Acadia Realty Trust (AKR) 2015 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Acadia Realty Trust third-quarter earnings conference call.

(Operator Instructions)

As a reminder, today's program is being recorded. And now, I'll hand the call over to Lynn Belfiore, from Acadia Realty Trust.

Good afternoon, and thank you for joining us for the third-quarter 2015 Acadia Realty Trust earnings conference call. My name is Lynn Belfiore, and I'm a Property Accountant in our accounting department. 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, November 4, 2015, 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.

President and Chief Executive Officer Ken Bernstein will kick off today's management remarks with a discussion of the Company's core portfolio, followed by Amy Racanello, Vice President of Capital Markets and Investments, who will discuss the Company's fund platform. Then, Chief Financial Officer Jon Grisham will conclude today's prepared remarks with a review of the Company's balance sheet, as well as its earnings and operating results.

Once the call becomes open for questions, we ask that you limit your first round to two questions per caller, to give everyone the opportunity to participate. You may ask further questions by reinserting yourself into the queue, and we will answer as time permits. At this time, it is my pleasure to introduce Ken Bernstein.

Thanks, Lynn. Lynn was our summer associate in 2012, went out, got her CPA, rejoined our accounting division this year, and thank you for taking on the thankless task of reading the mind-numbing forward-looking statements. Good afternoon, everyone, let me get down to business.

During the third quarter, we saw significant volatility in the public markets, with REITs seemingly impacted by both concerns, on one hand, of potential interest rate increases from an improving economy, causing an increase in cap rates, and thus decrease in real estate values. And then on the other hand, concerns of a global economic slowdown, causing declines in property fundamentals, and thus also a decrease in real estate values. Meanwhile, in the private real estate market, fundamentals and valuations held firm, with retailer demand for high-quality space remaining strong, and investor desire for yield remaining solid.

So with these conflicting and somewhat contradictory concerns in mind, I'd like to spend a few minutes discussing how our Company is positioned, from both a defensive or recession-resistant perspective, as well as from a future growth perspective. Beginning with our core portfolio and its defensive attributes, as you may recall about half of our portfolio is comprised of high-quality, more traditional urban and suburban retail, predominately anchored by supermarkets, other necessity retailers, as well as discounters. Top tenants in this half of the portfolio range from Stop & Shop to Target, from TJ Maxx to Home Depot.

These properties are primarily in high barrier to entry, supply constrained markets ranging from Queens here in New York to San Francisco, from Cambridge, Massachusetts to Westchester. Over the past five years, we've seen a healthy recovery in the performance of these assets, with market rents now re-approaching pre-recession highs. These properties, and the retailers that occupy them, have proven to be fairly recession-resistant. And if there were to be another economic slowdown, we would expect the defensive nature of these assets to respond accordingly.

The other half of our core portfolio is comprised of street retail properties. Our focus here is on properties in the major gateway cities, 24/7, live, work, play locations, where we are responding to the ongoing retailer demand to be in these key brand-relevant, highly productive corridors. And while we spend more time talking about the superior growth profile of the street retail properties, there's several reasons why we think that this half of our portfolio, at least at this point in time, actually may provide superior defensive attributes, as well. And that's simply due to the nice cushion that has developed between our in-place rents, compared to market rents.

More specifically, over the past three to five years, the compounded annual growth in market rents from our street retail portfolio is significantly higher than in our suburban. It's ranged from 5% to 10% a year in markets such as North Michigan Avenue in Chicago or M Street in Georgetown, to the low- to mid-teens per year in several New York City markets, including Soho, Tribeca, Union Square. This cushion means that almost without exception, the recapture of any street retail space in our portfolio would be a profitable event, and thus highly downside-resistant.

Second, while there's been some recent concern about the impact of declining international tourism on certain flagship retailers in key avenues, keep in mind that the shopper at our street retail properties is primarily the live, work, play urban professional who buys groceries at our Trader Joe's in Lincoln Park or banks at our Citibank in Tribeca. Now, on the other hand, assuming that the US economy continues to improve, our core portfolio, both street, urban, and suburban, also remains well-positioned from a growth perspective.

During the third quarter, our portfolio delivered solid same-store NOI growth of 4.3%, which was not supplemented by any redevelopment activities, nor does it include the value-add activities of our fund platform. And digging deeper into the quarterly numbers, our results remain thesis-consistent, with street retail NOI for the quarter up over 6%, and urban and suburban up approximately 3%. While we feel good about our portfolio's contractual rent growth, we also have several opportunities to add incremental income to our portfolio.

For example, in eight of our core properties -- five street properties, two urban, one suburban -- we believe that we can harvest a total of roughly $5 million of incremental NOI over the next five years, through re-tenanting and redevelopment activities. This $5 million represents roughly 5% of our current in-place NOI. It breaks out as follows. Roughly one-third of this NOI is immediately actionable, resulting from the lease-up at three street retail properties, an urban property in Queens, as well as the planned redevelopment of a prime corner of our Clark and Diversity property in Lincoln Park, Chicago. These all should be accomplished in 2016 and 2017.

The next third of this NOI pertains to our Prince Street property in Soho. As we've discussed in the past, both tenant spaces here at this property are currently leased at below-market rents. And while our first contractual lease expiration is in 2017, both spaces could be candidates for early recapture, and either way, are going to provide nice mid-term growth. Finally, the balance of the incremental NOI pertains to two longer-term redevelopment opportunities, which we hope to accomplish over the next five years. One is a modest expansion of our City Center property in San Francisco, and the other is the eventual re-anchoring of our Crossroads shopping center in White Plains here in New York.

Then, beyond this $5 million, as we think about potential upside further out, over the next 5 to 10 years, it's also worth noting that the leases for almost half of our street retail rents either expire without options, or have options to renew at fair market value. This is about twice as much, or twice as fast, as within our suburban portfolio, and highlights our ability to harvest embedded upside of our street retail assets sooner than in our stable but longer-term growth suburban assets. Along with internal growth, we also supplement the core -- the growth profile of our core portfolio, with a disciplined core acquisition program.

As we've discussed, we'll only add assets that are consistent with our long-term investment focus, and accretive to NAV. Furthermore, even though our conservative balance sheet provides us with some latitude, we believe that acquisitions should be done on a match-funded basis. Thus, given the volatility in the REIT market during the third quarter, we were not active issuers of equity through our ATM, nor did we issue OP units. And thus, our core acquisitions were a bit tempered. During the third quarter, we did close on one $20 million urban retail property, located in Chicago's South Loop, bringing our year-to-date volume to $200 million.

And as the REIT market has more recently stabilized, we are carefully re-accelerating our core acquisitions, and feel very good about our pipeline. So in short, we're very comfortable with how our core portfolio is positioned during these times of volatility. In the same way, as we like both the growth and the defensive attributes of our core portfolio, our fund platform also provides us with additional opportunity and flexibility, both during periods of growth as well as volatility. And with that, I'd like to hand the call over to Amy, who will discuss our fund activity.

Thanks, Ken. Consistent with Ken's discussion of our core portfolio, today, I'd like to discuss how our complementary fund platform enables us to create value for all of our stakeholders, at all points in the cycle. In doing so, we'll review our new acquisitions, the status of existing projects, and our recent asset sales. First, on the acquisition front, unlike our core portfolio, our fund acquisition program is not correlated to the REIT market. If anything, there's probably a negative correlation, with some of the best buying opportunities seeming to arise when REITs are sidelined.

Over the past several weeks, disruption among high-leverage buyers, and a renewed desire among sellers for certainty of closing, have led to increased deal flow. Accordingly, subsequent to third quarter, Fund IV acquired two properties, totaling $18 million. First in October, Fund IV, in partnership with MCB Real Estate, opportunistically acquired a retail condominium at a former enclosed mall, that's shadow-anchored by Walmart and Kohl's, in Warwick, Rhode Island, for $9 million. We plan to invest another $21 million into this 160,000 square foot property, in order to reconfigure its layout to accommodate both anchor and junior anchor tenancy.

In fact, the partnership has already executed a lease with Burlington Coat Factory for roughly one-third of the space. Also in October, Fund IV, in partnership with Prado Group, began building a portfolio of street retail properties in one of San Francisco's key corridors. The property that we acquired, which includes three retail shops on the street level and two residential apartments on the second, is located on Fillmore Street in the affluent Pacific Heights neighborhood.

This is an authentic shopping and dining corridor, with an eclectic mix of trendy boutiques and restaurants, including local favorites such as Elizabeth Charles, SPQR and Jane, and national retailers such as Alice and Olivia, Ralph Lauren, and Rebecca Minkoff. We value the corridor's unique local character, and believe in its long-term growth trajectory. Consistent with several of our recent fund acquisitions, this is an example of an investment that we believe will not only deliver attractive risk-adjusted returns, but also contains significant asymmetrical return potential.

In other words, we see potential for outsized outperformance, driven by, among other things, a constrained real estate supply, growth in tenant demand and cap REIT stickiness. Additionally, as reported, Fund IV has another $50 million of property under contract. Together with the two acquisitions that Fund IV closed on in October, and factoring in planned redevelopment costs and leverage, these new investments should require roughly $50 million of capital, and we also feel really good about the shadow pipeline that has filled in behind that.

Next, with respect to our existing fund investments, recall that virtually all of our development activities occur in our fund platform. Accordingly, the capital to complete these value-add projects is already on call. Which means that we will not have to raise equity in the public market at the wrong time, in order to keep our projects on track. During the third quarter, we continued to make important progress on our fund development pipeline. Most notably, at City Point, our 1.9 million square foot mixed-use project in downtown Brooklyn, we executed a lease with Trader Joe's for a 19,000 square foot store on the concourse level.

Trader Joe's will be located adjacent to the very complementary DeKalb Market Hall, and it's a welcome addition both to our project and this food-centric borough. As previously discussed, we've leased City Point, from the top down, to Alamo Drafthouse Cinema, Century 21 department store, and City Target, who are anticipated to open in mid-2016. As well as from the bottom up, with a significant portion of the below-grade concourse level also leased.

Construction is now far enough along that our shop retailers can begin to really see what we've known all along, which is that City Point is going to be an incredibly dynamic project. And while it's fun to make tenant announcements on these quarterly calls, more importantly, our team remains focused on cultivating the right merchandise mix for this vibrant and significantly under-retailed Brooklyn community.

Now, turning to recent asset sales, one of the many benefits of the fund model is that it rewards the opportunistic sale of assets. Through this platform, we are able to co-invest dollars, alongside our institutional partners, at very strong returns. And this is something we've demonstrated over the past several quarters, with IRRs for recently sold investments in the 20s, 40s, and 50s. And these returns are all before we factor in the added benefit to Acadia of our 20% promote, which further enhances our returns.

During the third quarter, we continued to successfully monetize our stabilized investments on schedule and at significant profits. In July, Fund III, in partnership with MCB, completed the $27 million sale of Parkway Crossing, a grocery-anchored property located in Baltimore, Maryland. In roughly 3 1/2 years, we successfully re-anchored this shopping center, replacing A&P with ShopRite, and together with some small shop lease-up, increased the leased rate from 74% to 99%.

In doing so, we generated a 25% IRR, and a 1.9 multiple, on Fund III's equity investment, and an approximate 35% IRR and 2.5 multiple on Acadia's equity investment, once you include the promote. Looking ahead, our disposition pipeline, which includes more than 100 (technical difficulty) Fund III property, remains on track. And so far, we've not seen the recent market volatility translate into any falloff in expectations for the profitability or timing of our sales. We've now returned 115% of Fund III's invested capital, and we're roughly $13 million of equity away from being in a promote position.

We continue to project that the promote's total net contribution to FFO should be approximately $15 million, or roughly $0.20 per share, which is consistent with the more detailed calculations that we discussed on our last call. So as you can see, during the third quarter, we continued to execute on our Funds V/VI sale mandate by opportunistically acting on dislocations in the capital markets to source new acquisitions, by making steady and important progress on our existing self-funded redevelopment pipeline, and by very profitably recycling capital through asset sales.

Now, I'll turn the call over to Jon, who will review our balance sheet metrics, operating results, and earnings.

Good afternoon. Along with the strength and stability from our core portfolio, and the profitability from our fund business, the third key component of our business is our balance sheet, which continues to serve as a strong platform for both the core and funds. We have historically been disciplined users of our equity, and 2015 has been no exception. Given the choppy REIT market between April and September, we significantly curtailed our activity under the ATM. Since we initiated this program back in 2012, we've averaged roughly $25 million of quarterly issuance.

For the second and third quarters of this year, in aggregate, we did only $8 million. What stock we did issue over that six-month period was at an average gross price of $32.88 a share. We're also disciplined in our use of debt. We use very conservative leverage, as reflected in our current net debt to EBITDA of about 5 times. This is nothing new for us. In fact, we've averaged about a 5 multiple over the last 10 years.

That being said, even though we don't have much debt, we remain focused on continually minimizing any risks associated with interest rates and maturities, as well as diversifying our capabilities to access all the credit markets, including the unsecured market. To these goals, we just completed forward starting swaps for a total of $100 million, fixing base interest at an average 1.3%. We did these in anticipation of closing on $100 million of new, unsecured term loans within the next 90 days. Proceeds from these financings will be used to replace maturing CMBS debt, $59 million of which has already been paid off in 2015 with our line, and the remaining proceeds will be used to pay off maturing secured debt in the next 90 days.

The all-in interest cost of the new debt will be under 3%, which is 140 basis points less than the debt it replaces. And other than any balance on our line, these new financings keep our core debt 100% fixed, and stagger our maturities such that over the next 10 years, no more than 15%, or $75 million of core debt comes due in any given year. Lastly, when added to the $50 million unsecured term loan we completed earlier this year, these new loans will increase the percentage of unsecured debt in our core portfolio from 25% to 40%.

In terms of operating results, our core portfolio continues to perform consistent with what we would expect from a high-quality portfolio. As Ken mentioned, our same-store NOI, and the core of 4.3%, did not include NOI from significant occupancy gains or redevelopment activities. Occupancy in our core has been stable. We are currently 96.7% occupied, and we've been over 95% over the last eight quarters. And as to redevelopment, the vast majority of this activity occurs in our funds, which we don't include in same-store, and there's currently no significant redevelopment in the core. The point being is our 2015 same-store NOI is a clean result.

So given the strong performance of the core, we are increasing our full-year 2015 guidance, which was formerly a range of 3% to 4%, to what's now currently 3.75% to 4.25%. Turning to earnings, our results through the third quarter were at the high end of our expectation, and as a result, we are increasing our guidance. Our year-to-date FFO is $1.18. Matching this up with guidance, which is before acquisition costs, or $0.03 year to date, we're at $1.21. For the fourth quarter, we were originally forecasting net promote income of $0.02 to $0.03 from the sale of Fund III assets.

And as Amy mentioned, our disposition activities for the funds remain on track. But for the purposes of forecasting, we are now slating this for early first quarter 2016. Notwithstanding this, we still expect to achieve the high end of our 2015 guidance, given the strong performance in our core and other areas in the platform. Accordingly, we are increasing our guidance from an original range of $1.48 to $1.56, to a current range of $1.53 to $1.56.

One last thing to keep in mind for 2015 are special dividends. Recall, for 2014, we paid a special dividend of $0.30 from the highly profitable sale of fund assets. The capital gains generated so far in 2015 represent another $0.20 to $0.25 per share of distributable taxable income, keeping in mind that other fourth-quarter activity can impact our overall taxable income.

So in conclusion, we're not just maintaining an already solid balance sheet; we're making it stronger. And we continue to focus on building value, in our core portfolio and fund platform, which are contributing to strong 2015 results, and importantly, position us well going into 2016.

With that, we will be happy to take questions. Operator, please open the lines for Q&A.

(Operator Instructions)

Todd Thomas, KeyBanc.

Yes. Hi. Thanks. Good morning. Ken, thanks for the detail around the $5 million of incremental NOI that you expect to realize over the next couple of years. Just a question on that. If I look at some of the street leases that are set to expire next year, in 2016, there are nine, with average rents of $43. This seems to be a separate pool from everything that you mentioned in that $5 million bucket. Any color on the seasoning of those leases, maybe when they were acquired, on average? And what the expected lease spread on that pool might look like?

Yes. So first of all, those all have options that then take us into that next 5 year period. Because along with the $5 million, Todd, as you recall, I did mention that, in years 5 to 10 is when we will start seeing those leases, and a bunch of others, mature without options, or reset to fair market value. Given the timing of the acquisitions, given the vintage of those leases, you ought to expect that those get exercised, that you continue to see the strong same-store NOI that we posted this quarter. But it is going to be more along those lines.

Okay. And then, I just wanted to go back to some of the comments around the disruption in the market during the quarter. The comments that the fund dispositions are on track, I guess -- it doesn't -- it seems like the net promote income is going to be recognized now in 2016, versus the end of 2015. So I guess on -- what caused the timing delay there? And what gives you confidence that those assets will be monetized in early 2016?

Yes. So the confidence is based on contracts in place. And so if you read into our press release, we say we have over $100 million in place. The exact timing, whether it's a Monday, Wednesday, Friday, or a December versus January, is really what's driving this. And it would be taking you way too much inside the sausage factory to go through all the different ins and outs of what it takes to actually get the deal closed, funded, et cetera.

But not only based on the deals under contract, but those that are being bid, high quality assets, once we have stabilized them and have gone to market, the bids have remained very strong. The area of volatility that we're seeing, separate of the REIT market, separate of the emerging markets, et cetera, the one area of volatility, and I think Amy referenced it, is in the high levered borrower, high-levered buyer. And they are getting somewhat squeezed because the rates -- their rates have gapped out.

But for the general institutional buyer, notwithstanding all the noise on either direction, there's plenty of strong bids out there. What we've been able to do on the buy side, and the reason we're seeing some of our deal flow increase, is some of those high-levered buyers are getting marginalized. But for the institutions that we are selling to, so far, so good, and everything remains on track.

Okay. So sounds like, now that some of those concerns have abated, we should expect, on the buy side, maybe, to see some increased activity over the next quarter or two?

Yes. The -- real estate is a cyclical business. There are times when having dry powder and discretionary capital, like we do at Acadia, is really valuable. And there's times when it's less so. It does feel, given some of the uncertainties in the marketplace, that we're heading into a time period where it feels really good to have high-quality assets, strong cash flow, and plenty of dry powder on hand. And that, certainly over the past month or two, is what feels it's coming into place.

Okay. Thank you.

Sure.

Craig Schmidt, Bank of America.

Thank you. Good afternoon. I just want to talk a little bit about the food elements that you are bringing into City Point. What is the size of the DeKalb Market?

DeKalb Market is about 26,000 square feet of food halls, and real great fresh food. There will be about 33 to 45 vendors. So we think it's a great complement then to Trader Joe's, which also has some great food selection, and just a great use for the underserved Brooklyn Market, which doesn't have as many grocery options.

And is Katz Deli still a possibility to be part of the DeKalb Market?

Absolutely. I can't wait. And it won't just be about Katz, or any one or two other great vendors, although that is certainly one that we are very excited about. Brooklyn is about food. This new population, when you look at the new amount of housing coming to downtown Brooklyn, when you look at how vibrant, how it's become a borough of choice, it's going to be amazing. And this area of Fulton Street, this area of downtown Brooklyn, is significantly underserved, from a food perspective. Trader Joe's and the food hall are going to respond to that really well.

No, I think this is a great direction you've taken it to. And even as jaded as Brooklyn is used to wonderful things opening, I think this will be really nice for the surrounding community.

Yes. Absolutely.

And do you know when either Trader Joe's or DeKalb Market are hoping to open in 2016?

Trader Joe's is planning to open along with our other retail anchors, and DeKalb will more likely open right at the beginning of the fall, with the opening of the street retail.

And I guess just longer term, obviously, this is a fund investment. But would this ever be part of the core holdings, at some point?

If ever there was an asset that had the type of profile consistent with our core, this certainly would fall into it. Meaning that we are very bullish, as to not just what it feels like over the next few years, but over the next 5, 10, 15 years, as we see what a wide variety of developers are doing in downtown Brooklyn, and seeing these retailers come into play there. So stay tuned.

Okay. Thanks a lot.

Sure.

Jay Carlington, Green Street Advisors.

Hi. Ken, has there been a reason it's been quiet on the -- in terms of core dispositions this year? And maybe related to that, what does your non-core asset pool like in the core portfolio?

Yes. So within the core, Jay, the -- thankfully, and if you think about the fact we doubled the size of our core portfolio, the vast, vast majority of that has been either street retail or urban, a few dense or high barrier to entry suburban. None of which were acquired with a view towards any near-term dispositions. So you're really back to a smaller sliver of our portfolio. There is 5% or 10% of our portfolio that the team is in the process of fixing up. Once they do that, then we can talk about the disposition of it.

But I'll caution you that it's not going to move our NAV. It's just going to prevent us from having to talk about that during Q&A. And while these assets are more commodity-like mainstream, once we fix them, they're going to be fine assets. And given how much we have improved and changed the profile of the overall core portfolio, just not all that relevant. So we never guided towards core dispositions 2015. Sooner or later, though, we will dispose of them, and then we will find something else to talk about.

Okay. Thanks. And maybe switching gears, a big-picture question on San Francisco. Now that you've got one -- or I guess one legit street retail acquisition under your belt, is there anything -- I don't know -- unique about the market, from a cap rate, or a rent growth, or a CapEx perspective that you can talk about? And how you're underwriting San Fran versus your other street retail properties?

Yes. In some ways, each city, and each street within each dynamic city, is different. And then, in some ways, they are similar, in that there are very high barriers to entry in San Francisco, very good fundamentals, in terms of young, vibrant shoppers coming into the city. There are zoning constraints within San Francisco that are unique, unlike just about any other city we do business with, and that increases the barriers to entry. And that, in fact, forces our retailers to reach more, and reach to these certain streets where they can get a toehold, whether it's Fillmore or Geary, et cetera.

We need to be careful in any city we do business in, that we're capturing all the different dynamics -- less about CapEx than make sure we understand real estate taxes. Make sure we understand sales, make sure we understand population growth, and all the other factors. But Fillmore, which we have a small toehold in, and we look forward to growing, is the right kind of assets for Acadia to be accumulating. It's a profile not that different than what you've seen us do in some of the other markets we've been active in.

And in our dialogues with our retailers, when we say we can provide them with access to a street like Fillmore, that's a great place. As they think about coming to San Francisco, as they think about getting their brand positioned correctly, Fillmore is a perfect spot.

Okay. And maybe a quick follow-up to that is, I guess, you partnered up in San Francisco. Is that a way to make it easier to delay maybe staffing hires there, versus your monthly cross-country flight?

Yes. As we've done throughout the country, throughout our portfolio, over time, we try not to say we're the only people who can do this ourselves. You've seen us do this successfully down in South Florida, successfully with MCB down in Baltimore. And this appears to be a great group we're partnering with out there. Sometimes, people not only are better because we're not there, they're just better. And sometimes, it's a matter of time. Let's see how this all plays out, but we're very happy with that partnership.

Okay. Thank you.

Sure.

Christine McElroy, Citi.

Hi. Good afternoon, guys. Ken, just following up on the $5 million of incremental NOI potential, what sort of downtime associated with the re-tenanting should we be thinking about? And therefore the impact to NOI, over the next few years, before you get to that incremental size? Is this something that will potentially introduce some volatility to your same-store NOI growth rate?

I doubt it, Christine, or let me put it this way. I hope it does, in that I hope we can get back some of these spaces earlier. But for the most part, if you think about it, the first third is dominated by lease-up of space that we already have in inventory. And so there will be no volatility with that first third. Then, the next third, which is Prince Street in Soho, the rents are low. If we can get them back sooner rather than later, there may be a slight bump in the same-store NOI, but I don't think it'll be material, and the win will be huge.

Whether it happens in 2017, 2016, 2018, et cetera, that's what I'm really focused on. So I don't think that that will impact, in a negative view, the numbers. And then the final pieces are really add-ons, re-developments. In City Center, there will be no loss of in-place NOI. It's a matter of, we have this huge parking field, and we're going to figure out something pretty interesting to do there, to add incremental NOI. And in White Plains, it's recapturing a very below-market lease, which, sooner or later, we're going to get back. And while we will lose a little bit of rent, my guess is, as I said, that's several years out, and well past all of our forecasting models.

Okay. Perfect, thanks. And then give the small amount of equity that you've raised through the ATM in Q2 and Q3, I think the price is slightly lower, or maybe in line with where the stock is today. Can you disclose whether or not you've issued any equity, post-quarter end? And you talked about the potential for higher acquisition activity coming up. What's your appetite to raise equity, at the current level, given where you see opportunities to match funds?

So, as to the raising of equity, post-third quarter, we have raised none. In terms of pricing, again, if you just look historically at what we issued at, $32 plus, that would be a logical floor to expect, in terms of future issuance.

And let me just chime in that we have been pretty successful at utilizing OP units and pretty disciplined at when and how we issue equity. So whether it's OP units or otherwise, what we have shown is a willingness to not raise equity, and put our feet on the brakes when it makes sense to slow down. And then we understand how we can increase our net asset value through external acquisitions. But you need to be very careful about how you do it.

Thank you.

Jeremy Metz, UBS.

Hi, Ken. It's Ross Nussbaum here with Jeremy. On the acquisition you did, the San Fran acquisition, I'm a little confused as to why that made its way into the fund, as opposed to your balance sheet. Can you help me un-blur that decision?

Yes. And every now and then, Ross, we come up with assets that are a bit blurry. And when we do, if there's enough growth profile -- and in this one, there happens to be, because of below-market leases that we're going to get and turn around, add some other growth to it. They go into the fund, and our risk-adjusted returns there feel appropriate, keeping in mind we're co-investing 20% plus into it. We're getting the carry-above. So that would be a, let's hope, high-class problem, not unlike Baltimore, et cetera, where we put up 20% returns, and get closer to 40% returns on our equity. And we feel pretty good about that.

Okay. I think Jeremy had a question.

Yes. I just had one, looking at the dynamic of the portfolio today being 50/50 urban street versus suburban. I'm just wondering where ultimately you see this trending? And how long you think it takes to get there? So is it, five years from now, we're going to be more 25% suburban and 75% urban street retail? Or will it take a little longer?

Yes. And keeping in mind that our core portfolio is relatively small, so every $100 million or $200 million of acquisitions skew the numbers one direction or another. That being said -- so it's not a matter of how long it takes. Our stated goal -- and I think we're doing a pretty good job of achieving it -- is to grow a really high-quality portfolio. Today, it's about half street retail. It's about 20% urban. And then the balance is suburban, with the vast majority of that being very high-quality.

What you should expect is, we are only going to be adding suburban assets that are of a very high-quality nature. And so by definition, or by math, assuming we continue with this 20% a year growth trajectory in the other areas, this suburban will slowly decrease. But whether it goes into urban, or street -- unfortunately, it just happens to be very deal-by-deal specific. And what I would expect to see is, street retail continues to slowly grow from 50% to 60%, urban slowly grows from 20% to 30%. And then the balance will be the suburban that's remaining, either through acquisitions and/or dispositions, as we discussed earlier.

Okay. Thank you.

Paul Adornato, BMO Capital Markets.

Hi. Good morning. Was wondering if you could give us an update on the small shop leasing at City Point. And maybe also touch on what's working, and what's not working, at City Point?

So thankfully, Paul, most is working. And what's especially working is our construction and build-out teams getting City Point ready for opening in just under a year. The timing of -- and Amy walked through it -- but the timing of, and the strategy that we have leased this, is five, four, three, two, then concourse leaving the street retail. As much as I would like to early pre-lease the street retail, what's required is for these retailers to be able to walk, see the space, and we're really close now to being able to do that. And so I think we're pretty close to start to sign and negotiate the leases there.

And what I have said in the past, and will stick to, is we've been very disciplined about how we have offloaded our risks associated with the residential, having successfully sold all of that. How we have offloaded the anchoring of this, five, four, three and two, as well as now bringing in Trader Joe's. And we are being patient and opportunistic, as it relates to the street retail, because it is such a vibrant area that I want to make sure we're capturing the dollars that we all deserve.

That translates through into, probably over the next quarter or two, you should expect to start seeing some announcements. But in general, it will show up as we get closer to grand opening.

Thanks. And just in terms of the size of the stores, any larger boxes on the street level? Or what's the appetite for size?

Thankfully, we have a fair amount of flexibility. But what I would say is that the majority of the demand, and the best and highest use for both Prince Street and some of our other frontage, is going to range from the, at largest junior anchor, 10,000, 15,000 square feet. For the right retailer, we would squeeze, and figure out how to do something larger. But my guess is, this is really going to meet the local demands of what is emerging in downtown Brooklyn, and some of the smaller retailers associated with that.

Thank you.

Sure.

Michael Mueller, JPMorgan.

Yes. Hi. I was wondering, could you talk a little bit about Savannah, and just the leasing update there? And how it's transitioning?

Sure. Amy, why don't you do that?

So Savannah, we bought it about a year and a half ago. Again, we're 50/50 partners with Ben Carter. The retail leasing there has been incredibly strong. We discussed, last quarter, that H&M is opening a new 32,000 square foot store on four levels, and that's under construction. Lululemon and J. Crew and L'Occitane and Lillian Pulitzer are all open. We just signed a lease with Club Monaco. So the retail leasing is exceeding expectations and going well, and that project is on track.

Okay. And what percentage of the GLA has been transitioned where you have leases and you know what's going to happen? The leases are signed or executed, and just how far through that process are you?

I believe it's in the range of a third to 50%, but we can circle back with a more exact number.

Got it. Okay. Great. Thank you.

Sure.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Ken Bernstein for further remarks.

Great. Thank you all for joining us. I'd like to thank our team for their hard work in the third quarter, and look forward to speaking to everyone in the near future.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.