Wheeler Real Estate Investment Trust, Inc.
Q3 2017 Earnings Call Transcript

Published: 9 Nov 2017

[Operator:]

Welcome to the Wheeler Real Estate Investment Trust 2017 Third Quarter Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Laura Nguyen, Director of Investor Relations. Thank you, Ms. Nguyen, you may begin.

[Laura Nguyen:]

Good morning, everyone, and thank you for joining us. Today, you will hear from Jon Wheeler, Chairman and Chief Executive Officer of Wheeler Real Estate Investment Trust; and Wilkes Graham, Chief Financial Officer. Following management's discussion, there will be a question-and-answer session, which is open to all participants on the call. On today's call, management's prepared remark and answers to questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For more a detailed discussion related to these risks and uncertainties, we encourage listeners to review the company's most recent filings with the SEC. As a reminder, forward-looking statements represent management's view only as of the date of this call. Wheeler Real Estate Investment Trust assumes no obligations to update any forward-looking statements in the future. Definitions and reconciliations of non-GAAP measures are included in the company's quarterly supplemental package, which is available through the company website. At this time, I'd now like to turn the call over to Jon Wheeler, Chief Executive Officer and Chairman of Wheeler Real Estate Investment Trust.

[Jon Wheeler:]

Good morning, and thank you for joining Wheeler Real Estate Investment Trust 2017 Third Quarter Conference Call. I'd like to also welcome my colleagues, Wilkes Graham, Chief Financial Officer; and Dave Kelly, Chief Investment Officer. I will start today's call with an overview of our third quarter operating metrics, highlighted by $0.43 per share AFFO; followed by an update on the significant progress on anchor backfills and derisking of the portfolio; and finally, our plan to address the near-term debt maturities inclusive of our facility with KeyBanc. I'll then turn the call over to Wilkes, who will discuss our third quarter financial results, review guidance for the full year and fourth quarter 2017 and provide an update of our balance sheet. I'll close with remarks about our long-term strategy and our continued efforts to adapt to the changing face of retail, and how that could impact our centers. I'm pleased with the portfolio's operating results, as AFFO came in at the higher end of the guidance range at $0.43 per share. NOI was line in with our internal budget at approximately $10.7 million, representing 34.7% increase from continuing operations year-over-year. Our leasing team continues to successfully post positive rent spreads on renewals and push rates on new leasing as we look to maximize revenues from our small shop tenants, that provide complementary cross-shopping opportunities at our properties. Same-store NOI was 1% on a GAAP basis and a negative 0.9% on a cash basis, driven by a slight increase in property revenues and a decrease of 0.8% in property operating expenses. If you were to look back at our Career - excuse me, if you were to back out the Career Point closure we had at Perimeter Square, same-store NOI growth would have been positive 3%. We have worked really hard to streamline and create efficiencies throughout the operations and have been successful in transitioning leases from recently acquired assets over to our standard lease form, resulting in increased expense reimbursements, a testament to the excellence of our team. Leased occupancy came in at 93.5% for the quarter, a decrease from 94.3% the previous quarter. This is mainly attributed to the buyout and subsequent lease termination of the BI-LO located at Shoppes at Myrtle Park, which will be discussed in more detail shortly. As a result of successful LOI negotiations, operations needed possession of the space to accommodate a user for approximately 60% of the available 37,900 square feet available. We're in talks with other interested users for the remainder of the space and have an agreement with KeyBanc that the current backfill [indiscernible] at the center, once executed, restores the asset's eligibility on the line. Renewal rent spreads were impressive at 5.8% on 34 renewals this quarter, totaling approximately 206,000 square feet. Of the 92,000 square feet of remaining 2017 expirations at the end of the third quarter, the majority has already been addressed as of today. In addition, 12 new leases, totaling 30,364 square feet, were executed with an average rental rate of $10.98 per square foot, which is approximately 15% higher than our portfolio average rental rate at September 30. Year-to-date, we've now executed on 118,000 square feet of new leases accounting for $1.9 million of new NOI, of which approximately 46% or 55,000 square feet had yet commenced rent as of September 30. Of the 55,000 square feet of new leasing, over 80% commences rent over the next 2 quarters. Our leasing team has done an exemplary job of both pushing rates on renewals and backfilling vacancies throughout the portfolio, and I want to thank them for their continued hard work. Included in the 206,000 square foot of renewals we executed in the third quarter, we're able to execute renewals with 2 anchor tenants. At our Tampa Festival asset, we successfully rebranded the former Winn Dixie to a Harveys, maintaining both the credit of Winn Dixie and the current rent, and securing term to 2023. At our Alex City asset, Winn Dixie exercised their option to extend through 2028, which included an increase of $34,000 per year of rental income. Subsequent to quarter end, we secured a backfill for the vacant former Monarch Bank Building, where the lease expires December 31 of this year. Having secured a backfill at this property, we now have a term sheet that will extend the maturity of this loan to June 2019, and we'll look to take this asset to market as it is outside of our core strategy. I'll now discuss the derisking strategy we have undertaken this year to reduce our portfolio exposure to high-risk leases, those with nearing expirations and unfavorable market conditions and high concentration towards any one specific anchor operation. We've further concerns regarding our BI-LO exposure and, more broadly, the risk of potential lost income from anchors in our portfolio, as the grocery sector continues to see increased competition from new entries as well as increased online presence. We've done an extensive risk analysis of our 64 income-producing assets, and believe the steps we have taken in the past few months have largely mitigated the risk. Let me address a few of these initiatives. First, let's discuss the 3 anchor vacancies that were announced back in May. You'll recall that Southeast Grocers - Southeastern Grocers, the parent company of BI-LO, announced the closure of 20 stores during the second quarter of 2017. As a result, 2 of our 15 BI-LO stores were affected, and both had 2018 lease maturities. Due to the merger of Ahold and Delhaize and the subsequent FTC requirements of that transaction, the Martin's at Brook Run closed in August. However, the lease term and rent continues to run through August of 2020. This quarter, given the strength of our current lease negotiations with a quality credit user, we successfully negotiated a $469,000 lease termination with BI-LO at Shoppes at Myrtle Park in Bluffton, South Carolina. As a result of the significant increase in grocery competition in the Bluffton market, we made a shift in our remerchandising plan for this center, which we feel will enhance the value of this asset in the long term. Interest has been strong in our other former BI-LO at Cypress Shopping Center in Boiling Springs, South Carolina and we expect to make an announcement on a backfill in the coming months. At our Brook Run asset in Richmond, Virginia, we're currently in advanced stages of negotiations with Ahold for the assignment and assumption of their former Martin's space to a new tenant, which includes the extension of term through 2025. The progress on these backfills in just a few short months demonstrates the strength of our locations and the associated strong demand. As mentioned in our previous earnings call, we had 2 unidentified anchor tenants that were in arrears totaling $245,000 as of June 30, $45,000 of which we reserved in the second quarter. I'm pleased to announce that we've successfully restructured both leases, resulting in full recovery of back rent with one tenant and a recovery agreement with the other, which will result in a full recovery by March of 2018. As of today, the 2 tenants are current on their payments. And at September 30, the combined arrear has decreased to $119,000. We expect both tenants to remain current on their payments and be fully caught up by March 2018 per the payment structure. Finally, as a part of our refinancing efforts that Wilkes will discuss in more detail, we negotiated extensions with 2 BI-LOs that had terms set to expire in 2018, resulting in 8 years of additional term at each location. However, rent adjustments were a part of the agreements. These seven assets represent the majority of what we currently view as our exposure to rent reduction. In aggregate, these initiatives should replace $3.3 million of annual rent, with a weighted average lease term of 2.6 years, with $2.6 million of annual rent with a weighted average lease term of 8.5 years. Offsetting these reductions in rent is over $1 million of expected pickups in annual NOI from anchor and junior anchor backfills at Perimeter Square, Crockett Square and Forrest Gallery as well as NOI from other executed new leases and on-balance sheet development stabilizing in 2018. We recognize the uncertainties surrounding BI-LO, but at the end of the day, it is the quality of the real estate that will determine the long-term plan for any asset. To that end, we're confident in the real estate that we own. And subsequent to the derisking initiatives I just discussed, we believe the majority of our anchor risk for any additional rent reductions is limited to 1 or 2 assets. Further, as Wilkes will discuss, we remain confident that the reductions in either rent or third-party fees going forward have been or will be replaced by increased earnings from the REIT-owned assets, resulting in materially higher-quality stream of cash flow that funds our dividend to our common shareholders. Our on-balance sheet development. Columbia Fire house remains on schedule, with tenant deliveries scheduled to begin in the first quarter of 2018. This asset is 80% preleased with weighted average rents of $27 per square foot, with one 4,000 square foot space left to fill. A phase 2 component is also being contemplated, and we'll keep you informed as we progress on this redevelopment. Turning to our KeyBanc facility. We're pleased to have executed a 2-year extension with Key, that takes the maturity out to 2020 with an option to extend to 2021. The facility was increased to $52.5 million from $50 million, an accordion feature was increased to $150 million from a $100 million, and the rate remains constant at LIBOR plus 250. As a part of the extension, we'll have until June 1, 2018, to complete - excuse me, July 1, 2018, to complete the current refinancing process on $15 million of debt, to bring the balance to $52.5 million. The remaining debt that we have coming due over the next 2 years are smaller property debt maturities and the $6.8 million line of credit with Revere Capital, all of which we plan to be able to update you on the fourth quarter earnings conference call. With that, I will now turn the call over to Wilkes for his update and review guidance, and then I'll end the call with a few closing remarks. Thank you.

[Wilkes Graham:]

Thank you, Jon, and good morning, everyone. I'll begin by touching on some of the financial highlights of the third quarter of 2017. I'll then address guidance, followed by a review of our balance sheet. We reported third quarter 2017 AFFO per share of $0.43, which came in at the higher end of our guidance range of $0.40 to $0.44, and when compared to our $0.34 quarterly dividend, translates into an 80% AFFO payout ratio for the quarter. The variability in our guidance range for the third quarter was a function of a range of internal estimates as to the amounts and timing of both third-party fees, which netted $532,000 for the quarter; and a lease termination fee from BI-LO at our Shoppes at Myrtle Park asset, which ultimately amounted to $469,000. As Jon mentioned, we have a signed LOI for a backfill of this space and are currently pushing paper on the lease. Same-store NOI year-over-year growth for the third quarter was a positive 1%. And excluding the Career Point vacancy at our Perimeter asset, which went dark in the fourth quarter of 2016, but has been backfilled by Aspire Fitness at higher rents commencing in the first quarter of 2018, same-store NOI growth was a positive 3%. Economic occupancy across our portfolio of 4.9 million square feet, and in September 30 at 92.8%, down 90 basis points from the prior quarter. 70 basis points of this decline was the result of the lease termination buyout at our Shoppes at Myrtle Park asset. Our percentage leased, which includes the executed leases where rent has not yet commenced, was 93.5% at September 30, down 80 basis points from the prior quarter. And again, 70 basis points of that decline was attributed to the Shoppes at Myrtle Park. Moving on to guidance. We are maintaining our 2017 AFFO per share range of $1.48 to $1.53, which implies fourth quarter guidance of $0.35 to $0.40. Through the first 3 quarters of this year, $0.95 per share of our $1.13 of AFFO, which contributed from REIT property NOI and interest income less SG&A and fixed charges. And we anticipate a similar contribution in the fourth quarter. We continue to include a range of estimates for third-party fees and guidance. And the fourth quarter also includes a range of expectations for seasonal operating expenses, such as snow removal, as well as the reversal of the $45,000 of bad debt reserve we took against the one tenant in the second quarter of 2017. As we look to 2018, we are finalizing budgets, and we'll provide formal guidance on our next earnings call. But for now, we can say that despite the derisking strategy that has resulted in reduced rents at a handful of assets and materially longer term and a lower level of asset management fees next year, we remain comfortable that NOI from new leases and redevelopments, combined with the Sea Turtle accrued interest payment, will more than offset these reductions. As a result, we expect a greater percentage contribution to overall earnings from REIT assets next year. The stabilization of the Sea Turtle Marketplace development that is expected to occur in late 2018 will provide us not only with $0.13 a share of accrued interest, paid in cash, but also over $13 million in cash to the REIT that can be used for accretive acquisitions, tenant improvement costs, debt pay downs or other liquidity needs. Turning to the balance sheet. We ended the quarter with a debt-to-gross asset value of 62.1% compared to our covenant with KeyBanc of 65%, cash at end of the quarter at $5.7 million. From Page 10 of our supplemental package, which is on our website, you can see that we have approximately $92 million of debt principle coming due over the next 24 months. I'd like to address where we stand on these maturities. First, as Jon mentioned, KeyBanc has agreed to increase our current capacity on the line of credit to $52.5 million from $50 million, to increase the accordion feature to a $150 million from $100 million, and to extend the $52.5 million on line by 2 years from the date of closing, with an option of a third year. We anticipate closing this extension by year-end. Agreed upon terms include no changes to the interest rate or coverage ratios from our current line. Second, given our current $68 million balance on the Key line, Key has also extended to July of 2018 the date by which we can pay the line down by $15.5 million to reach that $52.5 million level. We continue to work diligently on a basket of 8 assets that currently total $19 million in debt, and we appreciate Key's support in providing us additional time to execute. As Jon mentioned, we recently negotiated anchor lease extensions on 2 of these assets, which were set to expire in late 2018, strengthening our ability to put long-term financing in place. Finally, the three debt maturities in December 2017 that total $4.5 million are all expected to either be paid down at maturity or extended in short order. We continue to expect to successfully refinance our $6.8 million Revere debt prior to the April 2018 maturity at a materially lower interest rate burden. With that, I'll turn the call back over to Jon for his closing remarks.

[Jon Wheeler:]

Thank you, Wilkes. This month, we complete our 5th year as a publicly trading company on November 19. Our strategy remains consistent, and we'll continue to push to maximize long-term shareholder value. Retail will continue to evolve as consumer trends change, however, bricks-and-mortar will remain a constant. A recent JLL report noted that the number of retailers opening stores on a net basis far exceeds those that are closing. From that report, we estimate that 7% of our revenues come from retailers opening at least a 100 stores this year, while only 1% is exposed to retailers closing 50 stores or more. I feel this statistic helps bring - it helps illustrate the overall health of our tenant base, that we continue to work to mitigate our exposure to higher-risk tenants. Our focus on the 1 or 2 remaining at-risk assets will be to maximize the long-term value of the asset. Our necessity and service-based retailers are the backbone to a thriving economy and support the needs of the communities in which they serve. With that, I will now turn the call over to the operator for Q&A. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from the line of Craig Kucera from B. Riley FBR.

[Craig Kucera:]

I know you addressed some rent reductions at BI-LO. But when I look at your supplement, it looks like there was a pretty meaningful decline at Piggly Wiggly. Can you comment on that?

[Wilkes Graham:]

Want me to get this?

[Jon Wheeler:]

Yes, go ahead.

[Wilkes Graham:]

Yes, so when we mentioned the 2 tenants that as of June 30, as you know, were $245,000 past due, $45,000 of which we reversed - or we reserved in the second quarter, that amount of back rent declined to $119,000 at September 30 because we executed - as they're both Piggly Wigglies, we executed lease modifications on those 2 assets, which resulted in lower rent but also allowed for them to pay in full on that back rent. So those were both Piggly Wigglies, and that's what you're seeing.

[Jon Wheeler:]

And Craig, this is Jon. To follow-up on that as well. When we do - when we execute lease modifications, it's not only rent-oriented, but also, it's term. And we're able to actually - in one location because of the location and the density in Columbia, South Carolina, work that term to our benefit. And I think you'll see that going on with some of these other stores that go on. It's actually not a negative. It's actually a very good positive.

[Craig Kucera:]

Is that something that you think you is system-wide for Piggly Wiggly? Or do you think these were more isolated instances?

[Jon Wheeler:]

These were isolated. They were location specific.

[Wilkes Graham:]

Yes. And Craig, I think this goes back to the derisking strategy that Jon talked about across the seven assets. These were 2 of those 7 assets. And again, as Jon said, and I think as we both said, we look at our 64 assets now. We think if we have any more high-risk assets, where there might be any change in rent to a downside, it would be limited to 1 or 2 assets. So, we don't see it as a system-wide event.

[Jon Wheeler:]

Right. And also, Craig, as we've gone through this exercise because of what we were presented and confronted with on these BI-LOs, as Wilkes mentioned earlier, we've looked at every location, every shopping center, and now the anchors with the junior anchors to mitigate any type of exposure that could come in the future by identifying those backfills now. And that goes 2 and 3 deep.

[Craig Kucera:]

Got it. Circling back to moving assets off the line, I know that you guys have been aware of the situation for a while. I think you've been discussing that you thought you would get something done in maybe October, November. And now you have another extension, which is great. But can you give us an update on timing of when you think you're going to move those off. Is that probably a 2017 event? Or you're likely to push that into 2018.

[Jon Wheeler:]

Well, since they are individual assets on the line. We can move them off in groups of 1, 2 or 3, or just a single asset by itself. But I think it's fair to say that, that process will be ongoing from now to the end of the year. And then in the course of first and second quarter as well. So, it really is more, again, location-specific.

[Wilkes Graham:]

Craig, I think I've learned that any time you put a date on particularly a refinancing, it is a big and different date. It's just the way it goes. So, we're not going to put a time on any one of those individuals. Again, as we said, we appreciate the extra time Key has given us. We're working hard on it. We think some of the lease modifications that we've made are going to help in that respect. And we feel confident we'll get it done.

[Jon Wheeler:]

And Craig, let me follow-up one more time on that as well. It's all about the location. It's all about the real estate. And you always hear location, location, location. And that's one thing I'm very proud of Dave Kelly and his team. With the acquisition side of things, we've got very strong locations that consistently provide high interest, not only from anchors and junior anchors, but small shops. And if you look back to our percentage of lease since day 1, November 12 to today, we've consistently been around 93%, 94%, 95%. And then look at the renewals that we just took place here recently, that 5% plus on the accretive benefit to the renewals. And that's all detailed and commanded by the location.

[Craig Kucera:]

Got it. And when you look at your leases rolling over here in the fourth quarter, I think about 2% are expiring, and 30% of those have a renewal potential. What do you think your retention rate is going to be on those renewals? And kind of what's your expectations for the other space that doesn't have a renewal option? Do you think you'll be able to lease that up? Or is there your anticipation will see occupancy drop again this quarter.

[Jon Wheeler:]

So again, as Wilkes just said about anticipated dates and so forth, I don't want to give you dates specific. But let me tell you what my experience is after 36 years in this business. First and foremost, an option is a concession to a tenant when you give them option and you give them the right to exercise or not. And you see us in our new leases, and especially as we move tenants from previous owner leases to our lease forms, we focus on options, and really the lack thereof to give us the ability to push rents and not have fixed stated increases in the future. Looking back over the last 2 or 3 years, we have consistently renewed existing tenants somewhere between 90% and a 100%, whether it's been 30 renewals that took place, or 60 renewals took place. And again, it goes back to the location. And again, on those renewals, whether it was a stated renewal with a fixed increase or no renewals with a negotiated increase, we've had positive rent spreads. What I can say is I'm confident that those type of percentages will continue, not only just in the fourth quarter but each quarter thereafter.

[Wilkes Graham:]

And Craig, I'll add. I think Jon said in his script, 92,000 square feet is set to expire in the fourth quarter based on the supplemental. 30% of those have options. About half of those are month-to-month. And so, if you have these very small month-to-month leases where some really small tenants, they show up as expiring. And yet they probably - we expect those - pretty much all of those to continue as they are. They just always show up as expiring. On the other half of that, one of them is an anchor that we've already backfilled. So, I think, as we said on the call, that other half is largely addressed at this point.

[Jon Wheeler:]

And Craig, again, to follow-up for a third time with Wilkes. We renewed early 2 anchor tenants. And we've been doing that pretty consistently through the last 5 years of being publicly traded. And again, that shows you the strength of location. And in some cases, it wasn't just the next pending 5-year option, but we took it out by an additional 8 years. So, these retailer, too, have capital needs. They have same-store sales. They need to be able to demonstrate when they borrow money, that they have term to produce sales to pay the notes. So, I think, again, that shows the strength of locations with those 2 anchors. Any time you can renew somebody early, that's a good thing.

[Operator:]

Our next question comes from the line of Larry Raiman with LDR Capital.

[Lawrence Raiman:]

Quick question for you, Jon. You mentioned that you may be pivoting in terms of the merchandise mix in some of your stores. Could you give the nature of discussions you're having with regard to other types of retailers moving into your centers?

[Jon Wheeler:]

Yes, sure. Let's talk about Bluffton. Bluffton is a perfect example, with not only the existing - we're getting some feedback there.

[Jon Wheeler:]

So, Larry, using Bluffton as example, that's on the mainland where Hilton Head Island, South Carolina is one of the barrier islands. Bluffton is a good example where most likely, it is overstored from a grocery-store standpoint, plus you have the new entries coming in, like Aldi and Lidl. So, from our perspective, we're always focused on cross-shopping and co-tenancy, but at the same time, focusing on who's in that market and who's not. And that goes back to the extensive analysis we've just completed on the 64 assets. So, it's not only do we have a grocery store replace a grocery store, but what is the better use for that particular submarket and that specific shopping center. So, I can't give you a specific name on Bluffton. But I can say that as time changes and users come and go, it's no different than the movie industry with the video stores or SINGER sewing - back when our mothers literally bought sewing machines and did sewing at home. Those trends have changed. And it's the same thing, where sometimes grocery stores not only go out of favor because of their use, but also their credit. But maybe they go out of favor because that particular submarket is overstored. That's the case of Bluffton, and we're very happy with the use that's coming in for about 60% of that space. That will be a better tenant, and actually create more traffic from a greater radius than what the grocery store did. Grocery stores traditionally draw from a 3- to 5-mile radius. This particular tenant that we're close to consummating will draw from a 10- to 15-mile radius, which is much better for the shopping center.

[Lawrence Raiman:]

Okay, great. And just one another follow-up question with regard to the revenue mix on a going-forward basis. I know you've been working hard toward upping the REIT recurring cash flow percentage relative to third-party fee structure. And Wilkes, you cited that percentage over the course of this past year and this past quarter. Based on your business plans going forward, do you see that continuing to move up and could eventually show a replacement entirety to a 100% of recurring revenue to the run rate and coverage on the dividend?

[Wilkes Graham:]

Yes. So, I think, Larry. I think that's the game plan. That's what we're working towards. The managed portfolio that we earn asset management fees from, continues to shrink. And that's not something we're trying to replace. I think we're taking - we are we've said on the new leasing side, we generated $1.9 million of new income. And I think that's something to note that our average rents on our portfolio are $9.51 a square foot. But when you have a vacant space, you're paying expenses on that vacant space. So - and I think we looked at our portfolio, our top 10 assets from a vacancy perspective were about 70% occupied right now. So, there's some opportunity in those spaces that you can get new leasing to fill vacancy and you're not going to just get the rent. You're going to get the reimbursements as well. If you look at the 118,000 square feet of new leasing we've done this year, the revenue per square foot - and it's actually the NOI per square foot that we've added is $16.14 a square foot of NOI per square foot that we've added. Because, again, you're already paying expenses on those properties, on those vacant spaces. And so, you're getting rent and reimbursements. So, we continue to see opportunities despite all the new leasing we've done. We still have opportunities with some low-hanging fruit on the vacancy side, where we can add material NOI. We've got NOI coming from Columbia Fire House. As we said, we have $13 million coming back to us from the Sea Turtle development sometime next year. We can generate additional earnings from that as well. So, we do see a number of opportunities to continue to increase the contribution from NOI, and that's our game plan.

[Jon Wheeler:]

And Larry to follow-up again with Wilkes. When we buy a shopping center, we don't pay for vacancy. So, if it's 10%, 5% vacant, we always include a 5% vacancy anyway. If it was a 100% leased on the small shops in [indiscernible] analysis over a 10-year period, well, that's bound money that you don't pay for. And to support what Wilkes is saying, when your average base rents, your ABRs, are $9.51, and you can push the needle, which we did here recently, we're roughly around $10.50 on the average on new leases on base rent alone. And as Wilkes said, you throw in those operating expenses that you're not getting to offset those expenses, it's powerful. And as we have a center, and we implement our policies and procedures and we push the rates, as a good example this third quarter, when you go quarter over quarter over quarter, if we stood still, we still feel confident in the accretive benefit of renewals and new leases.

[Wilkes Graham:]

And part of that, just as I didn't finish my own thought, was of the $1.9 million of new NOI that we had generated, a little under $1 million of that contributed to the bottom line - or contributed to our income statement as of September 30. So, there's almost $1 million in there that we've already executed on that'll start to hit. As we said, 80% of that starts to hit in the next couple of quarters.

[Operator:]

[Operator Instructions]. Our next question comes from the line of Will Wheeler with Compass Point.

[William Wheeler:]

I was wondering on the BI-LOs that are dark. You had indicated at one point that you were getting close to re-signing one of them and being able to move that off of the KeyBanc line. Do you have any commentary or update on that?

[Jon Wheeler:]

Yes. So, the one BI-LO was in Bluffton, and the other one is in Boiling Spring, South Carolina. And that, too, is in progress with a contemplating user to backfill. But again, I don't want to identify the user or the use yet, but we feel good about that success.

[Wilkes Graham:]

And just to be clear, Will, once we get the backfill at Shoppes at Myrtle, which is the - that's the only dark BI-LO that's on the Key line. The Cypress asset's not on the Key line, and we're working obviously on both. But on the Shoppes at Myrtle asset, which we sometimes call Bluffton, because that's in Bluffton, South Carolina, once we get that backfill, which we've said we're pushing paper on finalizing right now, if - it then becomes an eligible asset to remain on the line again. So, as we said, we have a basket of 8 assets totaling $19 million that we're working on taking off the line. Whether that ends up being one of those or not, I think is just - you just kind of see how it goes. But once you get that backfill, it technically could remain on the line.

[Jon Wheeler:]

Well, also, Will, what you know is important. We've got LIBOR plus 250 on the line. If it remained on the line versus put permanent debt on it, right now the permanent debt may be 450, 460. And if you're LIBOR plus 250, you'd be much less than that, and it may be a smart business decision to just let it sit.

[Operator:]

Our next question is a follow-up question from the line of Craig Kucera.

[Craig Kucera:]

Just one more from me. Assuming that the new tenant at Shoppes at Myrtle Park were to - everything closes and proceeds forward, when will that actually begin - when would they actually begin paying rent?

[Jon Wheeler:]

Well, we're in negotiations now. And again, not give you a hard date on the outside. But when you look at lease negotiations and permitting time and construction time, it's hard to say but a rough range could be 4 to 6 months. But we don't want to give you a specific hard date.

[Operator:]

That are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

[Jon Wheeler:]

Thank you, Operator. On behalf of the team here at Wheeler, I would like to thank all those that dialed in for the call, and we look forward to talking with you again when we report fourth quarter 2017 results. Have a great day.

[Operator:]

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