Washington Prime Group Inc.
Q2 2013 Earnings Call Transcript

Published: 19 Jul 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Glimcher Realty Trust Conference Call. My name is Britney and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). I would now like to turn the presentation over to your host for today, Senior Vice President, Finance and Accounting, Lisa Indest. Please proceed, ma’am.

[Lisa Indest:]

Good morning, and welcome to the Glimcher Realty Trust 2013 second quarter conference call. Last evening, a press release was circulated on the newswire, and hopefully each of you had the opportunity to review our results. Copies of both the press release and the second quarter supplemental information packet are available on our website at glimcher.com. Certain statements made during this conference call, which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Reconciliations of each non-GAAP measure to the comparable GAAP measure are included in our earnings release and the financial reports we filed with the Securities and Exchange Commission. Members of management with us today are Michael Glimcher, Chairman and CEO; Marshall Loeb, President and COO; and Mark Yale, CFO. And now, I would like to turn the call over to Michael.

[Michael Glimcher:]

Thank you, Lisa. Good morning everyone and thank you for joining us on today’s call. We are very encouraged by the progress made during the second quarter and the overall continued execution of our long term business plan and strategy. First, from a financial perspective, our $0.18 of adjusted FFO per share was a penny above the upper end of our guidance range going into the quarter and represents 29% growth over the second quarter of 2012. A significant factor in this performance were contributions delivered from our core mall portfolio, where operating fundamentals remain solid. Aided in part by the dispositions of the Tulsa Promenade and Lloyd Center during the quarter, we continue to drive growth and productivity within our portfolio with quarter end sales reaching a new record level of over $470 per square foot, representing 8.5% growth over the prior year. Total occupancy increased 110 basis points over last year, which included an increase in mall store occupancy of over 200 basis points. Re-leasing spreads were positive again at 13% for the quarter while maintaining a portfolio occupancy cost ratio at nearest store close of 10.5%. Most importantly, core mall NOI growth accelerated to 5.6% during the second quarter. When considering the nearly 4% increase generated during the first quarter, it's clear that our recent investments in the company's growth platform are delivering tangible results. While pleased with this growth, our longer term goals focus on ensuring that such growth is sustainable. We will look to do this on several fronts. First we expect to continue to leverage the low occupancy costs throughout our existing portfolio by driving positive re-leasing spreads on renewals, enhancing the overall quality of our tenant mix and occupancy. Secondly we will look for further opportunities to reinvest in our core properties through redevelopment as we believe this still represents the best use of our capital on a risk adjusted basis. In addition to our investment in our two outlet collection properties, we see further redevelopment opportunities throughout the portfolio, including Polaris Fashion Place where we are in the planning phase for the redevelopment of the former Great Indoors space. The next part of our strategy focuses on external growth. Accordingly we're pleased to have gained full control of WestShore Plaza during the second quarter. With sales in excess of $400 per square foot, the center continues to perform well and is positioned for additional growth. In addition to brands like H&M, Macy's and Victoria’s Secret, DICK'S Sporting Goods is scheduled to open their flagship store in the Tampa Bay area at WestShore next year and the center offers one of the premier restaurant line ups in the region. We're also excited to start 2013 with the acquisition of University Park Village in Fort Worth. With sales over $800 per square foot and occupancy cost in the single digits and a reasonable amount of space rolling over the next three years, we're confidant regarding the NOI growth potential of the property going forward. Our search for similar new opportunities will continue with a focus on properties with high sales productivity, outsized growth potential and a rent roll of tenants that we have or whom we're looking to expand our relationships with. Not only is the content of the property important but also its context and environment. In this regard we continue to be drawn to more open air properties and mixed used properties driven primarily by the retail components. We're currently seeing a nice pipeline of new opportunities that meet this outlined criterion. Obviously we will need to be mindful of the recent volatility in the capital markets, especially in the REIT space and thus it will be important for us to identify a clear funding strategy before we make any firm commitments within the current environment. Finally we are also focused on improving the quality of our portfolio as well as our growth profile through divestitures. Solid progress was made in this regard during the second quarter with the sale of our ownership interest in both Tulsa Promenade and Lloyd Center. Conversations also continue with a special servicer on the loan for our Eastland property, and we hope to have a plan for the assets some time later this year. We will also be opportunistic in terms of monetizing the bottom half of our portfolio, especially if we believe we can redeploy such capital into higher growth assets either through redevelopment of existing properties or acquisitions of new ones. In the fourth quarter of 2011, we crossed over $400 per square foot in sales. And now our sights are clearly set on $500 per square foot, a goal we expect to meet by the end of 2014 through a combination of organic growth and the remixing of our portfolio. This combined with modest occupancy cost of less than 10.5% provides the company with meaningful long term growth prospects. The yield on Scottsdale Quarter’s first two phases did improve during the second quarter and is tracking with our internal guidance. We are pleased to have opened approximately 20,000 square feet of space during the quarter, highlighted by urban outfitters and Kendra Scott. We are also excited about the recent commitment from [Sid's Supply] (ph) to open their first store in the Western United States at the Quarter by the end of the year. When including signed leases, not yet open, and leases out for signature, occupancy gross to the mid-90% range. In terms of phase III, our multifamily developer has made substantial progress on the zoning and the entitlement process for 275 unit for rent residential project. No contingencies remain at this point and we have non-refundable monies on deposit. So we are very pleased with this progress. Additionally we continue to move forward with discussions on a deal to bring a fashion department store anchor to the site. As discussed during our last call, the desire to proceed is certainly there on both sides. Now with all that said, I would like to turn the call over to Mark Yale to provide you with more detail on our financial results.

[Mark Yale:]

Thank you, Michael and good morning to everyone. Our adjusted FFO per share for the second quarter of $0.18 is a penny above our guidance range going into the period. The biggest driver of this performance was property operations. Core mall net operating income growth accelerated again during the second quarter, up 5.6%, which was actually ahead of our plan. Also contributing to the quarterly FFO performance was $2.4 million of income from the termination of the Saks lease at WestShore Plaza. With respect to the contribution from Scottsdale Quarter, the yield on the project for the second quarter increased to approximately 3.7%, roughly in line with our forecast. Excluded from our adjusted FFO per share was a $6.9 million gain for our pro rata share related to the debt settlement for the Tulsa Promenade. Now, let’s turn our attention to the balance sheet, for a change things were pretty quiet from a financing perspective. We obviously addressed the Lloyd maturity and the Tulsa debt due to the sale of those properties. This leaves us with only one remaining 2013 debt maturity. The $13 million loan on the Scottsdale Quarter phase III ground which we expect to pay off with proceeds from the sale of the northern parcel and availability under our revolver. When reflecting on all this recent financing activity, we are pleased that over the last 12 months we have been able to reduce our overall rate on our fixed rate debt by 50 basis points while extending the average maturity from 3.9 years to 5.6 years. As previously discussed, we anticipate utilizing the company’s ATM program to match fund against redevelopment and major re-tenanting activities throughout the portfolio. During the second quarter, we issued approximately $6 million under the program at an average price $12.25. This level of activity was muted somewhat by the volatility seen in the capital markets during the month of June. During the quarter we did reload the program and now have over $200 million of remaining capacity under the ATM. Finally, we did update our FFO guidance for fiscal year 2013 solely to reflect the $6.9 million gain on the Tulsa debt extinguishment. The revised FFO range is now $0.68 to $0.72 per share. Other key assumptions as detailed in our previous guidance remain the same. We also provided FFO guidance for the third quarter of 2013, in the range of $0.16 to $0.18 per share. Key assumptions driving the guidance include net fee income dropping to approximately $300,000, lease termination income of $200,000, and core mall NOI growth of over 3%. I’d now like to turn the call over to Marshall.

[Marshall Loeb:]

Thanks Mark. While excited about the recent acquisition and disposition activity previously discussed by Michael, we are more encouraged with the 5.6% increase in net operating income realized from our portfolio during second quarter bringing year-to-date growth to approximately 5%. We plan to continue driving growth through executing on our redevelopment projects, raising occupancy quality by replacing weaker performers and increasing rents upon lease roll. With the supply equation continuing to be an important positive factor we remain enthusiastic with the overall health of our operating fundamentals. Total occupancy increased over a 100 basis points from last year. Re-leasing spreads were positive again at 13%, and portfolio occupancy costs sit below 10.5%. Finally retailer profitability continues to be solid as bankruptcy activity remains muted near historic lows. We are hitting closer the grand reopenings associated with our roughly $60 million investment and our two outlet collection centers, Jersey Gardens and Seattle. Both are scheduled for later this fall. At Jersey Gardens we’re on target to complete the major interior and exterior renovation by the end of third quarter and are excited about the leasing momentum there. In terms of the outlet collection in Seattle, we recently announced the lineup of new tenants that will be joining the center. In addition to Coach, Nordstrom Rack, Tommy Hilfiger and Banana Republic, which are already present, Nike, Michael Kors, J. Crew and Brooks Brothers just name of few will be opening stores. With respect to the 100,000 square foot of space we have targeted for new key outlet retailers, over 80,000 square feet is now addressed through signed leases or leases out for signature. Additionally we have letters of intent on the balance of the space. With the type tenants we are working with, we see the potential to drive sales well above $400 per square foot at Seattle. The grand reopening is scheduled for October 17. And we look forward to seeing many of you there. We expect to earn a high single-digit return on the outlet investments and begin seeing those financial contributions this year in terms of Jersey Gardens and into 2014 when considering Seattle. As discussed previously, we view redevelopment as one of the best uses of our capital. As it relates to near term redevelopment opportunities. We are focused on the parcel at Polaris formally occupied by the Great Indoors. As previously discussed, we have the opportunity to add approximately 125,000 square feet of additional open-air retail, restaurant, and entertainment space. Another area of attention is phase three of Scottsdale along with the redevelopment opportunities within our top tier properties that are in the initial planning stages. Additionally, we continue looking at ways to take advantage of adding big box retail into the malls throughout our portfolio. Finally, we are pleased to see that our Tier 1 portfolio grew to 91% of the Company’s NOI and there is a portfolio that generates over $500 per square foot in sales with occupancy above 95%. At this time, I will turn the call back to Michael.

[Michael Glimcher:]

Thanks, Marshall. While pleased with the progress made across the board so far in 2013, we will continue to focus on creating a sustainable growth platform. To accomplish this, we must maximize opportunities present within our portfolio from leasing and redevelopment perspective and prudently execute on our acquisition divestiture strategy to change the composition of the portfolio and keep our centers relevant to all of our customers. Now, with all that said, we would like to open up our call for any questions you may have.

[Operator:]

(Operator Instructions) Your first question comes from the line of Todd Thomas, Company, KeyBanc Capital Markets. Please proceed.

[Todd Thomas:]

Hi, good morning, Jordan Sadler’s here with me as well. First question just regarding guidance, same-store NOI growth, it’s trending above the guidance that you suggested for the year, so year-to-date it was 4.8% versus 3.5% to 4.5%. I was just wondering are you expecting some fallout a little later in the year and why [would it be] [ph] this quarter didn’t result in you taking up operating guidance at all, it seems like the second half of the year could still be strong with the third quarter in particular?

[Mark Yale:]

Hi, Todd, it’s Mark and it’s a good question. Right now for the last six months of the year we were expecting about 3% growth, with the third quarter being a little bit stronger than the fourth. I think the other factor, which probably does impact the numbers in the second half and we touched upon it was the termination of the Saks and they were paying a lot of rent and we’re now at downtime, but we’re certainly landing our feet with DICK’s Sporting Goods but that won’t be the next week or next year and that does have an impact on growth. That’s about $400,000 to $500,000 of kind of comp NOI that won’t be part of the numbers in the second half of year. So I think at this point when you factor in the 3% growth in the second half, where we are in the first half, we’re looking at being right in the middle of our guidance, right around that 4% NOI growth for the full year.

[Todd Thomas:]

Okay, and then in Seattle at the outlet redevelopment, seems like things are going really well there and I think in the press release, yesterday Marshall, you were quoted you know saying that’s exceeding expectations. I was just wondering what specifically that means? Is it that the yield's coming in ahead of expectations of your projection for sales productivity or just the general merchandising of the center?

[Marshall Loeb:]

It’s probably more the last point you mentioned. You know you always worry about what can go wrong and so I’m proud of our team that the construction is going to finish on time and on budget there and then really you worry about the environment, but really the retailers we’ve gained, we’ve gotten the names we started out, not all of them but just about all of them, a vast majority of the ones we really want to chase and are still engaged in the good dialog with the others. So you just hope for the best and usually you get bad bounce or two but this one, thanks to the team is really tracking well and I think it’s a great story from we were to how this thing is going to look in another few months to another year or two after that.

[Todd Thomas:]

Okay and what’s the expectation for when that property maybe re-categorized to a tier one property from tier two? Is that 2013 event or will that be 2014?

[Marshall Loeb:]

We’ll need, go ahead Mark.

[Mark Yale:]

Yeah I think it’s going to be in 2014. Certainly, as we get those sales into the numbers, we fully anticipate that we’ll reach that $300 per square foot mark and would move it in sometime in 2014 and that’s certainly when we’ll start seeing the financial contribution from the investment we made in the center as well.

[Todd Thomas:]

Okay. And then just last question. Regarding the transactions with WestShore and Lloyd, I know Blackstone was running the process, sort of marking those assets, but I was just curious if you could give a little background as to what happened there, how you decided to come in for WestShore and why you chose to exit Lloyd. Both have sales below the portfolio average. WestShore sales are obviously higher but just curious what the thinking was there and then I was wondering if you could give us a sense for what the pricing was on the deals?

[Michael Glimcher:]

This is Michael. I probably would go all the way back to Pearlridge and first of all we had a great relationship, a great partnership with Blackstone. We’d love to do more things with them going forward and I think this was a real win-win for both parties. When it came time to think about selling the assets, we each established our views of pricing and in some cases we were a buyer and in some cases we were a seller. Most importantly when you think about this transaction coming out with Pearlridge and 100% ownership it was awfully special and we’re really happy about that. Not every asset in our portfolio is going to do exactly $500 a square foot. If we are going to have a $500 average portfolio, some we’re going to be a little less. We got properties that are doing $800 or $1,000-$1,200 a foot. So it all blends in. I think the thing we really like about WestShore is the momentum of this marquee flagship DICK's Sporting Goods, we have had in the last couple of years, Seasons 52, we have added Grimaldi's the mix of restaurants there with those plus Maggiano's and The Palm and a bunch of others it’s probably one of the best restaurant mixes and it really plays into the whole notion of experience of retail we like to talk about. So we think that the dirt under WestShore is as good as it gets and we think there is a lot of upside with that asset and we certainly know it well, even though the sales are an at or average. And in the case of Lloyd, it was going to require a lot of capital. We think there was going to be some anchors that were going to change over time and so in the mid-300s it really wasn’t helpful. It was a big asset that was going to take a lot of capital when we said we have got lot of other places to spend money that have a higher growth profile. So, based on those reasons we were able to put about - around a seven cap to buy WestShore. Lloyd sold at about a nine but you also have to contemplate the fact that [there’s going to] [ph] have to be substantial reinvestment in repositioning of what’s a great piece of dirt but it’s going to need a lot of investment and so based on that that’s how we got to the point of buying WestShore and letting Lloyd go.

[Operator:]

Your next question comes from the line of R J Milligan representing Raymond James. Please proceed.

[R J Milligan:]

I actually just have one question on the anchor lease that you guys signed in the quarter, was marked down, I guess there was 20%. Is that one deal and what deal was that?

[Marshall Loeb:]

R J, it’s Marshall. You are right. It is just one deal there in your backyard. So it’s a sample of one and it’s DICK’s Sporting Goods coming into the Saks spots at WestShore Plaza and that was when we came into WestShore, it was the previous owner, it was a deal where they have made a capital contribution to get Saks in there and open and we are happy with the rent we got from DICK’s Sporting Goods. We think it’s a fair rent in the market but that was just an older lease where capital have been contributed initially that was burning off.

[R J Milligan:]

And how much capital is being put in for DICK’S?

[Marshall Loeb:]

I think by the time we finish, we will deliver the store to them, it’s going to be about around a $9 million to $10 million investment as we work through the construction of it.

[R J Milligan:]

Okay. And Marshall if you could just talk about the momentum in terms of retailers looking for space, has that changed over the past quarter, remained the same, what are you seeing out there in terms of retailers?

[Marshall Loeb:]

Good question. It has not changed. Usually there is a pretty good lag-time. We always say it takes a Board meeting or two. Most of our retailers are public or an awful lot of them are before the Board will pull in the reins and the lead time to deliver space. So we have not seen a slowdown in demand. If anything coming out of ICSC, we had probably more deals we can squeeze into ’13 than we had had the last three-four years. So that’s a nice sign coming out of the downturn and really with no new competition and this is usually our low point in occupancy and we are around 94% to 95% at the end of second quarter. I think we are seeing them reach out looking for space earlier and earlier on because there is just not much inventory out there, especially in the restaurant category.

[Operator:]

And your next question comes from the line of Nate Isbee representing Stifel. Please proceed.

[Nathan Isbee:]

Just circling back to the Seattle and Jersey redevelopments, clearly we’re getting closer to the end of that whole process and just curious if you can give a little more detail on the expected 7% to 9% yield on those investments, if perhaps you can give a little more direction, are you higher or lower on that range?

[Marshall Loeb:]

I think, it’ll probably be between the blend of the two, Nate, we would be right in the middle of that guidance.

[Michael Glimcher:]

And Nate, it’s Michael, I think what we feel really good about is each of these centers we’ll come out of it with major renovations, all new tile, all new entrances, all new restrooms and all that’s paid for in the context of all the NOI growth. So from time-to-time you have to refurbish, you have to model centers. That all gets built into here and we still get a nice high single-digit return that feels pretty good.

[Nathan Isbee:]

Okay. And I guess at Jersey, how are you allocating that return in terms of the incremental NOI coming in, given that there is no significant expansion of the space, it’s more adding to retailers to the center?

[Marshall Loeb:]

We just identified specific retailers that were associated with that renovation. I hate to remember, when we started it was the idea that there was a certain atmosphere and environment that retailers were looking for, that was all part of the strategic upgrade and we specifically went after handful of tenants certainly anchored by Coach. We’ve got UnderArmour, we’ve got other good names. Those are the types of tenants that we specifically allocated that type of incremental contribution from those tenants and that’s how we’re coming up with that yield.

[Michael Glimcher:]

And what’s nice Nate, it's Marshall, I would add in there what’s not in our numbers with our renovation is we’ve really gotten some of the existing retailers to renovate like the Saks store, Nike is expanding and Converse are all renovating. So that’s not included but I love having the brand new prototype and that’s kind of drifting throughout the balance of the mall.

[Nathan Isbee:]

Okay. And then as you think about the incremental NOI from both those projects coming online, how much would you say is already flowing through and when would you expect all of the tenants to be open and paying?

[Marshall Loeb:]

Well, certainly a portion of it, mainly at Jersey’s coming through this year and would say somewhere in the neighborhood of probably 40% of that contribution we’re seeing this year, the rest will be into 2014 and with a good balance of that being at Seattle.

[Nathan Isbee:]

Okay. And then just moving quickly, the five-six same-store NOIs, I think about your growth in three buckets from the core portfolio, perhaps the re-tenanting and then Scottsdale, how would you break out that growth this quarter?

[Marshall Loeb:]

I think it’s pretty consistent with, as a lease for length of the core mall portfolio in Scottsdale, if you looked at our guidance at the beginning of the year, it’s about 150 basis points with and without Scottsdale and I think that trend has kind of held up. And then certainly beyond that within the core portfolio, a big part of it is driven by re-tenanting, releasing spreads, that’s really a combination of all the above as we look to upgrade the quality of the tenancy within the core mall portfolio itself.

[Operator:]

And your next question comes from the line of Ki Bin Kim representing SunTrust. Please proceed.

[Ki Bin Kim:]

Just have a follow-up on that question, how much of that same-store NOI growth, if you could put a number behind it is actually related to the redevelopment efforts in Jersey and Seattle. I you’re your grand opening is later this year, but I am assuming some of that NOI is already flowing through? And also if you’re lease termination income is it included in that number?

[Michael Glimcher:]

Lease termination income is not included and there is probably so far for the full year, I don’t know how much for the six months but full year you’re probably talking somewhere between $2 million of contribution from the redevelopment at Seattle and Jersey, most of that being at Jersey.

[Ki Bin Kim:]

Okay. And you’ve mentioned some cap rates for WestShore Plaza and Lloyd Center. At initial glance it seems a little high, especially the 9% for Lloyd Center. Was there something unique about that deal that made it a nine cap rate if I heard that correctly and is that where the market is basically?

[Michael Glimcher:]

It’s Michael and what I would say on that and what I was trying to allude to in the first go around is that there needs to be some anchor repositioning there. There is only a few years left on an operating covenant from Nordstrom. There is a number of things that are in play that are going to cost a substantial amount of money. So you can take a cap rate on in place NOI but there is a very large expected spend that I think was built into the pricing. So I think if you weigh that in, I don’t know how much it moves it. It probably moves it 100 basis points or a lot more because there is money that has to be spent there. So the question is do you want to hold the asset which really isn’t providing you dynamic growth or the sales volume that you want and put a lot of capital into it or do you want to sell it and let someone else put that capital in and realize that opportunity. We thought that was the best option moving forward and so we along with our partner felt like we've got appropriate market pricing.

[Ki Bin Kim:]

Okay and turning to Scottsdale Quarter, the phase three, you guys have been working on getting an anchor retailer tenant there for a while. I guess at this point though what is the major holdup? Is it kind of a PI package or is it getting the right retailer. Maybe you could give a little more color on that?

[Michael Glimcher:]

Sure, we've made tremendous progress in Scottsdale and I'm really proud that we've got about 95% - 96% of the space accounted for the property. We've got the four rent units coming up. We'll be delivering more space with that. We continue to upgrade the tenant mix there. There're still some ins and outs and we're still washing up the mix as we say, but as it relates to an anchor store, like we said before we never contemplated out of the gate. It's something that we would like to do but don't have to do and if we had an open checkbook we could do anything. I think the issue is, is there an economic deal that makes sense for us and makes sense for that type of tenant and that's what we're grappling with right now, is how much are you willing to spend, how much more valuable does it make the property when you're already performing in excess of a $1000 a foot, and you've got very successful asset. So these are long drawn out negotiations and discussions. It's something we'd be interested in but we also have many options and by the time the apartment units are done and will be developing the south eastern parcel as well with the mixed use, there'll be parking, retail and its mall space above, we only have the one parcel left at the property. So we are extremely pleased with where we are at Scottsdale. An anchor store would be nice, but it’s a want to have, not a have to have.

[Ki Bin Kim:]

Okay, let me, maybe rephrase that question a little bit. So do you have an anchor tenant that would want to want to move in tomorrow but it’s basically maybe the PI package that you're unwilling to give up, maybe that's the hold? Is that the right way to describe the situation?

[Michael Glimcher:]

I'd say we have discussions going on with various tenants and if you had an open checkbook it'd be really easy to make a deal and you know our checkbook is not wide open. So there's a balancing point and so I don't necessarily hurt my negotiating position with any given retailer or retailers but it's an economic issue at this point.

[Ki Bin Kim:]

All right, thanks for that and just last question. Could you just give an update on the yield expectation for Scottsdale Quarter Phase 1 and 2 and just the mall purpose, how much have you recouped so far this quarter and what's left?

[Michael Glimcher:]

The yield for the second quarter at Scottsdale was 3.7% and we accept the fact that above 4% in the second half of the year and I think we've held our guidance for the yield overall at that all important quarter for Scottsdale for Phases 1 and 2.

[Operator:]

And your next question comes from the line of Carol Kemple, representing Hilliard Lyons. Please proceed.

[Carol Kemple:]

What are your all's thoughts on this position at this point? Are you actively marketing anything? Are you waiting for buyers to approach you?

[Michael Glimcher:]

Carol, that's a really good question it's Michael speaking. We're constantly trying to upgrade our portfolio. So every time we sell off the bottom, there becomes a new bottom to the portfolio and we want assets with our dynamic growth profile. So we can continue to deliver in the 3% to 5% NOI growth range, hopefully consistently with the top quality peers in the sector. So I think as there are opportunities to sell assets, we've had a tremendous amount of reverse inquiry. We try to manage our time so we're not always talking about every asset but I think we've articulated the marketplace, what type of assets we want to own and what we don't to own over time. So we get a lot of reverse inquiry and so I think from time to time you'll see us selling assets but again we're only trying to match it up with acquisitions and what our capital needs are. So I think it's going to be something that we always do is probably the short answer.

[Carol Kemple:]

So probably in the next six months I guess is it safe to assume if you all sell anything it's because a buyer approached you about a property whether instead of you all using a broker and trying to sell something?

[Michael Glimcher:]

There's nothing that we have actively listed today. So that would be correct.

[Carol Kemple:]

Okay and then at this point it looks like you just have one property left in a joint venture, but you mentioned earlier in the call that you all enjoyed your relationship with Blackstone in the past. At this point, would you still want to want to do joint ventures or are you thinking about maybe simplifying the company and owning everything outright?

[Michael Glimcher:]

It's really case by case and if having the right partner for the right opportunity exists, we're happy enough to have joint ventures. We really enjoyed the relationship with the whole team at Blackstone and there are certainly a lot of great institutional partners out there. So it's really case by case, asset by asset but for the most part you're correct, we're a wholly owned portfolio.

[Carol Kemple:]

And then can you give you give any updates on the Columbus outlet issues, the market up there, if anybody's dropped out of the contest?

[Michael Glimcher:]

I think there are a number of people looking at the opportunity and it really is tenant driven. Ultimately there is probably a dozen key tenants and maybe half of them that guide where these centers get built and from our perspective if those key tenants want to be with us, we would pursue a development opportunity and if they want to be with someone else we wouldn't. I don't think we would get into any sort of battle. That's probably not our nature. But we think like most markets, you got a market of 1.7 people, a market we know really well, in a sector we very well. We’re certain that we're probably the best party to deliver that kind of product in this market. But ultimately it depends on content and the content is going to be decided by the retailers and not us.

[Operator:]

And your next question comes from the line of Ben Yang representing Evercore. Please proceed.

[Ben Yang:]

Yeah, hi thanks. Michael, maybe going back to the question on WestShore, I recall that you did list WestShore with the broker about a year ago. So I was just hoping you can talk about maybe the type of buyer that took a look at that property, whether you received any bids on the mall, and then finally, if there was anything beyond the DICK'S investment that may have limited the pool of potential buyers there?

[Michael Glimcher:]

That a good question. I think the last go around, there was uncertainty about the anchor, just like there was uncertainty about the anchor this go around in Lloyd. And so having this flagship DICK's deal done and having the termination and everything work through with Saks made it a lot easier and a lot more straight forward and frankly us as a buyer, we liked it a lot better having that certainty. So if you think about the time frame, people wanted to buy a stable steady asset and when you've got an anchor that's moving around, that creates some uncertainty. We're also excited about this asset, which I think I didn't mention is that we signed a new 10 year operating covenant with Macy's and it's a premier largest volume Macy's in the entire Tampa Bay area. So we think they are a terrific anchor to the center and we have a long term operating covenant with them. So in that timeframe, long term operating covenant with Macy's, you got a new DICK'S store, you open a new restaurant; you open a new H&M, a lot of good things happen and they got us a lot more confident about the asset. And ultimately it traded at a price that we felt comfortable buying it.

[Ben Yang:]

Is there any considerations to maybe selling this mall, after you have done all that hard work, putting the DICK'S in, getting that operating covenant et cetera or is this long term hold do you think the company?

[Michael Glimcher:]

Well there is a lot upside on this asset. Like I said before, it's just great dirt. It's some of the best dirt in the market from a real estate standpoint. So we think there is still a lot of value to get out of this asset. We know it really well. Like I said before, over time, every time you move the bottom up you create a new bottom. If one day we wake up and it is our least productive asset, we may turn around and sell it, but we're not there yet.

[Ben Yang:]

Okay, fair enough. And maybe last question. Obviously there have been a lot of moving pieces over the past year, but it's still kind of interesting to see the average rent basically stay flat especially after you got rid of some of the lower quality malls, that presumably had lower rents. So I was just curious, was there anything in particular holding the absolute rent growth back? And then maybe if you could also disclose what the average rent growth was on a comparable basis?

[Michael Glimcher:]

We've seen the other day 13% positive releasing spreads and we’re certainly rolling rents in the right direction.

[Mark Yale:]

Ben, I think were up, not a whole lot, but were up a 0.1%, 0.2% on a comp basis.

[Operator:]

And your next question comes from the line of Cedric Lachance representing Green Street Advisors. Please proceed.

[Cedric Lachance:]

Michael, just want to ask you a big picture question with regards to occupancy cost ratios. In the past you have talked about 14% being appropriate target for your portfolio. But when I look at the portfolio now you have more outlook presence and you are starting to have more open air presence as well and those two typically have lower occupancy cost ratios. Do you still think 14% is a likely target for the portfolio or do you think that number has changed over time?

[Michael Glimcher:]

Cedric, I would say that on a weighted average maybe you can knock a 100 basis points off on outlet, although I don't believe outlets should have a lower occupancy cost. It's interesting most retailers are more profitable in their outlet stores, but they also pay lower rent. I think over time that's going to change as it just becomes just a regular distribution channel and I think we have a lot of room to push rents in the outlets. And on open air versus and closed, I think a lot of the lifestyle centers that aren't real meaningful were done based done on a low rental basis. The things that we're buying when you think about what we have in Kansas City in the critical mass, when you think about the highly productive Fort Worth that we bought, when you are doing $800 a foot, when you are doing $500 to $600 a foot, people can going to afford to pay high rents. It doesn't matter if there is a roof on it or not. So is it realistic to say you can get to 14% and achievable? Yes. It's going to take us a long while to get there. So we had a great runner over the last few years and I think shareholders have made lot of money. I think there is a lot of runway ahead of us, if we just keep on rolling rents, and we keep on getting these strong double digit rent increases. We can do that for a long time even if sales moderate. We have a lot of room to grow. So it's probably more of a theoretical question and it’s probably something you're going to have to ask me in a couple of years. We may not still be at the 14%, even if we keep on getting double digit increases.

[Cedric Lachance:]

And when you negotiate rents now a days, do you estimate that it is at about 14% occupancy gross ratio?

[Michael Glimcher:]

We always try to get the highest fixed rent possible, but we also want to make sure that the retailer can be profitable and every category is different and there is different margins store by store. So do we target to be in that range? Yes. It’s that our mantra? Is that what the whole leasing team thinks about? Yes. And then we look at every deal on a case by case basis, because it’s very custom.

[Cedric Lachance:]

Last question, I don’t know if you are in the market currently looking for assets or looking at assets. Do you have any sense of what’s appeared to cap rates over the last couple of months with the increase in the tenure rate?

[Michael Glimcher:]

Like I said earlier, we are always looking to buy, always looking to sell, and reshuffle the portfolio. Since maybe rates have moved, nothing has really traded. So it’s hard to know what’s happened. I would say sellers are probably thinking it shouldn’t affect anything. I think as a borrower we would think, if rates would run up, it should but we haven’t seen anything transact to really have any real data, and there is nothing that we're live with, that would give me any data to work from.

[Operator:]

And your next question comes from the line of Robert McMillan representing S&P Capital IQ. Please proceed.

[Robert McMillan:]

Your retailer outlook and what you are sensing for back to school as well as holiday shopping?

[Marshall Loeb:]

It's really a tough one. I think we’re cautiously optimistic. When we walk to malls, retailers certainly have the inventory to do the business. We are not economists, so it’s really hard. When you look at various data that’s out there in the marketplace, some people are saying slightly up, some people are saying flat, there is a lot of credible sources with a lot of different views. So without being an economist I would say cautiously optimistic. Stores are well inventoried. And the other thing we have talked about over the last couple of years is the back to school season has really spread out. I know when we were all kids, you go and buy your back to school clothes and that that would be it and you would be done. And today it’s more of a process where kids are buying and they are going to go see what other kids are wearing and then they go back to the mall and it stretches out and it’s a prolonged season. It’s not just a one stop shop.

[Operator:]

And your next question comes from the line of Ki Bin Kim representing SunTrust. Please proceed.

[Ki Bin Kim:]

Just one quick follow up. Has there been a change in your ability to push through radius restrictions on retailers. And is there a difference in your ability to push that through for retailers in the Jersey Gardens versus a Seattle outlet?

[Marshall Loeb:]

Ki Bin, its Marshall. Just on the outlet side, not really. I think as outlets get closer and closer to malls and lot of it just varies by retailer. There are some retailers who just simply won’t give you the radius restriction but we certainly try to get at every chance we can and then know the distances to our major competition in each of those markets. It has not shifted dramatically. Usually the retailer is the one that will focus on their distribution channel and how close they are to wholesale and retail and things like that but we have not seen a wholesale shift and radius restrictions.

[Ki Bin Kim:]

So in Seattle, for a lot of your newer tenants are, do they all pretty much have radius restrictions or not?

[Michael Glimcher:]

Every lease is different. We certainly ask for a substantial radius in our boiler plate lease and then everyone is negotiated differently and if you are taking a tenant and there is a lot of rent coming on the if-comp (ph) based on performance, there is a much better argument. If someone is paying a high base rent, hopefully that will cause him to not thinking about putting a store on top of another store, but again every one of them is different, much like occupancy cost and everything else. Each lease is custom.

[Ki Bin Kim:]

And just for my own education, how much of that radius restriction is outlet versus outlet or is there lot of crossover, is full line full price regular malls versus outlet?

[Michael Glimcher:]

In outlet, yes, you really talk about x amount per radius per outlet and some leases will say you can have full price with an x distance but you can't have an outlet store. Again they are all different. In an ideal world, they don’t have any full price over outlet within a significant distance at least 10 miles, maybe 15. But the reality is it gets negotiated but you probably say I don’t want an outlet store but if there is a full price store with an x, we could live with that.

[Operator:]

And there are no further questions in the queue at this time. I would now like to turn the call back over to Ms. Lisa Indest for closing comments.

[Lisa Indest:]

Thank you, everyone for participating in the Glimcher second quarter conference call. You may contact us directly with any additional questions or access our filings through glimcher.com.

[Operator:]

Ladies and gentlemen, that concludes the presentation for today’s conference. You may now all disconnect and have a wonderful day.