Rithm Property Trust Inc (RPT) 2006 Q2 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good day ladies and gentlemen.

  • Welcome to the Ramco-Gershenson Properties Trust Earnings Conference Call.

  • At this time, all participants are in listen only mode.

  • We will facilitate a question and answer session toward the end of the conference. [OPERATOR INSTRUCTIONS] I'll turn the call over to Dawn Hendershot.

  • - IR

  • Good morning, and thank you for joining us for Ramco-Gershenson Properties Trust second quarter conference call.

  • I'm hopeful that everyone received our press release and supplemental financial package which are available on our website at RGPT.com.

  • At this time, management would like me to inform you that certain statements made during this conference call which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

  • Although Ramco-Gershenson believes the expectations reflected in any forward-looking statements are based on reasonable assumptions it can give no assurance that its expectations will be obtained.

  • Factors and risks that could cause actual results to differ from expectations are detailed in the press release, and from time to time in the Company's filings with the SEC.

  • Additionally, we want to let everyone know that the information and statements made during the call are made as of the date of this call.

  • Listeners to any replay should understand that the passage of time by itself would -- will diminish the quality of the statements made.

  • Also, the contents of the call are the property of the Company, and any replay or transmission of the call may be done only with the consent of Ramco-Gershenson Properties Trust.

  • Having said that, I would now like to introduce Dennis Gershenson, President and Chief Executive Officer, and Richard Smith, Chief Financial Officer, and at this time, would like to turn the call over to Dennis for his opening remarks.

  • - Pres., CEO

  • Thank you, Dawn, and good morning.

  • I'm happy that you could join us for our second quarter call.

  • As always, we were pleased to have achieved a level the earnings that met or exceeded first call estimates.

  • As important, as our financial achievements is the level of activity in our profit centers which will insure continued earnings growth into the foreseeable future.

  • Our one acquisition this quarter was the Paulding Pavilion in Hiram, Georgia This center is in a western suburb of Atlanta, and fronts on U.S. highway number 278.

  • Our asset is surrounded by high quality, well leased centers with anchors that include a Super Target, and a Super Wal-Mart.

  • Although this purchase is rather small by our usual standards, we have optioned adjacent acreage for an expansion of the center.

  • Publix was the anchor for this modest asset.

  • When we acquired the shopping center, Publix had already closed but was still lease obligated.

  • Since our purchase, we negotiated a termination of the Publix lease.

  • We are are already in discussions with a mid box user for over half of the space previously occupied by Publix.

  • Interest has also been expressed by a number of larger users for an expansion of the center on to the adjacent acreage that we now control.

  • Thus, we plan to greatly increase both the return on our investment and net -- and the net asset value of this purchase.

  • Our acquisition team has also been busy securing the rights to acquire several additional centers that lend themselves to major redevelopment.

  • These opportunities are being considered for both on and off balance sheet transactions.

  • We expect to complete due diligence and acquire a number of these assets in the third and fourth quarters.

  • On the development front, we have substantially completed the Beacon Square project on the west side of the state of Michigan.

  • We are currently building a 15,500 square foot expansion to the center that will house six tenants.

  • A lease with advanced auto parts in 7000 square feet was executed in the second quarter, leaving approximately half of the expansion to be filled.

  • At our River City Marketplace in Jacksonville, Florida, we have opened six anchors.

  • Three more are scheduled to open this fall.

  • We couldn't be more excited about the cooperation we've received from the city of Jacksonville, and their support in making this project a huge success.

  • In May, we celebrated the opening and dedication of Airport Center Drive.

  • This boulevard will not only serve as the main access for the center, connecting I-95 with U.S. 27, but is also the first leg of an access route that the city and county anticipates will serve as the primary artery for all residents east of 95, clear to the Atlantic Ocean.

  • In addition to the opening of the balance of our anchor retailers and ancillary tenants at River City, in the third and fourth quarters, we will be announcing a number of out lot sales and leases that abut the newly opened Airport Center Drive.

  • Additionally, we are in serious negotiation with three anchor tenants who will occupy our planned Phase Two for this center.

  • Our asset management group has been especially busy this last quarter, as the number of new value added projects attest.

  • During the quarter, we commenced five new projects, bringing to eight the number of value added redevelopments underway.

  • Three of these projects are in our Michigan centers, specifically in metropolitan Detroit.

  • They demonstrate that credit national tenants continue to recognize the viability of southeast Michigan and the strength of our centers.

  • You should know that the dollar cost associated with some of these projects do not necessarily reflect the income improvement or asset value improvement they provide, not to mention the boost in our overall portfolio occupancy.

  • The strength of our locations often times means that the tenant will spend their own monies producing a disproportionate benefit for the centers.

  • Also the addition of credit tenants with long-term leases adds both stability and draw to already successful shopping centers.

  • Our leasing activity in the second quarter reflects 28 renewals of non-anchor tenants producing a 9.2% increase over prior rental rates.

  • We also signed 31 new leases, including anchors, producing a 10.4% increase over our portfolio average.

  • Of that number, 25 leases were for non-anchor locations, where we averaged a rental rate of $13.38.

  • Although this number is approximately 10% below our non-anchor average, seven new leases out of the 25 signed this quarter averaged approximately 10,000 square feet in size, and account for 68,000 square feet, or over 63% of the total square footage executed.

  • Because larger spaces produce lower rental rates per square foot, we are very pleased by the rentals achieved with each of these leases.

  • The success of our leasing program is also reflected in our occupancy rate, which stands at 94.6% at quarter end.

  • If you add those leases signed, but where the tenants are still under construction, our occupancy rate would stand at over 95%.

  • I would like to say a word about our debt level, which is both the result of a depressed stock price and the fact that our plans to generate additional capital, although not complete, are still underway.

  • These plans include another joint venture opportunity similar to our existing partnership.

  • It is our reasonable expectation that we will have something to report on the capital side in the third quarter.

  • We acknowledge that an important factor that has influenced our current stock price is the IRS case still pending.

  • The wheels of government continue to move slowly, and although we have nothing definitive to report today, we remain optimistic that the case will be resolved in our favor.

  • As you know, this cloud has hung over our Company for quite some time, in one form or another.

  • That has not deterred us, however, from formulating and executing a well-rounded business plan both over the past years and in 2006.

  • We remain bullish about our prospects, and optimistic about our future.

  • I would now like to turn this call over to Rich Smith who will expand upon the numbers in our statements.

  • - CFO

  • Thank you, Dennis, and good morning everyone.

  • The second quarter our diluted FFO per share was $0.63, which exceeded first call estimates by $0.01.

  • On a per share base, FFO remained unchanged from the same period in 2005.

  • On a gross basis, our diluted FFO increased $900,000.

  • We went from $12.6 million in 2005, to $13.5 million in 2006.

  • Some significant changes quarter to quarter included an increase in minimum rent, reduction in the G&A expense, and increase in contributions from unconsolidated entities, these contributions were offset by increases in other operating expenses as well as a decrease in income from discontinued operations.

  • The $1,149,000 increase in minimum rent was made up of a $958,000 contribution from acquisition properties and a $453,000 contribution from core assets.

  • The $574,000 reduction in the G&A expense was mostly the result of positive adjustments to professional fees, and our long-term incentive accrual as well as adjusting to actual employment costs accrued in prior periods.

  • Our income from unconsolidated joint ventures increased $108,000.

  • After adding back depreciation expense, the entities contributed $222,000 to our change in FFO, the majority of which came from our joint venture with ING.

  • The opening up of regional office in Florida, and an increase in our allowance for doubtful accounts due to potential write-offs associated with tenant audits accounted for the increase in other operating expense.

  • And lastly, for the quarter, the decrease in income from discontinued operations resulted from the sale of seven tertiary market assets earlier this year.

  • For the six months ended June 30, our diluted FFO per share increased 1.6% or $0.02.

  • We went from $1.23 in 2005, to $1.25 in 2006.

  • On a gross basis, our diluted FFO increased $2.6 million.

  • We went from 24.5 million in 2005, to 27.1 million in 2006.

  • Some significant changes for the six months ended consisted of an increase in minimum rents, an increase in our gain on sale of assets, an increase in the contribution from unconsolidated entities, decreases in our G&A expense, and these contributions to FFO were offset by a decrease in our recovery margin, an increase in other operating expenses, an increase in interest expense, and decrease in other income.

  • Our minimum rent increased $1,782,000, which was made up of a $1,775,000 contribution from acquisition properties and a $941,000 contribution from core assets.

  • These contributions from core assets were negatively impacted by a $524,000 reduction related to anchors purchasing their stores at Auburn Mile and Crossroads, and by $410,000 related to taking space off Line at Tel-Twelve in connection with the addition of Best Buy and PetSmart.

  • For the six months ended we sold sites at our Jacksonville development generating net gains of approximately $1.7 million.

  • Our income from unconsolidated entities increased $561,000 after adding back depreciation expense, these entities contributed $1,178,000 to our change in FFO, again, most of the increase related to our joint venture with ING.

  • G&A decreased $192,000 to $7.4 million for the six months.

  • We had approximately $450,000 of additional expense in 2005 that's not recurring.

  • This was offset this year by one time employment related charges for new hires.

  • We expect our G&A to the year -- for the year to be between 14.5 and $15 million.

  • For the quarter, we recovered 96.1% of our operating expenses, compared to 100.3 last year.

  • This resulted in a $887,000 reduction in our recovery margin.

  • The variance was the result of adjusting prior's year's estimates to actual based -- based on true up billings completed in the respective first quarter.

  • These adjustments increased recoveries in 2005, and decreased them in 2006.

  • We expect our recovery ratio in 2006 to be between 96 and 97%.

  • Our other operating expense increased $770,000, primarily due to the addition of our regional office in Florida, and additional bad debt expense taken in 2006.

  • Our interest expense increased $425,000 over the same period last year, $1,270,000 of the increase was due to additional borrowings at a higher average interest rate, $191,000 of the increase related to interest on a capitalized ground lease acquired in 2005.

  • These increases were offset by a $497,000 increase in capitalized interest on development, and redevelopment projects, and by a decrease in amortization of loan origination fees primarily due to our change to a non-secured credit facility and other miscellaneous items.

  • Other income decreased $455,000 primarily due to a decrease in lease termination fees, and interest income for the six months.

  • Our debt at quarter end was $702.3 million with an average rate of 6.3% and average term remaining of 4.3 years. 75.1% of our debt was fixed at an average rate of 6.2% and 24.9% of our debt was floating, with an average rate of 6.6%.

  • Availability at quarter end on our credit facilities was $30.5 million.

  • Our EBITDA interest coverage at quarter end was 2.2 times, and for the quarter our debt to market cap improved slightly to 53.6%, down from the 54.3% reported at year end.

  • Our capital expenditures for the quarter totaled -- totaled $30.6 million, 16.2 was spent on development, 8.4 million on acquisitions, five million on expansion renovation projects, $600,000 on non-recoverable Cap Ex, and $400,000 on recoverable CAM.

  • For the six months our capital expenditures totaled $51million. 31.2 was spent on development, 8.4 million on acquisitions, 9.7 million on expansion renovation projects, 1.3 million on non-recoverable Cap Ex, and about $400,000 on recoverable CAM.

  • We expect to fund future growth by retaining cash from operations by continuing to sell non-core assets and selected assets with limited upside potential, by refinancing assets which have been expanded or renovated in prior periods, and by drawing on our credit facility.

  • Lastly, as with last quarter, due to a difficult acquisition market, we expect our diluted FFO per share to be at the low end of our guidance in between $2.53 and $2.58 per share.

  • Steven can we open the call for comments please?

  • Operator

  • [OPERATOR INSTRUCTIONS] [Christeen Kim].

  • - Analyst

  • Hi, good morning, guys.

  • - Pres., CEO

  • Good morning.

  • - Analyst

  • Dennis, you spoke about some major redevelopments you guys are looking at to acquire over the back half of the year.

  • Could you maybe quantify that for us?

  • In terms of dollars?

  • - Pres., CEO

  • I have a little bit of trouble quantifying it at the moment.

  • The acquisition prices will be in the, oh, lets say the $15 million range.

  • But in each of these and the exciting part of these opportunities involves buying additional land that's adjacent to them.

  • We as a number of our peers when we have found it more problematic to buy core plus assets, because how competitive that environment has been.

  • We have looked at more opportunistic acquisitions so we are just in the process now of trying to put together the numbers for the expansions of these centers.

  • But I think you would find 12 to $15 million would be the price that the majority of them will fall into, and we are looking at two to three.

  • - Analyst

  • Okay, great.

  • And on the ground of the development side with River City, going to wrap up by the end of the year, do you guys have any other larger ground up developments, kind of on the horizon in the next six to 12 months?

  • - Pres., CEO

  • Well, as long as you go out 12 month, we are looking at several additional developments, not as big as Jacksonville.

  • If we had our preferences, they'd be within the four to 600,000 square foot range, more along the line of Crossroads development, we built in Toledo, Ohio.

  • But we are looking at several, as you may know, once you option a piece of property, the time frame between getting a property under control and actually beginning construction because of the entitlement process, signing of leases, selling of parcels to anchors, has grown to anywhere from 12 to 18 months.

  • So we are working on a number of these opportunities, and as soon as we're comfortable that we can announce them, we will certainly let you know.

  • - Analyst

  • Any change to your yield estimates on your development and reinvestments?

  • - Pres., CEO

  • Well we had historically said we -- we like a yield of 11 to 12, as with many of of our peers, and I've appeared on panels with a number of our peers who have been very active in the development area, it's become more problematic to achieve the high end of that range and we are very happy today with a 10 to 12 percent unlevered cash on cash return.

  • - Analyst

  • Great and my last question is on your G&A, you had a little bit of a bigger G&A savings this quarter than we expected.

  • Was there anything specific going on, any reclassifications this quarter or is everything the same as last quarter?

  • - CFO

  • I think everything is the same.

  • I think we are still on track, Christine, for the number I gave you relative to where we think we will be at year end.

  • I think we are on track for that.

  • If anything, I think our G&A was down a little bit from -- from a year ago.

  • - Analyst

  • Right.

  • Actually, if I can sneak in one more, any changes to your guidance for land sales or lease term fees this year?

  • - CFO

  • I'm not sure we've officially given any guidance on that, but I think that -- that the majority of the land sales will come at Jacksonville, continuation of that.

  • - Analyst

  • Last quarter you alluded to three to four million for the year.

  • - CFO

  • Okay.

  • I think then we are probably on track for that still.

  • - Analyst

  • Great, thank you.

  • Operator

  • David Fick.

  • - Analyst

  • Good morning.

  • - Pres., CEO

  • Hi, David.

  • - Analyst

  • Hi.

  • Your leasing spreads are solid here, I'm just wondering if you would comment on where -- where you're seeing them in the market?

  • You know, you're clearly in two very distinct markets in terms of sort of sentiment.

  • We're just hearing that Detroit is, sitting under a cloud, and that all the executive community there is depressed, and that sales are being impacted.

  • You seem very positive on the market.

  • So sort of two questions.

  • Can you comment a little bit more on Detroit, number one?

  • And number two, where -- what are you seeing in terms of distinction in rent spreads by market?

  • - Pres., CEO

  • You know, something, David, I'm glad you asked that question.

  • I wish I could address it this it this quarter, we will probably be able to address it next quarter.

  • We have an additional redevelopment that we will probably be announcing in the third quarter, so I -- I can't really say too much about it.

  • But there's at least one tenant who is occupied about 14,000 square feet.

  • He is paying, that tenant is paying around 20 to $22 a square foot.

  • We are terminating that lease.

  • We're dividing it into three to four spaces, and the new retailers, we're already under negotiations with several of them.

  • We'll be executing hopefully all the leases in the third quarter, if not some in the fourth, at between 35 and $40 a square foot, and this is in Farmington Hills, Michigan, which is a suburb of Detroit.

  • We're finding that we are doing street extremely well in metropolitan Detroit with our rentals.

  • Our shopping centers in metropolitan Detroit are hovering around 98% occupied, if not pushing 100% and I think that the primary difference between the 98 and 100 is merely that is we have lease turn over and we're building new spaces, etcetera.

  • But there have been a number of mid boxes that we've announced who have come into the Detroit area, we've got a Roseville Plaza where we put Office Depot in, is now 100% leased.

  • We put Home Depot in our Telegraph and Goddard, in Taylor on a land lease at a very healthy number.

  • We see our Detroit assets as doing extremely well.

  • As far as rent differentials, obviously, the Florida centers continue to set new highs as far as rental rates are concerned.

  • But we are not finding that metropolitan Detroit and Michigan are very far off the mark.

  • I've just referenced this expansion we're doing on the west side of the state of Michigan, and we are getting, mid teens to low 20s for our 3000 square feet spaces and under, and those are in some of the smaller communities.

  • So -- We are just very bullish on how well we're doing.

  • Now, is unemployment up in metropolitan Detroit?

  • You bet.

  • But remember that we have centers in basically a densely populated areas, and we're selling every day goods and services.

  • And so are there some centers that are suffering?

  • Yes, there are centers that are suffering, but again, you've seen the number of our assets in metropolitan Detroit, you know they are at Main and Main.

  • - Analyst

  • Yes, I guess I'm -- what I'm going for is, I know that in good sub markets, you're not going to see a change in -- in occupancy of significance, but there has to be sort of a cap rate impact that goes with the aura of a market that is viewed as challenged.

  • - Pres., CEO

  • Well I'll tell you this, we have looked at a number of assets that were changing hands in metropolitan Detroit as late as 60 days ago.

  • We bid on those, and we couldn't get close to the sales price.

  • So they were -- they're -- and we're bidding on assets in Florida and if there's -- if there's 25 basis points difference, that's a lot.

  • - Analyst

  • Okay.

  • Great.

  • I hate to hammer you on this, and I'm not, I just -- you guys had felt like this year you would be able to be a bit more aggressive with the IRS resolution, and push the issue to the next level quickly and that hopefully it will be resolved, before the end of the year.

  • How do you now -- you talked about it, and I know it's tough, but do you think the end of the year is still realistic?

  • - Pres., CEO

  • I'd like to think the end of the year is realistic.

  • I can tell you, David, that if we were getting all kinds of very positive signs from the IRS, I wouldn't be able to tell you that on this call because, I -- we've been advised until you have something in writing from the IRS you don't have anything.

  • And it just -- they are moving at their own pace.

  • My belief is that we should have something done by the end of the year.

  • - Analyst

  • Okay.

  • Given that your share price is depressing you, us, everybody else, why not sort of take advantage of that, sell assets and buy back more stock here, what better investment can you make?

  • - Pres., CEO

  • Well, there's no question that, that's -- that's a good move, we ob -- we obviously have to balance a whole variety of things, not the least of which is your next question might have been, okay, if you are buying stock back, how about your, your debt to market cap?

  • I think you'll see some additional activity in the third quarter.

  • Again, it's important that we raise capital in one form or another, and obviously, we are not going to come back to the market for it.

  • And then we will use those dollars in a balanced way to continue to work on our business plan to acquire more stock, because we've acquired several hundred thousand shares, in the second quarter, and then we'll also pay down some of our debt.

  • - Analyst

  • Okay.

  • - Pres., CEO

  • I'd like to think you'll -- you'll be happy with the execution on the utilization of those dollars in the third and fourth quarter.

  • - Analyst

  • Do you have an idea of the aggregate amount of potential sales?

  • - Pres., CEO

  • We're talking about raising somewhere in the vicinity of 50 to $60 million net.

  • - Analyst

  • Great.

  • And one last question, River City, how much dollars were placed in service there and what is the NOI projection there?

  • - Pres., CEO

  • You'll have to give us just a second.

  • - CFO

  • For the -- If you look at our supplement, David, back on page 20, it gives you an idea of funds from operation created which were minimal, about $47,000 , and if you look at our overall expected costs again on that, I think for the shopping center proper, I think we have around $70 million that project will run for the TRS portion for the assets to be sold, maybe about $20 million into that.

  • The, I think the next wave of tenants we are going to have between now and the fall, I think you'll see some lease up.

  • But I -- we wouldn't expect that to be stabilized until near the end of the year beginning of next year would be my guess.

  • - Pres., CEO

  • I think, just relative to the second quarter, David, and the number, Rich just mentioned, it's the vast majority of the tenants that opened the Bed Bath, the Office Max, the PetSmart, the Old Navy, they basically opened sometime in June.

  • So you'll see somewhat of a bigger impact with those retailers in the third quarter and we expect all of our mid boxes that we've named for you to be open by the end of the third quarter, so in the fourth quarter, you are talking about a much more significant number.

  • - CFO

  • Good.

  • David, just -- just to clarify, I think that the 47,000 I gave you was our share, gross was about 236 for the project.

  • - Analyst

  • I got it.

  • Okay. [Nate Isbee], I think has a question?

  • - Analyst

  • Yes, on the Georgia acquisition, what was your inplace yield on that today?

  • - Pres., CEO

  • Well the in-place yield when we first acquired it before we terminated the Publix lease, was probably in the vicinity of seven to seven and a half, but then we turned around to terminated Publix, and aside from Publix there's only about a half a dozen stores that were still in development.

  • So the whole concept here was to acquire a center where we absolutely had no intention of keeping the Publix rent in place.

  • Because as I said, Publix, sat across the street from the Super Wal-Mart, a Super Target, and there's a Kroger across the street as well.

  • So they -- they just thought the better part of discretion was to close that store.

  • And we didn't see it as an existing center, we saw it as an opportunity to buy that and then acquire the adjacent parcel.

  • - Analyst

  • Okay.

  • Thanks, guys.

  • - Analyst

  • Thanks.

  • Operator

  • Philip Martin .

  • - Analyst

  • Good morning, everybody.

  • - Pres., CEO

  • Good morning, Philip.

  • - Analyst

  • Question on your leasing, with -- with your occupancy, here in the mid 90s, can you talk a little bit about the discussions you're having with tenants that are seeing where their leases are going to be expiring here in the second half of '06, or early '07?

  • And what's your thought processes for the renewal increases, the tenant retention, etcetera?

  • Obviously you're in a better negotiating position with your occupancy in the mid 90s.

  • - Pres., CEO

  • Well, I think we see that the balance of the year as far as renewals are concerned probably just consistent with our historical averages which is retention of about 75%.

  • We are obviously pleased with over a 9% increase, we've been averaging typically somewhere between 7.5 and 8.5 or 9.

  • And we see no reason why those numbers should -- should change significantly.

  • Historically, the lion's share of our leases do expire, in the first quarter to two quarters of the year, so on the back side of this year, we probably don't have anywhere near at many expirations as we did in the beginning of the year.

  • Our lease flow, and I'm just -- maybe I'm too optimistic, our -- but our lease flow has been tremendous.

  • And do we have a problem center or two?

  • Everybody does.

  • But with the exception of that, we're going to have a couple of announcements in the third quarter relative to some significant changes in at least one or two centers, and at least one of those in Michigan that is incredibly positive, so stay tuned for some very good news.

  • - Analyst

  • Do you think the first half of '07, does that bode well for above average increases on renewals from historic levels?

  • Based on the positive news you are seeing or [inaudible] ?

  • - Pres., CEO

  • In certain centers, and coming back to the comments you made earlier, I mean when you put -- lease up a mid box space such as in Roseville or you add a new anchor such as we'll be announcing here, probably within 45 days at another one of our shopping centers, that allows you to add anywhere from $0.50 to $2 a square foot in what you would have considered renewal rentals for those tenants.

  • So just based on that kind of approach, I think we will do better with our leasing statistics going forward in '07, and obviously, because we've put so much in place this year, I think you'll see a nice increase just in our gross rents in 2007.

  • - Analyst

  • Okay.

  • Okay.

  • Perfect.

  • Same store operating margins year offer year declined a bit from 71 -- I think it was 71.1% last year, 69.5% this year.

  • Can you talk about what that was?

  • Along the rental line -- Well, can you talk about what -- what may have caused that to occur?

  • - CFO

  • You're looking at that, Phillip.

  • I don't really have an answer now, but I'll have one for you later.

  • - Pres., CEO

  • Phillip, what -- and I know a number of factors go into operating margins, but what is really very interesting is if -- if you take a look, obviously, we've just articulated for six months our renewals are up, our occupancy is up, new leases are approximately at portfolio average.

  • If you then go to the page where we talk about recoveries, as far as our tenants are concerned, I'll compare that number against anybody else in the industry.

  • I'll bet you nobody comes close to our recovery number.

  • So whatever those factors are that ultimately influence margins, it has nothing to do with our recovery rate on expenditures, and we're showing some very healthy increases in both on a per square foot basis and gross dollars as far as rental income is concerned.

  • - CFO

  • Phillip, a big -- a big part of that is in fact the recovery.

  • If you -- again, I don't have the break-out between, I'll give you like $887,000, a difference in margin.

  • I don't have the break-out in front of me between what was core and what was the non-core assets or same center or non-center assets.

  • But if you remember, every year, at the end of the year, if you take your best guess and accrue what your recoveries are going to be and your true up billings, then come the first quarter, you do your true up buildings, and in the first quarter you adjust to actual, I think what we saw in 1995 is, I think, that we didn't accrue enough revenue so we had a positive adjustment in -- in, I'm sorry, the first quarter of '95 for that, and then in '95 for '96, you were a little under so you had a negative adjustment.

  • So I think you had those things working against each other which generated about $887,000 across the Company but again, I don't know how much that impacted the same center.

  • - Analyst

  • Okay.

  • - CFO

  • I think that is probably the biggest -- biggest piece.

  • - Analyst

  • Okay.

  • That may have explained it.

  • Because again, you had a pretty -- over the last 12 months, your leasing has been pretty strong.

  • Occupancy has -- it's been generally positive on the leasing side, but year-over-year minimum rents, weren't up that much, and the margin fell a little bit, so I'm trying to figure out why that -- why that occurred.

  • - Pres., CEO

  • Again, after the call, I'll have somebody figure that out and I'll get back to you.

  • I think that's -- that's my guess what it is, right now.

  • - Analyst

  • And then the last question, you mentioned, Dennis, you mentioned out lot sales in the second half of this year.

  • Will those be -- will those out lots be sold after a lease has been signed by Ramco.

  • - Pres., CEO

  • Yes what we're doing, and I think we've discussed this in the past, but add Jacksonville, along this new drive, Airport Center Drive, we've created about 30 parcels, and some of those will be leased and some of them will just be sold outright, so the sales we are referencing are a portion of those properties that we had always intended to sell because they are in a TRS.

  • - Analyst

  • Okay.

  • Okay.

  • You know, I would think even leasing up an out lot, and then putting a cap rate on that leased -- on that lease revenue, might become -- might just be more profitable than selling an out lot that doesn't have a lease associated with it.

  • - Pres., CEO

  • Well historically what we've done, Philip, is if we lease the out lot, our intentions are more to hold on to it than -- than sell it.

  • You will run into not an insignificant number of people who -- who want to be on your out lots who just refuse to be tenants, and insist that they buy, so those are the ones that we are talking about for the balance of the year.

  • And that will extend well into 2007 and 2008.

  • - Analyst

  • Okay.

  • Okay.

  • Thank you very much.

  • - Pres., CEO

  • Thank you.

  • Operator

  • Rich Moore.

  • - Analyst

  • Hi.

  • Good morning, guys.

  • The big developments that you had in this quarter, Dennis, that is, what is that exactly?

  • - Pres., CEO

  • Yes, from Jacksonville?

  • - Analyst

  • It figured, and then so going forward, that -- what does that look like?

  • - CFO

  • I think the development process for that is probably going to go through the end of the year.

  • The lion's share of the dollars is [inaudible] so I think we'll continue to have development fees there.

  • Then again, as we pick up new development or slash redevelopment, if it's done off balance sheet, I think we will continue to have fee generation there.

  • - Analyst

  • Rich, do you think it's as high as the million bucks you did this quarter?

  • I mean going forward to third and fourth quarter?

  • - Pres., CEO

  • No, it shouldn't be as significant as this the quarter, but we have a number of announcements that we are getting ready to come forward with in, our largest off balance sheet joint venture with the Clarion Lion group that will indeed, because of our relationship with them, generate fees probably in the fourth quarter and then into '07.

  • - Analyst

  • Dennis, you are getting me pretty excited about what's going on in the third quarter here.

  • You're doing a lot of talk about some good stuff coming in a lot of different areas, that's great.

  • Can't wait for the third quarter call.

  • On that, by the way, on the joint venture, are you thinking, I guess you are thinking in part obviously with Clarion, but are you thinking, you mentioned a, something big on the capital side, is this another venture partner?

  • - Pres., CEO

  • More likely than not, we may be announcing another joint venture with another partner.

  • - Analyst

  • And they would buy some of your assets?

  • Is that the idea?

  • Or you guys would go look for value add opportunities, or what exactly is the [inaudible]?

  • - Pres., CEO

  • All of the above.

  • - Analyst

  • All of the above.

  • Okay.

  • And you're thinking that's a third quarter event?

  • - Pres., CEO

  • I'd like to think so.

  • - Analyst

  • Okay.

  • And then what happens with Clarion?

  • You guys are almost full there.

  • Does that -- does that also grow beyond the 450 million?

  • - Pres., CEO

  • We have an outstanding relationship with the Clarion Lion fund.

  • We have historically talked about expanding that, as of this juncture, we see no reason why we wouldn't continue that relationship.

  • - Analyst

  • Okay, so you think that goes bigger?

  • - Pres., CEO

  • Yes.

  • And you know, remember, and I have mentioned it before, the definition of what we were to have purchased for them were core assets, and if you'll remember, out of the 12 assets that we -- we purchased, we have seven, that a couple of them, we've already announced expansions to and we're, some of the ones I just references were fourth quarter '06 and into '07, so those are definitely turning in core plus opportunities, and I think that bodes well for our long term relationship with them.

  • - Analyst

  • Okay -- Okay, good, and when I look at -- when I look at your guidance, it seems you guys wants to draw us down to the -- to the lower end, and I'm trying to figure out exactly how you would even get to the upper end.

  • Are you thinking there might be -- because you did 62 and 63 in the first -- first two quarters, and then you'd have to do 64 and 64 roughly to hit the low end of the guidance.

  • Are you thinking to get to the higher end, you might have some more pad sales at Jacksonville than you expect?

  • - Pres., CEO

  • I think, I have two things come to mind, Rich, I think would be maybe some more pad sales, but I think another one that we had planned in our model anyway was more acquisitions during the year.

  • I think that the first half of the year, it hasn't panne dout like we thought it would.

  • Maybe the second half does, but I think we are bringing you down anticipating it not.

  • - Analyst

  • Okay, alright, that's fair, Rich, and when you look at acquisitions, do you think those would be accretive right away?

  • I mean obviously the one you just did is -- is not.

  • - Pres., CEO

  • I think if you do them off balance sheet for the type of properties we buy, I think it's definitely accretive right away.

  • Some redevelopments, I think it will take time to do those done whether you do them on or off balance sheet.

  • - Analyst

  • Okay.

  • No, I'm with you.

  • I have you.

  • And then I wanted to ask you, too, on the -- on the closing of the Publix, did you say, you might have said and I missed it, did you see there's a lease term fee associated with that?

  • - Pres., CEO

  • There was.

  • - Analyst

  • There was in the second quarter?

  • - Pres., CEO

  • That's correct.

  • - Analyst

  • Okay so -- and you know, I may do my calculation differently than you do, Rich, for expense recoveries, what you are saying, you are going to do 96, 97 going forward, what's your number for the second quarter, your ratio?

  • - CFO

  • I think we are about -- I think we're about 96 for the quarter, Rich.

  • We're picking up is -- is taxes and recoverable costs.

  • I think we are about 97.

  • - Analyst

  • Okay, so you are basically saying it should stay relatively flat?

  • - CFO

  • Yes.

  • - Analyst

  • Going forward.

  • Okay.

  • And then, I wasn't quite sure how to take your share repurchase activity, are you saying you are going to continue to try to fill up that $15 million share repurchase plan that you have out there?

  • - CFO

  • I think Dennis's comment to the extent we -- we form this new venture and generate some capitol by contributing assets to this joint venture, I think we will have fund to do it and then it's really a function of where our stock price is at and whether we're a buyer or seller at that price.

  • But right now, it's a good buy.

  • - Analyst

  • Okay.

  • All right.

  • Good.

  • Thank you.

  • And then when you look at the year end occupancy, what are you thinking?

  • How much, obviously, you've had a pretty good, a pretty nice little run here on occupancy.

  • What do you think as you look out to the end of the year?

  • - CFO

  • I think I'd keep in mind that the fourth quarter, theoretically, should be the strongest quarter.

  • I can see us getting a little bit higher than we are today.

  • - Analyst

  • Okay, and that's what your guidance is predicated on, Rich?

  • - CFO

  • That's correct.

  • - Analyst

  • Okay, and then maybe, I think it's the last thing I have here.

  • The general retailer interest, I mean, there's a lot of concern out there as -- as we travel around that the consumers are going to have trouble, that the GO political environment is not too good, oil prices are high.

  • What are you hearing from the tenants?

  • What's their attitude about new stores?

  • - Pres., CEO

  • Well it's a -- it's a double edged sword, and maybe that's not even a very good analogy.

  • You hear from the retailers that they do have a concern relative to all of the things you've just mentioned, and then they turn around both in the press and in their conversations with us and they are pushing very hard because they are not getting the number of stores they wanted to open this year.

  • As a matter of fact, we're working very hard with one mid box retailer who is going to take a space in one of our shopping centers, specifically because they needed to, get more stores done this year, and we were just able to accommodate them and so we're on the fast track to -- to get a lease signed.

  • So I -- I -- I think that what we have found historically is that the vast majority of the national mid box and anchor retailers are typically looking past the short term depths, because everybody, including us, have confidence in the long-term viability of our economy.

  • And it's the Targets, and the Wal-Marts, and the Kohls, and the Home Depots, and the TJ Maxx's, and Ross Dress for Less, and everybody else, see that you can't play to the short term, you have to look to the long term.

  • - Analyst

  • I think that's probably good advice for all of us.

  • Anyway, that's it.

  • Thank you, guys, very much.

  • - Pres., CEO

  • Thanks, Rich.

  • Operator

  • There are no further questions.

  • - Pres., CEO

  • All right then.

  • Thank you, everybody, for your attention.

  • And please look forward to some press releases, and look forward to talking with you at the third quarter conference call.

  • Good-bye.

  • Operator

  • Ladies and gentlemen, this concludes the conference, you may now disconnect.

  • Have a good day.