Washington Prime Group Inc.
Q3 2016 Earnings Call Transcript

Published: 6 Nov 2016

[Operator:]

Good day ladies and gentlemen, and welcome to the Washington Prime Group Q3 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Lisa Indest, Senior Vice President and Chief Accounting Officer. You may begin.

[Lisa Indest:]

Good morning, and welcome to WPG’s third quarter 2016 earnings call. During today’s call, we will make certain forward-looking statements as defined by the Federal Securities laws. These statements relate to expectations, beliefs, projections, plans, and other matters that are not historical, and are subject to the risks and uncertainties that might affect future events or results. For detailed description of these risks, please refer to our earnings release and various SEC filings. Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our press release, supplemental information packet, and SEC filings, which are available on the Investor Relations section of our website. Members of management with us today are Lou Conforti, CEO; Butch Knerr, COO and Mark Yale, CFO. Now, I would like to turn the call over to Lou.

[Lou Conforti:]

Good morning everybody and thanks for joining us. Today, I’m going to discuss the progress we made from our previous quarter and spend a few minutes highlighting our achievements from a strategic, financial and operational perspective. I’ll then turn it over to Mark and Butch and those guys will elaborate upon financial and operational metrics respectively. And bottom line, we’ve been real busy. I’d like to thank the Board with respect to appointing me as Chief Executive Officer. Only once before in my career, I’ve seen such an incongruity where perception and reality, they’re just so disparate and this arbitrage resulted in my former firm colony aggregating 30,000 single family residences. Regional malls, especially those in secondary markets, are currently being underwritten in de facto liquidating trust fashion, with little reversionary value. It’s just playing silly. Our results continue to demonstrate the stability of our cash flow. Our asset service town centers and its incumbents, we approve upon their dominant position. We must diversify our tenant mix, as well as offer differentiated shopping, dining and entertainment alternatives. We’re working our behind’s off to accomplish this goal. So, let’s talk strategic. As it relates to our strategic objectives, as discussed last quarter, our premise is unwavering, maintain options and negotiate from strength. Job one is to maximize shareholder value, nothing more, nothing less. By any evaluation methodology, WPG is undervalued. Whether the sum of the parts is greater or less than the whole, it remains to be seen. As we’ve previously illustrated, a normal distribution is the most practicable manner by which to evaluate our portfolio, continual culling of the assets to the left and to the right of this bell curve, and focusing upon the fat part is where we add value. So, let’s talk left side. So, the left side of the bell curve, those seven assets we previously had classified as non-core, as promised, we either closed or in contract to sell every single one of them. Earlier this year, we sold Forest and Northlake Mall, and in August, we disposed the Knoxville Center, and we are under contract again as promised to sell the remaining four subject to customary due diligence and closing conditions and they’re expected to close by year end. So now, let’s turn our attention to the right side. We’ve entered into a definitive agreement with respect to our second JV with O’Connor Capital Partners for seven open-air assets valued at about $600 million. This pricing implies a cap rate of just above 5% on underwritten NOI. We will retain a 51% ownership interest as well as management and leasing responsibilities, closing this targeted for Q1 2017. Upon closing, which is again subject to customary due diligence, and closing requirements, we will have 12 assets in partnership of O’Connor. These JVs accomplish three objectives. First, evidencing meaningful price discovery is always prudent especially when your company trades at a creamy discount. Second, one of the most respected institutional investors within our space repeatedly endorses us and to me that speaks our operating capability. Third, those proceeds which, Mark has a big smile, will allow for meaningful delivering, which we will discuss later. So, as a reminder, our Tier 1 and open-air assets currently represent 75% of total NOI. Our Tier 2, 18% and again currently, our non-core and lender give back 7%. Assuming completion of the above transactions, NOI contribution will be 80% Tier 1 and 19% Tier 2 with zero, naught or whatever in non-core. Last, during August, we sold the 25% indirect ownership interest since we had a Scottsdale Quarter multifamily or residential component sold to an unaffiliated third party. Turning to financial. So, what we do with the dough, Mark will discuss in detail, I I’ll be here to snippet. Combined net proceeds from the anticipated non-core dispositions and the new O’Connor JV are expected to total about $410 million which will be utilized to reduce our outstanding debt, including the lender give backs, the merger synergies, corporate overhead reduction, the things that we did earlier this year and the big non-core dispositions in the O’Connor JV, we estimate a decrease of net debt to EBITDA, that ratio from going down from 6.9 to 6.3 times. I have to admit a 0.6 decrease and one fell swoop is pretty substantive and pretty meaningful with minimal dilution. As we have said repeatedly, we are committed to improving our investment grade rating, while balancing and ultimately increasing cash flow. Operational, let me go quickly on operational, I grind it out as you guys and girls have heard it, it’s our official motto, as I now have it tattooed. Aggressively leasing space is our primary focus and we’re going to continue to reposition and strengthen our assets as again those dominant shopping centers within their locale, regardless, and listen up carefully, regardless of whether they have a roof or not. We’ve also have a cross tenancy mandate whereby we are substantiating the viability of our traditional open air assets for enclosed and vice versa to some extent as a result, and Butch will talk about this and he can talk about this all day if we let him. As a result, we’ve convinced Dick’s Sporting Goods, Ulta Cosmetics, Designer Shoe Warehouse at all amongst others to lease in several of our imposed assets. In fact, our Dick’s Sporting Goods [indiscernible] are in close locations actually outperformed open-air counterparts from a sales per square foot standpoint. Last, I’m going to talk about some e-commerce and technology initiatives. During the third quarter, we announced our agreement with Amazon to offer their lockers at 50 of our assets, which we believe is the largest installation within our peer group. We are taking this arrangement one step further by installing digital screens, which will have electronic couponing capabilities with the intent of driving customer traffic to our tenants that are in the belly of our assets. In addition, we should be – we soon should be in the process of beta testing, a concept, which carries Internet providers on a rotating basis allowing for a treasure hunt experience. I think this is going to be one of the coolest things and our attorney told me we can’t talk about it, so has to stop there. We are conceptualizing an initiative, which allows for brick and mortar tenant to increase visibility with our entire portfolio and we’re kind of thinking about this as a virtual store, where WP tenants will be able to gain access to smaller markets via pop-up shops, trunk shows, digital advertising, website access. So think about it, you have six locations and admittedly a smaller market may never warrant a permanent location. We’re going to accommodate you with temporary exciting and the reciprocal benefit is obvious. It creates excitement for our smaller market, as well as increases brand awareness for our tenancy. Last, we continue to research how our assets can service last mile fulfillment destinations, given our compelling locational and space characteristics. As I said before, we want to be the bricks, which complement the clicks and we’re not only talking the talk, but I think as we’ve evidenced in everything that we’ve done operational, strategic, financial, we’re walking it as well. In summary, the messages grinded out improve operating efficacy, do everything possible to create value for shareholders and maintain optionality. Butch, you’re up.

[Butch Knerr:]

Thanks Lou. First I want to provide some color on our NOI growth for the quarter. Combined core enclosed and open-air delivered NOI growth of 0.6% during the quarter and 2.6% year-to-date. Our open-air centers in the third quarter delivered growth of 6.9%, while our core enclosed properties slowed as expected and had a decline in NOI of 1.4%. This decline was driven primarily by three factors; one, store closings and rent reductions related to the bankruptcies of PacSun, Aeropostale and the Sports Authority. Two, downtime at Jefferson Valley from the redevelopment and three, declines in sponsorship income. Without the impact of these items, NOI growth for our core enclosed properties would have been 1.2% for the quarter and our 2% year-to-date growth would have increased to 3.5%. Second, I want to provide additional color on our re-leasing spreads. Year-to-date spreads for enclosed retail venues were negatively impacted by the rent adjustments related to the PacSun bankruptcies by approximately 230 basis points. Excluding this impact, the spread for combined new and renewal deals would have been positive. We believe our conservative approach to this metric of including the majority of our lease modifications is appropriate. As it relates to Macy’s recently announced store closings, we appeared to have fared quite well. We have been in discussions with Macy’s and while their list is still being finalized, we expect three locations in our portfolio to close in early 2017. For reference, we have 33 stores across our portfolio, 27 of which are owned by Macy’s. Leasing demand across our portfolio continues to be strong. In the third quarter, we executed 220 leases totaling approximately 700,000 square feet; in year-to-date, our leasing volume stands at over 2 million square feet, which is an increase of 20% over the previous year. In addition, at the end of the third quarter, we had approximately 865,000 square feet of leases signed, but not open, representing over $34 million in future income. Occupancy in our core portfolio ended the third quarter at 92.6%, down 10 basis points from a year ago. Of note, our Tier 1 enclosed centers grew 50 basis points to finish the quarter at 92.4% leased. Now, let’s talk about our redevelopment activity. In the last 45 days, we have opened three new Dick’s Sporting Goods locations within our portfolio, bringing the total number of stores to 18, which makes us their fourth largest landlord. These openings include Jefferson Valley Mall where Dick’s opened as the number one store in the region. The opening attracted more than 20,000 shoppers and traffic at the center has increased significantly. At LongView mall, where we just completed a $14 million renovation and finally at New Towne Mall, where we terminated our lease with Sears early and quickly replaced them with Dick’s. In addition, we are adding a 10,000 square foot Ulta Cosmetics, which will open in early 2017. In other development work, this August at Town Center Plaza, the new 56,000 square foot three-story Restoration Hardware opened. Restoration joins Crate & Barrel, Mitchell Gold and Bob Williams, Pottery Barn and Z Gallerie further solidifying Town Center Plaza as the home furnishing destination in Kansas City. We also completed the expansion at Lindale Mall with the opening of five new tenants. As Lou mentioned earlier, we remain focused on cross tenancy between our enclosed and open-air centers. A few recent successes include three new deals with Ulta Cosmetics at the Mall at Johnson City, Jefferson Valley in New Towne, as well as three new deals with Carter’s at Ashland Town Center, Lindale and Mall at Johnson City and a new Party City at Grand Central Mall. And on the flip side, we continue to have success in bringing traditionally close tenant-tenant to our open-air portfolio. A few examples of these successes include J.Crew Mercantile at Gateway Center, Forever 21 Red at Forest Plaza in Waterford Lakes and finally [indiscernible] except the Arboretum. This further demonstrates our unique benefit of our portfolio. These are just a few great examples of the tenants that we are cross-leasing across our enclosed and open-air properties. Now I’ll turn the call over to Mark.

[Mark Yale:]

Thanks Butch. Let’s now turn to the balance sheet, where we continue to take steps to improve our capital structure and liquidity. The positive impacts from the recently announced O’Connor joint venture and the non-core asset sales are significant as it allows us to accelerate the pace of our deleveraging plan. As Lou mentioned, assuming closing of all transactions, we will see a reduction in overall debt levels of approximately $360 million and our net debt to EBITDA will drop from the high 6 times to approximately 6.6 times at closing. When factoring in the remaining planned property give backs and the full year impact of the merger synergies and cost reductions implemented earlier this year, the ratio would decrease to approximately 6.3 times. Once again, we believe, the significant balance sheet improvement more than justifies the modest dilution from the O’Connor joint venture and the non-core asset sales. We should also point out that our dividend will still be well covered following these transactions at an estimated AFFO payout ratio of under 75%. In terms of the give backs, discussions continue regarding the transition to the respective loan servicers on River Valley Mall, Southern Hills and Mesa Mall with exits expected late this year or into early 2017. We’re also planning on transitioning Valle Vista Mall, back to the servicer, but we would not expect any transfer until the second half of next year. When considering the default interest being recognized in 2016, we are anticipating minimal FFO dilution from these give-backs during fiscal year 2017. That service coverage remained strong in 2016 projected at approximately 3.5 times for the full year and most importantly, we ended the third quarter of 2016 with over $650 million of available liquidity between credit facility capacity and cash on hand. The planned disposition activity only enhance our liquidity position going forward. It’s also important to remember that the Company has a very strong unencumbered pool comprising approximately 55% of our total estimated fiscal year 2016 NOI, with over 80% of this NOI or approximately $255 million coming from our community centers and Tier 1 properties. Now let me turn to our quarterly financial results. Our FFO for the third quarter was $0.46 per diluted share falling above the upper hand of our guidance range going into the period, a $1.7 million reversal of a hedge ineffectiveness charge and higher below-market lease amortization along with inline property level performance, primarily drove the upside during the quarter. While not included in FFO, we did recognize $20 million of impairment charges during the quarter, relating directly to our non-core assets. Finally, in terms of our outlook, we reaffirmed within the release, the midpoint of our previous adjusted FFO guidance, but narrowed the range to $1.78 to $1.80 per diluted share. This guidance excludes the impact of merger, restructuring and transaction costs and net gains on the extinguishment of debt. Along with the sale of the non-core assets currently under contract, the guidance assumes the transfer of River Valley Mall, Mesa Mall and Southern Hills late in the fourth quarter of this year. As previously discussed, the new O’Connor joint venture is not expected to close until the first quarter of 2017. With property, operating performance is generally in line with expectations during the third quarter, we’re maintaining our existing core comp NOI growth of 1.5% to 2.5% for 2016. We’re also introducing FFO guidance for the fourth quarter 2016 in the range of $0.48 to $0.50 per diluted share. We expect core comp NOI in the fourth quarter to be up around 1% compared to the prior year. We will provide guidance for 2017 after we finish our property budgets, and will take into account the pending new joint venture with O’Connor and the non-core asset dispositions. Now, we’d like to open up the call for any questions.

[Operator:]

[Operator Instructions] And our first question comes from the line of DJ Busch of Green Street Advisors. Your line is now open.

[DJ Busch:]

Thank you. You guys talked a bit about the cross-merchandising going on in the portfolio and I think it sounds like from earlier calls with the potential shadow supply caused potentially by department store closures or what not, is on the radar for some strip center REITs, but the question, I guess the profitability between a strip center – a traditional strip center tenant going into the mall. Lou talked about Dick’s and Ulta seeing good sales productivity, but what are you guys seeing from a profitability standpoint? How does you compare between the malls and the strips since you guys kind of have a seat – you have a good view on both sides?

[Lou Conforti:]

Sure we can take a relativistic view. I don’t want to speak without summative backup and [indiscernible] occupancy cost analysis, I don’t know if it’s appropriate for us to speak about occupancy cost, I perhaps Butch, can we make a generic comment and I hope, DJ, I hope you can understand that.

[Butch Knerr:]

DJ, I’m sorry, I would just say that I think that the best way to figure out if they’re going to be profitable in those community center players, as if they’re going to follow through and continue to do more deals. And I think that, till this point, we’ve seen a lot of activity where they want to come into our shopping centers, they want to come in and take some of the vacant boxes, whether it’s New Towne where we did Dick’s, and we did Ulta, just some other ones. But, I think it’s really going to be evidenced by the fact that they’ve come to us and said that they want to open up stores and if they continue to do that – that’s what we will see.

[Mark Yale:]

Yes DJ, it’s Mark. I’m not sure also if you’re alluding to whether it works for us in terms of a return on those deals, but it does. Just looking at Party City, Ulta, Dick’s, these are high single-digit type returns. They’re typically taking space, it’s unproductive, thinking through Ulta and Party City up against an anchor. So, it certainly works from a redevelopment perspective, and those deals are very similar to what the deals are in an open-air center, and we think we can make them work. But at this point, we keep doing and they keep coming back, because I think they’re performing in our enclosed properties.

[DJ Busch:]

Yes, that makes a ton of sense from your guy’s perspective, trading out very low rents, if any, for something much higher. I guess, I’m just trying to get a sense on, maybe just from a gross rent perspective, are they comparable between your community centers and the rents that you’re getting in the malls for these types of tenants, these bigger box tenants?

[Butch Knerr:]

Yes, DJ, yes they are, I would say that they’re very comparable.

[DJ Busch:]

And then outside of Dick’s and Ulta, which we’ve heard a lot about, who are some of the other open-air tenants considering to do more deals in the enclosed portfolio?

[Butch Knerr:]

Well, we’ve made a lot of deals with Dressbarn, we made a lot of deals with Justice, Maurices. There’s a lot of those tenant set that go across to multiple – Vision works as a tenant that we have going into the mall environment, that’s currently in the open-air portfolio and then, of course, Shoe Carnival is a tenant, DSW is another tenant that has traditionally operated in the open-air environment that we’re making deals with.

[Lou Conforti:]

I’m pulling up right now, and again probably not appropriate to that. Paul Ajdaharian, one of our senior management team members. We have actually designated a cross tenancy initiative and – traditional in line. We have literally about 25 names, Butch probably mentioned about three or four of them already. So, we’re seeing continued interest in coming into and again the idea of that us owning a shopping center, whether that shopping center has a roof on it or not, if you can get enough critical mass pursuant with respect to traffic, we will see more of this cross tenancy.

[DJ Busch:]

Okay and then sorry if I miss this, but on the community center side, the NOI was up significantly, but look at the spread, they were slightly positive, rent growth was modestly positive, occupancy was a little bit down. What drove the increase on the community center side?

[Mark Yale:]

It’s really DJ, timing of expenses, I think if you remember, going back to the second quarter, our growth was only 1.5%, but we said we were going to continue to drive very solid growth for the year at the community center. So, it’s really just a shift in expenses and then Butch, I don’t know, if you want to talk about the spreads on that.

[Butch Knerr:]

Yes, I would say that the new spreads were down slightly in the quarter and it was really due to three key deals that we felt were important for the shopping centers. So, we made a deal with J.Crew Mercantile at Gateway, that was a negative spread and then R House up in Chicago, we opened them up in one of our community centers. So, those were key deals for those centers that we felt like we’re going to drive more deals down the road. So, they were important deals for us.

[DJ Busch:]

Sure. Okay, thank you guys.

[Operator:]

Thank you. Our next question comes from the line of Ki Bin Kim of SunTrust. Your line is now open.

[Ki Bin Kim:]

First, let me just quickly follow-up on that last question. So, what would community center same store NOI run rate be after normalizing the expense shift?

[Mark Yale:]

For 2016?

[Ki Bin Kim:]

Yes, going through it.

[Mark Yale:]

Yes, I mean for this year, we’re probably in the neighborhood of give or take around 5% for the year – 4% to 5% for the year and I think we’ve talked with that type of portfolio that 3% plus with the quality, is something that internally we’re planning for.

[Ki Bin Kim:]

Okay. And on the O’Connor JV asset sales, how does that impact your same store NOI, just maybe high level. I’m assuming those are some better quality assets than the average, sort of want to see how much your same store NOI might take little bit of the hit going forward?

[Lou Conforti:]

Ki Bin, that’s a very good question and when we did a rank order of those assets, what we can tell you by pulling them out, actually there was zero impact. So, we did a with and we did a without, when we looked at open-air and there was zero impact.

[Ki Bin Kim:]

Okay. That’s interesting.

[Lou Conforti:]

And actually I want to repeat that again, because it is very, very important. There was zero impact and I don’t know – I’ll leave it at that.

[Ki Bin Kim:]

Okay. And just want to clarify on some of you guys said earlier. You guys said there is about 860,000 square feet of leases that are under LOI or something like that, that hasn’t kicked in yet and was that rent $34 million? Was that correct?

[Butch Knerr:]

Yeah, its leases that are – Ki Bin, this is Butch. It’s leases that are executed that have not opened yet and is $34 million in future income, so it includes CAM and rent and other charges.

[Ki Bin Kim:]

That sounds like a lot, when I compare it to your revenue run rate. Is that normal or is that a kind of abnormality right now that we should expect a benefit going forward?

[Mark Yale:]

I think it’s pretty consistent with where we have been in terms of that number and I also remember some of those are going to replace the olds where we have tenants in place. So, it’s not necessarily an incremental number. I think what we’re trying to do with that is to provide kind of an idea of our pipeline and I think what it showing is that it’s been pretty consistent and we’ve had a robust pipeline and we’ve kind of been able to maintain those levels.

[Ki Bin Kim:]

Okay and on your lease spread page, is that on a signed basis or on a commenced basis, the leasing volume, and spreads.

[Mark Yale:]

Keeping that on signed.

[Ki Bin Kim:]

Okay. Thank you, guys.

[Mark Yale:]

Thank you.

[Butch Knerr:]

Thanks, Ki Bin.

[Operator:]

Thank you. [Operator Instructions] And our next question comes from the line of Floris van Dijkum of Boenning. Your line is now open.

[Floris Van Dijkum:]

Great. Good morning, guys. Question on – obviously the increased liquidity that you have and does that make you more free to pursue larger redevelopments and what does that do to your potential redevelopment plans going forward?

[Lou Conforti:]

Let me provide kind of the opening salvo. So, we’ll have nearly close to $1 billion of availability of liquidity, again pursuant to the confirmation of these transactions and as it relates to hyper-charging redevelopment opportunities, we have been extraordinarily stringent and rigorous in beating the heck from – not only from an absolute return standpoint, from a relative standpoint. Our unit of capital in our shop has to compete against – our project has to compete against another project for that marginal unit of capital. So, the answer is no. Guys, am I missing anything? No, I mean not like – just because we have a couple of extra bucks in our pocket, we’re not going to – god forbid, we won’t do anything and prudent as a result of that. And I think Mark’s prudency and conservatism has evidenced itself with respect to our balance sheet and he actually, which I’m going to mention something right now. He said after these transactions, our net debt to EBITDA will be the third best in the peer group behind SPG and SKK and Tanger. So, don’t expect us to be flipping just as a result of a little bit of extra dough in our pocket.

[Floris Van Dijkum:]

Fair enough, fair enough. Maybe can you also touch upon where you stand in further sales or dispositions of your Tier 2 assets? And what do we expect for next year? Obviously, you’ve had a very good year so far, but can we expect this kind of pace or what’s the pace of dispositions that people should be expecting for next year?

[Lou Conforti:]

Right now, there is kind of intrinsic dynamism in that Tier 2 bucket and you think about this normal distribution as opposed to this kind of linear stair-step that we use. I actually think we might see a couple of Tier 2 assets sneak up to Tier 1 and the reality is, you might see some degradation and they might go to non-core, I can’t answer that. And because these are works in progress, where we’re just, we are really grinding it out and just figuring out from an operational standpoint, what’s the viability and how can we improve upon these assets. Butch, am I missing anything?

[Butch Knerr:]

No, I think the only thing, I think that we’ve mentioned before, that we’re transitioning a handful of those Tier 2 and convert back to the lender late this year or 2017. So, other than that, I think it’s a progress we’re making in these centers and trying to make these centers better all the time.

[Floris Van Dijkum:]

Can I have one follow-up question maybe on your initiatives?

[Butch Knerr:]

Of course.

[Floris Van Dijkum:]

On moving the former Glimcher malls to fixed CAM and when do you expect that’s going to be done and what sort of – what kind of pick up in operating margins or NOI improvements could we expect from that?

[Mark Yale:]

Floris, this is Mark. We’ve effectively moved our mall portfolio including any of the Glimcher legacy assets effectively to fixed CAM.

[Floris Van Dijkum:]

So, there is no addition, even though there’s potentially five years to move that, all the benefits are already in there?

[Mark Yale:]

Yes, I mean, we might, there might be one property in the portfolio that’s got some pro rata CAM. But, outside of that, effectively the way we look at the mall portfolio, it’s effectively on fixed CAM.

[Floris Van Dijkum:]

Okay. Thanks a lot.

[Mark Yale:]

You’re welcome.

[Operator:]

Thank you. And we have a follow-up question from the line of Ki Bin Kim of SunTrust. Your line is now open.

[Ki Bin Kim:]

Thanks. Just a couple quick ones here. The Macy’s store closures, what’s the game plan right now for those three boxes? Sorry, if I missed it.

[Lou Conforti:]

No, we are – I mean, I think from an adaptive reuse standpoint, we are always under head of construction and development, Greg Zimmerman. We have been very proactive and anticipatory, it’s really premature for us to chat about those boxes and obviously we were unable to nor would we mention locations. But, we’ve heard pretty down well. My apologies, Ki Bin that’s all we can really say right now.

[Ki Bin Kim:]

That’s fine. I can wait. Is there any risk of with any of those locations losing a Sears location as well. I’m just looking at, maybe the tail-end risk of losing two anchors in the center?

[Lou Conforti:]

So, you are speaking of co-tenancy?

[Ki Bin Kim:]

Yes.

[Lou Conforti:]

No.

[Butch Knerr:]

No. We feel good about those centers. And I would follow-up with what Lou said is – we’re always looking at every one of our department store boxes and quite frankly every tenant is what the health ratio is and what opportunities that we have. So, our development team has been out there, talking about some of those opportunities and we think we’ll have some pretty exciting stuff to do there.

[Ki Bin Kim:]

Okay, and just your opinion on what you think next year will bring us. Do you think the constant kind of back and forth or dealing with anchor spaces coming back or larger store closures, does that get better next year or same or little bit worse, just curious what you’re thinking?

[Lou Conforti:]

I couldn’t even conjecture. I’ve seen, what we have seen having met with the major department stores is that, I think there’s a realization to not only from a merchandising and an operational standpoint, but to think about the real estate a bit differently. So, I think there is going be more pro-activity, I just don’t know how it might manifest itself.

[Ki Bin Kim:]

Okay and just last one. What does the debt yield look like for the assets that you might give back to the lender, much of that’s changed since when you last reported, does that?

[Mark Yale:]

Yes, it’s the same, it’s roughly for that whole pool. It was right around 10% debt yield. So, nothing changed there.

[Ki Bin Kim:]

Thanks again.

[Lou Conforti:]

Thanks.

[Operator:]

Thank you. [Operator Instructions] And I’m showing no further questions in the queue. I would now like to turn the call back to Lisa Indest for any further remarks.

[Lisa Indest:]

Thank you. I’d like to highlight upcoming events on our IR calendar. Lou, Mark, Butch and I will be attending NAREIT’s REITWorld Annual Investor Conference later this month in Phoenix, Arizona. If you’re attending the conference and have not yet scheduled a meeting with us, please reach out to me or Kim Green to get something scheduled. You may contact us directly with any additional questions. Thank you for joining us today and have a great afternoon.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.