Washington Prime Group Inc.
Q4 2015 Earnings Call Transcript

Published: 26 Feb 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the WP Glimcher Fourth Quarter and Full-Year 2015 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 be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Ms. Lisa Indest, SVP and Chief Accounting Officer. Ms. Indest, you may begin.

[Lisa Indest:]

Good morning, and welcome to WP Glimcher’s fourth quarter earnings call. Yesterday, we issued our fourth quarter and full-year 2015 earnings release and supplemental information packet, which are available on the Investor Relations section of our website at www.wpglimcher.com. Before we begin, a reminder that certain statements made during this call may contain forward-looking statements as defined in 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, please refer to our 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 release at SEC filings, which are available on our website. Members of management with us today are Michael Glimcher, CEO; Butch Knerr, COO; and Mark Yale, CFO. Now, I’d like to turn the call over to Michael.

[Michael Glimcher:]

Thanks, Lisa. Good morning, everyone, and thank you for joining us today. With respect to our 2015 results, we continue to make progress on key metrics. Same property NOI in our core portfolio increased 0.2% in line with our guidance for the year. We remain focused on narrowing the occupancy gap and ended the year at a solid 93.4% occupied for our core properties. Our core mall portfolio is now 91.8% leased, a 120 basis point increase from the third quarter, as we make continued progress in leasing space impacted by the early 2015 retail bankruptcies. Sales at our core malls increased 5.5% to $365 per square foot on a trailing 12-month basis. Our community center portfolio is delivering real value today, as reflected by the growth in occupancy and rents. The community centers ended the year at 96% occupied, an improvement from 95.4% a year ago, and had a strong NOI growth of 3% in 2015. 2015 was a year of building a solid foundation that will enable us to drive NOI growth in 2016 and beyond. Looking back, it was a very challenging year, as the team worked tirelessly to build the operating platform for the new company. A little over a month ago, we successfully welcomed over 400 property associates and brought 52 community centers onto our platform. And we’re just days away from operating as a fully integrated standalone company for the first time. As we bring the remaining 42 malls over well ahead of the transition services agreement expiring at the end of May. Even while working on the integration of the new company, the team remained focused on making deals and improving occupancy. We leased nearly all of the space impacted by retailer bankruptcies in 2015 and demand for space across our portfolio remain strong. Additionally, we developed a long-term plan to allocate capital to our properties. As we believe the most effective way to narrow the significant discount between implied NAV and our current share price is to prove out our portfolio. We completed 20 retenanting and redevelopment projects in 2015, and we will see the benefit from these efforts throughout this year. It took time and a lot of effort to get to where we are today. And I’d like to thank all of our associates for their hard work and dedication throughout. I can’t stress enough the importance of people. To me one of the biggest indicators of the opportunities ahead of us is the fact that we have been able to attract new talent from some of the best in the industry. Combined with our legacy Glimcher and Simon Associates who know the assets well, the team we have today is second to none. I’d like to say that our people are important than our assets, which means that we can only make the portfolio more valuable than it is today. To really understand the portfolio, you need to rollup your sleeves and become familiar with every asset and its unique position within each markets. I have now participated in five quarters of internal property review meetings and I personally visited almost all of our properties. Our business is done in the field, not in the home office, which is why it was very important to spend a significant amount of time on the ground, getting to know the story, behind each and every asset. After visiting a center, opportunities to drive growth and unlock untapped value are far clear. For example, a year ago I visited Longview Mall located in Longview, Texas. On that trip, we saw various opportunities at the center and today we are under construction with Dick’s Sporting Goods. We are also adding a new H&M, and other national retailers and restaurants, also while deciding to renovate the common areas and the entrances of this mall. Now that I have a more intimate knowledgeable of our portfolio, my goal is to help others understand the incredible value, and growth potential embedded in our core assets. Based on our recent stock price it’s clear that others do not see what we see. We recognize that investors have concerns with slow retail sales and departmental stores weighing on the sector. And because we previously did not provide any bifurcation it was likely easier to pay our portfolio with one broad brush. Well, some of these concerns maybe wanted for the bottom quartile of our portfolio, roughly 75% of our core NOI is high quality malls in shopping centers and should be valued very differently from the rest. So with the goal of providing further clarity, and to address any misconceptions, we have enhanced our disclosure this quarter by including a bifurcation of our assets. Let me walk you through the groups within our portfolio. First, our community centers represent 52 high quality assets that generate 21% of our NOI and we believe this group will deliver 3% comp NOI growth in 2016. Second, our Tier 1 mall portfolio represents 51% of our NOI and includes 36 properties with sales in excess of $400 per square foot and manageable occupancy cost of just over 12% and strong NOI and occupancy of nearly 94% at year end. We believe our Tier 1 malls can also deliver 3% comp NOI growth this year. Since you are following along with the math, these high quality assets that make up 72% of our NOI are expected to deliver growth of 3% or more in 2016. In terms of our Tier 2 malls, which represent 24% of our NOI, we have separated these into an encumbered and unencumbered. It’s important to point out that the encumbered assets within this group, which represent 15% of NOI forum value at the secured debt levels. At year-end the debt yield on these assets was 10.9%. We believe many people are incorrectly valuing these assets at high double-digit cap rates and not taking into account this four unvalued. Finally, the remaining 9% of our NOI is from Tier 2 malls that are all unencumbered. So if you want to discount the value of Tier 2, please feel free. But with a four unvalued in place on 60% of these assets and generation of strong annual free cash flow, we believe the appropriate view on evaluation is now far clear with this new disclosure. I want to emphasis that while we are dividing our malls between Tier 1 and Tier 2 in order to provide further clarity on valuations, we continue to operate these assets as one portfolio. From a capital investment perspective, we see exciting opportunities throughout the core portfolio including Tier 2 assets. Our Tier 2 and Tier 2 assets are part of our portfolio 4% of our 2015 NOI was generated by seven non-core malls. These are assets that we don’t view as long-term holds. At our Investor Day, last month we communicated our goal to sell one to three of these malls in 2016. At the end of January, we successfully sold two non-core malls for $30 million to a private investor. This reflects our commitment to delivering value through active portfolio management and overtime, we will continue to evaluate opportunities to enhance the quality of our platform. Now let me turn my attention to how we are looking capital allocation. It starts with ensuring that we have adequate liquidity on hand, which is even more important when considering the volatility that we are all seeing in today’s capital markets. The good news is with over $7 million of liquidity in place, we are confident with our current position and this allows us to fully commit to our redevelopment pipeline. First and foremost this has been largely an under managed portfolio and we believe investing back into our assets represents the best use of capital today. In terms of where our stock buyback may fit in, we see the value in considering our current share price and the resulting implied cap rate. However, we are sensitive to our overall leverage and we remain committed to our investment grade rating. Accordingly, we believe we would move forward the buyback program only on a leverage neutral basis or better. In summary, our current capital allocations are, priority-wise, first, focus on leverage; next, reinvest within our portfolio; and third, a share buyback. Before I turn the call over to Butch, I want to acknowledge that we still have a lot work to get done. However, we remain optimistic about where we’re today and confident in our ability to deliver on our near-term goals and drive growth across this portfolio. Butch?

[Butch Knerr:]

Thank you, Michael. In January, we celebrated our first year as WP Glimcher. This past year will be remembered as a year of challenges due to the largest around of retailer bankruptcies in recent history. I’m pleased that the team has met this challenge head on. Last year, we completed 1,100 leases totaling in excess of 3.5 million square feet. Over 1 million square feet of that production were new deals with an average lease term of approximately seven years. And we are picking up momentum. In the second-half of 2015, our deal volume increased 26% when compared to the second-half of 2014 with roughly 14% more new square footage leased than a year ago. We had more than 400,000 square feet of leases signed, but not opened for non-anchor space at the end of the year. This presents approximately $12 million in annual revenue that will open up throughout 2016. Retailer demand for space remains strong and our leasing efforts are focused on the right mix of retail, food, entertainment and services. Multiple new deal packages have been completed with some of the best retailers in the industry, including Victoria’s Secrets, PINK, Rue 21, Bath and Body Works, Hot Topic, Torrid, Kirkland’s and Yankee Candle. As we have stated adding food and entertainment options for our guests is a priority. These uses drive traffic, increase the frequency of visits to our centers, and extend the duration of the shopping experience. At the end of 2015, restaurants represented 8% of our non-anchor GLA. We have almost 100,000 square feet of new restaurants set to open this year, similar to retail uses we have completed multiple new deals with restaurants and entertainment brands, such as Zoës Kitchen, BJ’s Brewhouse, Planet Fitness, and Sky Zone. Core mall occupancy declined 100 basis points in 2015 when compared to last year. As you will recall, we lost approximately 500,000 square feet to retailer bankruptcies in early 2015. At the end of the second quarter when we saw the greatest impact, core mall occupancy was 210 basis points lower year-over-year. So the team has been very successful on leasing space as evidenced by the improved – improvement at year end. Releasing spreads in our core portfolio were positive for the year, primarily driven by the continued strength of our community centers, which produced spread of nearly 20%. The lower spreads in our mall portfolio were not surprising, as we are measuring near-term success by first improving occupancy. As we reached higher occupancy, we will aggressively focus on driving mall spreads. This strategy is already reflected in our community center results. On the mall rent side, we are absorbing end zone spaces as we drive occupancy higher. Until occupancy is in the mid-90s, we expect fairly flat rents. You may also notice the tenant allowances were higher in the quarter. This was due to an addition – to the additional restaurant space I mentioned earlier, which carry a higher tenant allowance. Now, let me talk about our redevelopment efforts. As we have stated, redevelopment is important to driving NOI growth, improving out the value of our portfolio. Michael mentioned that we completed 20 projects last year. The majority of the large-scale projects were completed in the back-half of the year and these late 2015 openings will provide meaningful NOI growth for 2016. We continue to replace underperforming anchors within our portfolio. This past year we replaced a former Sears space at Polaris Fashion Place in Columbus, Ohio with a Dick’s Sporting Goods and Field & Stream combo store. This helped increase mall traffic by more than 20% in the fourth quarter. In 2016, we plan to replace Sears at Newtown Mall in New Philadelphia Ohio with a strong national retailer scheduled to open later this year. Other projects we anticipate will come online in 2016 includes the opening next month of Saks Off 5th at Gateway Center, a New AMC Theater at Indian Mound Mall, Red Robin and Bar Louie at Brunswick Square, Restoration Hardware at Town Center Plaza, Academy Sports at Lincoln Crossing, Sky Zone at Westminster, and we continue to make progress on construction of Dick’s Sporting Goods at Jefferson Valley Mall. At the end of the fourth quarter, we had active or approved projects across 20% of our core portfolio, including a mix of large and small-scale projects with an estimated yield between 8% and 11%. Our leasing development and property management teams continue to execute within our four walls to drive continued results. With that, 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 recent volatility in the capital markets, it’s important to remember that we have a strong and stable balance sheet today. Net debt to EBITDA is trending below seven times, debt service coverage in 2016 is projected to be approximately 3.5 times, and most importantly, we currently have nearly $750 million of available liquidity between credit facility capacity and cash on hand. A big driver of our enhanced liquidity related to the $340 million seven-year unsecured term loan that were closed on in December. We had eight of our commercial banks participate, institutions that know us and our portfolio very well showing our confidence, lending to the company over a seven-year time horizon. In terms of where we expect to finish 2016 from a liquidity perspective, we’re projecting around $700 million of availability irrespective of whether we move forward with a bond issue later this year. We also have a very strong unencumbered pool comprising approximately 56% of our total NOI with nearly $140 million coming from our community and open-air centers. As discussed during our Investor Day, our upcoming debt maturities over the next three years, which will comprise solely of unsecured mortgages are very manageable. In terms of the specific 2016 maturities, discussions continue regarding the transition to the respective loan servicers at Merritt Square Mall, Chesapeake Square, and River Valley Mall. We are currently expecting these to be completed sometime during the second quarter of this year. We plan to commence discussions with the special servicer with a Southern Hills Mall mortgage over the next several months. I would expect a similar outcome with the transition back to the service. The good news is, with a four loans, it represents $260 million in total outstandings all having debt yields in the single digits. The ultimate exit of these malls in this fashion will allow us to improve the company’s overall debt leverage. These properties also represent approximately 30% of our Tier 2 encumbered group. Finally, with loans on the Mesa Mall and Weberstown Mall will mature in June of this year. As previously discussed, our goal is to refi both of these mortgages. Now, let me turn to our quarterly financial results. Our adjusted FFO for the fourth quarter was $0.49 per diluted share, ahead of our guidance range going into the period. Positive variances and purchase accounting related amortization, lease termination income and fee income primarily drove the upside. We did record a non-cash impairment charge of approximately $138 million during the quarter. As a remainder, the impairment charges are excluded from FFO. This non-cash charge was primarily related our non-core properties, where we decided to shorten the whole period and used to estimate future cash flows, as part of the impairment of evaluation. To be clear, this represents a recent change in facts and circumstances. As Michael mentioned, we disposed two non-core assets earlier this year, which leaves us with five non-core assets in our portfolio. NOI contributions from our core portfolio were generally consistent with our expectations. As mentioned during our third quarter call, NOI growth was pressured by one-time real estate tax savings realized during the fourth quarter of 2014. When neutralizing for this activity, the core mall and community center portfolios would have generated growth of 0.4% and 2.5% respectively for the fourth quarter of 2015. The 9% year-over-year increase in AFFO, which excludes costs related to the merger was primarily attributable to EBITDA contributions from the Glimcher legacy properties, partially offset by higher G&A and interest expense. With better visibility of the timing of planned dispositions, we have raised our 2016 guidance that was provided in connection with our January Investor Day to an FFO range of $1.76 to $1.82 per diluted share. Other key assumptions for the full-year did not change, and we continue to expect comp NOI growth in the range of 1.5% to 2% for 2016. We are also introducing FFO guidance for the first quarter 2016 in the range of $0.41 to $0.43 per diluted share. We expect core comp NOI in the first quarter to be up over 1% compared to the prior year. Before I turn the call back to Michael for some concluding remarks, I want to provide a few comments on our dividend. We recently reported that our entire 2015 common dividend represented ordinary income, inferring that our taxable income is tracking with current distribution levels. We are expecting this trend to continue for fiscal year 2016. I’d also like to call out the addition to our quarterly supplemental information packet on page 12, where we have provided the additional bifurcation of our mall portfolio that Michael discussed a few minutes ago. This is consistent with our goal to be increasingly transparent and we hope this additional disclosure is helpful. Michael?

[Michael Glimcher:]

Thanks, Mark. Although 2015 was a challenging year, it was an important one in our short history. We have built a foundation that will enable us to drive meaningful growth this year and throughout the future, with the world-class team, ample liquidity to execute our plan, and the additional clarity around our portfolio, we hope you know see the incredible value, which we see. In summary, we remain focused within our four walls and are executing on our stated goals of driving growth across the current portfolio, operating a lean and efficient business model, and maintaining and improving our investment grade balance sheet. Now with all that said, we would like to open up our call for any questions you may have.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of Ki Bin Kim from SunTrust. Your line is now open.

[Ki Bin Kim:]

Thank you. Good morning, guys.

[Michael Glimcher:]

Good morning.

[Mark Yale:]

Good morning.

[Ki Bin Kim:]

Could you talk about the, I mean, I guess first of all, we appreciate the new disclosure, I think it’s definitely helpful. So on the Tier 2 malls that are encumbered, you showed a debt yield of 10.9%, and I know you’ve said you’re going to give back a certain amount of them. But what is holding you back from doing that entire category over time?

[Michael Glimcher:]

It’s a great question Ki Bim, it’s Michael. What we wanted to establish that there is a floor on value. So the 10.9% is really a floor on value. Each one is a different set of facts and circumstances. And some of those assets we will choose to turn back as we have, others will choose to refinance and perhaps invest capital into and again each one of them is very different. I think the reason for the disclosure and the suggestion that we have that option is just to say there’s certainly a floor on value.

[Ki Bin Kim:]

But I guess given where the market is, given where the implicit pricing is for your cost of capital and implied value for this Tier 2 malls. I guess the concern is do you really want to put more capital into these malls, where sales per square feet is $300 million, $307 million, and potentially this is a bucket where Sears and some other anchors might go dark. I think that’s why from my perspective, it doesn’t make sense to maybe not just consider it a floor in value, but maybe not spend that much capital into these masses?

[Michael Glimcher:]

Well, very clearly the majority of our capital, almost all the capital we invested in the prior year went into Tier 1 malls. So the return – and the return threshold for Tier 2 is significantly higher, if we’re going to look at investing any capital in those malls. So generally speaking, most of the money we invest, which by the way much of that free cash flow coming out of Tier 2 gets reinvest back into Tier 1. So it is a really pretty amazing cash flow machine that spits off free cash flow that we can then reinvest and make the Tier 1 malls more valuable.

[Mark Yale:]

And Ki Bin we did communicate that we anticipate over the next 18 months that there will be five of those properties most likely being transitioned back to the servicer. And that represent just over $300 million of debt. So certainly, that’s an area of focus, I think we’ll take advantage of where it makes sense. But to Michael’s point, there are some assets in there, where we think we have some equity, and there is good cash flow and then worthy of investment and we think we can grow NOI.

[Michael Glimcher:]

Additionally, as we work through there’s lender transitions, you’ll see the Tier 2 category shrink down a bit. And that will obviously weight Tier 1 as well as the community centers heavier – having a larger emphasis on the higher quality portion of the portfolio.

[Ki Bin Kim:]

And so for the portion that’s encumbered, what is the kind of dialogue that you’re having when you talk to lenders about potentially putting mortgages on it and what kind of LTVs do you think you can get?

[Michael Glimcher:]

Well, as it relates to the unencumbered, we would intend to leave those unencumbered and just let them keep continue to generate free cash flow.

[Ki Bin Kim:]

Okay. All right. Thank you, guys.

[Michael Glimcher:]

Thanks so much.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Andrew Rosivach with Goldman Sachs. Your line is open.

[Andrew Rosivach:]

Good morning, guys.

[Michael Glimcher:]

Good morning.

[Andrew Rosivach:]

I thought maybe to follow-up on Ki Bin’s question, you’re looking to refinance Mesa Mall, which is a Tier 2 encumbered property. And I guess, it’s kind of a two-part question, one, where do you think the proceeds you can get on their mortgage if you were to refinance it, what they would be? And then second, let’s say that their market shutdown and you weren’t able to refinance the property. Would that potentially change your mind and you would give the keys back there as well?

[Michael Glimcher:]

Yes, Andrew, great question. So we’re out in the market with that particular asset. And we would anticipate that we think it proceeds that were similar to or just slightly less than the current one, which is in place. In the event, we can’t find the financing that works for us. We do have the put option and that’s always available to us. That’s a very stable mall. I mean it’s going to be flat 2% up. We think sort of year-after-year, we just as a team spent time there touring the market and looking at the asset. And it’s an asset we would like to move forward with if the capital markets will cooperate, again if they don’t we have in option.

[Andrew Rosivach:]

Great, thanks a lot guys.

[Michael Glimcher:]

Thank you.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Floris van Dijkum from Boenning. Your line is open. Floris, please check your mute button.

[Floris van Dijkum:]

Excuse me.

[Michael Glimcher:]

Yes.

[Floris van Dijkum:]

Can you hear me?

[Michael Glimcher:]

Yes. Good morning, Floris.

[Floris van Dijkum:]

Good morning, guys. Yes, today you announced or there’s announcement that Sokolov resigned from the Board. Was this always expected? And who do you think is going to replace him or how you think about his expertise is irreplaceable or how you’re looking to fill that spot?

[Michael Glimcher:]

Well, certainly it’s Michael speaking for myself. Rick’s expertise is irreplaceable, because he is one of the brightest people in the industry. But yeah it certainly was expected and new management of the remaining legacy of the Washington prime malls is switching over to the company, the first week of March and as we become more independent, it was a natural time for Rick to roll off.

[Floris van Dijkum:]

Okay. Other question on capital allocation and that you sort of touched upon this before Michael, but I just want to – you mentioned you could consider putting some capital into some of your Tier 2 loss. What returns will you need to get to justify putting money into those properties relative to potentially buying back your stock at a 50% discount? And how do you weigh that?

[Michael Glimcher:]

Yeah, that’s a good question. Clearly and if you look at last year, the majority of the capital we invested went into Tier 1 and that’s where we will continue to spend. Most of our capital return threshold would be incredibly high and there will be different types and circumstances depending on what asset-by-asset, deal-by-deal. So it’s hard to say that every single asset is exactly the same just because it’s in the bucket each one is unique.

[Floris van Dijkum:]

But again buying your stock buyback at call it 50% discount, how do you – that’s pretty attractive returns right?

[Michael Glimcher:]

There is no question about it and if we had doubled the amount of liquidity we had today, it would be easy decision. But like I talked about in the prepared comments, we need to invest in assets mostly our Tier 1 and our community centers. And then if for some reason we accelerate, it is some dispositions, we had additional capital that would certainly that a very logical place to spend money. But we’re very focused on our balance sheet. We’re focused on growing the core portfolio. And then the next use of capital in our stock is incredibly cheap. That is a great argument. It’s just a notion of having the right amount of liquidity.

[Floris van Dijkum:]

But you wouldn’t put a buyback program in place to give you the flexibility, should you accelerate your sales of your Tier 2 properties, for example to be able to capture some of this upside?

[Michael Glimcher:]

Well, clearly it’s a Board level decision. And I would think at such a point as we would have that incremental liquidity, there will be a discussion we would have at the Board level.

[Butch Knerr:]

And for us we’d also Michael mentioned leverage is important. So, even though if we have liquidity, we’ve got to make sure we can move forward on our leverage neutral basis at a minimum. Our investment grade rating is important to us, and we would not want to compromise in that context. So that’s all something that we need to balance when considering that potential.

[Floris van Dijkum:]

One more question for you guys. Your expense recovery seem to have ticked down a little bit, is that having to do would with the property tax issue you refer to earlier or any particular reason for that or is that maybe just tied to its occupancy?

[Butch Knerr:]

Yes, this is Butch. That’s exactly what it was. It was the tax recoveries that we had last year.

[Floris van Dijkum:]

Great. Thanks, guys.

[Butch Knerr:]

Thanks, Floris.

[Operator:]

Thank you. And our next question comes from the line of D.J. Busch with Green Street Advisors. Your line is open.

[D.J. Busch:]

Thank you. Mike, I think you mentioned that you expect in 2016 that the community centers and Tier 1 should grow from an NOI perspective at around 3%. I guess that implies something around negative 2% negative 3% for the Tier 2 properties? I guess, does that driven by the malls that are already expected going – to go back to the lender, or is that Kind of the part of the strategy that are kind of Butch outlined as far as kind of taking rent in the near-term to fill space, I guess, can you comment a little bit on what looks to be a decline at the low-end in 2016?

[Michael Glimcher:]

Yes, I think, and I think you are doing the math really well, if the top 70 some percentage is generating 3% growth. And you’re saying publicly you’re going to grow 1.5% to 2% something has to be going backwards and that’s clearly it’s a blend of the Tier 2 portfolio and it’s not specifically and the ones that are going back, it sort throughout the portfolio. But the NOI going slightly backward in that portfolio offset the growth in the top three quarters of the portfolio. And I think, the comment that Butch was making as related to, it was about sort of releasing spreads and rent growth. The idea is that if you got a mall portfolio that is 90% until you really get it to sort of 95% or the mid 90s, you’re not going to have the pricing power. Additionally, a lot of the vacancy is end zone space sort 20 yard line in and out. So we said this at the beginning of the year and we said it just take it’s a couple of year cycle, I should lease a lot of space. If we absorb another 2%, 3% of our space, even if – they won’t be, but even it was half of where the mall rent is, we are still going to grow NOI substantially. So the focus is really not on that portfolio, that’s not as well occupied, it’s not necessarily how do you push the highest possible rent, it’s how do you gain occupancy and then over time push rents.

[D.J. Busch:]

Okay. And then I know you touched on the spike, I guess, in the TAs during the fourth quarter, of the 120,000 square feet leases done, how much of that was entertainments or restaurants? It just seems like it was a pretty dramatic increase. And I’m just wondering, what is kind of the net effective rent of restaurants and that entertainment used versus kind of a traditional retail?

[Michael Glimcher:]

Yes, DJ, that’s a good question. The – as we stated all along adding these restaurants and entertainment is a big part of where were going with this company to drive traffic. It was about half of that – a little bit over half of the space our square footage was dedicated to restaurants and entertainment.

[D.J. Busch:]

Okay. And then I guess, is the right way for us to think about restaurants in a larger entertainment use is essentially the new anchor, because it seems like on a net effective basis, it’s probably similar rent than what you would get from bigger box?

[Michael Glimcher:]

Well, certainly we think that it’s going to drive traffic. We know that it’s going to drive traffic and it’s going to increase the length of the visits, which is a big part of how we continue to drive traffic in the shopping center. So, I think that they’re in a certain piece of the whole puzzle that we put together in a shopping center.

[Butch Knerr:]

And D.J. the other thing I would point out is that this is not taking the best place in the mall. It’s typically taking weaker space that we have had challenges getting, at least, five times, it’s been occupied or reconfiguring space. So really ends up being a win-win. And even when you look at the higher TAs s and you look at the rent, it’s still a reasonable payback and it’s very strategic for the center.

[D.J. Busch:]

Okay, great. Thank you, guys.

[Michael Glimcher:]

Thanks.

[Operator:]

Thank you. [Operator Instructions] One moment for question. And I’m not showing any further questions at this time. I would now like to turn the call back over to Lisa Indest for further remarks.

[Lisa Indest:]

Thank you. I would to highlight an upcoming event on our IR calendar. Michael and Mark will be attending the Citi CEO Conference in March in Hollywood Florida. The presentation and webcast will be available on the Investor Relations section of our website. You may contact us directly with any additional questions. Thank you all for joining us today and have a good afternoon.

[Operator:]

Ladies and gentlemen thank you for participating in today’s conference. It does conclude the program and you may now disconnect. Everyone have a great day.