Kite Realty Group Trust (KRG) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the first-quarter 2011 Kite Realty Group Trust earnings conference call. My name is Derek and I will be your operator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the conference. (Operator Instructions)

As a reminder this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. Dan Sink, Chief Financial Officer. Please proceed.

Thank you, Derek. If you have not received a copy of the earnings press release, please call Kim Holland at 317-578-5151, and she will fax or email you a copy. Our first-quarter supplemental financial package was made available yesterday on the Company's website at KiteRealty.com. The filing has also been made with the SEC in the Company's most recent Form 8-K.

The Company's remarks today will include certain forward-looking statements that are not historical facts, and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown facts, risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results, or from any results expressed or implied by such forward-looking statements. The Company refers you to the documents filed by the Company from time to time, with the SEC, which discusses these and other factors that could adversely affect the Company's results.

On the call with me today from the Company are John Kite, Chief Executive Officer, and Tom McGowan, Chief Operating Officer. I'd now like to turn the call over to John Kite.

Thanks, Dan. I just want to say how happy we are to have Dan read the intro, just so we can confirm that his Hoosier accent is still strong. So we did confirm that. Today I'm going to spend the majority of the time discussing three of the following areas. First, improvement in core operations, giving you an update on our redevelopment and development projects, and the progress we are making in the strengthening of the balance sheet.

Our FFO for the quarter was $0.10 per share, which was inline with consensus estimates. During the quarter, our operating results continued to show steady improvement as our same-store NOI increased 1% and the year-over-year lease percentage also increased approximately 2%. This same-store NOI increase puts us in a solid position to achieve the top end of our 2011 guidance of flat to up 1.5%.

We also experienced improved tenant environment as our overall tenant health ratio for reporting tenants continues to improve. We posted another solid leasing quarter, signing 33 new and renewal leases, for 183,000 square feet at an overall positive rent spread of just under 6%. Our operating retail portfolio ended the quarter at 92.3% leased, up over 2% from 90% at the end of March of 2010.

Also, our small shop leasing percentage increased for the fourth consecutive quarter, gaining 2.8% since the first quarter of 2010. And currently stands at slightly over 78% leased. We look to maintain our leasing momentum as our team prepares to attend the ICSC convention in Las Vegas. Our pre-convention planning meetings over the next couple of weeks will ensure that we are focused on key company initiatives, and at this point, we are pleased both with the quality and quantity of the scheduled meetings.

Over the past several quarters, we have focused on the importance of tenant retention and the related effect of driving low-cost NAV growth. Recently, we implemented new software that tracks the number of times each of our tenants receive a touch from KRG staff members. This communication is logged into our system so we can be attentive to each tenant's needs and be proactive on renewal discussions, expansion plans and overall tenant health.

A portion of the asset management incentive compensation levels will tie directly to the percentage of tenants retained. This is an important initiative as we strive to raise tenant retention percentages, from the current 78% to the mid-80% range.

A similar strategy has been successfully utilized in our leasing group over the last several years. This blueprint is simple; we need to find and retain the best talent, while compensating them for results that have a direct impact on the overall NAV of the organization.

The first-quarter results were impacted by several items that do not represent recurring expenses. The G&A expense in the quarter included incentive compensation expense and public Company costs relating to the annual report and proxy. We estimate our full-year G&A expense will be at the high end or slightly above of our previously issued guidance. The above run rate assumption is important when analyzing the recurring FFO going forward, and the impact of annualizing debt to EBITDA, for debt to EBITDA purposes.

We provided an analysis on page 10 of our supplemental that adjusts the current quarter net debt to EBITDA for the seasonality of rents, mid-quarter rent commencements and the normalization of G&A. With these adjustments, the net debt to EBITDA was up from 9.1 to 9.7 times as we continue to work towards stabilization of our in-process developments and redevelopments, as well as the completion of tenant build outs on executed leases. It is critical that you have an eye toward forward leverage metrics when analyzing our current debt levels, as debt is obviously funded in advance of recognizing EBITDA growth.

Our short-term goal is to reduce this number to approximately 8 times over the next 12 months, with a long-term objective of reducing it to approximately 7 times. The development and redevelopment progress is gaining momentum in the first part of the year. At Whole Foods in Cobblestone Plaza will be delivered to the tenant by the end of August, and the project will transition to the operating portfolio prior to the end of the year. South Elgin Commons too is 100% leased. Ross and Toys Baby's plan on opening for business prior to the end of October.

Delray Marketplace is approximately 60% pre-leased and a portion of our off-site improvements have commenced. We currently have signed leases totaling 150,000 square feet of anchors and small shops, which will include high-end, regional, and national tenants. We plan to commence work on the entire project during the second half of the year. On the redevelopment assets, at the recently acquired Oleander Point, we executed a lease with Whole Foods to replace the prior anchor, Lowe's Foods.

The property was acquired in February, and we plan to commence full renovation of the center on June 1, with a projected opening date for Whole Foods in the spring of next year. We are recognizing a $750,000 lease termination fee, allocated between the first and second quarter, as the existing tenant vacates the space.

Rivers Edge, our most significant redevelopment asset, represents 60% of the estimated total capital outlay in the redevelopment pipeline and, is on time and on budget. The project is 98.6% leased.

Nordstrom Rack took possession of their building on April 15, with a planned September store opening, while Container Store and buybuy BABY plan to open in the fall. We also continued to execute our strategy on the center in Carmel, Indiana. We transitioned the asset into the redevelopment pipeline in the first quarter, after the acquisition of our JV partner's interest. This provides a clear path to maximizing the value of this asset.

We will take advantage of a dense trade area and $100,000 average household incomes in the 3 mile radius. All three of these assets are good examples of our off market acquisition strategy, which includes value creation via maximizing underutilized real estate. As landlord work and tenant construction is completed, we will begin to recognize approximately $4.5 million of additional, annualized EBITDA.

The breakdown of the EBITDA between operating, in-process development, and redevelopment assets, is approximately 50%, 25% and 25%, respectively. We expect the majority to commence in Q3 and Q4 of this year. In addition to realizing improved operating results, we are establishing a number of new, critical relationships for future growth opportunities -- relationships with tenants like Whole Foods, Urban Outfitters, Nordstrom Rack, the Container Store, as well as a number of other national, small shop tenants such as Ulta, Charming Charlie and Apricot Lane, which will provide long-term benefits for the Company.

On the balance sheet, we refinanced International Speedway Square in Daytona, Florida with long-term secured debt for 10 years at 5.77%. The loan proceeds were used to reduce the line of credit balance and unencumber the Corner Shops property that had debt expiring this year at a loan to value of less than 20%. Of the remaining 2011 maturities, 60% of them have built-in extension options; however we are pursuing longer-term financings.

Subsequent to the end of the quarter, we received an over-subscription of commitments from a syndicate of banks, substantially the same as our existing lending group, to amend and restate our $200 million, unsecured line of credit for three years with a one-year extension option. The covenant package is consistent with our current line and has several enhancements. The interest rate at our current leverage is anticipated to be LIBOR plus 2.75%. The closing is of course, subject to normal and customary loan documentation, which we expect to occur in the second quarter.

We are continuing to look for opportunities to de-lever and grow NOI via acquisitions. At this point, we are tracking several quality assets that we would hope to add to our portfolio, while continuing to use our value added facilities, post acquisition. The acquisition market for core assets is very competitive. And, we will continue to be disciplined and deploy only capital on quality assets that have a positive NAV impact on a long-term basis.

Our plan to generate more, core real estate earnings is highlighted in this quarter. As we have essentially wound down the construction and services business. Our leasing efforts and $4.5 million of anticipated EBITDA, have paved the way for recurring FFO component, projected to be in excess of 90% for 2011. We're committed to recurring a predictable earnings and are confident that we have the leasing, development and asset management personnel, and most importantly, the real estate to make this happen.

This concludes our prepared remarks, and operator, please open the line for questions.

(Operator Instructions)

And our first question is coming from the line of Todd Thomas from KeyBanc Capital Markets. Please proceed.

Hi, good afternoon, I'm on with Jordan Sadler as well. John, you mentioned that your ICSC calendar is encouraging and I'm sure you will get a better sense then, but I was wondering if you can give a little more detail on your leasing pipeline today and what you suspect we could see with regard to shop tenant occupancy in particular by year end. Maybe you could provide a range that you have underlying sort of guidance?

Right. Well as it relates to the shop side, you know as I said, we are slightly above 78% which is about 3% above where it kind of bottomed out a few quarters ago. And, you know, our objective is you know we like to get that into the low 80s. I think we mentioned before, Todd, when we were about 94% leased overall, I think our shop occupancy was around 85% or 86%, and that number is somewhat dictated by how we manage the assets. It could be higher if we allowed it to be higher, but we were always pushing rents and making sure that we had the right tenant mix. So I think we are going to be happy if by the end of the year, that goes north of 80%, which it should, along with our overall occupancy as we projected you know to be in that 93% range.

Okay. And then, you also mentioned in your prepared remarks, that the tenant health ratios are improving. Can you just provide some detail around that?

Yes, again, in our business in the community, and neighborhood shopping center area, we probably get less visibility around sales than you would obviously in the mall business, but about right now, I think we have a little over 60% of our tenants report. And when you look at the overall health ratio, it is kind of in that higher single-digit range -- Sub 10%. So, as long as we maintain that kind of range in our type -- with our type of retailers we are very comfortable with that. But, it is very different per category. So, but overall, you know being in the high single-digits for the reportable tenants shows us that we're -- that our tenants are getting healthier and sales are picking up for them.

Okay. And then, switching over to the balance sheet, with regards to the construction financing, on Eddy Street Commons, I was just wondering, you know as you think forward to refinancing that, you know what your plans will be if you plan to source fixed rate debt and if so how much excess proceeds do you think you could generate?

Hey, Todd. This is Dan. As far as Eddy Street, we do have an extension option with the lender on that, but we are planning on using that extension option. We currently have several properties out in the market that we're you know getting some bids back from large -- large group of lenders, be it life companies and large banks. So we will have a good feel for that over the next couple months when we start getting the bids back in place. But, we feel good about the asset and obviously we've had additional leasing progress on Eddy Street since it's gone into the operating portfolio. And, so as we take that out to market, you know we'll have a good sense of where we will end up but we feel positive about it now.

Okay. And then, sticking with Eddy Street, well, I guess there was an increase in straight-line rent and you know looking back it was pretty consistent in 2010 each quarter, and then it increased by about $300,000 in the first quarter here, so about a little over $1.2 million for the year. I was just wondering if there's one or two large leases perhaps at Eddy Street that accounted for this amount, maybe some rent abatements or is there anything one-time in that number?

No, not anything in particular one-time and as you look out throughout 2011, we are going to have some additional straight-line rent as long as a number of these large box tenants take possession. So for instance, as we turn the spaces over to these boxes that are over 20,000 feet, 25,000 and 30,000 feet, while they are doing their work inside of their space, that's where we, from an accounting perspective, trigger straight-line rent. So, for 2011 as we continue to open these tenants, there will be a month or two where we will be incurring straight-line rent as we get them open.

Okay. All right, thank you.

(Operator Instructions)

Your next question comes from the line of Rich Moore from RBC Capital Markets. Please proceed.

HI, good afternoon guys. On the line of credit as the new one comes up there, is -- will there be the same sorts of limits you guys had before, where you have different levels of capacity, based on different metrics or is it just a straight-up, $200 million kind of line?

It is -- it is a $200 million line, Rich, but there will be -- there is borrowing base limitations to the extent you have unencumbered assets in the pool. So, when you look at the line of credit, the restrictions that are placed on it primarily have to do with -- there is a permitted investment as well as vacant land investment number, et cetera. But, for all intents and purposes it pretty much mirrors what we have today. And as soon as we finalize the line, we're still going through final documentation. So as the -- the loan documents are being passed between the lending group, so, it's not finalized yet, but right now it looks pretty much to mirror the previous covenants et cetera for the line and we have got a couple enhancements that we will talk about as we press release it.

Okay. And is there a floor on the LIBOR?

There is no floor. And, it is still an unsecured line.

Got you. Okay, good. And then, for the Parkside Town Commons, I assume you put -- you put for the loan, you put some equity in there, is that right, when you redid this?

That is correct. We put equity in Parkside Town Commons along with Prudential.

Right, exactly. And then are there any changes in the plans, John, for what you guys are doing with that, where that stands, what you're thinking right now?

No, I mean I think it is in the same phase in terms of pre-leasing, Rich. We just -- the changes really reflect around us managing the site plan to maybe be a more current reflection of what tenants are looking for. So the site is kind of set up, it's a big site; it's 130 -ish acres but it's kind of divided between a north and a south vis-a-vis a road that connects -- that will ultimately connect from our site to the Research Triangle Park.

So, we're focused right now more on the box activity because we have some pretty good interest on the box side. So that's kind of what is driving the timing of the project as we have kind of re-tooled it, whereas in the beginning, mainly because of requirements from the city, the site was designed to be more of a mixed use lifestyle type deal, whereas now, we are pushing it more towards a traditional, as much as we possibly can, more towards a traditional layout. So, that takes time, as you go through the process with the municipality, et cetera and the tenants. That is really what is going on there.

So, I think our -- the refinancing has given us plenty of time to execute that. And, as Dan said, Prudential has been a very good partner here, very understanding of the process and obviously contributed -- continues to contribute capital. So, that gives us a good feeling.

Okay, good. Thanks, John. And one last thing, will you guys see any savings from the -- savings in personnel I guess from the reduction in the construction business? And maybe anything else you're doing. I mean, it seemed to me I would've thought G&A would go down a bit and it sounds like it's creeping a bit higher.

Yes, well Rich, one thing about that is -- a couple items. A, This has been going on for quite some time, our process of reducing that. So, it's not like we just did it in one quarter. I would say that over the last three years, I mean, you forget how long we've been going through this phase of the economy, but over the last three years we've significantly reduced headcount. It's not going to just pop up in one quarter. I think more importantly, when you look at it, you know, a lot of companies that were historically set up around development took very severe hits when they rationalized their overhead and moved it out of one area and into another whereas we have just eliminated a lot of that.

When you look at the construction and service revenue, in this quarter down to $10,000, you can see that we are literally out of that business but yet our earnings are going up. Our NOI is going up, so you know I feel very good that we hit that very early in the process and now are positioned just as Dan talked about and I've talked about, positioned to grow recurring revenue and not be as kind of you know exposed to transactional and service based revenue. To me that is important that we are growing our earnings in this process, and as you know, you will really start to see it towards the end of this year. And then if that part of the business comes back, you know, you can always adjust and bring back some of that business and grow it from there.

Okay. Great. Thanks, guys.

(Operator Instructions)

We do have a follow-up question coming from the line of Todd Thomas from KeyBanc Capital Markets. Please proceed.

Hi. Just a couple of quick follow-ups. With regard to the construction and service fee revenue and the expenses, so I mean I guess we should just expect that to run -- to be a pretty good run rate going forward, and maybe add a small operating loss for that segment?

Yes, I think that's fair, Todd. I think it's pretty much de minimus. I think it's flat to what we had this quarter. We may have some -- most of the construction and service business is in the taxable REIT subsidiary, so to the extent we have some activity in taxable REIT subsidiary that would require some allocation of time, that would be where it might change. But I think if you look at this quarter, that's what we anticipate on a fair run rate going forward.

Okay. And then, at Delray Marketplace, at Delray, can you just talk about I believe there was some roadway infrastructure that needed to happen surrounding that project. I was just wondering if you can give us an update there and if there is any risk to that not getting done?

Hey, Todd, this is Tom. As it relates to that specific cost, that tied back to off-site improvements that we were contracted to the county to perform. So, that work is underway and it's an extension through our property line to then meet up with the county's expansion up to the north. So, it is underway with really no risk tied to that hard bid number.

But the important thing there to add to that, Todd, is that this will be the primary, north-south artery that will connect our site to the Boynton Beach market. So, this is something that is a big, big deal and is a big deal in terms of why we are seeing significant pickup in small shop leasing activity there, because people can actually see that this is happening. And there is also east-west improvements along Atlantic, between 441, a major north-south and Florida Turnpike which is obviously major. So, this is -- I wouldn't underscore how important this is to taking this to the next level.

Okay, that's helpful. And then, just two quick ones if I may. Can you just give us an update on the A&P at Ridge Plaza in New Jersey?

Nothing that I know of, no change from last quarter. They are still in the space, obviously operating. We haven't been informed of anything. They are still within their period of identifying what assets are -- I assume they are still within that period, but as we said before, this is a pretty good store, with no real competition in the direct area. And, it's kind of -- you know it's a store that's in that $400 a foot kind of area so, we don't see that as a high likelihood that it would close. However, if it does, you've already established that you've got a grocer that's done north of $20 million in the space, so I would think we would be able to release that.

Okay. And then, just lastly with regard to the new line, I was just wondering, if you thought you would hedge that out, like the current line and what your thinking is with regard to you know floating rate debt today?

Yes, Todd, and I think as we complete, as I mentioned on earlier in the call, we have several properties that we are out looking at the secured market. And once we finish up the financing on that and get the line of credit closed, we are going to look at where the floating rate stands. And as we've talked about, our comfort level with -- because we have more loans in construction et cetera, than the neighborhood of 20%, so when we look at that, where we stand, once we finish these secured loans, we will then analyze whether we want to lock up some of the line with the hedge.

Okay. All right, great. Thank you.

Your next question comes from the line of Andrew Dizio from Janney Capital Markets. Please proceed.

Thanks, good afternoon, guys. I was just following up I guess on something you talked about last quarter, you talked about an upcoming full asset review; you were taking a look out ancillary revenue opportunities throughout your portfolio. I'm just wondering, as you look out on kind of on a multi-year period, if you expect a -- you think the redevelopment projects, as you get through what you're working on now, if you feel like you have a pipeline that can continue for a few years out?

Yes, I think we do. I think Tom talked about this last quarter, how we actually have a very specific list of assets that fall in that hopper. And we currently have I believe five in the redevelopment pipeline today out of our 62 -ish number -- five or six in our redevelopment pipeline out of 62.

So, you know you look at it from that perspective, obviously, our assets, one of the pluses of our portfolio is our assets are very high-quality and pretty new in general. So, we are going to probably have less of those but as we get every year that goes by, there is more opportunity for us to seek value there. And a lot of it also can come down to whether or not we believe that we're maximizing the density on the site plan. I think most municipalities are becoming more realistic about parking ratios, things like that, that may have held us back in the past.

So, bottom line is, we are going to always look at that, we are pretty good at, we get pretty good returns at it because we have built in we have these development capabilities. And for the companies that have been more acquirers in their history, who turn around and now all of a sudden are developers and think that they can do this stuff without having the long experience of dealing with this, I think that's a big, much bigger challenge than most people realize. So, we are very comfortable when we take it on.

And then, Andrew, this is Tom. The only thing I would add is when we did have the asset review meeting, that was a key topic and you know we obviously have projects in queue to establish those redevelopment efforts.

All right. Thanks. And just one other question. Obviously, it was a pretty quick turnaround as far as getting a re-tenanting done at your Wilmington acquisition. Just curious what the market looks like as far as you think there is a one-off possibility to replicate that here and there or just what you're seeing there?

Yes, I mean, I think that we mentioned that, Andrew, that when you look at the acquisitions and we call them redevelopments, but the bottom line is Rivers Edge was an acquisition in Indianapolis that had one, single Office Depot anchor that we took and created one of the best shopping centers in the city or are creating.

The Oleander deal in Wilmington, North Carolina, you know this is an example of situation, off market transaction we very quickly understood that it was great real estate and underutilized. And, you can see from the result that a major, major national player agreed with us. So, yes we think we can continue to do that.

We think we can do it in situations where other people might pass it by. And, that's perfect, because the same situation was buying out our partner at the center, We are getting very good pricing on these deals as it relates to what you are seeing people do in the open you know highly bid out, competitive market. So, we want to focus on that as much as possible. Tom, you want add to that?

Yes, the only thing I would add is if you take a look at the Wilmington project, from a time perspective, I think we've shown that we can react quickly where we actually acquired the property in February, and we will commence construction in June. So, as John mentioned, we've got the infrastructure in place to do that. And, also, mentioned in his prepared remarks, is finding undervalued real estate opportunities and that's going to be a key moving forward.

Yes, and I guess the tenant relationships help as well. Thanks a lot, guys.

Your next question comes from line of Paul Adornato from BMO Capital Markets. Please proceed.

Hi this is Mark [Lugensky] here with Paul. When you're looking across your portfolio at some of your markets there, are there anywhere you're seeing more attractive opportunities than others?

From a geographic perspective?

Yes.

No, I mean, I think if you look at what we are focusing on, the Southeast has -- is a market where there has been -- went through a lot of ups and then went through some pretty severe downs. So, I think we've seen some opportunity there, now. North Carolina is a very important market for our future so the acquisition we made in Wilmington was important there. But, I would say that in our core markets, is where we are focused. So, the Southeast and Texas and to a lesser extent, the Midwest. I mean, in certain situations in the Midwest we will find good opportunities but we're probably be a little more focused you know in Florida and other parts of the Southeast and Texas.

And then on the flip side, are there any markets in your portfolio now where you think it might be a good opportunity to exit?

Yes, we have kind of talked about this a little bit over the last couple quarters. We are in the process right now of analyzing a couple opportunities. And, that would both be individual asset opportunities that don't -- that we don't believe that we can continue to grow NOI, which is kind of what we look at, one of the biggest issues for us. And then, geographic situations, where we are isolated a little bit, for example the Pacific Northwest, perhaps other areas where we maybe only have one asset in a market.

So, I think we clearly are focused on that and we want to -- if we can, we want to take advantage of the environment that we are in today and then try to redeploy some of those assets.

Great. Thank you.

Your next question comes from the line of Quentin Velleley from Citigroup. Please proceed.

Hi, good afternoon. Just speaking on acquisitions, and some of the undervalued real estate that you are looking at can you just talk a little bit more about what the size of the opportunity is? And then how you think about funding that opportunity?

Sure. Quentin, I think in terms of the size you know we look at each deal individually and by the way those are correlated. I mean, the funding and the size is going to determine whether or not we believe it is an asset that makes sense for us or not. But, as it relates to what we are looking at today, you know we kind of laid out an objective that, I think we talked about in the beginning of the year, where we want to look at accelerating the deleveraging process with acquisitions that would utilize, if not all, the majority of the capital structure would be equity.

So, when we are doing that and we look at our planning over the next 12 to 18 months, maybe that is around $50 million of acquisitions, plus or minus. Just to fall within what we have planned and what we think we are very capable of capitalizing without creating any issue as it relates to our capital plan in the developments and redevelopments and just the general tenanting process.

So, if we went larger than that, then we would be looking at how we -- what the transaction was. We certainly can always look at partners, but as you know we prefer to take advantage of these on our balance sheet to the extent that we can pass through you know the earnings and the growth to our shareholders that we have today.

So bottom line is, we feel very comfortable acquiring assets in that kind of $10 million to $20 million range, just knocking down the existing plan we have. But, if we were to look at something bigger, if it was a pool of assets, and it was bigger, then we would probably look at either selling, redeploying to get into it, or potentially bringing in a partner also.

Okay. Thank you.

Your next question comes from the line of Nathan Isbee from Stifel Nicolaus. Please proceed.

Just focusing on Delray for a second, first of all thanks a lot for that pre-leasing detail.

Sure.

What would you say you have in terms of out for signature or actively working beyond that 60%?

Well, I don't know we want to get hard-core into those numbers yet, but, we will try to give a 30,000 foot level.

Nate, just to give you kind of a high-level perspective, we've got our anchors in place, as you know, the two primary anchors, that book-end the development. And with 150,000 executed, we have basically two tiers of deals that then follow behind that. The deals that have leases under negotiation, signed letters of intent and then the second tier below that being letters of intents at least underway. So, we like the way that queue looks at this point.

And with the start of construction on the off sites that we have started, it's created some buzz and it will then allow us to -- when we start full construction, to bleed into that and to give us further momentum. So, we like what we have in queue and feel very good about the 60% level, having not started construction in its entirety yet.

But I would add that we are pretty comfortable by, you know, a month from now, that number will be higher. And, you know we are very focused on that.

Okay; so your plan is now is to just go in and build the whole thing -- there's no thought of staging any part of that construction?

No, because the way the leasing -- again that's why we waited so long, Nate; I shouldn't say wait, that's why we worked it so long to get to the point where we didn't have to worry too much about that because now we have tenants with signed leases and soon-to-be signed leases in every kind of building, every phase that we would be building anyway. And, once we get to that level where we are going north of 60%, obviously you know it would make no sense not to do it all at once from a cost perspective and a mobilization perspective. So, yes, we'll be doing the whole thing at once.

Yes, the economies on the bid side will be very strong. So, it's important that we start within our schedule.

All right, thanks. And then, just in terms of the other projects in the future development group, any of those leases that have signed have any outs and just in terms of how long it might take to get those started?

I mean every lease that we sign at some point, they typically have dates that we work within. So, what we have done throughout this leasing process and our kind of situation where we've said that we don't want to start these until we are comfortable, has gone back where we needed to and extent those. And, we did that at Delray for example on both anchors.

So, as far as the other ones where we have signed leases, that is also already kind of taken into account. And, we don't at this point foresee a problem. And, as you know, it has been a virtue that we were able to wait because the retailers are only getting better by the month. And, I think when you look at April same store sales as an example, with the big box guys all recording double-digit increases for April, a lot of reasons for that, but I take it as a pretty positive sign.

I think this is playing out in our favor, Nate, because there just aren't any -- there just are very few available, ground-up deals for tenants to say are legitimate and then for them to plan for their 2012, 2013 kind of open to buy period. We're one of a handful. I mean, honestly, of the deals that we are working on and the magnitude that they are, I honestly say that's a handful in the country. So, long answer to -- it doesn't appear to be a problem.

Got you. And just circle back on Delray. Did you mention a projected yield on that project?

On Delray? What we said -- yes, we did mention that. Not in this call, but the incremental return will be north of 10% in terms of new capital spend going forward and that's kind of how we are judging these deals.

Okay. Can't argue with that. Thanks.

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Mr. John Kite for any closing remarks.

Okay, thank you. Just want to take this opportunity to thank everybody for joining us and want to wish all the moms out there a Happy Mother's Day coming up and everybody go out and shop for them this weekend. Thanks a lot.

Ladies and gentlemen that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.