Retail Opportunity Investments Corp (ROIC) 2015 Q1 法說會逐字稿

Welcome to Retail Opportunity Investment's 2015 First Quarter Conference Call. (Operator Instructions)

Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of Federal Securities law. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations.

Information regarding such risks and factors is described in the Company's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. Participants are encouraged to refer to the Company's filings with the SEC regarding such risks and factors, as well as for information regarding the Company's financial and operational results. The Company's filings can be found on its website.

Now I would like to introduce Stuart Tanz, the Company's Chief Executive Officer. You may begin, sir.

Thank you. Here with me today is Michael Haines, our Chief Financial Officer, and Rich Schoebel, our Chief Operating Officer.

We are pleased to report that the Company is of to a terrific start in 2015. Fueling our great start are the exceptionally strong fundamentals across our core markets. In fact, our markets rank among the top retail markets in the country according to Marcus and Millichap's 2015 retail outlook.

Needless to say, we are making the most of it. We continue to lease space at a record pace, and with our portfolio virtually full, we are having great success in driving rental rates higher as well as enhancing the tenant mix across our portfolio, as Rich will discuss in a minute.

With respect to acquisitions, we continue to draw upon our 25 years of operating on the West Coast and the relationships that we've built during that time. Through our off-market contacts, we continue to source great opportunities to acquire truly exceptional shopping centers.

Thus far in 2015, we have secured $207 million of acquisitions, including $99 million acquired in the first quarter and another $108 million that we currently have under contract.

The deals under contract include two extraordinary best-in-class grocery-anchored shopping centers located in the San Francisco Bay Area market, with Marcus and Millichap ranks as the No. 1 retail market in the country.

The trade area and demographics for both of these new acquisitions are extraordinary, with a population density at over 150,000 people and household income over $140,000. One of the shopping centers, Gateway Center, is located in the same sub-market of San Ramon as our existing Country Club Village shopping center. In fact, the two properties are less than a mile apart. With Gateway we will now own and control the two premier grocery-anchored shopping centers serving that sub-market, which will enhance our ability to drive rental rates higher, maneuver tenants, and take full advantage of the offerings' synergies.

The second San Francisco Bay Area shopping center that we currently have under contract, Iron Horse Plaza, is located just north of San Ramon in Danville. The property is anchored by one of the best high-end grocers in the Bay Area that serves as a terrific draw to the shopping center given its 60-year history in San Francisco and its very loyal customer base.

With these two new acquisitions, our San Francisco Bay Area portfolio will now include 11 shopping centers totaling upwards of 1 million square feet.

In addition to acquiring the two San Francisco shopping centers, we are also acquiring the grocery-anchored spaces at two of our existing centers. Both spaces are controlled by the same investor that we've had a long and successful history with dating back to our Pan-Pacific days.

Specifically, at our Pinole Shopping Center, we are buying the 59,000 square foot space that is leased to Save Mart. At our Canyon Park Shopping Center, we're buying out the Albertsons lease. Albertsons had been underperforming for years at this property but given that they were only paying a minimal amount of rent, they continued to operate the store until this past year. Since the day we acquired the center, we've been working to get control of the lease.

The merger between Albertsons and Safeway finally paved the way for us to get control of the space. We already have LOIs from three different grocers vying for the space, all at the current market rent, which will be a substantial increase.

In light of acquiring these two anchor spaces, it's important to note that of our entire portfolio, totaling close to 8 million square feet with over 1,400 tenants, we only have a small amount of anchor spaces where the retailers own the space. At the very core of our acquisition philosophy is owning and controlling the square footage at our properties, especially the anchor space. In fact, we often pass on what would otherwise be attractive acquisition opportunities when the properties have shadow anchors.

This strategy has proven to be instrumental over the years in our ability to effectively manage our tenant base and consistently achieve high occupancy and strong rent growth. Needless to say, we're very pleased to get control of these two grocery-anchored spaces.

Now I'll turn the call over to Michael Haines, the Company's Chief Financial Officer. Mike?

Thanks, Stuart. For the three months ended March 31, 2015, the Company had $45.1 million in total revenues and $12.9 million in net operating income, as compared to $36.4 million in total revenues and $10.1 million in net operating income for the first quarter of 2014.

On a same-center basis, which includes all the shopping centers we have owned since the beginning of 2014, totaling 53 properties, net operating income on a cash basis increased by 4% for the first quarter of 2015 as compared to the first quarter of last year.

With respect to net income, for the first quarter of 2015, the Company had net income of $4.4 million, equating to $0.04 per diluted share, as compared to net income of $3.3 million, or $0.04 per diluted share, for the first quarter of 2014.

In terms of funds from operations, for the first quarter of 2015 FFO totaled $21.8 million as compared to FFO of $16.5 million for the first quarter of 2014. On a per share basis, FFO increased to $0.23 per diluted share for the first quarter of 2015, representing a 9.5% increase over FFO per diluted share for the first quarter of 2014.

Turning to the Company's balance sheet, at March 31 the Company had a total market capital of approximately $2.6 billion, with $825 million of debt outstanding, equating to a debt-to-total market cap ratio of 31.6%. And for the first quarter, the Company's interest coverage was a solid 3.6 times.

With respect to the $825 million of debt, the bulk of that was unsecured, totaling approximately $732 million. As of March 31, we only had $93 million of secured debt outstanding, and we continue to work to lower our secured debt even further. In fact, subsequent to the first quarter we retired a $16 million mortgage so our secured debt is now down to just $77 million.

The largest mortgage we currently have is a $48 million loan that is secured by our Crossroads Shopping Center. The loan matures on September 1 and bears interest at 6.5%. We expect to replace that mortgage with a new smaller loan totaling approximately $36 million that will bear interest at a significantly lower rate, approximately 3.5%. And the new loan will be secured by a much smaller shopping center so Crossroads will become unencumbered.

As a result of the $16 million mortgage being paid off, taking into account for pending acquisitions, all of which will be unencumbered, and the Crossroads loan being replaced, our unencumbered portfolio, which stood at 91% as of March 31, on a square footage basis will increase significantly to approximately 96% by the third quarter. And we will have only about $60 million of mortgage debt outstanding.

In terms of equity, thus far in 2015 we have raised approximately $10 million through our [ATM] program at an average price of $18.25 a share. In addition, in connection with our pending acquisition of Iron Horse Plaza, we will be issuing approximately $16 million of operating partnership payments.

Lastly, in terms of FFO guidance, taking into account the results for the first quarter together with pending acquisitions and ongoing leasing activity, we currently expect FFO per diluted share to be between $0.90 and $0.94 for 2015.

Now I'll turn the call over to Rich Schoebel, our COO, to discuss property operations. Rich?

Thanks, Mike. As Stuart indicated, the fundamentals across our markets and portfolio continue to be very strong. Not only are the economic and demographic trends favorable, perhaps more important the supply and demand fundamentals remain very strong, specifically as it relates to retail properties. New development continues to be very limited in the shopping center sector across our core metropolitan markets.

Additionally, the barriers to entry are considerable as the amount of land available for new development is very limited and the entitlement process is very time-consuming, unpredictable, and costly. Which all translates into our markets and shopping centers being very protected.

As a result, demand for space continues to accelerate. And it's coming from an increasingly broader range of retailers. In fact, during the first quarter, when there's typically some post-holiday season fallout amongst tenants, we've hardly experienced much of anything this year. And what little seasonal vacancy we've had we are already quickly releasing that space such that our occupancy is up 110 basis points from a year ago to 97% leased as of March 31, which is the highest our portfolio has ever been at this time of year.

Breaking the 97% leased rate down between anchor and non-anchor space, at March 31 our anchor space was 100% leased and our shop space was 93.4% leased.

And in terms of the spread between occupied space and leased space, which includes newly signed tenants that will soon take occupancy and commence paying rent, you may recall that at year end the spread was 5%, representing an additional $5.4 million in incremental annual base rent on a cash basis. During the first three months of 2015, tenants representing about $1.7 million of that $5.4 million started paying rent.

In terms of the current spread between occupied and leased, as of March 31 the spread stood at 4.5%. This takes into account not only those tenants that started paying rent in the first quarter but also includes all the new leases we signed during the first quarter, where these new tenants haven't yet taken occupancy and started paying rent.

With these new leases included, the 4.5% spread represents about $5.6 million in incremental annual base rent on a cash basis. And that $5.6 million, as well as the $1.7 million that started in the first quarter, does not include the additional incremental cash flow from [camera] coverage or percentage rent going forward.

Taking all of that into account, needless to say there's a considerable amount of cash flow that will be contributing to our bottom line in the months ahead from all of our leasing activity.

And with respect to specific leasing activity in the first quarter, during the first three months we executed 92 leases totaling 280,000 square feet, achieving a 12.8% increase in same-space comparative rents on a cash basis.

Breaking that down, we executed 48 new leases totaling 111,000 square feet, achieving a same-space comparative cash rent increase of 25.4% and we executed 44 renewals totaling roughly 170,000 square feet, achieving a 7.1% increase in cash rents.

And the leasing momentum continues to ramp up in the second quarter. As an example, we just completed a re-tenanting initiative at a shopping center that we acquired at the end of last year. When we acquired the property it was 88% leased. Our team immediately went to work and in just a few months' time we successfully relocated several in-line tenants, reconfigured and combined spaces to make way for a new retailer that we just signed such that the property is now 99% leased.

Looking ahead at our scheduled lease expirations between now and year end, we only have one anchor lease expiring, for 21,000 square feet, which we're in the process of re-leasing. And in terms of non-anchor space, we currently have about 300,000 square feet scheduled to expire.

Given the strong demand for the space that we continue to see across our portfolio, we anticipate that we will re-lease this space, achieving rent growth consistent with our first quarter results, possibly better.

Now I will turn the call back over to Stuart.

Thanks, Rich. With our strong start to the year, we are excited about the prospects of 2015 shaping up to be another banner year for the Company. Notwithstanding an increasingly competitive marketplace, we continue to execute our business plan across all disciplines.

As Rich just indicated, leasing continues to accelerate. And in terms of acquisitions, our pipeline of off-market relationship-driven opportunities is very active today. That said, we remain highly selective, as always.

One of our competitive advantages, particularly with sourcing acquisition opportunities from private owners, is our ability to issue operating partnership units. As Mike noted, as part of acquiring Iron Horse Plaza, the owner is taking equity in ROIC. This represents the fourth acquisition in the past 18 months where the seller has sought to take equity in our Company.

In total, to date we've issued approximately $80 million in OP units. With each acquisition, the pricing of the units has been at a meaningful premium to our stock price at the time the transaction was agreed upon. We believe that these property owners see the potential up side in the Company, in part because of our history with them as well as our proven track record.

In fact, the weighted average total returns of these property owners that took ROIC currency instead of cash is already over 30% to date. From our viewpoint, issuing units that are reasonably valued is a cost-effective means of issuing equity and helps to maintain our strong financial position as we grow our business.

In short, we believe it has been a win-win situation that has served us immeasurably in terms of being able to acquire some truly exceptional shopping centers. Now I'll open up the call for your questions. Operator?

Thank you, sir. (Operator Instructions) Paul Adornato, BMO Capital Markets.

Good morning, Paul.

Hi; good morning. Stuart, I was wondering if you could tell us a little bit about how you came to the two San Francisco properties. Were they shown to the market or from existing relationships?

Sure. Both properties were from long-term relationships that I had and management has had on the West Coast for many years. And so we knew the assets well, we were able to move quickly in terms of underwriting the assets, and the quality of these assets, in my humble opinion, some of the best-quality assets on the West Coast. But long-term relationships.

Okay, thanks. Can you talk about the cap rate on those transactions and what up side you see once you take ownership?

In terms of the cap rate for the properties that we have under contract, they're just shy of 6%. Looking ahead there's good up side through a number of opportunities that we identified during our underwriting process, which should increase our yield by about 100 basis points over the next 12 to 24 months.

Okay, great. And was wondering if you could also comment -- given the rapid rent growth, how is that affecting your tenants? What is their occupancy cost and are they having to stretch in order to pay the additional rents?

Hey, Paul, it's Rich. I think the other thing we're seeing besides the rent going up is the sales are trending up very well across the board for our tenants that report sales. Particularly the grocery tenants, where we're seeing some really strong double-digit growth in their sales. So the customer demand seems to be there as well as the tenant demand.

Okay, great. Thank you so much.

Thank you.

Collin Mings, Raymond James and Associates.

Good morning, Collin.

Hey, good morning. A couple of questions, first just on the acquisition front. I know in the prepared remarks you indicated there's really a limited amount of anchor space that might be available. But you said you're looking at additional acquisition opportunities -- do you have any other deals that you're looking at with a similar type of structure and not going to take out an anchor space?

Our pipeline remains very, very strong. In terms of anchor spaces, I don't see these type of opportunities at the current time in terms of our pipeline. But again, it ebbs and flows every day in terms of the opportunities. But in terms of what's in front of us this second, no.

Okay. And then maybe just -- last quarter you highlighted some potential capital recycling plans for this year. Can you update us on that front, and anything you might be able to provide as far as potential cap rates as far as if we're to ex-(inaudible) this year?

Sure. I mean, we are still considering selling some non-core properties. It's a bit too early to talk, give you any specifics. And I guess patience continues to pay off in terms of the marketplace because we are seeing a lot of assets on the West Coast now trade in the sub-5% cap rate -- 5% cap rate range.

Okay. And then, again I think -- as we think about the different markets that you're in on the West Coast, I think last quarter you highlighted that Portland was really a market where you were really encouraged about some of the momentum and some of the potential for more pricing power. Can you talk just a little bit more about what's driving that outlook for that market in particular, and any update to that outlook as well?

Sure. Well, all our markets are really strong, as we've articulated today and I think as we've shown in terms of our earnings. Portland and Southern California are the two markets on the West Coast that have come out of the recession later than Seattle and the Bay Area. So those are the markets we're seeing a lot of pent-up demand and a lot of growth as it relates to our rental rates.

Portland is continuing to show that growth. And as I look into certainly the second half of the year or certainly the balance of the year, I see this continuing even more, even stronger than it's been. Again, for Portland and primarily Southern California. And of course, Seattle and San Francisco just keep going. I mean, there's no let-up from what we can see there in terms of overall tenant demand and growth in rental rates.

Okay. Thanks very much; I'll turn it over.

Thank you.

[Sandy Speke], Wells Fargo.

Good morning, Sandy.

Oh, good morning. I guess I'm just curious -- on the $5.4 million of leased and uncommenced rent that was signed at year end 2014, how much of that are you expecting to commence this year?

It is Rich. We don't have a specific number that I can give you right here on the call. We can certainly follow up with you with some more details. But throughout the balance of the year, we expect that most of that will be coming in. However, we're also going to be adding to it as we lease up the available space. There's always going to be some number out there of uncommenced rent.

And we see the acceleration much more so as we move into the second and especially the third quarter of this year. That's when a bulk of this really hits our income statements.

Okay, great; thank you. And then, it looks like the guidance adjusted this year counts $2 million lower versus prior guidance. I know last quarter you talked about the model kind of running higher, shares for acquisitions, on a leverage-neutral basis. I guess I was just curious, if it's not going to be equity, if it's going to be funding some of these additional acquisitions, what you're sort of expecting in terms of another use of capital.

Hi Sandy, it's Mike. So we -- at the end of the first quarter we had gone back into our internal model and kind of modified the assumptions for capital needs going forward, both debt and equity. And that said, just keeping our floating rate debt balance in mind, watching the bond market and weighing all of our options, it'll just be a function of timing our acquisitions as we move through the year. We're a little bit front-loaded on acquisitions but we also thought we were going to raise equity -- or contemplated, model-wise, projection-wise -- to do some more in the first quarter, but that's going to be pushed out further in the year.

Okay, great. And then, maybe just in terms of Excel being, obviously, taken out at this point, I guess I'm just sort of curious what you think about that transaction and just kind of wanted to get your perspective on the timing.

Sure. I mean, in terms of the Excel deal, I think it's good for both sides. I mean, the deal was announced a few weeks ago and we've gotten a lot of questions about it. And given that Excel is based in San Diego, a lot of people thought that their portfolio was actually similar to ours. However, only a third of their portfolio is located on the West Coast, and only about a third of their properties are grocery anchored. So in terms of the overall transaction, we think it's good for both sides.

Okay. And then just, I guess, in terms of sort of timing on that, is this -- I guess there's sort of a message that says is this a good acquisition environment or is this a good disposition environment? I guess just maybe can you give us some sort of broader perspective on that? Thank you.

For us, it's a great acquisition environment. Because we continue to be the [black] buyer of choice on the West Coast, and we continue to source some very strong off-market transactions. So we believe certainly acquisitions, for us, is a much better way at this point to create value with shareholders, along with all the embedded growth that we've got coming in our portfolio.

Okay, great. Thank you, I appreciate that.

Thank you.

Todd Thomas, KeyBanc Capital Markets.

Good morning, Todd.

Hi. Thanks, good morning. Just a quick follow-up on the guidance question. What was the increase attributable to specifically? Was it a change in sort of the corporate model around funding acquisitions and the reduction in the share count, or was it the same store? I mean, what was the primary driver?

Well, I think it speaks to the strength of our property and the fundamentals. Our Q1 came in $0.01 ahead of consensus and we're just looking through the model for the balance of the year and looking at (inaudible) that's going to come on and just felt that we could tighten up the guidance a bit.

Yes. I mean, it's coming in from the operating side of the Company. I mean, the share count is important, Todd, but I think what you're seeing here is really, as we've articulated, is the strength of the real estate more than anything else.

Okay. And then Stuart, the $300 million acquisition target for the year -- that was a net number, including dispositions. It sounds like dispositions might be taking a little bit of a back seat right now. Is that the right read?

And then, given the pace of acquisitions so far to date, are you now assuming a higher net acquisition number for the year?

We haven't guided the Street with an increase in terms of acquisitions, but I'm very comfortable where certainly things at this point in the year. And again, as I articulated in terms of dispositions, we are still considering selling a couple of non-core assets. But again, I think you'll hear more specifics as we move closer through the year.

Okay. And in terms of acquisitions, are there any sizeable deals or any small portfolios out there, I guess, or is it mostly one-offs like we've seen over the last several quarters that you're targeting?

It's both. We are seeing some very nice one-off transactions with some size as well as portfolios. We've got our eye on both. So we'll see how things progress. But right now, the year is looking very strong. And more importantly, the quality of the assets -- that's what's important to us, that we're buying the best assets in our back yard that have what I would call juice in terms of building shareholder value.

Okay. And just last question. In terms of the anchor acquisitions, not sure if I missed this at all, but how much capital do you anticipate spending to re-tenant the spaces? And what do you anticipate the overall stabilized yield to look like upon completion for those two boxes?

Well remember, we're only doing one of the two because one is an existing tenant that's paying rent. But the store in Bothell, in Seattle -- Rich, what are we spending there, about?

Well, we're going in for those deals in the mid-6%s and we expect that depending on which tenant we select for Canyon Park, that that yield will be in the 7%s.

So on a blended basis, you're probably in the mid-6%s, and that's conservative.

Okay, great. Thank you.

R. J. Milligan, R.W. Baird.

Good morning, R. J.

Hey, good morning, guys. Stuart, wanted to follow up on Sandy's question about West Coast and where we are in the cycle. Curious where you think we are in the cycle and maybe how that's changed over the past year or two. And whether or not the cycle's gotten longer, and maybe what's contributed to that.

Yes. I mean, look, we think the cycle is a bit longer this time around. No supply -- I mean, that's been one of the key factors. There's been nothing that has been built. So certainly the acquisition environment and valuations are getting in the sub-5%s at this point. But the runway is still looking pretty good for us. So if you would ask me what inning we're in I would tell you we're probably still in the sixth inning.

Okay, thanks. And I -- also to follow up on sort of the M&A question, there's obviously been increased interest in retail access. I'm curious if you're seeing private equity interest out on the West Coast, whether it be one-off acquisitions or looking to portfolios, given the fact that cap rates are so low. It's difficult to make the math work if you're private equity.

The wall of capital is tremendous. From private buyers, institutional capital -- there's a lot of it. And the West Coast over the last year has become the most sought-after market in the country. So we continue to see a very strong demand.

But for us, we are very selective in what we're buying. And more importantly, we're buying from primarily mom & pop owners that -- for us, that mom & pop owner. So the wall of capital is there, the buyers are there, but we continue, because of our longstanding relationships, to find some very attractive opportunities.

Okay, great, guys. I'll see you out in Vegas.

Thank you.

Jay Carlington, Green Street Advisors.

Good morning, Jay.

Morning, Stuart. So Mike, not to beat the guidance horse here, but just wanted to check on the FFO. The absolute number, I guess, has come down a little bit? But it sounds like most acquisitions are front-end loaded. So just kind of curious what moving parts are in there that I may be missing.

Well I think, again, it goes back to the model assumptions that we use. We had the three acquisitions that had closed in January that were kind of identified late last year. We also had some other acquisitions pegged in the model to occur during Q1 but those have been pushed back into Q2. So it's pushing down a little of the total FFO on a yearly basis.

So just a quarterly shift from Q1 to Q2, then?

Right.

Okay. And then, Stuart, I know we talked a bit last year, kind of the spread on your leased commenced and how you were kind of seeing a delay getting those tenants to commence. Are you kind of happy with the progress you saw in terms of that commence-to-lease spread narrowing 50 basis points? Is that kind of a good run rate to think about as we move throughout the year?

Yes. No, we were making very good strides there and I think, as I think Mike has articulated and I think I've articulated, that that spread really starts to accelerate as we move into the second and third quarter of the year. So I can't give you an exact number by quarter -- but I can tell you in terms of 50 basis points, but I can certainly tell you that it is going to accelerate, which hopefully will provide us some very strong numbers in terms of same-store NOI growth.

Okay, thank you.

Thank you.

Christy McElroy, Citigroup.

Good morning, Christy.

Good morning, guys. Sorry, another follow-up on the guidance stuff. It sounds like, from what I'm hearing, that the change in the share count had to do with the expected timing of an equity raise. Was that change in timing expectations -- did it have more to do -- was it more related to the change of expected timing of the remaining acquisitions that you're guiding to, or has there been any change on your views of sort of leverage and the balance in debt and equity when it comes to funding investments?

No, it's really just a shift of the timing, pacing it with the acquisitions. Like I think I mentioned earlier, we want to continue to keep our leverage ratio in the 40% range and keep our key credit metrics about the same levels as they are today. So as we go through the balance of the year, we're going to be looking at debt and equity to make sure we keep those metrics in check.

And so, what's in the model right now in terms of the timing of a raise this year? Because obviously there's still a raise that's assumed in there. So maybe you can help us pinpoint sort of a timing of the issuance and dollar amount.

We're keeping all of our options open. I think we're going to be doing, obviously, both debt and equity. How we're going to go about doing that -- we have a lot of different options at our disposal so I don't want to necessarily pinpoint any specifics.

Obviously, we're not -- our equity is the most precious resource. So we're not going to be selling our equity cheap, either. It just depends on where the markets move and what's best for shareholders as it relates to capital allocation.

Got you; okay. I know you're focused on grocery-anchored centers. Maybe you could provide your thoughts around whether or not you'd be interested in maybe expanding beyond that scope into other sort of retail formats like street retail that are in your core markets.

Yes. No, look, this is what we've done for the last 25 years. We have focused in one product type -- grocery- drug-anchored shopping centers. We did buy one street anchor, one urban project in downtown Seattle, the only grocery store in downtown. So periodically if we can find an opportunity in one of the big CBDs on the West Coast that fits that profile, we'll look at it and we might buy it.

But the focus and the discipline of this Company is not going to change. There's a lot of advantages with buying this type of product as it relates to the retail industry. I mean, personally I think the grocery- drug-anchored sector offers not only the most defensive part of the business but in a lot of cases it also provides the up side. But more importantly, it's the co-tenancy provisions. Very few co-tenancies. So as retail continues to change day in and day out, it certainly protects the down side risks, which for us are really important.

Okay. And then, just lastly, I'm sorry if I missed it. It sounds like the Save Mart at Pinole Beach there was a sale lease-back. What was the cap rate on that, and sort of in terms of your comment about gaining control over the real estate, is there any sort of longer-term strategy in terms of gaining control over that box?

Sure. It was not a sale lease-back. This was an investor that purchased the Albertsons leasehold interest up in [Bajo] and then owned the fee interest here and leases it to Save Mart. So we're taking out that sandwich position.

And then in terms of what it might hold for the future, having control of that property gives us a lot more flexibility as redevelopment opportunities present themselves going forward. And that property, we believe, long term has some redevelopment potential.

I'm sorry, what was the yield on that, taking out that position?

Well, on a blended basis we're going in at about a 6.5% cap on both transactions. We expect that to be in the 7%s going forward. That's unlevered cash.

Okay, thank you so much.

Thank you.

Collin Mings, Raymond James Associates.

A follow-up here. We've been talking about the cap rate environment, just the overall demand you're seeing in your markets. Talking again about sub-5% cap rates for some assets. Can you maybe quantify that, Stuart, on maybe how much that has changed in your mind year over year, or even since the beginning of the year?

Sure. Year over year, probably 75 basis points, 50 to 75 basis points. In the last 90 days, I would tell you about 25 basis points. Values have continued to move up, cap rates have continued to move down. And I will again say that the West Coast continues to be the most sought-after market in the country.

Okay, that's very helpful. Thanks.

Thank you.

Thank you. And I'm not showing anybody else in the queue, sir.

Great. Well in closing, I'd like to thank all of you for joining us today. If you have any additional questions, please contact Mike, Rich, or myself directly. Also you can find additional information on the Company's quarterly supplemental package, which is posted on our website.

And lastly, for those who are attending ICSC convention in Las Vegas starting May 18, be sure to look us up. Our booth is in the same location as last year. Specifically, in the south hall at S490 N Street. We hope to see you all there and thanks again, and have a great day, everyone.

Thank you. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program; you may now disconnect. Everyone have a wonderful day.