Rithm Property Trust Inc.
Q2 2013 Earnings Call Transcript

Published: 24 Jul 2013

[Operator:]

Greetings, and welcome to the Ramco-Gershenson Properties Trust Q2 2013 Earnings Call. (Operator instructions.) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Ms. Dawn Hendershot, Director of Investor Relations. Thank you, ma’am, you may now begin.

[Dawn Hendershot:]

Good morning and thank you for joining us for Ramco-Gershenson Properties Trust Q2 2013 Earnings Conference Call. Joining me today are Dennis Gershenson, President and Chief Executive Officer; Gregory Andrews, Chief Financial Officer; and Michael Sullivan, Senior Vice President of Asset Management. At this time management would like me 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 statement 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, and good morning ladies and gentlemen. Ramco-Gershenson’s strong Q2 results and our ability to post positive metrics quarter after quarter speaks to a company that is highly productive and well positioned to deliver continued, sustainable growth. Our positive broad-based accomplishments and the attendant increase in function operations furthers our company’s overall business strategy and moves us toward achieving all of our 2013 goals. In its simplest terms, our strategic mission is to be the best in class owner of a portfolio of geographically diverse, high-quality, multi-anchor shopping centers with built-in, above average income growth potential. Our 2013 goals which advance this strategy include first growing and refining our shopping center portfolio through accretive acquisitions and non-core dispositions, value add redevelopments and center expansions; second, diversifying our geographic footprint so that no one market represents more than 25% of our average base rents; third, generating consistent, sustainable same-center net operating income growth through a proactive leasing and asset management program; and lastly, accomplishing all of these growth and diversification goals while maintaining and improving a strong, flexible balance sheet. We are confident that successfully executing on each of these objectives ensures that our stakeholders will experience ever-increasing share value and a competitive dividend. How have we done so far against these measures? In the first six months of 2013 we acquired over $430 million of high-quality, multi-anchor shopping centers at an average capitalization rate of 7.4%. In addition to these acquisitions, we’re in the process of realizing on the opportunity to develop the land parcels we purchased adjacent to our recent acquisitions at Fox River in Milwaukee, Town & Country in St. Louis, and Harvest Junction in Longmont, Colorado. Each of these projects involves constructing additional square footage and the leasing of out lots at the shopping centers, generating not only accretive returns on the new capital invested but also producing higher property NOI by increasing each shopping center’s net asset value. In addition to acquiring shopping centers in targeted markets, as part of our efforts to refine our shopping center portfolio and diversify our geographic footprint we are actively engaged in the process of selling a number of additional non-core properties. We expect to complete these sales in the second half of this year. Complementing our strong showing and external growth during Q2 and the first six months, our Asset Management Team continues to demonstrate its ability to drive healthy increases in all of our portfolio operating statistics. Key metrics of a highly desirable and successful shopping center portfolio, including same-center NOI growth, leasing spread increases, improving occupancy levels and healthy operating margins all advanced for us in Q2. Of special note is the success we’re achieving in signing highly desirable anchor and small tenant leases. Based upon the letters of intent and leases we’re negotiating we recently expect to sign at least one additional anchor lease with a leading national retailer by year’s end. We also anticipate a continued acceleration in our small tenant leasing momentum. You should remember that I indicated in our Q1 conference call that our small tenant lease occupancy goal for 2013 was between 89% and 90%. We are presently on track to reach that target. The advances we’ve made in both our anchor and small tenant occupancy will by no means slow our potential for income growth. Rather, in addition to contractual rental increases and options exercised, we have multiple sources to drive property level income over the next several years. These sources include one, renegotiating leases and replacing tenants we signed in 2008 through 2011, a period of [retention] – we anticipate that we will generate rental rate increases for both new and expiring leases similar to those we’re achieving in Q2 and the year-to-date 2013; two, capitalizing on a significant lineup of value-add redevelopments which we only announce and include in our supplement when we have solidified plans for the project. As I mentioned these projects currently include Harvest Junction, Roseville Towne Center and the Shoppes at Fox River. And lastly, a third source of strong net operating income growth will come from the pipeline we are creating for expansions at newly-acquired shopping centers. An example of the potential for this type of future income growth is our most recent acquisition, Mt. Prospect Plaza. This core-plus community shopping center, located in a dense in-filled northwestern suburb of Chicago was approximately 85% leased at the date of purchase. Based on its strong demographic profile, position in the market, roster of national credit tenants and the existence of significant retailer demand, we believe that we can move quickly to lease the majority of the existing vacant space. Our plans also include adding at least one out lot and constructing an additional retail building on the site. Thus, pursuing all of these avenues to grow our income stream will enable us to broaden and deepen the income growth potential to be mined from our expanding shopping center portfolio. As we undertake all of our external and internal growth initiatives we are ever mindful to maintain a strong balance sheet. Our capital activities in Q2 and the year-to-date reinforce our commitment to limit interest rate risk while emphasizing equity as an integral part of funding our acquisitions, developments and core portfolio improvements. Our continued focus on value-add acquisitions, operational excellence and a strong capital structure has produced a steady improvement in our earnings. Based on these results we’re increasing our FFO guidance for 2013 by $0.04 at the midpoint of our range. Over the balance of the year we will continue to deliver on our business plan, and as part of that plan we expect to acquire an additional $40 million to $80 million of high-quality, value-add shopping centers in our targeted markets. The first half of 2013 has positioned your company to reap the benefits of all of our growth initiatives. We anticipate the second half of the year will be a very productive period as well. I would now like to turn this call over to Michael Sullivan who will provide insight into our operating metrics.

[Michael Sullivan:]

Thank you, Dennis, and good morning everyone. Ramco’s Asset Management Team is pleased to report our Q2 operating results. We think the continuing improvement in our operating metrics speaks volumes about not only the quality of our shopping center portfolio but also about the opportunities embedded in our centers. Asset Management is on track in executing its 2013 business plan which supports Ramco’s broader strategic goal. Leasing continues to drive our portfolio productivity. In Q2 we generated strong leasing velocity of positive [rentals] for both new and expiring leases. Total lease transaction volumes exceeded 475,000 square feet, and on a comparable basis the cash rental spread was up 9.1%. We continue to take advantage of an active retail leasing environment at several levels. Shop leasing velocity was strong in Q2, accounting for approximately 70% or 150,000 square feet of total new leases signed. There are three key areas driving this activity. Number one, local small shop tenants are expanding and opening new stores at a higher rate than they have in past years, accounting for approximately 50,000 square feet of new shop leases executed during the quarter. Our selection process in vetting new local tenancies has become very stringent, allowing us to pick winners in this category which we view as those with specific concepts desired in our markets that add a flavor and excitement to our centers while benefiting from the traditional high rental rates achieved from these tenants. Number two, we also continue to benefit from high interest from national and regional small shop retailers that are expanding their stores, including The Children’s Place, America’s Best, H&R Block, and Salon ONE. Number three, large format shop users – those over 5000 square feet – continue to be a very important element in our high-quality, multi-anchor centers. For the quarter we signed 75,000 square feet of these leases with expanding retail concepts including DSW, Advance Auto, Kirkland’s, Buffalo Wild Wings, and Rue 21. Our success in our shop leasing program is a prime contributor to the increase in our core average rent to $12.04 a square feet. Additionally, anchor leasing continues to be active as national retailers expand and relocate to the best-positioned shopping centers. We executed three anchor leases in Q2, one of which has TJ Max replacing a departing Staples. Our anchor lease occupied rate stands at approximately 97%. We attribute these leasing trends to several factors – retail sales continue to increase, retailers view growth through expansion most favorably, and the lack of new development places a premium on existing spaces in well-positioned, high-quality, multi-anchor shopping centers. On the renewal front we renewed approximately 83% of expiring leases with a rental growth of positive 6.8%. We see this trend continuing. In fact, demand for spaces in our shopping centers has presented us with an opportunity to be more selective in renewing tenancies and more aggressive in driving rental increases. As a result of our successful leasing program, occupancy in our core properties continues to increase. In Q2 we posted a leased occupancy rate of 95.1%. This was the result of positive improvements across all regions of our portfolio. The greatest increases were realized in Georgia, Florida, Ohio and Michigan. Michigan now has a leased and occupied rate of 97%. The Asset Management Team is focused on supplementing its growth through value added redevelopments and expansions. Tenant interest in our Fox River and Harvest Junction properties will result in lease agreements sufficient to expand those centers in the coming quarters. Our Roseville redevelopment involving a Wal-Mart Super Center and re-tenanting the balance of the center with national retailers is on schedule, and we have identified a pipeline of future projects. Ramco’s team continues its focus on driving income and reducing costs with positive effects. In Q2 our operating margin was 73.4%, a 190 basis point improvement over last quarter and a 210 basis point improvement over the comparable quarter last year. Achieving our leasing, renewal, income and cost containment objectives has also improved our same-center NOI performance. We posted a same-center NOI gain of 3.2%. Our Asset Management Team is committed to generating consistent, sustainable internal growth through operational successes in leasing, value added redevelopments, shopping center expansions, and cost containment. With that I’ll turn it over to Greg.

[Greg Andrews:]

Thank you, Michael. In Q2 we took a large stride forward in our capital structure and our earnings. I’ll begin by covering the balance sheet, then I’ll review our income for the quarter and conclude with our outlook for the year. During the quarter, assets increased approximately $50 million. We bought two high-quality shopping centers for a combined $58.8 million, Nagawaukee Center located in a high-income suburb of Milwaukee and Mt. Prospect Plaza, located in a dense in-fill suburb of Chicago. Both properties strengthen our presence in existing markets and exemplify our strategy of investing in well-anchored centers located in higher-income trade areas. We also sold one non-core property in Atlanta for $8.4 million. During the quarter, our $17 million development of phase one Parkway Shops in Jacksonville, Florida, was completed and opened; and we initiated expansion projects at the Shoppes in Fox River and at Harvest Junction. We funded our $50 million in asset growth with the assumption of a $9.2 million mortgage loan on Nagawaukee Center, the addition of $29.5 million of incremental debt, and the issuance of $12.5 million in common equity through our aftermarket equity program. In terms of liabilities management, we broke new ground in Q2 by closing a $110 million private placement of senior notes. This was our inaugural issuance in the private placement market. We are delighted to have earned the confidence and support of a highly selective group of net investors. By establishing our access to this source of unsecured debt capital we have demonstrated our ability to diversify beyond the bank market and to extend our debt maturity. The unsecured notes are in three tranches maturing in eight, ten, and twelve years. The weighted average term is 9.9 years and the weighted average interest rate is 4%. In order to stagger our debt maturities we also closed a $50 million seven-year bank term loan during the quarter. We swapped the full notional amount of this loan to a fixed interest rate at the current loan spread of 3.5%. We used the proceeds from these two long-term fixed rate unsecured financings to pay off five maturing mortgage loans totaling $113.6 million and to pay down our line of credit to an outstanding balance at June 30 of just $3.0 million. So let me sum up our quarter-end financial position following these transactions. One, our debt to total market capitalization is 39.3%; two, our interest coverage is 3.6x and our fixed charge coverage is 2.5x; three, we have over $230 million available under our existing line of credit; four, our unencumbered operating real estate provides a borrowing base exceeding $1.1 billion which equates to 65% of our total operating real estate; and five, our weighted average term of debt including our pro rata share of joint venture debt has increased to 5.8 years. In short, our financial position provides ever greater strength and flexibility to execute on our business plans. Now let’s turn to the income statement. FFO for the quarter was $0.28 per diluted share of 8% higher than the $0.26 reported in the same quarter last year. Here are some of the key items driving FFO this quarter. On the operating side, cash NOI was $31.2 million or $9.6 million higher than in the comparable quarter. This increase reflects the addition of $430 million in real estate to our consolidated balance sheet this year as well as $150 million of acquisitions closed in 2012. Notably, our acquisition of twelve properties from the Ramco Lion joint venture which closed in March is performing slightly ahead of our underwritten expectations. As Michael noted, same-center NOI increased 3.2%. On a same-center basis, occupancy increased 1.1%. This uptick in occupancy helped drive an increase in rental income by 2.2% and in our recovery ratio by 70 basis points. We recorded an overall provision for credit loss of $313,000 this quarter which at 0.7% of revenue was the same percentage as reported in the comparable period. General and administrative expense of $5.6 million for the quarter was higher than the $4.9 million a year ago. G&A in Q2 included $449,000 of acquisition costs related to closed, pending, and dead deals. Our revised forecast for G&A expense for the full year is approximately $21.5 million. During the quarter we booked a gain of $332,000 or approximately $0.005 per share on the sale of an out parcel to a restaurant operator at our Parkway Shops development. We expect to close one additional out parcel sale in Q4 that should result in a gain of between $200,000 and $300,000. Our joint venture results this quarter reflect diminished JV earnings as a result of the sale of twelve properties by the Ramco Lion venture. For those who are modeling earnings, the amounts reported this quarter from management fee income, earnings from joint ventures and the add-back to FFO of our share of JV depreciation all reflect approximate quarterly run rates going forward. Now, let me say a few words about our outlook. We are increasing our 2013 FFO guidance to a range of $1.10 to $1.16 per diluted share. The $0.04 increase at the midpoint reflects contributions in three areas. On the internal growth front we now anticipate that same-center NOI for the year will be at the high end of our prior guidance range of 2% to 3%. Both the pace of leasing and rents being achieved are driving this improvement which adds about $0.01 per share. On the external growth front we have added two strong properties to our roster this quarter and returns that are immediately accretive to earnings, also by approximately $0.01 per share. Lastly, our interest expense projection is lower by approximately $0.02 per share in part because we used our line in Q2 to prepay mortgages and bridge to our new long-term financing in part because those long-term financings were priced favorably. In closing, our financial position has strengthened yet again. Our leasing pipeline remains healthy and our markets continue to provide compelling investment opportunities. We look forward to executing our business plan for the remainder of the year. With that I’d like to turn the call back to Jessie for Q&A.

[Operator:]

Thank you. Ladies and gentlemen, we will now be conducting our question-and-answer session. (Operator instructions.) Thank you. Our first question is coming from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

[Todd Thomas:]

Hi, good morning. Thanks, I’m on with Jordan Sadler as well. In terms of acquisitions, Dennis, you mentioned an additional $40 million to $80 million in the balance of the year. I was just wondering if you’ve seen any change in the competition or pricing for property with where interest rates have moved.

[Dennis Gershenson:]

Well, if I could give you just a little broader perspective, starting at the beginning of the year we saw a significant uptick in supply as well as competition for the assets that we were interested in. Since the end of May or you know, May 21st, there has definitely been somewhat of a stall in the market. Less product is indeed coming to market and certain sellers are wondering about the mood of the buyers. We keep in touch with many of our peers and everybody really has somewhat taken a wait and see attitude. I think what we need is the sellers to become more used to what is going on in the environment and to accept the fact that with an interest rate increase there will obviously have to be some adjustment in cap rates. How large that will be is yet to be determined.

[Todd Thomas:]

Okay. And these acquisitions, should we expect this to be wholly-owned or are you working with Clarion on these acquisitions? I know you had confirmed an agreement with them after acquiring the twelve properties from them last quarter to move forward with pursuing additional acquisitions.

[Dennis Gershenson:]

Right. Without going into their criteria we do continue to show them opportunities. At this juncture the $40 million to $80 million we’re contemplating would be on balance sheet.

[Todd Thomas:]

Okay. And then I just wanted to get your thoughts, I know Ramco doesn’t own a whole lot of property within the city of Detroit but you know, sometimes what’s good or bad for the city may be good or bad for the state and have some other implications. I was just wondering if there’s anything that you’re thinking about or anything that you’re doing internally, you know, any impact that you’re thinking about regarding the properties that you own in the metro area given the situation in Detroit?

[Dennis Gershenson:]

Right, well look – first of all, I’m glad you asked the question. We certainly knew it would come up as part of this call you know, because some see our Michigan presence as the elephant in the room. From our perspective, if there is an elephant there it’s a baby elephant and we have made it a point in most all of our conference calls to say look, not because we have lost faith in Michigan, in the communities we’re in or our assets or our tenants, but because there is this concentration, because we don’t think it’s healthy to have more than that approximate 25% than we’ve referenced we are working to reduce that concentration in part between acquisitions as well as dispositions. I think that there are a number of people who truly have done their research on the state of Michigan; some of them have been here and have seen our centers. However, there are those who don’t understand Michigan and Detroit at all, and worse there are those who don’t care to learn about Michigan but are absolutely prepared to articulate a view anyway. And that is both frustrating and disappointing. So let me set the record straight if I could. Number one, just the facts – we do not own any shopping centers or any assets whatsoever in the city of Detroit. We do own shopping centers in the communities that surround the city to the north and to the west. The majority of centers that we own in these areas as well as the majority of the square footage is located in Oakland County, and as we’ve said in the past Oakland County is one of the wealthiest counties in the United States with populations over 500,000 people. Oakland County is also one of only a handful of the 3100 counties with a AAA credit rating. Our trade areas where our shopping centers are located all have above-average demographics, populations that are well educated, significant job growth that is occurring today and a broad base of both industries and businesses. Just putting Detroit in this context, we all have to remember that Detroit’s problems are not new. They did not occur during the latest recession but have gone on for decades. So any impact that the city of Detroit would have had on our shopping centers obviously would have occurred over that extended time period. But even in the latest recessions we were never lower than 92% leased, and primarily – we could go through those tenants, over 90% are national or regional chains. At the present time we are 97% leased and occupied in Michigan. I’ll stack that statistic up against any of our peers. So if you take a look at our assets, where they’re located, the rental increases we’re experiencing, the demand for space, I will say unequivocally that the Detroit problems will have absolutely no effect on our shopping centers. Now, do we wish Detroit well? We do. We believe that with Governor Snyder’s help the city can clean house, restore its fiscal sanity to their existing problems and come out of this in a much stronger position. We will continue to mind our own business and to take care of our assets and to lease the very few remaining spaces we have in our Michigan shopping centers at ever-increasing rents. I hope that answers your question.

[Todd Thomas:]

Alright great, thanks a lot.

[Operator:]

Thank you. Our next question is coming from the line of R. J. Milligan of Raymond James and Associates. Please proceed with your question.

[R. J. Milligan:]

Hey, good morning guys. Dennis, in your opening comments you talked about dispositions expected for the second half of the year. I was just wondering if you could quantify those and at what cap rates you expect those dispositions to happen at.

[Dennis Gershenson:]

We’re expecting about something in the range of $25 million to $35 million. These will be assets that are located in secondary markets and typically the anchors that go with these assets are not the type or the credit worthiness of the anchors that we really want in our portfolio going forward. So I think rather than give you a specific cap rate we are securing bids as we speak on a number of assets, and I can tell you that Michigan will be the primary source of those sales. Will they exceed the cap rates for the assets we’re buying? Absolutely, but again, I would emphasize that it’s the difference in the type of quality and anchors that will make that determination.

[R. J. Milligan:]

Thank you. And can you talk about who the potential buyers of these assets are? Are they individual buyers, small buyers? Are they private equity – who’s coming to the market looking for these assets?

[Dennis Gershenson:]

It really is a lot of all of the above. There are some institutional players who are looking for higher cap rate acquisitions but we’re finding that the individual buyers who are truly prepared to roll up their sleeves and really focus on those assets specifically because they don’t have a large portfolio are the people who are coming in with the best offers.

[R. J. Milligan:]

Okay, thanks. And for your occupancy, if you get small shop occupancy over 90% by the end of the year where does that take portfolio occupancy?

[Michael Sullivan:]

We anticipate our lease occupancy to really be at the high end of the range that we’ve identified, which is pretty much quarter-over-quarter close to the 95% number.

[Dennis Gershenson:]

That’s core.

[Michael Sullivan:]

Core, correct.

[Dennis Gershenson:]

He asked about the entire portfolio.

[Michael Sullivan:]

We see the trend still continuing and occupancy through the portfolio increasing as well. There is sort of a relationship; we see the spread changing from quarter to quarter but there is a relationship between our core leased and our combined portfolio leased. That spread can be anywhere from 30 to 80 basis points. We see basically the combined portfolio increasing as well.

[R. J. Milligan:]

Okay, thanks. And my last question is just on the acquisition front. Given the trend that we’ve seen over the past year and a half and the increase in retailer demand for space, as you think about your target markets would you prefer an asset that has lease-up opportunity or are cap rates still attractive enough to buy a stabilized property that will still provide a good yield?

[Dennis Gershenson:]

We have always looked at the potential acquisitions for those that may appear reasonably stable to the seller but always have value-add opportunities for us – whether we expand the anchor, we expand the center, add an out lot. We just have not been stable asset acquirers.

[R. J. Milligan:]

Okay, thanks guys.

[Operator:]

Thank you. Our next question is coming from the line of Vincent Chao of Deutsche Bank. Please proceed with your question.

[Vincent Chao:]

Hey, good morning guys. I just want to go back to your comments about you know, it sounds like you’re driving some rent growth from some leases that were signed in the 2011-2012 timeframe when leverage was more in the tenant’s hand. Can you just give us some color on how much in terms of leasing is available there and maybe what the market you think looks like on that set of assets or leases?

[Dennis Gershenson:]

Let’s take the first question which is really about rental growth. Is that accurate?

[Vincent Chao:]

No, specifically to the comment made about renewing or rolling over some of the 2011-2012 lease signings that were maybe done in tougher times and seeing some opportunity there. I’m just trying to get a sense of how much in terms of square footage that represents and what you think the mark-to-market on that set of leases looks like.

[Dennis Gershenson:]

Well Vin, I’d really refer to ’08 to ’11. Most of the leases we signed in that timeframe were either three-year or five-year leases so we’re seeing those now rolling over. The ones that obviously we have signed in ’11 and ’12 will be coming up in ’14, ’15, ’16. Again, I think you can use the yardstick of the kinds of increases we’re achieving year-to-date, anywhere from the 5% to 10% on average increases over the entire group. One of the issues obviously is in any particular quarter are you negotiating with an anchor or a group of anchors or are you negotiating with smaller format tenants, who obviously if we negotiated from ’08 to ’11 we can see a much healthier increase. So depending upon the mix in the quarter it’ll vary, but for the year I certainly think 5%, 6%, 7% is not out of the question.

[Vincent Chao:]

Okay, thanks. And then just going back to the investment environment, it sounds like people are sitting on their hands a little bit and maybe less assets coming to market. I’m just curious though, on the deals that you are still working on are you seeing any changes in potential buyer behavior in terms of number of buyers on different deals? I know you do probably mostly off-market but bid, ask, spread, things like that, are you seeing any material changes in those kinds of areas?

[Dennis Gershenson:]

I think the reality is it may be a little early. I think we’d be in a better position to answer that in Q3 because the deals, again, in talking with our peers and our activities, those deals that we’re in contracts for we’re pretty much sticking with, with attempts to barter a little bit with the seller to see if there might be some movement. If reasonable questions come up in the acquisition then that’ll give you more leverage to change the purchase price, but in the main I think people are sticking with the contracts that they have and we are all waiting just a little bit – maybe another 30 or 60 days – before everybody dives back in and feels comfortable that the cap rates they’re willing to buy at will indeed generate transactions with the sellers.

[Vincent Chao:]

Okay, thank you.

[Operator:]

Thank you. (Operator instructions.) Our next question is coming from the line of Mike Mueller with JP Morgan. Please proceed with your question.

[Mike Mueller:]

Hi, thanks, just a few quick things here. I know you laid out the second half of the year acquisitions and dispositions and guidance, and I know it’s not going to have a huge impact in this year’s estimates but are those factored into the earnings guidance as well? Or is that just kind of exclusive of it?

[Greg Andrews:]

It’s exclusive of it, Mike. That’s sort of consistent with how we’ve always modeled and provided guidance. As you point out I don’t think it’s going to have a big impact one way or the other because we’re heading into the back half of the year now.

[Mike Mueller:]

Got it. And as we look forward for the next couple years, few years, what do you think is a good baseline we should be thinking about for asset sales in a given year? If you were sitting where we are do you think $50 million, do you think it’s more than that per year to kind of get you to your goals?

[Dennis Gershenson:]

I think at least a safe number is $30 million to $40 million.

[Mike Mueller:]

Okay, got it. Okay, and then where do you think development, redevelopment spend ramps up to say in ’14 and ’15 per year?

[Dennis Gershenson:]

Well, we didn’t talk about it on this call but out there obviously is our project in Lakeland that is a $40 million project and you could expect that to kick off in the second half of this year with the majority of the spend coming in in ’14. But as we’ve articulated in a number of our past calls, I think the majority of the development you’re going to see from us will be things like we’re pursuing at Fox River which are typically anywhere from $10 million to $20 million as far as new construction or expansions of the center are concerned.

[Mike Mueller:]

Okay. And then last question, and I know I can get this from the transcript but towards the end of your comments, Greg, you rattled off a couple of smaller line items where you said these are good run rates going forward. Can you just hit those again?

[Greg Andrews:]

Yeah, those are related to our joint ventures, so the management fee line item, the earnings from joint ventures and then the depreciation add-back at our share, just as I imagine everyone following the Clarion deal that we did in Q1 is looking for a little guidance on the joint ventures. I think this quarter’s run rates for all three of those items are good run rates for modeling purposes.

[Mike Mueller:]

Okay got it, thanks. That’s it.

[Dennis Gershenson:]

Thank you, Michael.

[Operator:]

Thank you. We have a question from the line of [Edward O’Keene with Fasso Capital]. Please proceed with your question.

[[Edward O’Keene:]

Yes, I just have a quick question on the Detroit and Michigan issues. What I’m interested about is what percentage of your NOI comes from that region or from that city and state?

[Michael Sullivan:]

Well, as Dennis said none of our NOI comes from the city of Detroit. In the southeast Michigan area which includes the surrounding counties it’s about 30% of our net operating income which as Dennis pointed out is largely from Oakland County but also includes Macomb and Wayne Counties.

[[Edward O’Keene:]

Okay, alright. Thank you.

[Operator:]

Thank you. (Operator instructions.) And as there are no further questions at this time I would like to turn the floor back over to Mr. Dennis Gershenson for any concluding remarks.

[Dennis Gershenson:]

Ladies and gentlemen, as always we truly appreciate your interest and your attention. This organization is on an upward trend. We’re very excited about the balance of ’13 as well as the prospects for our portfolio, and we look forward to talking with you in approximately 90 days. Be well.

[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.