Regency Centers Corp (REG) 2011 Q3 法說會逐字稿

Good morning, my name is Kim, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Regency Centers Corporation third quarter 2011 earnings conference. As a reminder this call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions). I would now like to turn the conference over to Lisa Palmer, Senior Vice President, Capital Markets. Please go ahead.

Thank you, Kim. Good morning, everyone. On the call this morning are Hap Stein, Chairman and CEO; Brian Smith, President and COO; Bruce Johnson, CFO; and Chris Leavitt, Senior Vice President and Treasurer.

Before we start this morning, I'd like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Bruce?

Thank you, Lisa, and good morning. Since the SEC recently advised NAREIT that it now take no position on the inclusion or exclusion of impairments and FFO, NAREIT reiterated this week that, in accordance with the definition of FFO, impairment charges should be excluded. As such, we have begun excluding impairment charges from FFO this quarter. Recurring funds from operations for the third quarter were $0.61 per share. Total funds from operations were $0.62 per share for the quarter. Third quarter's same property NOI growth was a minus 0.2%, excluding termination fees, this growth was a positive 0.2%. Same property percent lease increased 80 basis points to 93% Likewise, non-rent paying pre-leased GLA increased by about the same amount, delaying some of the benefit from leasing activity in NOI growth. Other income increased by $2.5 million over the second quarter.

As we've always reported in the past, our Captive Insurance profits are recognized in the third quarter based upon the claims experienced from the prior year. This is not considered same property income, but it is included in other income and impacts NOI. Accounts receivable balances continued to improve, with a total on a pro rata basis, down nearly $5 million from the second quarter, as tenants continue to pay real estate tax and CAM balances billed in the prior quarter. Total AR over 90 days is now 0.7% of revenues, compared to 1.1% at September 2010.

Our liquidity position remains strong. In September, we closed on the refinancing of our $600 million credit facility. The facility has a 4 year term with a 1 year extension option. The interest rate is LIBOR plus 125 with a facility fee of 25 basis points. We are currently documenting a $250 million term loan to refinance December and January bond maturities. The loan will carry a 5 year term at attractive pricing, similar to that of our recently closed credit facility. As we execute our capital recycling plan, this term loan will provide the flexibility to buy assets or pay down debt. Loan execution is anticipated in November with funding in January.

In August, we locked rate on $193 million of mortgage debt to refinance the maturities in our GRI partnership. The refinanced debt matures in 2022 and carries an interest rate of 4.5%. With this refinance and the term loan, we have handled essentially all of our 2012 maturities. Looking ahead for the year, we have tightened guidance range of recurring FFO to $2.34 to $2.40, and total FFO per share to $2.45 to $2.51. For the fourth quarter, we expect recurring FFO to be in the range of $0.58 to $0.64 per share. Brian?

Thank you, Bruce, and good morning. We continue to experience robust leasing activity, which points to future improvement in fundamentals. Total leasing for the operating portfolio was 2.1 million square feet. To give you some context, you could look back over the past 6 years and not see a quarter with close to 2 million square foot of leasing. The 590,000 square feet of new leasing was the most ever registered, and only the second time we've leased only 500,000 square feet with last quarter being the first time. Move-outs have been improving grudgingly since mid 2009 and are still above historic norms. An encouraging sign that move-outs are trending toward pre-recession levels is that small-shop move outs were meaningfully lower than recent quarters. Additionally, we released every one of the 5 largest anchor move-outs we experienced.

The strong leasing resulted in positive absorption of 140,000 square feet, giving us 2 consecutive quarters of positive absorption. The 1.5 million square feet of renewal leasing was more than we've ever done in a quarter. As a result of this leasing progress and a favorable impact on occupancy from dispositions, we are now 93% leased on a same property basis. We had occupancy gains in all size ranges. Spaces less than 5,000 square feet registered a 50 basis point increase for a total of 100 basis points over the past 2 quarters and were 85% leased in that section. Spaces larger than 20,000 square feet improved to 99% leased.

Although total rent growth was negative 1.6%, when we exclude spaces vacant for more than 12 months, rent growth was slightly positive. I want to point out that it will take a few more quarters for these leasing gains to positively benefit NOI growth. The full NOI benefit is delayed due to 2 factors. First, it is taking longer for tenants to move from lease execution to rent paying due to staffing issues in local governmental offices. The delay was further impacted by the large amount of leasing volume that occurred in the second and third quarters. As a result, our pre leasing increased from 150 basis points to 225 basis points. Second, move-outs unlike new leases, have an immediate, negative impact on NOI.

Encouraging signs related to tenant health merit being highlighted. Retailers are renewing at a rate above historic norms. As a result of actively culling weak tenants from the portfolio and replacing them with stronger operators, accounts receivable greater than 90 days are now below pre recession levels. Rent relief requests are almost non-existent, and defaults are one-third of what they were a year ago. Habitually delinquent tenants that have not yet moved out have decreased from 42 to 28 basis points over the past year. These metric, along with the notable decrease in small shop move-outs all point to a healthier tenant base.

Looking forward, our current leasing pipeline remains robust with nearly 1.3 million square feet of leases, or LOIs under negotiation. Leasing the development portfolio has been encouraging as well. On an apples-to-apples basis, our percent lease at 87%, increased 480 basis points compared to the fourth quarter of 2010. And based on recent activity and momentum, we believe we would finish the year 98% leased.

We disposed of 4 truly C-quality properties that we believe had significant NOI risks, and we acquired 4 premier operating properties. Tech Ridge Center located in Austin, Texas, is anchored by highly predictive HEB, with a potential to expand the center as demand allows. Oakshade Town Center, located in the [high-barrier] Northern California market is anchored by the highest volume Safeway in its trade area. The center is 93% leased and remaining anchor leases are below market. Calhoun Commons, the Whole Foods anchored center, we discussed on the prior call, was purchased with [CalSTRS] and is located in an upscale neighborhood near downtown Minneapolis, Minnesota. Rockridge Center, which is also in Minneapolis, is anchored by a market leading Cub Foods with extremely high sales volume.

As we continue to execute our recycling strategy, the resulting impact on the quality of our portfolio will enhance the future sustainability of NOI growth. Since the beginning of last year, we've sold nearly $140 million of at-risk properties and acquired nearly $256 million of extremely high quality centers. In terms of key indicators, the 3-mile household income of the acquired properties is nearly $100,000, and at nearly $700 per square foot, the average grocery sales are 2 times the average of those we disposed. This is the kind of upgrade in real estate and tenancy that we'll continue to pursue.

Given the positive momentum we're experiencing with selling assets that don't meet our standards, we're accelerating the rate at which we bring dispositions to market. As our capital recycling program picks up, we look to reinvest the proceeds into premium real estate that will enhance Regency's portfolio and drive reliable NOI growth. Also, our 6 most recent development starts are already 93% leased, and are currently projected to produce an average return on invested capital of 9.5%. And I'm encouraged by the depth and quality of the shadow pipeline for future developments and redevelopments, which now exceeds $325 million. The vast majority of these opportunities represent expansions and renovations to better position assets already owned or the development of prime shopping centers that we look forward to owning long term.

We started one new value-add redevelopment this quarter, located in Boynton Beach, Florida. We replaced a dark Winn-Dixie with a Publix relocation from a nearby center and filled a vacant Blockbuster space with Chase Bank. The incremental return on the new facade and redevelopment cost is 8%, before taking into consideration the significant increase in high quality, shop space demand since the redevelopment was announced.

To conclude, in spite of the slow and fragile recovery and the uncertainty caused by events in Washington and Europe, we are encouraged that many key measures are moving in the right direction and are starting to have a positive impact on NOI and recurring FFO. Hap?

Thank you, Brian and Bruce. I likewise am encouraged by the improvement we are making on key aspects of the business. Also, like Brian and Bruce, while I appreciate the groundwork that is being laid for future growth and NOI and recurring FFO, I'm ready for these improvements to start having a larger impact. This will occur sooner if leasing momentum continues, especially with small tenant leasing that we're experiencing. We'll return to more normal pre leasing levels, and the improving trends that Brian described in tenant health and move-outs, reach pre-recession norms.

I do want to highlight what is being accomplished. Most important of all, the continued tenant demand coupled with the intense focus of leasing team and the attributes of the portfolio, we signed roughly 590,000 square feet of new leases, and nearly 1.4 million square feet of renewals during the third quarter, and increased occupancy to 93%. In addition to the C- and non-strategic properties that we sold in the first 9 months of the year, over $150 million of assets are on the market -- are about to go to market. We acquired the terrific shopping centers that Brian describes, and these are consistent with our proven strategy of owning dominant grocery-anchored shopping centers and infiltrate areas with meaningfully above-average household income and supermarket sales in excess of $25 million. As a matter of fact, the grocery anchors in these centers have average sales of over $40 million. Our experience shows that these are the types of centers in our portfolio that enjoy sustainable NOI growth. We are positioned to start over $100 million of new developments and redevelopments this year, that along with building new and improved core assets will enhance the overall quality of Regency's portfolio, while achieving attractive risk-adjusted returns.

In addition, we're continuing to convert our inventory of land into sales or developments. Once the $35 million of sales contracts, LOIs, and land and high probability development closes, we will have effectively converted a quarter of our own land into cash or attractive new developments. As Bruce described, with the new line of credit, term loan and mortgage refinancing, we've improved our maturity profile, and at the same time provided significant flexibility as we execute our capital recycling.

As Brian said, we all recognize that we're operating in an uncertain world with sluggish economic growth and volatile capital markets for the foreseeable future. But, I more poignantly realize more than anyone else that Regency is not yet where we want to be in relationship -- in relation to our high absolute and relative standards and goals. At the same time, I am gratified by the state progress that is being made towards achieving Regency's strategic objectives. Obtaining 95% occupancy, and 3% NOI growth, growing the development program to $150 million of development and redevelopment starts of core shopping centers, recycling the remainder of our C-assets and potentially some of our non-strategic assets into A-centers, and continuing to cost effectively and opportunistically enhance an already solid balance sheet.

Most important of all, I appreciate the focused efforts of the team in executing our strategy to position Regency for meaningful and reliable long-term growth and recurring FFO and NAV. We thank you for your participation, and welcome any questions you may have.

Thank you. (Operator Instructions). We also ask that you please limit yourself to 1 question and 1 follow-up question. You are welcome to requeue later in the program. Nathan Isbee from Stifel Nicolas.

Focusing on the leasing done during the quarter, clearly occupancy has had a nice ride the last 2 quarters, but yet the rents, especially on the new leases, are still trending down about double digits. Can you just talk about that. When can you expect to see that change, or is that just a function in some part of above-market leases, or as your occupancy goes up, would you expect that to change near term?

Nate, I think all that -- first of all, we are seeing, it's really coming down to supply and demand, right? So if you look at our centers, we are already 95% leased. We have about 400 basis points better rent growth in those that are less than 95% leased. So for the same reason you're seeing renewals, we've got positive rent growth. So how do we get the rest of it up there? I think the combination of the improving tenant health we talked about, should lead to lower move outs. We are getting rid of the worst properties in the portfolio, which should help us there. The continued move out -- lease-up, I think all of those things, and the lack of supply coming onto the market, should benefit us, and you will start seeing better rent growth.

I know you haven't issued guidance for 2012 yet. Can you give any color on what you would expect on that line item for next year?

We'll give that you guidance, but I'd say it's going to be in the flat range for overall rent growth between renewals and new leases. More to come in December.

Quentin Velleley from Citi.

Good morning. I'm here with Michael as well. Just in terms of the disposition activity in some of the weaker assets you're trying to sell. I noticed that your guidance came down for this quarter, but it sounds like you've got $150 million of assets you're trying to get ready for marketing. I'm just curious given what happened over the last few months in capital markets whether or not there's been a change in the pricing of these assets and whether the same depth of buy is there?

There has been a change, Quentin, when the CMBS market softened, we saw, right after that, a softening in the pricing for some of the BNC quality centers. I'd say overall, the A centers, the demand continues to exceed the supply, so the pricing has gotten extremely aggressive. I'd say the typical A now is 5.75, and you're going to see well below that in California. The low 5s and there's a couple comps below 5, say 4.6 to 4.75.

After that, you've got the Bs and Cs. What's happening there is if you have a B market with an A tenant roster, or you have a B market that doesn't have upside, there's not as much demand for that. Interestingly, there's more demand for the C-properties where there is upside. I think what we're selling would be a combination of those. We've got some 100% leased assets that we would consider Bs that we're moving out the door. And then we've got some Cs that have upside are being priced on the current occupancy. So it hasn't really impacted the pricing we've seen so far, and where we are, you mentioned about $150 million worth of properties getting ready to go to market. The vast majority of those are actually on the market. We've already gotten about $40 million to $50 million worth of offers. So good momentum on that.

We really are encouraged by the momentum, and especially given the fact, selling these assets that we're trying to sell is easier said than done. But we really are selling those assets that we really want to sell, not from so to speak the middle of the portfolio, but in effect from the lower part of the portfolio. And we're encouraged by the progress that we're making. So knock on wood, hopefully that continues.

Craig Schmidt from Banc of America Merrill Lynch.

Good morning. I just wondered what you specifically saw between the second and third quarter that resulted in the adjusted same store NOI, whether that was geographical or type of shops or anything.

It was primarily this increase that Bruce mentioned in the amount of prelease that jumped up from 150 basis points to 225 basis points. It's the time, and Brian amplified on it, the time it's taking to get from, in effect, LOI to lease to rent paying. Some of it has to do with the large amount of volume of leasing that we're doing. Some of it has to do with the time it's taking to get approvals and some understaffing on the tenant side of the equation.

So my sense is that it was actually getting worse, and that gave you pause for looking at your NOI. Is that the case? The time to go from A to Z, so to speak.

Yes. It's just taking more time, and we did not have the uptick in 225 basis points in preleased until this quarter.

Okay. Thank you.

Basically, all of the occupancy increase is equal to the increase in the preleasing.

Christie McElroy from UBS

Hi, good morning. Just following up on the preleasing question, the 225 basis points. Does that mean that your commenced occupancy rate is just above 90%? And sorry if I missed this in opening remarks, but with regard to your small shop occupancy, what was the commenced occupancy versus the leased percentage.

On the less than 10,000 square feet, that 250 basis points would be 375 basis points.

Okay, so what was the leased rate?

Well 81.5% essentially would be rent-paying occupancy versus 85.3% leased.

Okay. Following up on Nate's question just directionally. Market rent growth between big box versus small shop, can you talk about what that looked like in 2011 versus what you're projecting for 2012?

We don't have that many big boxes going into 2012. I don't have it broken down by rent growth, but we look at the average leases, the average rent signed in the third quarter compared to the second quarter, our anchors were up 12%. Does that answer it, Christie?

And then small shop, directionally, just looking at market rent growth, given where occupancy is.

It was the same thing. The exact same number. So the average rent again, was up 12% for both the small shops and for the anchors. That represents 2 quarters in a row that they've been up. So that's different than the rent growth because we certainly have some tenants that if they have a different space, let's say we subdivide a space, whatever the rent growth that's associated with those 2 spaces would be are not counted in our rent growth. So a little bit different numbers. Using average rents signed for proxy, what's going on in the market, it's been up 2 quarters in a row, 12% the most recent quarter.

It's not space to space, but it is a pretty good proxy, as Brian indicated for directionally what's happening.

Thanks.

Thank you, Christie.

The only other thing we have, Christine, is that we break out the rent growth above 6,500 square feet and less than 6,500 square feet. And for less than 6,500 square feet in the third quarter, we were negative almost 6%, and for those over 6,500 square feet, we're actually positive about 5%.

Jay Habermann from Goldman Sachs.

Hi, good morning, everyone. Just a question on the accelerating pace of asset sales. Can you give us some sense of perhaps what you're thinking as you look out to 2012. I know you mentioned, obviously, the disruptions in the capital markets recently. Would you plan to match those proceeds with new acquisitions, and perhaps even some sense of what you think is the bottom tier at this point?

Some sense of the bottom tiers as far as --

Percentage of total portfolio.

Bottom tier as a percentage of total portfolio is in the 5% range. I think it's a realistic objective that we can sell those within the next 3 years. Some are not ready to sell right now. And we are being able to execute that in our strategy. We may accelerate that. More to come at investor day. And, yes it is our intent to obviously to match those sales and effectively trade those proceeds into shopping centers that have the attributes that we just talked about that we found in our portfolio that are continuing to generate the highest level of NOI growth, strong anchor sales and strong demographics with good purchasing power. As Bruce mentioned, to the extent that we sell more properties than we're able to buy, we do have the flexibility with our term loan to pay down the term loan with excess proceeds.

Thank you.

(Operator Instructions). Paul Morgan from Morgan Stanley.

Hi, good morning. Just a little bit on the acquisitions strategy. You've talked about focusing more on infill. I just wanted -- maybe you could give a little color on the deal in Davis at the 5.8% cap rate, which it doesn't seem at first blush to be in-fill certainly, and also at a relatively low cap rate below what you've been looking for. Is there an upside there, or is that driven more by just the dominance in the market even though it's a small market?

One of the things about in-fill is that it implies a lack of new supply coming into the market. If ever there's a market that checks that box, it would be Davis. I personally, when I was in California tried for a good 15 years to develop something in Davis. You just can't do it. Any new development in Davis literally has to go before the voters in referendum to get approval. So that's why you see no new supply in that market. It's why you've also seen vacancy rates of about 1%, even through the recession. So high constraints and low vacancies is what was attractive to us.

Then you've got this property that has the highest-volume Safeway in the market. Of course, Safeway dominates Northern California. Then there is potential growth. I always like to say, I like to buy the centers where's any bad news translates into good news. In this case, there's 2 other anchors that are the weak players within their segment. You've got Rite Aid, and you've got Office Max. Rite Aid is the only entitled drug store in that market that has a drive-through, and they are below market. So if they were to leave, we'd instantly have, we'd have interest from the other 2 players, and they would pay us a lot more rent. The same thing with Office Max. It's the only office supply store in that market, and you've got the University of California sitting on your doorstep. So we really like that property. It's one you just don't see a way you can go wrong on it.

Okay. Great. That's helpful, thanks.

Michael Mueller from JPMorgan.

Yes, hi. I was wondering if you could talk about some of the drivers in the Q4 range, which is wide. And at this point, where does it look like you're going to end the year and your occupancy guidance of I think it's 92, 93.5.

That is our guidance, so however you want to look at that. Right now, the number is pretty much -- where we are right now is where we expect to end up at the end of the day.

Okay.

I think, Mike, for the range of FFO per share, if you'll do the math, the driver really is equal to the same property NOI growth range. So it will depend on where we fall within that range.

In closing, a development that we're getting real close to, which impacts capitalization related to that project.

Okay. Got it. Thank you.

And Jeff Donnelly from Wells Fargo has our next question.

Good morning, guys. Just first off as a follow-up to Quentin's earlier question about cap rates. Can you tell us where pricing is on B and C assets that I think you referenced, Brian? The second part of my question pertains also to dispositions. One of your competitors pulled the trigger on $0.5 billion portfolio sale. What is your thinking on executing a transaction of that nature to pull back the band aid, if you will, a little bit more quickly on your non-core assets rather than holding onto them for the next few years? Is that a pretty deep market in your view?

Well, I'll start with the first one, Jeff. I'd say that the B-market is, again, depending on whether there's any upside or not is somewhere between 8% to 9.5%. So obviously, if you've got more growth, then you are talking 8%. If not, then you're going to go higher than that.

In terms of the portfolio, what I can tell you, I think you've seen 2 things going on out there, where people have tried to sell portfolios that included properties from all over, they have been pretty unsuccessful. There was one out in California. One of our peers had one. People basically want to cherry pick those. They want to take the good properties and not take the bad ones, so those have not been successful. I think what is a successful strategy is if you package a portfolio to exit a market, and within that portfolio, you have some higher quality ones and some lower quality ones.

I'd say, though, that I think that portfolio that was sold was, from what I understand, may have been cherry picked, and pretty consistent qualities as far as strong anchor tenant with long terms left on the leases, happened to be in secondary markets. What we're selling is stuff typically from the bottom part of our portfolio or is not strategic. We would look and will look at does it make sense to sell a portfolio, as you said to quicken the pace, but more to come in that regard.

Anything further, Mr. Donnelly?

Sorry, thank you.

Rich Moore from RBC Capital Markets.

Hi, good morning, guys. I wondered if you could give us a little color on what's going on in the development pipeline, especially the pre-2009 or stuff that started in the past 3 years or older than 3 years. Specifically, I see interesting things in there, like Waterside, for example, leasing fell, but yield expectations went higher. So I'm wondering exactly how much effort is being put in here, and what you guys are thinking?

Let me just say there is a focus on leasing all of our vacant space. That's where we can really, so to speak, move the needle and whether those spaces are operating properties or properties that we developed within the last few years. So I will just assure you that there's a tremendous amount of focus in that regard.

Yes, I saw some of these interesting -- there were others as well, besides Waterside, where it looks like there's activity or actually, a thinking that some of the yields are changing, which tells me that there's activity going on there, but yet leasing doesn't change. Is that -- I'm just curious how much activity goes on in the pipeline here in the older stuff.

I'm not sure which ones you're talking about exactly. Where you will see some movement typically would be in the completion yield, because that's just a date and time. And what we will do is we'll make changes to our underlying assumptions. For example, in any given quarter, it often happens that we may delay the sale of a pad, and push it back till the quarter after the completion date. That still keeps our stabilized yield where it was. That should not move very much. The completion date will yield -- will change just because you had some movement of space as to when it either leases or in the case of a pad sale that transaction takes place.

Okay. So just to understand, make sure I realize I understand exactly what you guys are doing. All of these will move into the completed bucket by the end of next year pretty much, right? We have 4 years from the start, and you show that as your date. So basically this pipeline will be gone as a development pipeline, so to speak, by the end of next year?

That's correct.

All right. Great. Thanks, guys.

Chris Lucas from Robert Baird.

Good morning. Brian, I guess could you give us a little bit more color on the renewals, meaning how much of the 1.4 million feet that you did in the quarter was related to this year versus next year renewals? Then could you give us the specific tenant retention rate, and how that compares to what the last 4 to 8 quarters has been?

The retention rate was 78%, which is exactly the same rate it was last quarter when we had some higher renewal as well. The long-term rate was 68% last quarter. When you factor in last quarter, it takes up to 69%, 69.5%. In terms of the renewals, when they are taking place if you will, the way most of our leases are structured, particularly with the national tenants is, we ask that they give us anywhere from 6 months to 12 months' notice. So if you actually measure when the renewals are taking place, or when they take place versus when the leases expire, you'll find that for this quarter, about 90% of the leases were set to expire, either in the current quarter or the next 3. So within the next 12 months, that's when 90% of our renewals are taking place.

Okay. Thanks. And then I think I know the answer to this, but I'm going to ask it anyway. Any exposure to either ANP or [SIMS] filings?

ANP, no to the latter, ANP, we had 3 ANPs. One was already dark. And then when they went bankrupt, they rejected -- well they rejected one, and they sold the other. And we have released both of those.

Thanks a lot.

Cedric LaChance from Green Street Advisors.

Great. Thank you. When I look at the amount that you sold so far this year, about $17 million versus what you've acquired, about $100 million, there's obviously a gap there in terms of you being in that investor. If we think about the next 3 years or so, is your goal still to be a substantial net investor, or do you really want to recycle the capital fully?

Our goal is to be a net zero investor from an acquisition standpoint. I think we will -- some of this is just a matter of timing. And there is a good chance, as I indicated earlier, that we may be a net seller. If that is the case, then the term loan fits very, very well because if we can match our acquisitions with dispositions, and in effect trade up in quality, that's obviously our objective. But to the extent that we're unable to find acquisitions that meet our standards, then we're in a position to in effect pay down the term loan, or in theory, finance our development program.

Okay. Just going back to the gap between the leased space and occupied space. You have about 225 basis points at present. What is the historical gap that you maintained over time?

It's been about 150 basis points for the last 5, 6 quarters. The 75 basis point jump, pretty much reflects the increase in occupancy.

And how long do you think it will take to go back to about 150 basis points?

I don't know. I would -- right now, from the time the lease is signed until a tenant opens is somewhere, it could be as short as 3 months. It could be as long as 9 months, so it's going to depend on the new volume. If we continue to keep leasing at the pace we've been doing, it's going to stay high. To the extent we start filling up all of these vacancies and get through the permitting process faster, it's going to come down quicker.

Okay. Thank you.

Thank you, Cedric.

Tayo Okusanya from Jefferies & Company.

You might have us on mute, Tayo.

Tayo Okusanya, your line is open. Please go ahead with your question.

Why don't you move to the next question. Next questioner.

RJ Milligan from Raymond James.

Hi, good morning. I'm just curious if you are seeing a difference in leasing spreads for small shop space between the more national retailers and the smaller mom and pops for those deals that you are signing with the smaller mom and pops?

We have not tracked that. I don't have any good data on that.

Nothing discernible jumps out.

I'm just wondering if maybe the national retailers, knowing that there's a lot of space out there are squeezing the landlords more than say a mom and pop who just wants the demand or just wants the space and the demand is there in that particular market.

It depends on the center; it depends on the market. And even then, it depends on the negotiation. I think we may have talked about in the past, there's a good example down in Tampa where we've got a weak market, but we've got some real experienced people and we've got some good assets. And in that 1 particular center, we had 2 national tenants come to us with offer in hand from a competitive landlord and with a full build-out and lower rent. And we knew they were doing quite well in our center, and we knew also that it's really operations that makes that decision, not real estate. And for them to give up a very successful store is, there's a lot more risk in that than there is in trying to build up a new one. So in that case, we said no. And we actually released both of them, and had some rent growth.

That is 1 of the things that is taking a lot of time to convert from the leasing pipeline into signed leases, is national tenants and local tenants are pushing. And we're pushing back.

Okay. Thank you.

Thank you.

Ari Freidman from Cobalt Capital. (Operator Instructions). Your line is open. Please go ahead, sir.

Hi. Can you guys please provide some color on the type of tenants you're seeing for that small shop space? And what the average rent is for some of these new leases versus some of the move outs? Thank you

There's really nobody that's not actively seeking space. But I'll tell you that the highest demand is coming from restaurants, all types of restaurants. The burgers are hot, the coffee stores, the yogurt stores. We're also seeing good demand from pet stores, lots of services. And I would say the average rents for last quarter for the small shops is a little bit north of $25 a square foot. That's down, at the peak, that was about $29 on average. And it got down as low as a little bit above $21. So, we're halfway between the peak and the trough right now in terms of last quarter.

And is this tenant mix materially different from what you've seen over the last couple of years?

No, it's not. It's very similar. But in terms of the use, there's very little difference. But in terms of the caliber of the operator, the credit and everything, it's a much better mix.

(Operator Instructions).

If there are no further -- since there appears to be no further questions, we appreciate your interest and time and involvement and participation. Everybody have a great day and a great weekend. Thank you.

And that does conclude our conference for today. Thank you all for your participation.