Washington Prime Group Inc.
Q1 2015 Earnings Call Transcript

Published: 7 May 2015

[Operator:]

Good day, ladies and gentlemen, and welcome to the First Quarter 2015 WP Glimcher Earnings Conference Call. My name is Tony, and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we'll be conducting a question-answer session. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Lisa Indest, Chief Accounting Officer. Please proceed.

[Lisa Indest:]

Good morning, and welcome to WP Glimcher's first quarter 2015 earnings call. Yesterday, we issued our Q1 release which is available along with our first quarter supplemental information on our Investor Relations section of our website at wpglimcher.com. Before we begin, a reminder that certain statements made during this conference call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For a more detailed description of the risks and uncertainties that may cause future events to differ from the results discussed in the forward-looking statements, please refer to our earnings release and to our various SEC filings. Management may also discuss certain non-GAAP financial measures. Reconciliation of each non-GAAP financial measure to the comparable GAAP measure are included in our earnings release and the financial reports we file with the SEC. Members of management with us today are Mark Ordan, Chairman; Michael Glimcher, CEO; and Mark Yale, CFO. On today's call, Mark Ordan will provide an overview of the current state of the business and an update on our integration. Michael will then provide an overview of our leasing and redevelopment activity, and Mark Yale will provide an update on our financials and outlook for the year. With that, let me turn the call over to Mark Ordan.

[Mark Ordan:]

Thanks, Lisa. First, let me assure everybody that the news of our death is greatly exaggerated. Despite the turbulent retail environment and as a newly formed company WP Glimcher's first quarter results were solid and reflected modest growth. Our results clearly attest to how we benefit from our complementary concentration in two key sub-sectors

[Michael Glimcher:]

Thank you so much, Mark. One of my first responsibilities following the merger was to put in place a fully integrated leasing team. We've made tremendous progress since our last call and our combined deal approval process is now very productive. We have approved more than 330 deals and held over 65 portfolio meetings with our retail partners. These meetings are a powerful way to sell across our entire portfolio. During the quarter, we opened 63 new stores for a total of 196,000 square feet. Examples of key tenants that opened are Sephora Town Center Plaza, H&M at Southern Park, LA Fit at Melbourne Square, Fitness Connection at Irving Mall and Total Wines at Plaza at Buckland Hills. In addition, we executed over 200 leases in the quarter totaling over 620,000 square feet. New deals included Dick’s Sporting Goods and Field & Stream Stores at Polaris Fashion Place, Pure One at Bloomingdale Court, Ben's at Scottsdale Quarter, and Altar'd State at Clay Terrace and Polaris Fashion Place. I'm also pleased that we either opened or executed 14 restaurant deals in the quarter adding fine and casual dining to our portfolio, provide shoppers with experiences that they cannot have online, which brings them back to our centers more and give them reasons to stay longer. Restaurant deals in the quarter include BJ’s Brewhouse at Melbourne Square, Chuy's Tex Mex Restaurant at Mall at Fairfield Commons, First Watch and Potbelly at Bowie Town Center, and Pops and Provision Kitchen at Classen Curve. We also look very forward to a busy ICSC recon schedule and have more than 400 retailer meeting scheduled. Our drop in mall occupancy was primarily due to the unusual level of retail bankruptcy this year. We are very proud of the work our leasing team has done to address this and we continue to execute with a real sense of urgency. Our relationship with retailers combined with the great spaces available have helped us make significant progress. Since January, we've leased approximately 200,000 square feet and space to substantially recover from this loss and we expect to have 70% of this space addressed by the end of the year. Now I’d provide details on the redevelopment activities Mark spoke of earlier in the call. Let’s start with Scottsdale Quarter, where we've made great progress in our third phase. On the retail front, American Girl is on schedule to open this fall, which will be the retailer’s only store in the entire state. We recently signed a deal with Design Within Reach for a two level of flagship store that is also scheduled to open this year in phase three. The residential building is progressing on schedule and the 275 new units will be complete with occupancy to begin in July and to be at over 60% by September. Additionally, we are making progress in the agreement to add a boutique hotel and we’ll be finalizing that later on this year. Finally, our office leasing is proceeding rapidly with prospective tenants seeing Scottsdale Quarter as the place to be for premier location in the market. In our Town Center Plaza and Property in Leawood, Kansas, we recently opened a new Sephora Store and both new Arhaus and Restoration Hardware stores are under construction. The 40,000 square foot two-story Restoration Hardware will be their only flagship store in the state and the Arhaus Store will be the first in the market which solidified our town center property as the premier fashion and home furnishing shopping district in the Kansas City market. At Jefferson Valley Mall, a 556,000 square foot legacy Simon shopping center in Northern Westchester County, we are adding a new H&M, a dominant national sporting goods retailer and another junior box anchor along with a new mix of inline tenants and restaurants at a high single-digit yield. We’re spending approximately $34 million and expect the project to be completed in mid 2017. This is a solid asset and we’re very excited about its new trajectory. As an example of how we can reposition space and an increased NOI we are converting former department store space at the Mall at Fairfield Commons in Dayton into five restaurant spaces. We expect this project to be completed later on this year. Importantly, the beyond these high profile projects we are executing many smaller redevelopments at our mall, lifestyle and community center portfolios. An example in our community center portfolio is the redevelopment of Rockaway Commons. We’re under construction with Nordstrom Rack, DSW, Kirklands and several other shops, all scheduled to open in 2015. In our Mall and Lifestyle portfolio, we are spending $3.3 million at Markland Mall in Kokomo, Indiana to take an only game in town asset and add to its growth by upgrading the property and improving the tenant mix at a low double-digit yield. We also recently completed the expansion of Waterford Lakes Town Center in Orlando, Florida adding nearly 20,000 square feet featuring great tenants like Cooper's Hawk, Marlow's Tavern and Kay Jewelers. As we continue to tour properties together I believe we will have many more opportunities just like the ones I mentioned. Remember, we've had great success in the past at taking properties that weren’t getting attention and finding smart ways to improve NOI and cash flow. This is the same playbook we’re executing across our larger and integrated portfolio. All of these value adding activities are a testament to our associates who are working diligently to address the needs of our portfolio and execute on our integration plan. Now with that said, let me turn the call over to Mark Yale, who will provide more detail on our financial results.

[Mark Yale:]

Thanks, Michael, and good morning to everyone. As previously mentioned, we took advantage of available balance sheet capacity to move forward with our strategic merger with Glimcher. While our leverage has increased, we’ve been executing on a clear plan to reduce our overall debt levels and take out the bridge we use to fund the portion of the merger. In late March, we completed our inaugural bond offering, issuing $250 million to 3.85% senior notes due April, 2020. These proceeds were used to pay down a portion of the outstanding bridge loan resulting in a remaining balance of $942 million as of quarter end. Upon closing of the JV with O’Connor, which is expected to occur in the second quarter, we'll be able to reduce debt levels by approximately $800 million including approximately $430 million of proceeds to apply against the bridge loan. Finally, through a new fully committed $500 million term loan, which is expected to close in the second quarter, we plan to repay the remaining outstanding balance on the bridge. The term loan will mature in 2020 and has pricing and structure consistent with the company’s current outstanding term loan, thus, demonstrating our continued access to attractive capital. To manage our overall exposure to floating rate debt, we do have plans to fix the interest rate on the term loan via swap for some portion of the term which will add over 100 basis points to the rate. Assuming the closing of all these transactions goes as planned, and when including merger synergies that we expect to be realizing in 2016, our estimate pro forma net debt to EBITDA ratio will drop to the high six times, moving us closer to our long term target 6 to 6.5 times. We expect to migrate closer towards this range over the next several years through future EBITDA growth, opportunistic asset sales and potentially common equity issuances if market conditions become more favorable. In terms of our March bond offering, we were pleased with the pricing on the five-year tranche. We had a high quality order book and the deal is currently trading at a tighter spread in the secondary market as compared to original pricing. It’s also a positive close on our debut bond offering and established relationships with a new investor group. While the committed term loan gives us flexibility with respect to timing we would like to approach the market for a 10-year benchmark deal later this year. In terms of our remaining 2015 mortgage debt maturities, approximately $365 million relate to loan is on Pearlridge and Scottsdale Quarter. Prior to the closing of the JV we expect to replace this debt with $300 million of new non-recourse permanent financing; we’re currently rate locked on separate loans for each property both with 10-year terms at fixed interest rate of approximately 3.5%. We expect to close on these financings within the next several weeks. Similar to the unencumbering of Gateway Plaza and West Town Corners during the first quarter, we plan to pay off the mortgages on Clay Terrace and Bloomingdale Court later this year and extend to refinance those on Westshore Plaza and Merritt Square Mall. With an assumed annual dividend rate of $1 per share and an estimated $65 million of recurring capital expenditures and tenant allowances to be incurred during the year, we expect to generate approximately $100 million of free cash flow in 2015. Additionally, we’re still expecting to invest approximately $185 million in redevelopment this year. In terms of our quarterly results, our adjusted FFO per share for the first quarter of $0.47 was ahead of our expectations. Adjusted FFO per share excludes the impact of $24.9 million of Glimcher merger costs and upfront bridge loan fee amortization. Additionally, our comp NOI growth and general administrative expenses of $9.7 million were in-line with our expectations for the quarter. As previously discussed, NOI growth during fiscal year 2014 is negatively impacted by several key factors including, one, tenant bankruptcies that will result in a negative impact of 100 basis points to growth during the year, even while making solid progress in getting the space re-leased; two, the timing of integration while progressing well in terms of the leasing and management for the WPG Legacy Malls won’t result in a positive impact to growth until next year; and three, minimal positive impact from redevelopment during the year as the majority of the current pipeline won't start coming online until late this year or into next. The good news is that all these factors position us nicely for growth in 2016. Mark spoke to our updated guidance range of $1.77 to $1.85 per share for adjusted FFO. All key operating relating assumptions remain generally the same as previous guidance. Other than the O’Connor JV the current guidance assumes no dispositions, acquisition or issuance of common equity during the remainder of 2015. We also provided adjusted FFO guidance for the second quarter of 2015 in the range of $0.44 to $0.46 per share. In terms of NOI growth, we will experience the greatest impact in the tenant bankruptcies during this period. Accordingly, we’re expecting flat to negative comp NOI growth for the quarter. Other key second quarter guidance assumptions include the closing on the O'Connor JV, reduction of the Series G preferred shares, and full repayment of the bridge upon closing on the new term loan. At this time, Mark, Michael and I will take your questions.

[Operator:]

[Operator Instructions]. Your first question comes from the line of Ki Bin Kim of SunTrust. Please proceed.

[Anthony Hau:]

Good morning, guys. This is actually Anthony Hau on for Ki Bin Kim. So my first question is related to bankruptcy. I think in the last call you mentioned that on a annualized basis, portfolio has $40 million of revolving bankruptcies of which $12 million were hit and $6 million will be replaced. So let's say, we divide $12 million hit by 4 to get to $3 million per quarter. How much of that $3 million actually impacted first quarter NOI? Do you see the full impact starting from day one or was it $2 million to $1.5 million because of timing?

[Mark Yale:]

Yes, Anthony, it's Mark Yale. It is certainly impacted by timing. I would say roughly 100 basis points of growth in the first quarter. As I mentioned in the prepared remarks, it is going to step up and probably be the most impactful in the second quarter, and then as we get to stage 3 leased we will gradually address that and see the most minimal impact in the fourth quarter, but overall once again its about 100 basis points of growth for the full year and would say that the first quarter was found in line with that full year forecast.

[Michael Glimcher:]

It's Michael. I would add that while we won't mitigate all the downside during the year of 2015 what our leasing team has done a tremendous job of is really putting us in a great position so we can end 2015 incredibly strong and then hit 2016 with the majority of that spaced released, and that’s what we feel really great about.

[Anthony Hau:]

Okay, I'm just wondering. So what is the timing on recovering these that six mainly because I think in previous conference call you guys mentioned fourth quarter. Is that within your expectation?

[Mark Yale:]

Correct. As Michael mentioned, we have 70% of the space already addressed. That will come on throughout the year. Some of it could well into '16, but that’s all incorporated into that $6 million impact. And we feel good about what progress we're making but there really been no changes to the estimated impact that we provided in our last call.

[Michael Glimcher:]

But the pace of recovery has been very strong. We've been very pleased by the square foot that released just this January.

[Anthony Hau:]

So my next question is actually related to the non-core category. I think in the press release you mentioned that these assets are generating positive cash flow or unencumber[ph] for the company is going to use a non-traditional leasing strategy. Could you just provide some color on the leasing strategy? And also what differentiates these malls from the rest? Do they have a lower sales productivity or are they in markets that you do not want to be in?

[Mark Ordan:]

It's simply that these are strong, stable cash flowing asset where we don’t really see the opportunity for traditional retail development. So they're not in bad markets, they're not bad centers, they don’t have a bad trajectory, we just don’t see reinvestment which is always key to growth as appropriate here as retail centers. So that’s why we're taking them out of our statistics.

[Anthony Hau:]

Okay. Do you guys plan to sell these malls or these assets like recycle the capital for redevelopment?

[Mark Ordan:]

Well they're cash flowing well and they're stable. So we're happy with it just the way it is. We haven’t decided that we want to sell them; they're a good part of our portfolio. We just want people to understand as much as they can about our portfolio and if we have assets that we're not investing, which is, as Michael and I both described on the call, is so key throughout the portfolio that there is so many reinvestment opportunities we think it's appropriate to carve out assets if we don’t see that.

[Operator:]

Your next question comes from the line of Caitlin Burrows of Goldman Sachs. Please proceed.

[Caitlin Burrows:]

Hi. Good morning. Just regarding the outlook for the flat to negative NOI growth in the second quarter, how do you expect that to trend for the various different segments of your business?

[Mark Yale:]

I mean, obviously, looking at the trend in the first quarter between the malls and the community centers, the bulk of the impact from the bankruptcies was in the mall category. So I think you will see those kind of differential pretty similar as we carry out throughout the rest of the year but you will see in the fourth quarter we would expect the mall component to pick up as we see the impact of getting that space re-leased.

[Michael Glimcher:]

We learned the fact that in the mall category while we get hit -- well, obviously, not have to get hit, but an unusual wave of bankruptcies we are very pleased to see how quickly we could recover from this and attract often higher rent paying tenants and also lease space that was previously unleased. So just to us, it demonstrates not that we hope for waves of bankruptcy but it demonstrates to us the resilience of these assets and our ability to push occupancy.

[Caitlin Burrows:]

Okay. And then I guess on the similarity of releasing the space, I saw you guys added some disclosure on releasing spread. So thank you for that. I guess there is one thing on that it looked like you overall portfolio was up about like 3.5% in terms of those rents, but when I think about what other retail companies in the mall and strip centers had been reporting, it seems like there spreads are more in the double digit range. So just wondering what you think might be the difference for the WPG portfolio.

[Michael Glimcher:]

Well, you are looking at a blended portfolio so maybe the portfolio you are comparing us to our pure mall and maybe pure A mall or pure B mall. This is a mixed portfolio, there is open air centers, there is also larger spaces in there, and there are some malls that we talk about that just keeping them flat would be a win and there they are just stable, steady performers that are contributing excellent cash flow. So it is a different mix of assets and if you probably break it down it would come out just as you would think that they are highly productive or very strong releasing spread that will look like a traditional A mall company and the community centers are same and the more moderate malls are same. It just when it blends altogether it gets to that nice positive number. What we are excited about is we're making the company more valuable. We think as we release more space or any of these goes up certainly our NOI will go up and we are moving the ball forward and these are very positive numbers.

[Mark Yale:]

I just want to remind everybody that when I sitting around but we are still a relatively new company. We took asset that as we said from the very start had been neglected for quite a long time. We then combined Washington Prime and Glimcher to create a new company which took place a few months ago. So the whole thesis of this company has been that through increased attention and through redevelopment we can really change the trajectory of these assets. The bulk of that activity that Michael described going forward hasn’t hit our numbers yet. So again, while we are not sitting around twiddling our sons, the whole strategic thesis of WPG is playing out as we invest these dollars across our portfolio to increase our growth. So we would expect that that will affect that number and other numbers going forward very materially.

[Caitlin Burrows:]

Okay. Thank you.

[Operator:]

The next question comes from the line of D.J. Busch of Greenstreet Advisors. Please proceed.

[D.J. Busch:]

Mark, I just want to go back quickly to the seven non-core assets, based on your comments stable cash flow albeit you don’t want to invest further in the assets, that sounds like they would be prime candidates for disposition. Why aren’t you looking at them that way as opposed to just simply carving them out but leaving them kind of in the portfolio?

[Mark Yale:]

Well, DJ, I keep getting this. Anything is for a sale on a price. If we think something as a stable cash flowing asset depending on the kind of cap rate that it would sell at, that would move our thinking. So obviously the reason I answered the question the way I did is we think that they are more valuable as continuing strong stable cash flowing assets than they would be in a sale. If somebody would have come along and have an attractive cap rate, if they want to buy one or seven of these, our phone lines are open, but what we are pleased about and what we want to be clear about is that these aren’t withering assets, these are stable assets, but if you look at these as a market for certain assets and say is it worth selling or is it worth continuing to harness our cash flow.

[D.J. Busch:]

I guess if they are stable why even remove them in the first place. I understand that there is a different strategy there and there's it may introduce other types of use than retail but if they are stable cash flow why even remove them in a first place.

[Mark Yale:]

Okay. Let me be clear because we think that what we have is the basis of a real growing machine at WP Glimcher. So we think that by focusing on strong national and local tenants and careful smart reinvestment in our assets we can have both a stable and growing portfolio throughout the company. On the other hand, if you have assets where it doesn't seem to be a strong return from redevelopment then you can't expect that growth, so it makes sense to us to not focused on those as the same way we focused on our other assets. When you have limited bandwidth of what you can focus on and where you are going to spend your money, you want to do it but you are going to get a good return and again where it is going to growth. We see throughout portfolio in our top quality A assets and in our solid B assets throughout the portfolio Michael highlighted an asset [indiscernible] how he made several examples of what we are doing. Those are the assets that that play to our strength and our strategy to have a focused pleasing team and to spend money carefully on redevelopment so that you can spur growth, and we are taking I would say the bottom tier of the portfolio that still cash flow and strong and they are separating it because we are not using the same tactics there. No more no less.

[D.J. Busch:]

Okay. Could we see that non-core pool grow?

[Mark Yale:]

Just all the time I think any company is always evaluating its assets and saying are there ways to recycle them and the things that to be different. So I would say we are always going to be very market driven. We could be very pleased by alternate uses there. So sure that list could change but we didn’t like wake up when they would come up in the list. We thought about these assets, collectively, we have managed these assets for a long time. So we know them well. So we think that's certainly a list that we are comfortable with for the time being.

[D.J. Busch:]

Okay. And then following the acquisition the portfolio is quite big with 60 plus malls and lifestyle centers and 50 strip centers. Similar to some of your peers disclosure and even the legacy Glimcher disclosure, is there an opportunity there to kind of tier the portfolio or break it up and so we could see the operating metrics even if they are deemed non-core like some of the other mall and strip center peers do.

[Michael Glimcher:]

DJ, its Michael, we are doing a lot of work internally trying to categorize assets and it is something we would certainly be open minded to. I think it is important for us to get our arms around; we have been to our visiting properties and I can tell you I have been to about half, there is a lot of new real estate to see. And so as we see the properties, as we build our capital plan we think about where we are going to allocate getting more visibility I think you have seen us to have better disclosure, I think which is clearly something we want to focus on. So if something we would consider if that is how we are looking at it and that's how we are viewing the business, we would certainly be open to sharing it with you, but again what I am really proud of is how productive we have been, how integrated the leasing and development teams are all while we are integrating these companies, all over pulling it all together. So you see in this quarter's disclosures better, the information is better and I think you will see what we see and you will see thing thorough our eyes as we work deeper into the portfolio.

[Mark Yale:]

DJ, we don't have like a community life center division and an A mall division and a B mall division. Our property towards our total combined integrated leasing and development team that includes people from Simon from Washington prime and from Glimcher and I think if you were on the tour and we look forward to doing if you would not know who comes from which company. So all asset types, we view them as we said on our script today we view them as really very complementary with each other. Where there are many tenants in common and where our leasing people are working together to raise the bar overall the center. So it’s a very, we feel a very healthy mix.

[D.J. Busch:]

Okay. That's helpful. Maybe one last question on off price to that point, Mark, being able to use kind of operational releasing synergies across the two different subsectors of property types. I know there has been some retailers kind of speaking about moving off price closer to city centers whether it would be Ralph Lauren or Macy's prototypes are doing in New York City. Have you seen that trend following in your portfolio? Is that an opportunity for your portfolio to introduce some more off price given the kind of level of productivity of your malls and the fact that you have sizable strip portfolio?

[Mark Yale:]

It's really interesting point to make. We just did our first half strip deal which will complement the Nordstrom Rack Gateway center in Austin. We certainly have dialog going on with Macy's about what they are going to do next; we have relationship with all of these retailers. So we think we have a really unique portfolio where we can take posh tenants in the malls, we can bring them into community centers, we could try outlet concepts. We have a very broad portfolio where retailers who want to try different formats can do that and we are seeing it and when we meet with whether it is discount or full price or people who are traditionally off mall going in the mall, we are seeing these things happen, we are seeing things people try it out as their concepts evolve. So it's a great question we are absolutely doing it and the fact that, as Mark said, we are one company, once leasing team with one vision which is to have stronger NAV and increase NOI, we are doing those exact things that you talked about. So that's a great observation you make.

[Mark Ordan:]

DJ, I started off kidding around paraphrasing Mark Twain when I said news of our death is greatly exaggerated but I hope that what's come through both in our results and on this call and on our last call talking about JV and everything else we are doing, this is an awfully dynamic portfolio, number one. Today, it's an enormously dynamic portfolio, and the investment in redevelopment is yet to bear fruit. So when you think about where we are there is so much demand our states and we have proven ability to take spaces and make them stronger. That's why we really do see this as a growth story and we see this first quarter as showing that even in a very turbulent time we can grow even if it is modestly before the results of our development, redevelopment kick in.

[Operator:]

Your next question comes from the line of Ki Bin Kim of SunTrust. Please proceed.

[Ki Bin Kim:]

Hey, good morning, guys, this is Ki Bin. If you still make it a non-core asset on segmentation it's like, I guess this is first of all not a question but I mean I could imagine the concern from buyer side would be that tool changes size over time and not at the same thing we’re going on but the professing that something could be going on when asset move in and out of that pool, I could potentially see that being a sticking point with investors deep in mind so thought I just point that out. So to ask my question, going back to the --

[Mark Ordan:]

Well, first, Ki Bin, let me just respond to that, first of all, there is nothing going on, and this is not something new, it’s very common for companies and I think it’s better disclosure because it gives you a better sense of where we’re focused and where we will spend our money. As I responded to an earlier question, we didn’t wake up one day with a list of assets; these are assets that were managed for years by our team. We watch their trajectory, we watch the leasing results, we thought about where we’re going to allocate capital and we take pride in being very careful capital allocators. So we think this is a list that will stand the test of time. Could it change over time? Sure, it can, but this is not like watching the dove.

[Ki Bin Kim:]

Yes, I was just working some of the question about high ear on that so I thought bring it up. Okay, thanks for clarity. And going back to your comments about on 70% of the -- space outlook hit by retailer bankruptcies and release or addressed or on a serious note, what kind of lease spread, and I realize there it takes CapEx part of the story talking about spreads, but what kind of lease spreads could we expect from this bucket of leases?

[Mark Yale:]

Well, Ki Bin, I mean I think its somewhere in the neighborhood, we certainly move forward with leasing activity in the first quarter and in the mall space, so a lot of it had to do with the release in that space, and that was kind of that 3% to 4%. And I think that’s probably a good range, I think we’re looking probably on average about 5% leasing spreads in our mall portfolio for the balance of the year.

[Mark Ordan:]

And my -- comment and there is a lot of our activity is also not just taking spaces where there were bankruptcies but also taking spaces that had in malls that have been neglected where there were long vacant spaces and pushing occupancy that way too.

[Michael Glimcher:]

Well yes, as the space turns we can combine it; we’re doing a lot of things like we talked about with H&M, also with others in creating junior anchors and new draws to the centers, our facing space for restaurants, so you don’t just look at that space and lease inside this four walls you look at the opportunities for that asset. What I'm more excited about is, is our demand the fact that we've addressed and what I’ve addressed by the end of the year roughly three quarters of that space that tells me there is a big demand and there is positive releasing spreads, that’s the data that I’d be focused on.

[Mark Yale:]

Yes, and other positive is, its modest decrease that our occupancy cost to decrease over last year and we think it’s positioned in such a way that we should have the opportunity for positive leasing spreads in that mall portfolio.

[Ki Bin Kim:]

Okay, and I hazard a thought there is evolving, as you know, since the last [indiscernible] it was reported in many different ways and lease spreads, just quick question, are your lease spreads inclusive of all leases or you have the [indiscernible] shopping center but it only includes space sellers whatever kind of within 12 months or is it all --

[Mark Yale:]

20.

[Lisa Indest:]

Its 24 months, Ki Bin, if the space has been dark over 24, its not compare.

[Ki Bin Kim:]

Okay, that’s helpful. And I won't ask this every quarter but just given, that this is very top of line in people's mind [indiscernible] talking about WPG, could you maybe for six months time talk about that trajectory of the NOI growth when you look at Glimcher pre-merger versus WPG pre merger? [indiscernible] NOI growth or may be that first quarter NOI growth.

[Mark Yale:]

I'm sorry, it didn’t -- your question didn’t come through completely clearly. Are you asking what our NOI growth is going forward, can you repeat it?

[Ki Bin Kim:]

I'm sorry, what I meant is for the quarter so it’s about 1% NOI growth but if you had to segment it out Glimcher versus WPG how would that look like for the quarter?

[Mark Yale:]

Hey, we don’t segment that out. We’re a combined company with few different asset types. So we don’t segment it out, and we don’t operate the portfolio that way.

[Ki Bin Kim:]

Okay. And last question from me, can you -- you guys provide guidance on FFO but I was curious and I know this is maybe little bit trickier but may be provide some guidance on a FAD basis for post CapEx?

[Mark Ordan:]

Ki Bin, we did talk about $100 million worth of free cash flow. We also talked about $65 million roughly of expenditures from a CapEx and kind of traditional tenant allowance, tenant improvement dollar. So I think the pieces are there to figure it out.

[Operator:]

Your next question comes from the line of Caitlin Burrows of Goldman Sachs. Please proceed.

[Caitlin Burrows:]

I just had a question on your anchors. In looking at your lease expirations still remaining this year, it looks like there is 15 anchor spaces. I was wondering if you could say anything about the timing and plans for those 15 spaces.

[Mark Yale:]

Hey, Caitlin, it's Mark. I think outside of a couple of non-core assets those leasing and those expirations are either going to be addressed through renewals or we have plans to get the space released. So we feel good about the majority of those. And I think it just ties into once again, if you looked at our current leasing on big-boxes 50,000 square feet or more in our mall space, excluding the non-core assets, we have two boxes right now of 50,000 square feet, that's not addressed in our mall portfolio.

[Caitlin Burrows:]

Okay.

[Mark Yale:]

Probably, the first of 300 boxes.

[Mark Ordan:]

Well, I'll just say in most cases the anchors have built-in options and typically take them half historically. So somehow it looks like there is a lot of space turning and it's just someone exercising the option or we -- or they haven't hit the window yet, then we need to exercise it. But we are very little anchor on vacancy. These are opportunities when you get them.

[Caitlin Burrows:]

Okay. And then, just last question on the anchors and its come up on various earnings call, so figured out I ask it. I know you guys have a number of Sears locations, I see there are 60. I guess could you just talk about the types of conversations you had with Sears recently? And if there is any -- if any decisions would be more on a space by space basis or if there could be some sort of larger agreement like some of the other mall refinanced?

[Mark Ordan:]

Well, we have a very good relationship with Sears. We talk to them, we talk to them frequently. They are profitable overwhelmingly in our portfolio. We do discuss possibilities of transactions in some of the spaces. So I would say we will -- we again, thinking about our capital are always going to be very careful in the assets that we have, to be very careful about where we think it's worth putting out capital to get a space back and what the advantage of that is going to be. So while obviously, we've seen some of the JV agreements that Sears has done, it's probably a less robust opportunity in our portfolio than in some others. So -- but there are a few where we could certainly possibly do something. And I would tell -- Michael, you may want to comment not just about Sears but our anchors is kind of leasing in general on that side.

[Michael Glimcher:]

Sure. And to say specifically, with 57 Sears, roughly 11% of our GLA, only a little over 1% of our -- or 1.2% of our base rate, let's put that in perspective, it's probably not the highest rent paying space we have in the portfolio, and we own a little over a third of them. So I look at that as upside, I look at that as opportunity, if there were to be an issue. We have a great mix of anchors. We have been enhancing that mix. I talked about the junior anchors, the DICK's Sporting Goods, H&Ms things we're adding on top of the traditional department stores. Also, what we are doing a Fairfield Commons, where we said we have a department store here, we think it's more productive to do five restaurant deal. It will create more visits, better quality of customer and higher volume for that amount of space. So I think our job is to actively manage these assets, reinvest in them and come up with the right uses. So if one day any of our anchors -- and this would be true to any of our peers, went away you have a lot of work to do. But the tremendous amount of opportunity you would have when its 10% of your space paying 1% of your rent give or take you do the math, if we can't find upside of that space, probably not the right people that do it. And I'm very confident we can find a tremendous amount of upside.

[Mark Yale:]

And obviously, we never hope for weak anchors. But in any given center, if there is a very weak anchor then the weakness of that anchor is already in the numbers for that center. So it just reinforces Michael's point that if they were to decide to move on its either flat to positive for us.

[Operator:]

We would like to take this time to thank everyone for their participation in the question and answer session. And we will now turn the call over to Ms. Lisa Indest for closing remarks.

[Lisa Indest:]

Thank you everyone for participating in the WP Glimcher first quarter 2015 conference call. You may contact us directly with any additional question or access our filings through Investor Relations section of our website wpglimcher.com.

[Operator:]

Ladies and gentlemen, that concludes today's presentation. You may now disconnect. And everyone have a great day.