Acadia Realty Trust (AKR) 2012 Q1 法說會逐字稿

Welcome to first-quarter 2012 Acadia Realty Trust earnings conference call. As a reminder, this conference is being recorded. At this time, all audience lines have been placed on mute. We will conduct a question-and-answer session following the formal presentation.

(Operator Instructions)

I will now turn the call over to Amy Racanello, Vice President of Capital Markets and Investments. Please, proceed.

Good afternoon, and thank you for joining us for the first-quarter 2012 Acadia Realty Trust earnings conference call. Participating in today's call will be Kenneth Bernstein, President and Chief Executive Officer, Jon Grisham, Chief Financial Officer, and Michael Nelsen, Senior Financial Principal.

Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the Company's most recent form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, April 25, 2012, and the Company undertakes no duty to update them.

During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release, posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to Ken Bernstein.

Thank you, Amy. Good afternoon, thanks for joining us. On our year-end earnings call, we reviewed both our 2011 and fourth-quarter results and also laid out our growth plan for 2012. So, today we will briefly review our 2012 plan. We will update you on our recent progress of our various initiatives, discuss what variations we are seeing and then Jon will conclude with a more detailed review of our first-quarter earnings and operating metrics. As we stated on our year-end call, for 2012, our team will be focused on creating value through two broad components of our business.

First is within our core portfolio where the key drivers are in the short term; our accretive re-anchoring and lease-up projects at three of our existing shopping centers; then, coupled with the acquisition of a host of high-quality assets as part of our asset recycling and core acquisition initiatives.

The second component is through our external growth platform where we will execute new opportunistic and value-add acquisitions as well as continue to develop, lease up, stabilize, and then monetize our existing investments. So I will begin today's discussion with our core portfolio activity, then follow it up by an update on our funds activity.

First with respect to our core portfolio operating fundamentals, when we look at our first-quarter results and strip out the noise from our three re-anchoring projects, same-store NOI increased by 230 basis points on stable occupancy numbers and positive leasing spreads. And this is somewhat consistent with the continued mild and somewhat uneven recovery that we appear to be in.

As we look forward over the next year, we expect the vast majority of our occupancy and NOI gains will be driven by our three previously announced re-anchorings. First in Bloomfield Town Square, and then two properties that formerly had A&P Supermarkets as their tenants here in New York. As we discussed in detail on the last call, beginning in the second half of this year, we will begin to add what will total on a run rate basis, an incremental 3.5% to 4% to our occupancy, $3.5 million to $4 million to our NOI, and approximately 8% to our earnings base.

First the re-anchoring at our Bloomfield property. It is proceeding on track. We are 98% leased at this 240,000 square foot property and by the end of the second quarter we anticipate the opening of Ulta, Five Below, and most importantly Dick's Sporting Goods. With respect to our two A&P locations, first in Smithtown, Long Island, where our two adjacent centers, Village Commons and The Branch, total over 200,000 square feet and represent the vast majority of the retail space in downtown Smithtown.

We have executed a lease with L.A. Fitness who is scheduled to open during the fourth quarter of 2012 for the majority of the former A&P space. This tenant will nicely complement the shopping experience in downtown Smithtown. Our other former A&P location is at our Crossroads Shopping Center in Westchester, New York.

Since our last call, along with making progress on a very worthwhile, straightforward re-leasing plan that we are in the process of finalizing, we have also been presented with strong interest from an exciting tenant which would require us to expand the existing A&P.

Now, since this expansion could also potentially be more accretive for us, we are going to evaluate this opportunity over the next few weeks. And while it may cause some minor delays in finalizing our re-anchoring plans and projected opening dates if we proceed in that direction, it will certainly be worth it.

Rents on average for the new leases at these three re-developments should represent a 50% increase over the prior rents for those spaces. These re-anchoring projects are now in aggregate approximately 80% pre-leased with Crossroads comprising the vast majority of the balance. And as anticipated, the NOI and earnings contribution from these re-anchorings will begin to contribute to our second half 2012 and then more significantly 2013 growth.

Along with the growth contribution from the three profitable re-anchorings, the second key driver of core growth is from our asset recycling and core acquisition initiatives, most significantly through the addition of select high-quality assets. Our focus in 2012 is to do some modest pruning while we continue to add properties that we think, over the long term, have the potential to significantly outperform the asset class in general.

Our focus recently has been primarily on urban and street retail properties in the major gateway cities. Having already closed on our acquisitions in Georgetown, DC, and SoHo, New York, in the first quarter, we closed on our previously announced Whole Foods anchor property in Cambridge, Massachusetts, as well as four more of our previously announced Chicago acquisitions.

And then more recently, we added two additional Chicago properties, one on Milwaukee Avenue in Lincoln Park tenanted with Aldo and Carhartt and the other on Rush Street in the Gold Coast and that is tenanted with Lululemon. The nine remaining assets in our Chicago acquisition portfolio are in a securitized pool that we are hopeful will close relatively shortly but working through this process is an insightful and interesting experience.

Our acquisitions over the past year have been in the DC to Boston corridor as well as Chicago. They are all in key supply-constrained markets with strong tenant demand and as we continue to make additions like these, it will further shape our portfolio over the next decades. It appears to us that these street and urban properties should be both better insulated from some of the more recently emerging concerns related to the growth of e-commerce which is primarily in the big-box segment and increasingly important to our tenants as they are multi-channel retailing initiatives progress.

Complementing our core growth initiatives is the second major component of our business, the value creation generated from our fund platform. In April, we closed on our previously announced Lincoln Park Center asset as well as another New York City property, 640 Broadway.

Our acquisition of 640 Broadway is just down a block from last quarter's purchase of 654 Broadway; it is another complementary street retail redevelopment opportunity in NoHo here in New York. The key driver in this investment will be the repositioning of the street retail on Broadway and Bleecker Street with Swatch Watch in the key corner of this project.

As for continued deal flow, we are seeing an increase in recapitalization opportunities. These in general should be similar to our recent 654 Broadway discounted purchase of debt and will be transactions that will enable the re-equitization of overleveraged properties that also utilize our hands-on retail expertise.

And while there is no sign of the floodgates opening, the amount of commercial mortgage debt maturing in the not-distant future is beginning to act as a catalyst for certain transactions, as many financial institutions transition, one way or another, past the kicking-the-can-down-the-road phase. Companies that are correctly situated from a capital and execution perspective should be in a good position to capitalize on this.

So, after taking into account the past quarters' fund transactions and those that we now have under contract, looking forward, we have about $50 million of Fund III equity remaining to deploy and are continuing to pursue those transactions that are consistent with our mandate. And accordingly, we expect our Fund IV to launch toward the end of the second quarter and to have terms and sizing similar to Fund III.

With respect to our existing fund investments, many of our redevelopment projects are now approaching stabilization and the market for high-quality, stabilized assets has regained its footing with demand continuing to strengthen. Accordingly, we are evaluating a wide range of potential monetization opportunities.

Keep in mind that stabilized Fund II assets include our Fordham Road project, where we recently executed the final office lease. So, the office is now 100% leased; the retail is 100% leased and occupied. Canarsie Brooklyn is 98% leased; Pelham Manor is 94% leased; Liberty Avenue is 100% leased. With respect to Fund III assets, Westport Connecticut is 90% occupied, our White Oak Center is 100% occupied, and our self-storage portfolio has now ticked up to 88% occupancy. So, we will keep you apprised of our progress on this front.

In conclusion, in the first quarter, we made steady progress on achieving the 2012 goals that we set forth on our last call within our core portfolio. We continue to push forward both our re-anchoring projects as well as new core acquisitions. These should contribute significantly to our earnings growth in the second half of this year and more importantly, further enhance our core portfolio quality long term.

And then, combining this growth with our opportunistic and value-add investments made through our fund platform enables us to create value through a broad range of investment activities. Finally, the anticipated launching of our Fund IV will position us to take advantage of a wide array of opportunities as they arise over the next few years. I'd like to thanks our team for their hard work over the past quarter and I will turn the call over to Jon.

Good afternoon. I will briefly touch on earnings and then turn to our core portfolio performance and then lastly cover 2012 guidance. FFO for the first quarter of $0.21 was as expected. One notable item is that this includes acquisition costs of $500,000, give or take $0.01, related to the closings on a portion of the Chicago portfolio and our Cambridge Whole Foods location.

Turning to the core portfolio, also consistent with expectations, same-store NOI was minus 3.9%. And excluding the impact of our Bloomfield Hills and A&P re-anchorings, this result would have been a positive 2.3%. This 6% drag will moderate in the second quarter as Bloomfield will be fully online by this June. And then following this, same-store NOI should turn positive for the second half of the year and consistent with our previous guidance, we should achieve between 2% and 3% same-store NOI for the year it in total, inclusive of these re-anchorings.

On whole, our tenant base and collections are sound. One tenant we are keeping a close eye on is The Avenue for which the parent company, United Retail Group, filed Chapter 11 in February of this year. We have four locations in the core totaling about 25,000 square feet. They have not rejected any of our leases to date. And two of our locations are here in the New York area and are at comparatively higher rents, as one would expect, and in general the four locations are at market rents.

Core occupancy as of March 31 was at 90.3%, with the anchor component at 93% and small shop occupancy of 84%. And taking into account signed leases, we are at 94% overall occupancy, which is consistent with our projected year-end occupancy target.

Looking at earnings guidance for the balance of 2012, the core portfolio is performing as expected. As noted, the major moving piece in the core is the $3.5 million to $4 million or $0.08 of annual NOI related to our re-anchorings for which we continue to expect about $0.03 to contribute to 2012 and the remaining $0.05 contributing incrementally to 2013 earnings.

The timing on the closings of our existing 2011 pipeline represents another variable for 2012 earnings and potentially a short-term drag. Of the total 2011 pipeline of $181 million, we had closed on $74 million by year-end, we closed on another $41 million during the first quarter of 2012, leaving $66 million still left to close. As Ken mentioned, we are currently working on closing this last tranche and once all closed, in total, the 2011 pipeline will generate $0.05 to $0.06 of annual FFO.

Lastly we continue to make progress on the launch of Fund IV and our current year core and fund acquisition goals. The speed with which we close on these may impact short term and we will keep you posted as we get further into the year.

So, as we previously noted, 2012 earnings will be transitional. The contributions from these items I've discussed are weighted to the second half of the year with the specific timing of these representing variables for 2012 earnings. As a result, the next couple of quarters may have noise, but importantly, and consistent with what we have said on our previous conference call, once we finalize these moving pieces, we expect our quarterly earnings will be closer to $0.30 and represent a high-quality, recurring earnings base which will provide a solid platform to build off of going forward.

Lastly, turning to the balance sheet, we continue to operate at appropriate leverage levels. The launching of Fund IV will provide continued capital to fund growth in our opportunity fund business and we are using our $75 million ATM to match funds of both our core and our share-of-fund acquisitions to the extent needed to maintain our low-risk balance sheet. With that, we will be happy to take any questions at this time. Operator, please open up the lines for Q&A.

(Operator Instructions)

Todd Thomas, KeyBanc Capital Markets.

Good afternoon. I am on with Jordan Sadler as well. First question, on leverage, your net-debt-to-EBITDA is creeping up a bit with some of these recent acquisitions. It was about 6.2 times in the quarter versus just under 5 times last quarter. You have always operated at a conservative leverage level and it is still fairly conservative, but I was just wondering how you view your current debt levels today and going forward as you continue to acquire properties?

Yes, we target a 6 multiple is the right range, the right amount of leverage. So, anywhere plus or minus around that level we think is appropriate, so you will see us hover around that level.

Okay, and then sticking with financing, for some of the recent street retail properties, I know you lump some of the Clark and Diversey and other Chicago properties together. I wasn't sure if I saw anything, but I was just wondering if you could give us an update on the financing of the Trader Joe's and the Urban Outfitters property. And then also maybe you could talk about what you're seeing from lenders for this type of product today more generally.

Yes, I'll touch on that. In general, for longer-term borrowing, which is what we are going to look for, and that is in the range from, at the short end, 5 years probably out to 10 years, we are seeing strong lender demand to finance high-quality, high-barrier-to-entry assets like that. Spreads ranging from 150 at the tight end to 200 on the wide side. And then depending on leverage level, we won't finance every asset at 40% leverage, we will probably use a little bit more debt on some and keep more unencumbered. So, in the range of plus or minus 200 over is a 10-year treasury, it is a very attractive time to lock down long-term debt. I think that is what you should expect to see, for instance, on that Diversey asset. And the lenders seem to be continuing to separate and far more interested in pursuing high-quality assets. Street retail certainly falls into that category.

And in fact we have seen a lot of interest in the West Diversey asset and you'll probably see us close on some financing during this quarter.

Okay, great, and then just lastly, I was curious about the Lululemon lease, the acquisition. How does that yield compared to some of your other Chicago-area acquisitions that you have discussed and also can you provide any details about that lease? Maybe what kind of sales they are doing and what the lease term looks like?

Yes, without getting into specifics which we are not permitted to do, it is a very strong-performing store with a long-term lease. Equally importantly, it is the fourth building on Oak Street and Rush that will be part of our collection and that area is rock solid and tenant demand for the few vacancies that are showing up there is really strong. So, we expect strong performance out of not just that store, but the rest of what we have on that Rush Street/Oak Street corridor.

In terms of cap rates, we don't break out individually, but what we have said is our acquisitions have blended in the Chicago street area to about 6.5%. This is below that, it is at the lower end, but it is a very high-quality corner there on Rush and Oak, right across from the Elysian Hotel and we are very pleased with that addition.

All right. Great. Thank you.

Craig Schmidt, BofA Merrill Lynch.

Ken or Jon, how does the revenue recognition or the NOI growth for Urban Street compare to that of a suburban shopping format?

It can vary and if you are talking about SoHo in New York it would be at the highest end of this but Georgetown, DC would be another example. In general what we are seeing is about 100 basis points higher. So, if you are penciling 2% growth for a well-occupied stabilized suburban center, not taking into account financial crises and major recession, et cetera, you're probably 100 basis higher or 3%. In some markets, though, Craig, what has been fascinating to see is the market rent growth for some of these key street retail has so far outstripped what we've experienced in our suburban, that when you have the reset opportunities -- while I certainly welcome to the re-tenantings that we are doing at our A&P and our two suburban New York, those re-tenanting opportunities, when they occur on street retail, are even more meaningful.

So, what is going to be hard to gauge, but we will see over the next 5 or 10 years is, as one gets the opportunity to recapture space, will the growth -- once you take that into account as opposed to just the contractual growth that I was talking about 2% versus 3% -- how much does that then create additional growth opportunities. That is going to be down the road because we are not buying assets that we are expecting the tenants to kick out short-term. If anything it is providing stability short-term, but in the long-term we see stronger market rent growth in the urban and street that we do in the suburb.

And then, Craig, in terms of the revenue recognition, obviously, with the increased contractual growth on a GAAP or straightline basis, the yield obviously goes up on these assets on a comparative basis because of the imbedded additional growth.

Great, and then just thinking about some of your street/urban in Chicago you have Lincoln Park, Gold Coast, and Wicker Park; in some ways very different, but the one thing they seem to share is the density and the high shopper traffic. Is that what is making you interested in these properties or is there other commonalities that I am missing?

Well, the first and most important, because we are not a retailer, is listening to our retailers and hearing where do they want to be, and where do they think that, in this changing environment, their sales growth and their profits will enable them to continue to pay us rent and pay us more rent. And what we have heard from a wide array of our tenants is, whether it is Lincoln Park or whether it is Lincoln Road in South Beach Miami, there is certain must-have locations, because they are viewing these locations not just in terms of sales per square foot, although that is obviously a critical piece, they are thinking about these locations from a branding perspective. They are thinking about these locations from order fulfillment perspective as their multichannel initiatives continue to gain steam. They are thinking about these locations as a positive type of showroom as opposed to some of the show-rooming negative aspects that we've all been reading about. And so these positive shopping environments, now they can be in suburban locations as well, all right. But areas where our tenants can utilize all of these different components seems to be where they are most excited about stepping up and signing leases that are attractive to us.

Okay, thank you. That is helpful.

Sure.

Quentin Velleley, Citigroup.

It is actually Manny here with Quentin. Just had a question. Looking at your street retail platform and the fragmented existing ownership of those types of assets, how do you build scale in your existing market? So, if you own the second and fourth building on the block, how do you get that third building so you have contiguous ownership?

Yes, it is not always easy. So I would say with some level of patience at some level of persistence and it helps to be small enough that we can add a building here and a building there accretively. I expect this business to remain fragmented, but over time, as is the case for a lot of commercial real estate, it makes sense for more of these high-quality assets to end up in responsible, institutional, well-capitalized hands. We are just going to have to be patient and where we see the opportunities we will take them.

And then in the same light, how do you enter new markets with the same type of fragmented ownership?

If we have to be patient and persistent in the ones we are in, we have to be very thoughtful about where we enter -- think about Chicago, we were on Clark and Diversey for probably a decade. But we waited for the right time, the right portfolio, it was north of $100 million to really have the right entry point. We've waited a long time to do a $50 million entry-point on Lincoln Road. In Manhattan, we will probably be willing to do smaller deals because it is right here in our backyard. But we look at what is the right size? What is the right timing? And, thankfully, it is just one piece of what we do.

So, between urban acquisitions, between some of these recapitalizations that we are beginning to see, there are a handful of markets that we would love to be more active in, and our team is pursuing those aggressively. But if we concluded that we would only expand -- in terms of street retail -- in those markets that we currently have a presence, I think for our size, we could continue to execute and grow quite significantly, because we love M Street in Georgetown, happy to do more there, happy to do them one building at a time. We love Chicago and we think there will be continued opportunities there. We like Lincoln Road; it is getting very competitive down there, but that is great for our existing investments. Greenwich, Connecticut; Westport, Connecticut; Boston, there is plenty for us to do within those that we are already in without having to explore new markets. But when the new opportunities show up, we will pursue them.

Thanks for that and I think Michael has a question for you, as well.

Yes, Ken, just a question on where you are in terms of Fund IV. How far are you in terms of that capital raising documentation and how we should think about when that comes about?

Yes, so what we have said and I think I hopefully will deliver on what we have said is, we hope to have, expect to have, the documentation done and that fund launched before the end of the second quarter. We are working with our existing Fund III investors in terms of their re-up and we're very positively encouraged by that. But the reality in the institutional discretionary fund business is that re-ups don't get you to 100%. So, thankfully, through primarily reverse inquiry, there has been a bunch of new investors who have also stepped up to circle what probably will be the lion's share if not the balance. Let's get all that done before the end of the second quarter, that is our expectation. If there is a little tail left, if the conflicts don't arise, I'll let you have it.

Thank you. How -- in terms of discussing with the new investors, I assume the old investors are pretty familiar with you and the returns, what have the discussions been with the new investors in terms of -- because I assume this has been going on for the last, you've been having discussions well over the last 12 months -- how have their return expectations changed? And also have your fee expectations, in terms of the fees that you're putting in, how have those changed at all?

Our expectation is that, in terms of fees and structure, we are going to try very hard to keep it the same and I think it is fair and balanced where we could have a good discussion about whether it's too attractive one direction or another, we think it is fair and balanced to all of our stakeholders, both our public shareholders and our fund investors, and in general the response has been consistent with that. In terms of returns, there is a recognition to a point that in a low-return environment, returns are coming down. That being said, for the opportunity to invest in illiquid turnaround opportunities, I think that institutional investors are correctly saying, just because the 10-year Treasury is at 2%, please don't talk to me about single-digit returns being attractive. I think they are right.

So, we have shown ourselves to be disciplined in the past and not lean in too hard when deals don't make sense. We will continue to do that and a mid-teens net return, we think is achievable. The deals that we've announced over the past year will meet those goals, if not exceed it. Our institutional investors seem to be embracing that and it provides a good diversification for those investors looking for vertically integrated, focused companies with a commitment to buying assets, fixing them up, and then liquidating them.

Ken, how much time are you spending on buying retailers' real estate or buying retailers for the real estate? It has certainly gotten pretty a little bit more airplay given some of what the retailers doing with their real estate and certainly some of the activism that is going on.

Yes, so, we've been buying the real estate underneath broken retailers on purpose or by accident for as long as we have been in the shopping center business, because, inevitably, if you wait a couple of years some of your retailers break on you. So, the initial purchase of real estate whether it was anchored by Caldor or Ames or PharMor or Grand Union, would fall into that category. And then, there was that window of time where, through our RCP investments, we were buying both the real-co, the real estate, and the op-co, or participating in that and that was a relatively finite window in time and thankfully our investments we have already returned north of two X on our equity. Thankfully those we're profitable and real neat opportunities during that window.

What you are seeing us do now, if you think about some of the more recent transactions is we are back to buying the real estate underneath broken retailers. So, we've announced purchases where Shaw's was the anchor and we know with conviction that if they were to depart, it would be a very accretive event for us. We did two deals that had A&Ps where we quickly replaced them with ShopRite supermarkets and there is a nice arbitrage there. And then our Lincoln Park Center deal for instance, right across from a brand-new Apple store, we bought a Center Street retail, but that was anchored by a dark Borders Books. I think it is in the fall, Michael, more into those categories where were not buying the real estate from Borders per se, but the fact that there is retailer volatility as you just mentioned creates an opportunity for us maybe on a portfolio basis, certainly on a one-off basis.

Great. Thank you.

Sure.

Christine McElroy, UBS.

Just following up on some of the fund questions. Regarding your efforts to opportunistically monetize some of the fund assets that have stabilized, are any of the ones that you named being actively marketed? And ultimately what kind of IRRs are you expecting on the sale of some of these assets?

So, let me dance around that all a little bit. We are beginning to entertain various levels of conversation with a wide array of those assets and I think it would be fair to assume that in one form or another, we will be marketing or monetizing all of the assets that I mentioned. Because, remember, Christie, our fund model is buy something, fix it up, and sell it. In terms of the IRRs, I am not going to discuss those right now. What I will say is that cap rate compression for these kind of high quality urban assets, whether they are street retail like in Westport, Connecticut or urban more like Fordham Road in the Bronx or Canarsie, Brooklyn, the cap rates have, to the best of our knowledge, pushed well through 6% and so should be a good profitable execution depending on when and how we do it. Exactly when and how we do it, we will have to see, but as one of my favorite real estate executives recently wrote in his letter to shareholders, everything is on the table.

And just with regard to the storage portfolio, is this something that you would look to sell as a complete portfolio and did the recent sale of the Storage Deluxe portfolio make you a little bit more optimistic about the kind of pricing you could potentially get and maybe a little more willing to monetize that asset?

Sure. It was, I think, a win/win transaction where the folks at CubeSmart seemed to have planted a very powerful flag in a market, New York, that is just so hard to gain any level of scale. So, I think it was a very smart move from their point of view and then as you point out, in pricing, whether you look at it per square foot relative to our basis, certainly made us feel good, but we don't get to collect anything from the sale of Storage Deluxe, we get to collect when we monetize Storage Post and I am very open-minded to how we execute that. I don't really care other than our sole goal is to maximize our stakeholders' investments. And so, I think there is a bunch of different choices and any of them could work very well for us.

At Lincoln Road in Miami, I'm wondering if any progress has been made on that portfolio since we were there last about six months ago?

Yes, nothing we are going to announce just yet. But the first thing is, probably more so than almost anywhere else in our portfolio, tenant demand and thus market rents of where new tenants are executing leases is heating up very nicely. So, even with respect to some of our existing tenancies that you saw there, the opportunity to get back some of those spaces and re-tenant them profitably is looking surprisingly attractive. Then there were two effective boxes or more significant leasing opportunities and the team is making a lot of progress on that. But I would caution you that the longer-term, those big leases, are multiple quarters away. Our goal was not, our pricing was not, and we don't need to see that happen overnight.

Okay and just lastly, both of you I think talked about the 3.5% to 4% of additional occupancy starting to impact the numbers in the second half. Can you walk us through how the progression of the occupancy should look like through the year and where you expect to end the year?

Sure, so, if you look at our current occupancy now, which we talked about, you add another give or take 300 basis points, gets you to the 94% and that will be in place and open and paying rent by year-end. And then for the remaining balance of the A&P space that Ken spoke about that is not yet executed leased, that is another 90 basis points. So, upon that being signed, and then occupied, that gets us closer to 95%.

Okay and does that take into account any -- is that your target for year-end? Does it take into account any expectations for store closings?

Well, 94% is the year-end target. That additional 90 basis points is most likely -- it might be right at year-end, but could very easily be an early 2013 event. So I think it is probably more likely at 94% at year-end. In terms of other movement, there really is nothing else significant on the radar screen, plus or minus. Obviously, as things develop, we will keep you posted.

Thanks so much, guys.

Paul Adornato, BMO Capital Markets.

Just as a follow-up question, you talked about maximizing the return on that long list of assets that are ready for harvest. I was wondering if you could also talk about how that goal would play into the opportunities for new acquisitions and how you're going to balance the timing of dispositions versus acquisitions.

I don't think, Paul, from a timing perspective we are going to be overly concerned about which quarter, which hits. Our view is, let's -- we have plenty of capital. When we see good opportunities we should do them and when we don't see good opportunities, then we should remember it was just a few years ago that a lot of people were licking their wounds from having pursued opportunities that were just mediocre. So, the acquisition side isn't really focused on when the monetization occurs.

On the monetization side, what we are seeing is a very strong absolute demand in terms of returns, below cap rates, stabilized assets and the timing is starting to feel good. So, if we are seeing assets trade sub-6% cap, we can sit there and say well that is 400 basis points over or 350 over or 300 over the 10-year Treasury or look at relative to BBBs and we may try to guess exactly when the maximum value is; we are not that good. So, to the extent that we are able to sell these assets over the next year or two, at pricing that the market seems to be at, we should do it. No one has ever gone broke selling assets profitably.

Okay, that is helpful. And then with respect to the A&P or the potential A&P expansion at Crossroads, what -- can you perhaps run through some potential economics or order of magnitude and is the expansion currently entitled or is that a whole separate process?

I don't want to get into it in too much detail. It is not going to be a significant sea change in terms of the amount of square footage there and we would not do it if it is going to be a complicated or anything like an entitlement process. If we can do this expeditiously, we would be real excited about the addition, and in Westchester it is hard for tenants to get decent sized boxes so it is certainly worth our effort. But anything more specific in the next -- I think we'll know a lot in the next 30 days. But I just wanted to give everybody a heads-up that while we love to deliver on a quarterly basis, when we see opportunities like this, even if it causes a bit of a delay, it is in your interest and thus ours to pursue those.

Okay, great. Thank you.

Sheila McGrath, Keefe, Bruyette & Woods.

Yes, thanks. Ken, now that the storage occupancy is up substantially and Fordham Road is now 100% occupancy, I was wondering if you could give us some detail on how the NOI or rent levels look versus your original underwriting and also how the timing to stabilize looked versus your original expectations?

Yes, so the good news is, we got the rents that we originally expected. We spent the dollars that we originally expected. The bad news is that the financial crisis, when it hit, it froze a wide variety of these assets. Almost all of them. So, thankfully we weren't overleveraged. Thankfully we were able to be patient, but whether it was Westport, Connecticut -- we got the rents that we expected, we just got them a year or two later than we had originally hoped. And in a low-interest-rate environment, with low leverage, the impact to that is not nearly as painful as in a higher interest rate environment or if we had overlevered ourselves. So, Sheila, we will get there, thankfully, in terms of the NOI, we just had to talk about them for far too many quarters and it will be fun to start monetizing them.

And the cap rates right now are much lower than you originally expected?

I can't count this low. But I also didn't expect a 4% borrowing cost and I didn't expect all of this to play out in terms of the huge, and I think continuing, differentiation from high quality, high barrier to entry, what is perceived as stable and well insulated against some of the issues of e-commerce, type of retail, and the more generic stuff that's still having a harder time executing.

Okay and after all the recent acquisitions, which a lot of them have included street retail, I was wondering if you have an estimate of how the portfolio breaks down on a pro forma basis, the street retail, urban versus the suburban strips?

Yes, in general, when we think about our portfolio overall, not just our core, but the roughly $2.5 billion dollars of assets that we are responsible for owning/operating through the funds and/or the core, roughly 40% fall into the urban or street retail component. The balance, the 60% that is suburban, it used to be equally split, 50/50, but as we are slowly de-emphasizing some of the supermarket anchors, it is now slightly weighted more towards our discounter side. But, the first piece is the urban street being 40%. Our ability to grow that and our expectation is that that probably grows. We like and we are open-minded to all three different types -- urban, street, as well as then on the suburban side both supermarket-anchored and discounter. It's just where we are seeing the better, at this juncture, risk-adjusted returns.

And where, if you had to roughly estimate cap rate differential on the different asset types, what would your rule of thumb be?

So, we are stabilizing; we are 98% leased, great asset in Bloomfield Hills, Michigan. So that is a great suburban asset but I bet that trades -- and I'm going to use a broad range -- in a low of a 7% cap and a high of an 8% cap. And if it is at the lower end, it is over the past 6 or 12 month that it has come into the lower end of that range because a year ago, was a market was telling us it was north of an 8%. On the street side, we are seeing trades done on a relatively consistent basis sub-6% and we saw a fairly sizable trade done up in Boston at the sub-5% cap range so that is kind of the spread. The real issue is, and we are fond of Bloomfield Hills for instance, the asset has held up relatively well considering what has gone on there. The issue is over the next decade, what is your perception of growth for high-quality suburban retail versus some of the street and that is what is really causing this relatively wide gap to date.

Then for secondary, tertiary assets, not Bloomfield Hills, but other properties elsewhere in Michigan, I don't think they are trading at cap rates. I think they are trading per pound and I think those are tough in many instances, value traps. Not just in Michigan, but elsewhere in the country where it is not clear where NOI will stabilize over the next 5 or 10 years as we work through some of the issues. So, I wouldn't consider ourselves an expert on that kind of real estate, but you've got to be prepared to buy it by the pound and you've got to be very careful.

Okay. Thank you.

Sure.

Richard Moore, RBC Capital Markets.

Ken, on the acquisition front, how would you characterize that? Is that accelerating or is it starting to soften a bit?

Yes, when you say accelerate/soften, you mean in terms of our deal flow?

Yes, what you are seeing in the pipeline, what you guys are reviewing at this point.

So, there are a few interesting crosswinds going on. For well marketed, unlevered high, high quality assets, Richard, we've never been particularly good at buying those unless there's a major financial crisis like when we picked up Cortlandt Manor and the competition for that stuff is fierce, always has been. And I would expect that to remain fierce. For assets that have a twist to them, think of our Lincoln Park Center, great location, but vacant Borders Books, or where we are doing a restructuring, where debt has come due or is about to mature, where there is recourse, what we are seeing, if anything, is an increased catalyst, if you will.

As financial institutions -- it was in today's Wall Street Journal, for instance, you are seeing more and more of the European lenders shed their debt. When that debt sheds and ends up into the hands of opportunity funds or otherwise, that is a pretty big accelerant. And the existing borrower is highly motivated to transact quickly. They need someone who can quickly, in a matter of days, wrap their head around the moving pieces at the real estate level and with certainty, meaning money in place, execute. So were actually seeing that deal flow increase which we liked So, all in a, no one quarter ever remains the same as the previous. Things are changing. We think that there will be more and more demand for re-equitization, deleveraging, solving people's problems as their debt comes due and it is not kicked down the road. But we also expect fierce, fierce competition for high-quality, stabilized, well-marketed deals and you probably won't see us be the winning bidder of those.

Okay, and so, say again how much, I think you mentioned this, but how much you have left to deploy in Fund III?

We said about $50 million of powder. So, it is more than enough to keep us active, but not so much that I worry about it burning a hole in our pocket.

Okay and if you did have some left, it doesn't sound like you're really going to, would that just go into Fund IV, as well?

Directly or indirectly, exactly, Rich. So it is not a sin to -- although some institutions thought it was and they probably are not going to get re-upped that easily -- it is not a sin to not spend every last dollar. It is a sin to put money to work irresponsibly. We won't do that.

Okay, good, thank you. And then on the Avenue, that is only about 1%, as I look here, of your annualized base rent. Did they give any indication though on what they are thinking like how long the Chapter 7 process might take or what percentage of the stores they might think of closing? Are they to that point yet?

No. Well first of all it is Chapter 11 versus 7, so there intention is to emerge from this. Chapter 7 just means full liquidation. It is not significant, but Jon always needs something to complain about. And what they said is they do want to emerge and they recognize that in order to emerge they are going to have to -- or they will try to get rate reductions where they can. We are not inclined to do that and our rents are at market and I think as Jon pointed out, the higher rents are in the New York market but that would make sense. So, we would expect to hear from them in the -- I think they are in day 20 of a 90-day process.

Yes.

So we will hear from them in the next month or two and we wish them the best of luck. But we never buy real estate counting on our retailers, we buy the locations and that way if the retailers don't make it, we usually end up okay.

Okay, okay, good, thank you. And then on the G&A, if you take out the, I assume Jon, the acquisition expenses are in G&A for the quarter. If you take those out is the run rate for the first quarter a good run rate for future quarters?

Our guidance is $23.5 million to $24 million for the year. That is a good number to use in terms of G&A for the year so that is what I would look at.

Okay, very good. Great. Thank you, guys.

Cedric Lachance, Green Street Advisors.

Ken, earlier you talked about your desire to buy assets or strip center food-group assets that would outperform the sector, and what you have been doing obviously of late is primarily focusing on street retail. What it has resulted in I think, is that the grocery-anchored segment is becoming less and less important in your portfolio. What is now from a big picture perspective, what is less appealing now in the grocery-anchored segment versus what was appealing previously in that segment?

Yes, and I wouldn't read too much into any single move we make because as a small company, it can often be more anecdotal than not. We very much like the supermarket-anchored shopping center business. We are cautious about the potential misperception in the marketplace that our supermarket-anchored centers are immune to some of the changes both cyclical and secular that are occurring in terms of e-commerce, et cetera, because how our supermarkets are selling today and how the customer is shopping at them is shifting. The customer is now having several different choices in terms of where they do their more traditional food shopping.

So, there supermarkets are competing with the Targets and Wal-Marts of the world, they are competing with the Costcos and BJs of the world, Whole Foods, Trader Joe's, and then on the other end, diapers.com, et cetera. So the thought that they are immune I think is oversimplified and I think the market perhaps is pricing perfection on that site. But otherwise, we are happy to buy and hopefully will continue to buy supermarket-anchored centers when they are really well located, when the tenant demand is strong, when the shop space is right-sized so that we are comfortable as the evolution in retailing occurs that we will be able to continue to keep the shop space leased as well.

Okay and if we think about the power center segment with somewhat of the same question there, what is the level of interest that you have in power centers versus grocery-anchored and street retail?

You know, it is funny, an unfortunate series of articles a few weeks ago regarding one of the big box electronics guys -- all of a sudden, it seems the capital market wakes up and says, my gosh, Amazon all of a sudden exists. Amazon has been around for a long time intermediating a bunch of these box retailers and we are still in the early stage of that intermediation process. Those retailers who are not providing a good shopping experience and only are offering best pricing are in, what I think we are reading more and more about, is that go-broke-last mentality and that is going to be a tough business. So, if we are going to be in that business, they better be great locations so that at some of these retailers shrink or go away, is that there is strong enough demand in general. We think that there will be significant opportunities in that space, so I won't reject it, it is just the pricing and the right assets are going to have to be there and I think we'll have to be a little patient as we see how this all shakes out.

Great. Thank you.

Great. Thanks.

Michael Mueller, JPMorgan Chase & Co.

Jon, can we walk through the buildup to that $0.30 because it looks like you start off at around -- strip out the acquisition cost this quarter, so you're at around $0.22. The re-tenanting, it looks like it probably adds another $0.02 to $0.03 a quarter; you bring Fund IV online, that's maybe another $0.02 a quarter; that gets you closer to it but not quite there. What is the difference?

Yes, the balance is acquisitions, current-year acquisitions.

You mean closing 2011?

2012 and 2011, also, once we close that that will add incrementally as well. But it is that plus 2012 acquisitions.

Got it, and then can you just run over again what is the target for the core and as well as for the funds?

Yes, core is $100 million to $200 million over the course of the year and then in the funds it is $150 million to $300 million over the course of the year.

Got it, okay. And then, I think, Ken, you are talking about the Fund II assets, Fund III assets being either monetized or marketed. What's the difference between being monetized or marketed because I was under the impression that they would just be sold.

Yes, so, all different ways of saying whether we market for sale or someone comes in preemptively, we just need to make sure we get best pricing. So, monetization could include a wide variety of specific ways, but I think you would expect to see many of these assets be marketed.

Got it, okay, and then last question, I think you used the ATM a little bit in his first quarter. Can you talk a little bit about how you view equity into the capital equation for 2012?

Yes, so, our current leverage is about 30% to total market cap. So, when we look at acquisitions and the right amount of leverage versus equity, we look to maintain about that same amount of balance. So, we will match fund as we close on these acquisitions or as we make these acquisitions and we will use the ATM more or less to keep that proportion.

Got it. Okay, great, thank you.

And at this time I would like to turn the call back over to Ken Bernstein for closing remarks.

I would like to thanks everybody for their time. I'm sure you're all onto your next call. We will speak to you again next quarter.

We thank you for your participation in today's conference; this does conclude your presentation. You may now disconnect and have a great day.