Regency Centers Corp (REG) 2012 Q4 法說會逐字稿

Thank you for standing by. Good day and welcome to the Regency Centers Corporation fourth-quarter 2012 earnings conference call. Today's call is being recorded.

And at this time I would like to turn the conference over to Mr. Mike Mas. Please go ahead sir.

Thank you. Good morning and thank you for joining us. On the call this morning are Hap Stein, Brian Smith, Lisa Palmer and Chris Leavitt. Before we start, I would like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties. Actual performance -- actual future performance, outcomes, and results may differ materially from those expressed in forward-looking statements.

Please refer to the documents filed by Regency Centers Corporation with the FCC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in the forward-looking statements.

Hap?

Thank you, Mike. Good morning, everyone, and thank you for joining us on the call today. We believe the steps we have taken over the last several years to enhance our portfolio, our development program and balance sheet are positioning us to consistently perform up to Regency standards. In 2012, the hard work and focus of our dedicated team were clearly evident in the operating and financial results. We will hear from Lisa and Brian in detail, and I want to highlight the many notable accomplishments.

The performance of the leasing team was exceptional, pushing same-property operating portfolio to 94.5% leased. We started to exhibit pricing power as evidenced by rent growth of 5.5%, including nearly 20% on new leases. These factors, which were aided by robust demand, health of our tenants and lessening supply of available space, produced same property NOI growth of 4%.

Development team started four and completed nine irreplaceable shopping centers and transformed another five centers through redevelopment, adding an estimated $75 million of value. Transaction team continued to enhance the quality of the overall portfolio. They sold more than $450 million of shopping centers that no longer met Regency's risk, strategic or NOI growth objectives. They also acquired high-quality shopping centers with compelling future growth profiles.

The capital markets team further fortified Regency's solid balance sheet and access to capital. These efforts combined to produce core FFO per share of nearly 7% and, most important of all, an increase in total shareholder return more than 30%. To be sure, we recognize that a single year's positive results do not define Regency standard for success. This is particularly the case in light of our view that economic growth, while positive, will likely be slow for the foreseeable future. And our tenants will continue to operate in an increasingly competitive environment.

That said, it is worth noting that 2013 will be Regency's fiftieth year in business. Our experience over the last five decades have molded and enhanced what I am convinced is a tried and true formula that will sustain growth in shareholder value. Regency strategy starts with an intense focus on producing reliable growth NOI, which is the cornerstone to generating consistent increasing -- increases in earnings and net asset value.

We will continue to pursue acquisitions and developments that meet our strict standards, are of comparable quality to our most recent investments, and will fortify the reliability of the portfolio's NOI. At the same time, we are playing offense. We are extremely vigilant and proactive about identifying and continuing to sell the ever-declining share of centers that may no longer be consistent with our strategy.

Our ability to create meaningful value through disciplined development and redevelopment of irreplaceable shopping centers is one of our core competencies, which we will continue to profit from and is the second key generator of growth in NAV -- a solid balance sheet which we remain committed to managing in a conservative and prudent fashion. Finally, we will keep our most fundamental asset -- our people -- engaged and focused on the achievement of these key objectives.

Lisa?

Thank you Hap. Good morning everyone. As Hap stated, our results for the fourth quarter and for the full year were very good, with core FFO of $0.63 per share for the quarter and $2.56 per share for the year. Being $0.03 above the high end of our most recent guidance was a result of exceeding expectations in November and December. Primarily, first, better leasing; second, lower move-outs; third, lower real estate tax expense; and all those combined produced higher recovery rates.

Same-property NOI growth, excluding termination fees, was 4% for the year. Almost all of this growth was attributable to base rent, which was largely the result of occupancy gains primarily from non-anchor spaces, combined with built-in contractual rent steps. In the fourth quarter we recognized an impairment charge of $50 million, triggered by the decision to sell Deer Springs Town Center and exit the Las Vegas market. Given the difficulty of efficiently leasing and managing this large single asset in a state where we have no plans to grow, we believe it makes sense to exit the market at this time.

I would also like to briefly explain the fourth-quarter income tax expense. We employed tax planning strategies in our taxable rate subsidiary at year end to maximize the benefits of a net operating loss. These strategies generated taxable gains in our related non-cash income tax expense.

As Hap mentioned, and as we've previously communicated, we made significant progress in 2012 executing our portfolio-enhancement strategy. This is positioning Regency for better long-term sustainable growth. However, in the short term, being a net seller in 2012, will have a dilutive impact on 2013.

But even with that being said, the strong leasing and better than expected move-outs in December, will result in higher than expected average occupancy in 2013. As such, we have increased our 2013 full-year earnings guidance. We now expect core FFO per share in the range of $2.48 to $2.56 -- an increase of $0.03 to both ends of our range of the initial guidance. Our guidance for same property NOI remains unchanged at 2% to 3%.

Lastly, although I recently moved into his office, my predecessor, who was also my mentor and very dear friend Bruce Johnson, left a legacy of conservative and astute balance sheet management that I am committed to carrying on. This means we will continue to monitor our maturities and commitments while maintaining significant capacity on our line of credit.

To that end, in 2012, we increased the capacity on our line to $800 million, of which $730 million is currently available. And although we do not have any significant maturities in 2013, we took advantage of historically low interest rates by hedging the base treasury rate and swap rate on 60% of our 2014 and 2015 maturities.

We remain comfortable with our current leverage levels, but will always look to opportunistically enhance our balance sheet's strength by focusing on long-term targets of net debt-to-EBITDA of less than 5.5 times and a fixed-charge coverage ratio of greater than 2.75 times.

Brian?

Thank you, Lisa, and good morning. The fourth quarter was a near perfect way to cap off what was a very good year in all aspects of our portfolio. Strong leasing momentum continued to drive the business. We signed more new leases in the operating portfolio than any year on record, taking the same property portfolio to 94.5% leased.

Move-outs in 2012 were the lowest they've been since 2007. And a significant portion of this occupancy gain came from small shop space. In fact, our percent leased for spaces less than 10,000 square feet increased 170 basis points in 2012, and currently stands at greater than 88% leased. In addition, the average rent signed for small shops increased for the seventh consecutive quarter.

Given the strength of our leasing pipeline, the continued lack of new supply coming online and the slow but steady upward trajectory of the macro economy, I remain optimistic that our goal of 95% leased is well within our sights. And there's certainly no reason we should stop there.

What makes this even more satisfying is the fact that we increased occupancy while simultaneously improving both the tenant caliber and merchandising mix in our shopping centers. We did this not only by leveraging our considerable relationships with strong national tenants, but also with well-capitalized, innovative and exciting local and regional concepts that are considered fixtures in their local communities.

As we all know, the grocery business is very competitive and a dynamic one. With that in mind, I would like to provide a quick update on Supervalu. After recently meeting with them, we are more comfortable in our belief that our exposure to store closures remains limited and our initial impression of the recently announced transaction is that it reduces uncertainty and may even improve their long-term operating prospects.

Continuing on this topic of portfolio enhancement, the fourth quarter was important for us. We closed on the purchase of four exceptional assets, all of which were secured on an off-market basis.

Uptown Shopping Center is located in a dense, urban area of San Diego. This asset combines street-front retail with two top-notch grocery anchors -- Trader Joe's and Ralph's. It is the only center in the trade area with convenient surface parking, which gives it a real and unique competitive advantage. To accommodate the combined grocery sales of more than $70 million per year, it also has structured parking. The center draws from a three-mile population of 223,000 with strong household incomes and offers incredible re-merchandising potential.

On the other side of the country, Phillips Place is located in the highly desirable South Park sub-market of Charlotte, North Carolina, across from one of the most successful regional malls in the Southeast. Phillips Place has average incomes of $128,000 in benefits from a very strong daytime population. Phillips' roster reflects the prestige of the local market with tenants like Dean & DeLuca, Brooks Brothers, Restoration Hardware and The Palm.

Village Plaza is anchored by a high-volume Whole Foods that serves the local market of Chapel Hill, North Carolina, and benefits from its proximity to the University. This asset represents exemplary neighborhood retail real estate and comes with a redevelopment opportunity to further improve its already strong long-term growth prospects.

And last, but certainly not least, Sandy Springs is a generational asset in an affluent and infill neighborhood of Atlanta anchored by a highly successful Trader Joe's. We also have seen opportunity to harvest additional growth by re-merchandising the center to better serve the needs of the trade area.

These centers -- along with those acquired in the first three quarters of the year -- are excellent additions to our portfolio, with average three-mile populations and household incomes that, when combined, exceed our $200,000 target and grocery sales of more than $1000 per square foot, which is double our goal. And perhaps most importantly, they enjoy the long-term sustainable competitive advantages that will make them accretive to our NOI growth profile for years to come.

During the quarter, we also closed on the sale of three assets providing further enhancement to our portfolio. To a certain extent, all three were inconsistent with our strategy and had reached peak value. Specifically, one was a stand-alone Whole Foods in Santa Barbara, California, that we sold at a 5% cap rate. With no side shops to provide growth, we believe this asset was fully valued at a price representing $1000 per square foot.

With these dispositions and the planned sale of Deer Springs, our remaining pool of non-strategic properties currently targeted for sale represents approximately 3% of our portfolio. If sold, some of the properties could generate gains while others could be at a loss. But if there are losses, the aggregate amount would be dwarfed by the magnitude of the Deer Springs impairment.

Our in-process and completed developments are performing very well and saw huge demand during 2012 as evidenced by 860,000 square feet of new development leasing. The nine development completions leased up quickly and are currently more than 97% leased. As a matter fact, our fourth-quarter completions on average stabilized just 80 days after anchor opening and have an incremental return on invested capital of more than 10%.

Our in-process projects -- the majority of which were 2012 starts -- are already 86% leased and we expect them to be around 95% leased by the end of 2013. In closing, I, like Hap and Lisa, am proud of the progress that has made over the past two years and look forward to seeing just how far we can go.

Hap?

Thank you Brian and Lisa. Like I said, one good year does not automatically translate into many and does not define Regency's standard for success. But I am extremely gratified with what we have accomplished and feel very good about where we are headed. Our team of talented people has worked extremely hard and is poised to have continued success in building shareholder value in 2013. We now welcome your questions.

Thank you, sir.

(Operator instructions)

Michael Mueller, JP Morgan.

Good morning. First, on the Blackstone preferred investment, what is embedded in guidance in terms of the timing of either having -- calling that or having it redeemed?

We are currently assuming that we go the full term, basically, which would be December 31 of 2013.

Okay. Second question, Brian, to your comments about you still have about 3% of the portfolio targeted for sale. About how long of a time period do you think that covers to go through that 3%?

You know, it all depends. Those are the hardest assets to sell, so it all depends on the demand for them and all. But I would think that we would be out of that in a couple years.

And also --

Then it will be ongoing.

Yes, I was going to say --

And we'll have -- there will always be some assets that will be at the bottom of the portfolio that will be part of the annual recycling process.

I know Mike, you've been covering us a long time. For many years our strategy has been portfolio enhancement -- or capital recycling -- and to sell what we always said was the bottom 3% of the portfolio every year.

Okay great, thank you.

That you, Mike.

Christy McElroy, UBS.

Good morning everyone. Brian, I just wanted to follow up on the Q4 acquisitions you talked about. What percentage of the deals that you looked at were ones in which sellers were motivated to sell before year end for tax reasons? I know you mentioned they were off-market. And how would you characterize the current environment for acquisition opportunities?

A lot of activity, I think in the last probably four or five months of the year was related to people who wanted to sell before they saw the tax rates go up. I think that was a definite factor in the increased activity. I'd say the current environment right now -- of course it is probably too early to tell, there's been some speculation that people now are not willing to sell because of the higher taxes -- but I don't think there's enough data out there yet to know. So, we kind of view it right now as status quo, and are seeing some pretty good opportunities.

Okay. And then Lisa, I guess this is a question for you. Did Paseo del Sol drive the entire development gain in the quarter? And how much of that gain flowed through to FFO and core FFO?

It was most of it. The gains on our guidance page, anyway, we had one line where we netted of other transaction costs, as well. All of the gains flowed through FFO, but none through core FFO.

Why did that gain? Why did that center? Why did that qualify as a development gain instead of a gain on operating property? It looks like it was built in 2004.

We just completed it last year.

Okay, great. Thank you.

Jeff Donnelly, Wells Fargo.

Good morning guys. The first question on in-process development -- can you just talk about what's happening with rents and construction costs, because I was noticing that on Grand Ridge the yield pulled back a little bit sequentially from Q3 into Q4 with costs up. Or Windmiller, similarly the yield dropped despite the anchor opening moving up a little bit. Is there something that is specific just to those projects, or is there something else going on that maybe has a broader implication?

I would say, Jeff, it's specific to Grand Ridge. In fact, this morning I was looking at it. If you look at the 12 ground-up construction projects, excluding the redevelopments but including phases on the projects, that is 12, and the total costs are up across that whole portfolio about 2%, which is $3.4 million, and $3.9 million of that is Grand Ridge. So the other 11 properties actually came in $500,000 lower. So, what's going on with Grand Ridge, and Grand Ridge may not end up being $3.9 million, because we still have $2 million of a contingency that we didn't tap. We just increased the cost.

What's going on in Grand Ridge is that is in one of those very, very difficult to entitle markets. I have said this before, but the last property that was developed up there was developed 20 years ago. That took 12 years to entitle. And what happened is, the city just demanded a lot of upgrades that were not in the original budget, everything from enhanced lighting, landscaping, expanded plaza areas and the like.

There was a little bit of probably a miss on our part. We originally had the big boxes priced, I think it was at $120 a square foot, and then our pricing down in Northern California for the same tenants came in lower. So we reduced the price when we did the original budget. And in, fact they came in where they were originally targeted at $120. So, long answer to a short conclusion which is its all related to Grand Ridge.

There is a little bit of pressure though on construction costs right now.

And then, Brian, and how are you sourcing new development? Is it from land on the books or new purchases? And if I could just toss one in for Lisa -- I might have missed it -- can you repeat the reason why the write-down on Deer Springs?

Who do you want to answer first?

I will let you decide.

That was a clever bifurcation. (laughter) I will start the developments. The developments were sourced in the way we always have. We've got people out in the markets that in some cases have been working on properties for years trying to get them. And then we do have 400 or 200 acres of land held for development. Some of that we will be tapping.

So if you look at what we expect to do in 2013, one of those, and a large one, will come out of land held. But all the other ones -- and the one that we've actually been pursuing and working on for 19 years. Other than that they are all recently sourced opportunities.

And for Deer Springs, as Brian talked about, we do have another 3% of the portfolio that we have identified that we would like to sell. But as he said, the sale of those is really uncertain. What is different about Deer Springs is that we think it is more likely than not that we will sell it at some time in the next several years. Specifically because we want to exit the market and we have accepted that we will take a price at which we have written it down to. Because it is very difficult to manage and lease such a large asset when we don't have a local office.

Okay, thanks.

Andrew Rosivach, Goldman Sachs.

Good morning, guys. I just had a question on CapEx. If I take your disclosure on page 13 and I back it away from FFO, and I take away the straight line, it is actually coming up with a number that is lower than your dividend. But that is also not fair because, obviously, you are upping occupancy and that takes a lot of CapEx, as well. Do you have any idea of a sense of what your true run rate CapEx would be? And if you put that in, will you be covering your dividend?

I will let Brian address the CapEx run rate. But first, let me just -- we had a lot of non-cash expenses this year with preferred issuance costs, write-offs. We also re-did our term loan and our line and that also is some non-cash expenses. So we did cover our dividend this year and would expect that we're going to be covering it in the future, as well. But I will let Brian answer the CapEx run rate question.

Yes, our white box, which are really driving it, as she said, is related to a lot of things, one of which is the high volumes of leasing. In 2012 it was $0.60 a square foot, and we think in 2013 we will reduce that by about one-third, get it down to $0.40 a foot, and it will be even lower in 2014.

What is going on there is not only have we done a lot of leasing in 2011 and 2012, but a lot of the leasing was to restaurants, which required some upgrades and building renovation. But also a lot of anchor activity, re-leasing of anchor space where we had to, in some cases, replace and fix buildings where you had an anchor in there for 20 years. In some cases we had to combine small shops spaces to create a much larger space, which is very expensive. And then we had several examples of larger spaces being subdivided, where you got to do all kinds of work to the building. So, that is what's really driving it.

Said in another way, our routine building improvements should run about $0.55 a square foot. As Brian indicated, our white boxing in 2012 was $0.60. We expect it to move closer to $0.40 a foot. And then we would expect in 2014, it would even be at an even a lower level.

Terrific, I will put that in to the machine. Thanks guys. (laughter)

(Operator instructions)

Paula Poskon, Robert W. Baird.

Thanks, good morning everyone. Just a question for Lisa on guidance -- how much redevelopment investment is embedded in guidance, if any? Where do you guys see the most opportunity for redevelopment in your portfolio?

I will let Brian address the opportunities. We expect that we should be able to do up to about $15 million of redevelopments per year. We would love to do more. But all the stars have to align for that to happen. They are really difficult to get going. So, I will let Brian talk about what we have coming this year.

This year we may -- in 2013 we have already got the one going for $8 million. And that is just an example of an older center. This is typical, where we are actually going to get over $700,000 of increased revenue from the redevelopment of two anchors. We're tearing down a Walgreens, tearing down Publix and rebuilding. We've also got the Balboa Mesa redevelopment coming, which we acquired last year. And then, I guess the source going forward, as Lisa said, you can probably figure there is maybe $15 million that would come from the existing portfolio. But we also have the additional phases of a lot of the developments that when we went -- since 2009, we right-sized them.

For example, later this year we would hope to expand Lee Airpark in Annapolis, which is 100% leased or close to it. And then we've got the expansion of the Golden Hills property in California. And then one other we'd likely do at the end of this year would be the Woodway Collection, where the anchor is at the end of its term and we will replace the anchor and do a full redevelopment.

And also I want to amplify that a little bit and connect the dots back to Andrew's question about CapEx. The anticipated amount of starts from a redevelopment where we have visible attractive returns on invested capital is in the neighborhood of $15 million. And that absolutely is a top priority to the extent we can expand that that would be great.

But we've also -- and I think we break that out separately -- but we anticipate spending about another $15 million a year over and above routine building improvements where we think that we can enhance the look of the shopping center, do a facade redo, and that we think that although the returns aren't immediately visible, that we would expect we're going to get an even higher lift from our growth in net operating income.

And to clarify from a disclosure standpoint, the expansions and redevelopments that Brian was speaking about, we do disclose in our developments status page and we have it down at the bottom. So any expansions that we would do of existing centers would show there -- would not be part of the CapEx disclosure. The major renovation CapEx disclosure is on a separate page. But we also -- but we do disclose both in detail.

Thanks everyone.

(Operator instructions)

Cedrik Lachance, Green Street Advisors.

Thank you. Lisa, I just want to go back to your answer on the Whole Foods being included as a development profit. The Whole Foods sale. My understanding is that the Whole Foods itself opened in 2009. So how did it end up qualifying as a merchant building gain at the end of 2012?

It was completed and moved into the operating portfolio in Q4 of 2011. So basically, our internal policies have sold within one year of completion, it would be included in the gain. Remember, Cedrik, we do exclude it from core FFO.

Sure. I guess I misread that somewhere. So open in 2011?

That is when we completed it.

One of the other things is although right now it's just a Whole Foods, the original intent of that -- there was an office building on the corner and we were planning on redeveloping that. Either tearing it down, converting it to a drug store, or something, putting out another pad out there, and the entitlement process in Santa Barbara is an incredibly burdensome and lengthy one. And finally what we ended up doing is selling off that property so all we were left with was the Whole Foods, which then went into the operating property.

Okay. That works. In regards to the redevelopment discussion from earlier, how much of that redevelopment's spend contributes to same-store NOI growth in 2013? Does it account for 50 basis points of the 2% to 3%? Can you try to give me a range in there?

I will have to get back to you on 2013. In 2012, I believe it was about 20 basis points. Just as -- remember, Brian talked about he gave Woodway as an example. That is one where we are going to have the anchor down for a period of time so at the same time that you are getting the benefit of those that you are completing, you are being -- you are having the dilution from those that you are taking off-line. We are happy to give you that number. I'll follow up.

Okay, no problem. Final question -- have you been using the ATM in the fourth quarter?

We did not use it in the fourth quarter.

Thank you.

Thank you, Cedrik.

(Operator instructions)

We have a follow-up from Jeff Donnelly, Wells Fargo.

I was just curious to get your updated thoughts on Supervalu and Fresh & Easy, and how you guys are thinking about those situations?

Well, Fresh & Easy, we assume they are gone. So we are actively in discussions with people with replacement tenants for those spaces. And fortunately we have only got two operating and they are both in Northern California and they should be -- there is a lot of demand for those spaces. Supervalu, as I kind of indicated in the remarks, really no change. I think we said last quarter that, having looked at all the properties, looked at what we could do with them if we got all the spaces back, we felt there were only, you know, a handful of ones that might take some time to release.

Since then we met with the representatives who shared with us their profitability in the sales for all the stores, and there were literally just a few that were either at break-even or at a loss. And one of those is -- the term expires in 2015 and the rent is at $260 a foot so we're more than happy to get that one back. Another one is adjacent to a large retailer who would want to expand in that space. So honestly, there is just a couple I think that could be -- we just feel as comfortable as we can be that we are not going to be impacted that much.

And just in general, I think as Brian indicated earlier, we are not involved, but based upon that kind of secondhand knowledge, which we are following very closely, the operators of Albertson's have done a good job with that chain, the Supervalu people and investors are pretty optimistic about what they can do with the chain. It, obviously, still is a very competitive industry. It remains to be seen, but I do think that there is a better chance for a turnaround and there is a lot more clarity there.

That is helpful. Actually, just to circle back on Deer Springs, I guess my question before is I was maybe more surprised by the magnitude of the write-down. I was surprised that it would not have been tripped before because it is a pretty substantial write-down, I think of it particularly on a per square foot value relative to the size of the asset. Is that something to do where you guys think Las Vegas retail is currently valued?

I could go into a much longer discussion on an accounting education but I think it would bore you. (laughter) But you're adding impairment. There has to be a trigger, basically, to evaluate, to reevaluate for an impairment. And the trigger here was the fact that we believe it would be more likely than not that we're going to sell it.

Okay.

That was what changed.

The other thing, Jeff, about it -- what's interesting is when this was originally underwritten it was underwritten to be a 700,000 square-foot property and when the market turned, we built only what was under construction and that was only 330,000 square feet. So, there is 370,000 square feet that did not even get built for about 37 acres worth of coverage. And I think that is one of the reasons why you're seeing such a big impairment.

Okay, that is helpful. Thank you.

Just to reiterate, it is not consistent with our infill discipline future development strategy.

Nathan Isbee, Stifel Nicolaus.

Hello, good morning. Brain, could you give a little more detail on the expected 4Q move-outs that did not occur? Were those tenants close to maturity, just re-upped or were those tenants that decided to hang on?

They were tenants that appear to have decided to hang on. You know, that is just -- the move-outs are always the hardest thing for us to plan on. We go through space by space and we take a look at what the property managers are saying based on the feedback from talking to the retailers. We look at what we want to do. We look at their sales. At the end of the day, in the fourth quarter they just did not move out. Now, we wonder does that mean they are going to move out first quarter?

That is what I was getting at.

And the first quarter is not done, so I don't have the answer for you. But you would think that if they were going to go they would limp through the holidays, extract as much sales as they could, and then move out. But I would tell you right now, that the January numbers indicate that they have not moved out and we are way ahead of plan in terms of move-outs for January.

Okay, but you are assuming in your 2013 guidance that they do move out at some point?

Yes.

Okay. And then just, could you remind --

That is in the range, we are, right? That is what the same property growth of 2% to 3%, would assume that has a range of move-outs in it, as well as our percent leased.

We didn't change that.

Right. And since I have the floor and I have a really good team that e-mailed me the impact on redevelopment growth in 2013. To answer Cedrik's question, it is approximately 20 basis points.

Okay. And then could you just update us on the same-space rent growth assumptions in your guidance? I notice you took it out of the supplemental.

Yes, and we did not provide exact guidance even at our investor meeting in December. It is one of the most difficult things to forecast. But, if you'll recall, at that time Brian did indicate that we could expect that we would be in the mid to high single digits for 2013.

Okay.

We are starting to see more pricing power so that would put us at slightly better than 2012.

Okay, thanks so much.

That you, Nate.

Samit Parikh, ISI.

Two questions, really, on funding. One, I know, I think someone asked did you use the ATM in 4Q. Can you tell us if you used any of the ATM in 1Q so far?

It would be a blackout period.

That's true. Okay, fair. Also, you sold the Whole Foods, right, that you opened in 2009, and given sort of where cap rates are right now for these type of grocer -- either single tenant or small grocery anchored centers and Publix buying everything they can -- do you think selling maybe some of these assets that you developed between 2006 and 2008 you have several of these smaller grocer-anchored assets that may have some limited near-term growth is a better funding strategy near term than using the ATM to fund your development?

Possibly yes. And in fact that clearly the sale of Paseo del Sol was an opportunistic sale, because it was a cheaper cost of capital than selling our equity at that time. And that is why it is not a coincidence that we did not tap the equity market in the fourth quarter.

Are you in discussions right now? Is there a discussion going on with Publix or some of the other centers of the Whole Foods, and are you seeing an -- a big increase in the appetite of net lease investors to pay lower than your current cost -- lower than your current implied cap rate type -- cap rates for some of these assets that you would be willing to part with?

No, not necessarily. But I will also remind you too, that we do have this 3% that Brian talked about, which at this time is a higher priority than some of the limited growth assets. But to the extent that we can sell the limited growth assets in lieu of tapping the equity market, that is something that we will consider.

But we would not -- just to be clear -- we would not sell the primary anchor in a shopping center. Because we think that is important to the long-term value, even though that primary anchor obviously has less growth potential than the side shopper and/or some of the secondary anchors.

Okay, thanks.

With no additional questions in queue I would like to turn the call back to management for any additional or closing comments.

We appreciate your time and interest in Regency and wish everybody have a great day and a great Super Bowl weekend. Thank you very much.

And again that does conclude today's call. Again, thank you for your participation. Have a good day.