with the Sports Authority boxes, we already have some solid leasing traction that will allow us to upgrade and diversify in the merchandising at each center. We do expect to replace or exceed the Golfsmith base rent although as was the case with the TSA boxes we will need to invest capital into the spaces. In the end, through decline of these anchor retailers has created an opportunity and further improved our portfolio. In fact as I said in the last quarter, we continue to believe all of our anchor upgrades coupled with other redevelopment activities offer accretive investments and also help drive value at the properties for years to come. Regarding redevelopment, our current pipeline of projects is $79 million. During the quarter, we added two projects consisting of new outparcel pad buildings at River City Marketplace in Florida and at our 2014 acquisition Flower Mound Plaza. These projects together with projects we expect to add in fourth quarter at Troy Towne Center in Michigan, Woodbury Lakes in Minneapolis and elsewhere help continue our consistent redevelopment pipeline of $65 million to $80 million of active projects. In conclusion, our portfolio is performing well within this dynamic environment. Even the minor short-term setbacks in anchor follow-up this year provides opportunities for additional improvements in our high quality portfolio. Geoff will now give more details about our operating results. Geoff?

[Geoff Bedrosian:]

Thank you, John and hello everyone. Operating FFO for the third quarter was $0.34 per share down from $0.36 per share in the third quarter of last year. Cash NOI on a comparable basis increased $0.01 per share, primarily from redevelopments coming online and a bad debt recovery from Sports Authority offset by $0.02 per share and higher G&A expense and $0.01 per share from higher interest expense. G&A on a comparable basis for the third quarter of 2016 was higher by $0.01 per share as a result of higher long-term compensation expense and a one-time expense related to severance charges coupled with $0.01 per share savings realized in the third quarter of last year from the departure of the previous CFO. G&A was relatively in line with our previous two quarters and is currently trending at the high end of our guidance range. Additionally, we would like to highlight two add back adjustments operating FFO. First, an add back of $0.01 per share from a loss on extinguishment of debt related to our conveyance of the Aquia office property to the lender via deed in lieu which we previously discussed on our second quarter call. And second, an add back of $0.01 per share which reflects an impairment charge that substantially relates to certain land parcels available for sale at our Lakeland property. On the capital recycling, we had another successful quarter. As Dennis mentioned, we sold two wholly owned operating properties Livonia Plaza and Livonia Michigan and Shoppes at Fairlane Meadows and Dearborn, Michigan generating total gross proceeds of $40.1 million bringing our total growth property dispositions for the year to $121.9 million which represents the high-end of our guidance range. Turning to our capital market activity, as previously discussed on our last call, we entered into an agreement to issue $75 million of senior unsecured notes in a private placement with two institutional investors. The notes have a 12 year term and are priced at a fixed rate of 3.64%. The sale of the notes will close on November 30 of this year. We intend to use the proceeds in conjunction with drawing our line of credit to repay our Crofton and River City Marketplace mortgages totaling $126 million later this year. The repayment of these two mortgages addresses all of our 2017 debt maturities and will reduce our weighted average cost of debt at yearend to approximately 4% and extend the average term of our debt to 7 years. On the balance sheet front, our net debt to EBITDA at the end of the third quarter was 6.1 times, an improvement from 6.6 times at yearend 2015. Lastly, our coverage ratios remain stable as our interest and fixed charge coverage ratios ended the quarter at 3.8 times and 3.1 times respectively. So as we look beyond 2016, our balance sheet will be in very solid shape with manageable debt maturities of $37.6 million in 2018 and $13.5 million in 2019, the majority of which is represented by the current balance on our line of credit. Turning to guidance, as we reviewed our year-to-date and expected performance for the remainder of the year, the company is narrowing its 2016 FFO guidance by $0.01 per share at the bottom and top end of our range to $1.34 to $1.36 per share. So with that, I would like to turn the call back over to the operator to open the line for questions.

[Operator:]

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Todd Thomas of KeyBanc Capital Markets. Please go ahead.

[Todd Thomas:]

Hi, thanks, good morning. Just Dennis, as we think ahead to 2017, just curious if you can share some thoughts on the company’s disposition strategy, what we might expect over the next several quarters just given your comments around continued asset recycling after this year’s activity?

[Dennis Gershenson:]

Sure, Todd, good morning. There is no question that in 2017 we will continue our capital recycling program still with an emphasis on geographic diversification which obviously means that there will be additional dispositions as it related to Michigan. What’s important to understand and I think that you can see that in the third quarter we are going to do our best to align our dispositions with an acquisition or two, that, you know will at least keep any potential dilution down to an absolute minimum.

[Todd Thomas:]

Okay and John, the two Golfsmiths that you mentioned, where you don’t expect Dick’s to take either. What’s the expectation on the mark-to-market for those boxes at $14 a foot and what do you think it’s reasonable to expect in terms of timing to have those boxes re-tenanted?

[John Hendrickson:]

So I would hope that it will be at least in the high teens there especially at these locations and then time wise that does point probably early 2018 from a rent start standpoint. I mean, we are working on back those now but realistically it’s probably a first half of 2018, before you get rent back started.

[Todd Thomas:]

Okay, did those two stores, did they close during the quarter, are those included in the quarter end occupancy? No.

[John Hendrickson:]

No, they are still operating and we expect them to continue to operate probably through the end of the year.

[Todd Thomas:]

Okay and then just one last question. Also I think, you mentioned that three of the 15 junior anchors commenced in the quarter, I guess for modeling purposes, how much of the expected annual rent is in the run rate this quarter from those commencements, I guess, what’s the mid quarter adjustment that we should make to fully bring the rent into the run rate?

[John Hendrickson:]

Well, that’s – of the 15 that we have been talking about that we signed in the last – by end of 2015, 13 have already commenced before the end of the quarter. Most of those that was the difference between, so we actually have, I only named a handful but we actually only had seven through the second quarter and it was basically spread fairly evenly, return to 7 and 13, the rent start was fairly even with during that quarter. So I think, you get, you have a full run rate on the 13 obviously at the end of the quarter and then we have the remaining two open end, one is actually already opened and the other will in the next 30 days.

[Todd Thomas:]

Okay, so there were actually, there were six commencements during the quarter?

[John Hendrickson:]

Yes, right, exactly.

[Todd Thomas:]

Right. Can you share what the annual – so the timing was ratable on those six boxes throughout the quarter?

[Dennis Gershenson:]

Todd, for modeling purposes, I think that’s probably the right way to look at it. Remember, those 15 for this year had a penny impact. So to kind of specifically modeling out for the quarter, I think, you are not talking about a significant amount of dollar at the end of the day from an impact perspective.

[Todd Thomas:]

Okay, alright, got it. Thank you.

[Dennis Gershenson:]

Okay.

[Operator:]

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

[Collin Mings:]

Hi good morning, guys.

[Dennis Gershenson:]

Good morning, Collin.

[John Hendrickson:]

Good morning, Collin.

[Geoffrey Bedrosian:]

Hi, Collin.

[Collin Mings:]

Just to start, can you just maybe talk a little bit more about the Centennial Shops acquisition and provide a little color around pricing and then it sound like that there is some longer-term redevelopment opportunities there that might exist. Can you just expand upon that a little bit?

[Dennis Gershenson:]

Sure. The purchase price was just over $32 million, the cap rate approximated 6%. Really, one of the interesting aspects of this in addition to its outstanding location, you know and its strategic position in the marketplace is the fact that really contractual rents are the lion share of the 3% to 5% compounded annual growth in income. So, you know, we’ve got built in same center NOI growth from the get go. There are also a couple of leases that are well below market that we believe will have no problem bringing up to market. There is also an ability at the center because of this configuration to take a good look at a number of value add improvements to the asset that we are investigating now. Obviously, that will require cooperation from the community and we would look forward to being able to talk to you about, you know, additional restaurants there in unused parking areas, the ability potentially to buy land adjacent to the shopping center where you know we could expansions and really the key to this is it’s an in fill market and a very desirable location for a significant number of retailers who are not only present in the area – not present in the area but it would be impossible for them to see the development of a new asset.

[Collin Mings:]

Okay, that’s helpful, Dennis. And then just maybe a little bit more broadly, I mean, you referenced in response to Todd’s question earlier about maybe looking to offset some dilution from future asset sales, Dennis, you’ve spoken a lot about the competition out there for the types of asset you are looking to own, can you maybe just update us on your pipeline, are there any opportunities you are currently evaluating and you think have a high probability of closing as we go into 2017?

[Dennis Gershenson:]

Well there is no question that we are looking at several assets, we got our eyes on one in particular but you know whether or not that you know we are able to finalize an agreement and close on that, you know, we typically don’t like to get to fire out over our skis but you know we believe that as we proceed to upgrade our portfolio that’s where the emphasis will be and will be very focused on the type of assets like Centennial as well as larger assets where we have real redevelopment opportunities. But, you know, these – they all will be in attractive submarkets in major metropolitan areas, top 40 MSAs, some in our existing markets such as Colorado, Minneapolis, Chicago and Southeast Florida as well as the potential for a new marketer too.

[Collin Mings:]

Okay, that’s helpful. And then John, just maybe there was a pretty big jump in TIs in the quarter, can you maybe just touch on what drove that?

[John Hendrickson:]

Sure, Collin. It actually was just driven by two deals including one in the – the Dick’s deal that I mentioned, in my remarks. When you take those two deals out, you actually go to a number that ends up being very similar to last quarter and below the average for the trailing four quarters.

[Collin Mings:]

Okay. And then just one last one, John just as it relates to the watch list going into the holiday season here, any changes on that front?

[John Hendrickson:]

No, I think it’s, I mean, we feel pretty good about the stability of the portfolio for the remainder of the year. You know, the one other bankruptcy that we have was minimal, the Logan's Roadhouse that we mentioned in the last quarter, we have four locations and it looks like there are all be assumed that’s I think a good story and that will continue as a going concern at least for the near-term.

[Collin Mings:]

Great. Thanks guys.

[Operator:]

Thank you. The next question is from Craig Schmidt of Bank of America. Please go ahead.

[Craig Schmidt:]

Thank you. The cap rates on the two Michigan asset sales, you thought it might come somewhere in the 8-K [ph], did that in fact happen?

[Dennis Gershenson:]

Good morning, Craig. As a matter of fact, that’s basically the average cap rate over the two. One, sold at a number below that and one sold above and a lot of that just based upon the tenant mix in each of the assets and its location in their individual markets.

[Craig Schmidt:]

Great. And then do you have a sense of where same-store NOI is going to go in the fourth quarter without redevelopment?

[John Hendrickson:]

Craig. It’s John Hendrickson. In the fourth quarter, no, we are not given necessarily guidance specifically on that. I would tell you, we should end up for the full year, as I mentioned on the call, that we would expect to be on the lower half of the 3% to 4% with redevelopment and probably be on similar sense without redevelopment for the year, that being up from a standpoint of being in the lower half of the guidance that we give.

[Craig Schmidt:]

Okay, thank you.

[Operator:]

Thank you. The next question is from R.J. Milligan of Baird. Please go ahead.

[Craig Schmidt:]

Hi, good morning, guys. John, in your comments…

[John Hendrickson:]

Hi Craig.

[Craig Schmidt:]

Before you said that you expect to hit the lower end of your same store NOI guidance of 3% to 4% for the year, you guys are tracking 3.1% growth year-to-date, you guys put up 2.8% in the quarter. To hit that low end of your guidance, are you guys anticipating a reacceleration in same store NOI growth in the fourth quarter and is that due to those junior anchors coming on line or how do you think about how fourth quarter trends?

[John Hendrickson:]

Yes, no, absolutely, R.J. It really is driven by that getting a full quarter growth from really those 15 assets that we talked about. You will see that even with our – with The Sports Authority adjustments, our physical occupancy from a same center basis is basically even right now. So we are basically kind of get the benefit of that – those 15 driving growth in the fourth quarter.

[Craig Schmidt:]

Okay, thanks. And then Dennis on those – on that 8% cap rate for the dispositions, any change in sort of the disposition market, is there, have you seen a movement in cap rates at all in some of those Michigan markets?

[Dennis Gershenson:]

Interestingly enough, we are seeing an improvement in cap rates and more people coming to the table interested in the assets that we put up year-to-date and we don’t see any reason that that shouldn’t continue into 2017.

[Craig Schmidt:]

And Dennis, can you give a little bit more color as to the increasing or the larger pool of potential buyers who are looking for those types of assets?

[Dennis Gershenson:]

Typically, they are private buyers. We are seeing interest from a number of private REITs again for a certain type of asset class but primarily, they are private buyers and many of them are buyers that we have dealt within the past who will come to the table with cash, so that we are not running into financing contingencies.

[Craig Schmidt:]

Great. Thanks, guys.

[Operator:]

Thank you. The next question is from Vincent Chao of Deutsche Bank. Please go ahead.

[Vincent Chao:]

I just want to go back to Todd’s earlier questions, in terms of the sort of investment outlook for 2017, Dennis, should we interpret your comments to suggest that you would match fund dispositions in acquisitions or you are not trying to be that precise?

[Dennis Gershenson:]

In a perfect world, I would say, we would love to do that whether or not we are going to be successful in match funding, you know on a consistent basis throughout 2017, that’s in question. You know, let’s put it this way. I hopeful that we can give you a lot more color at the Investor Day specifically as to what our plans are vis-à-vis just to dispositions and I would like to think by that time give us another, you know, three months we may be able to talk more specifically about potential acquisitions.

[Vincent Chao:]

Okay. And then as we think about the spread between cap rates or buying at versus what you are selling at, I mean, it sound like maybe you are seeing additional demand maybe a little bit tightening of cap rates, I am not sure if that’s the right interpretation but should we be thinking about that spread narrowing a little bit in 2017 versus 2016?

[Dennis Gershenson:]

Well again, I think a lot depends on the specific assets that we are attempting to sell. But you know, realistically, I think that spread is between 150 and 200 basis point.

[Vincent Chao:]

Okay, thanks for that. And just maybe a question going back to the sports authorities, I think when we were on the road earlier this fall, it sounded like you had some good visibility on a couple of the boxes, I am just curious, I think one of them was stowed [ph] up between two national soft good that had two formats, I think one was maybe a grocer that was expanding. I am just curious are those still on the table or you know are we looking at different potentials for the Sports Authority watching [ph] now?

[John Hendrickson:]

No, this is John. The – we are still looking at the same concepts. The locations where I talked about are Wisconsin location all in the documentation and we are still heading in that same direction. One will be split between soft goods retailer and a grocer and the other is looking to be two concepts from same retailer but we haven’t announced it yet because we haven’t fully signed the agreements but we are close.

[Vincent Chao:]

Got it, got it, okay, thanks. And then just the last question on the spike up in the TIs which you mentioned the reasons for that one of them was the Dick’s, I think in the box pack, I guess as we think about the releasing of the other sports authorities, you know, I guess on a net effective basis, do we think this is going to create more of a wash in terms of the rent?

[John Hendrickson:]

I think on their face, the deal themselves are either a wash or maybe even slightly negative. I mean, we are seeing a 25% increase in base rent but of course that doesn’t mean directing [ph] capital. We kind of look outside of the deal itself and the impact on the rest of the centers and we certainly see them any of these standpoint as accretive overall to the whole properties.

[Vincent Chao:]

Okay, thanks a lot.

[Operator:]

Thank you. The next question is from George Hoglund of Jefferies. Please go ahead.

[George Hoglund:]

Thanks. When you look at your disposition plans and potential acquisitions for 2017, is there a ballpark or target exposure to Michigan that you are looking to get to by the end of 2017?

[Dennis Gershenson:]

Well, again George, we had set out a target of 25%. I believe that when we speak, you know, in the first part of the year will have set another goal even lower than that much closer to 20% but I would like to leave that conversation basically for when we meet in the spring.

[George Hoglund:]

Okay, thanks.

[Dennis Gershenson:]

Thank you.

[Operator:]

Thank you. The next question is from Vineet Khanna of Capital One Securities. Please go ahead.

[Vineet Khanna:]

Hi, good morning. Thanks for taking my questions. Just on Centennial Shops, can you maybe talk a little bit more about the mark-to-market on the existing leases there and then sort of what the lease expiration schedule looks like?

[John Hendrickson:]

Sure, this is John Hendrickson. I will take shot at it. I mean, so basically the property of 85,000 square feet with – 85% of it is really made up from three anchor tenants. Only one of those really rolls in the next – one of those anchor tenants rolls in the next five years. But the rest of the small shop is really where we see growth opportunities from a mark-to-market standpoint that we should be able to drive it and so that they end up getting that growth of 3% to 5% annually.

[Vineet Khanna:]

Okay, great. And then just sort of on the same store recovery ratio that was down 170 bps year-over-year, maybe could you provide some color on that?

[John Hendrickson:]

Same center recovery ratio is actually, recovery ratio is actually up quarter-over-quarter because year-over-year it’s actually up but quarter-over-quarter you write it down. That had more to do with the timing of a true up that we did in 2015 that drove that number higher. We are actually trending you know year-to-date at a higher recovery rate and that’s really driven by partially the mixture of our occupancy, you know the increase in small shop occupancy but also how our expenses real estate taxes are up which tend to be higher recovery versus cam [ph] cost are actually down which would be in general lower recovered than real estate taxes.

[Vineet Khanna:]

Okay. And then just lastly for me, maybe you guys can provide little bit of color on your sort of 11 Office Depots, how many of those depots are in sort of long hold or redevelopment targets?

[John Hendrickson:]

Well go the – so we have 11 Office Depots, then there is also seven Staple boxes, we kind of look at them as groups even though we do have more focus on the Office Depot. If you look at those explorations about 18 explorations, we only have only 3 expiring over the next year and one Office Depot that does expire in the next 12 months is already in the process of getting it replaced with another tenant. You know, we are at the – probably heard from our other peers, where now Office Depot and Staples are now engaged to actually have dialog about the future. I think, after their merger analysis in the past. So with that, we are actively with them to either right size them or replace them where appropriate.

[Vineet Khanna:]

Okay, great. Thanks for the time.

[Operator:]

Thank you. [Operator Instructions] And the next question is from Mickey Debeli [ph] of JP Morgan. Please go ahead.

[Unidentified Analyst:]

Hi, good morning, guys. Most of my questions have been answered, but whether if you could touch a little bit on development and redevelopment pipeline, what you are seeing for the next few years, where you see the most opportunity and maybe what would be good recurring amount to use for in your deliveries over the next few years just to get a sense?

[John Hendrickson:]

Sure, this is John Hendrickson. I will take a shot at that. But I mean, we are at $79 million right now. We have a fair amount of projects that will be placing in service before the end of the year. But we also have a pipeline that we will be adding back, so it will certainly be within the range that we’ve always talked about of 65 million to 80 million on a ongoing pipeline, and I think we have fairly visibility over the next couple of years on that and generally, how we think about it is the projects in general end up being 18 months to from start to stabilization. So from that you can place [h] in service you can get to using that math.

[Unidentified Analyst:]

Got it. Thank you.

[Operator:]

Thank you. The next question is from Floris van Dijkum of Boenning & Scattergood. Please go ahead.

[Floris van Dijkum:]

Great, thanks, good morning, guys.

[John Hendrickson:]

Good morning.

[Floris van Dijkum:]

Question on your sales, obviously you disposition, you’ve done actually pretty good pace here today, the 108 million of proceeds, you got roughly 35 million of gains on that which is actually pretty interesting to note. Does that mean that potentially you have to dividend out some of that by a special dividend by the end of the year or could you maybe talk about that?

[Geoffrey Bedrosian:]

Yes, Floris, it’s Jeff. Good question. We have been able to kind of protect a good portion of that with 1031 and right now we are not anticipating on having to declare special dividend next year or this year, excuse me.

[Floris van Dijkum:]

Great, great. I guess my other question, I mean, I suspect you probably touched upon some of these issues in February as well but as I am looking at your property because I note, you have one asset in Kentucky, one in Indiana, one in Maryland. Should we expect to see those markets disappear and focus on you know, markets where you have greater critical mass?

[Dennis Gershenson:]

Well Floris, if I start with back at the Kentucky asset really is metropolitan Cincinnati. I think, though, what you will indeed see an emphasis on certain specific markets and if we have one asset or even if some markets two assets that are not going to be a major focus for us then a measured basis indeed we will be moving out of those markets.

[Floris van Dijkum:]

Great, thanks, Dennis.

[Operator:]

At this time, I would like to turn the conference back over to management for any additional or closing remarks.

[Dennis Gershenson:]

Ladies and gentlemen, first of all, thank you again for your interest and your attention. Look forward to speaking to you after the first year and on behalf of John, Geoff, myself and the entire management team, we wish you a healthy and a happy holiday.

[Operator:]

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.