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Operator
Greetings and welcome to the Ramco-Gershenson Properties Trust first-quarter 2013 earnings call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Dawn Hendershot, Director of Investor relations. Thank you, ma'am, you may now begin.
Dawn Hendershot - Director of IR and Communications
Good morning and thank you for joining us for Ramco-Gershenson's first-quarter 2013 earnings conference call. Joining me today are Dennis Gershenson, President and Chief Executive Officer; Gregory Andrews, Chief Financial Officer; and Michael Sullivan, Senior Vice President of Asset Management.
At this time management would like me to inform you that certain statements we make 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. Additionally, statements made during the call are made at the data of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.
Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks that could cause actual results to differ from expectations are detailed in the quarterly press release.
I would now like to turn the call over to Dennis for his opening remarks.
Dennis Gershenson - President and CEO
Thank you, Dawn. Good morning, ladies and gentlemen. I am pleased to report another successful quarter for Ramco-Gershenson wherein we achieved very positive operating and financial results. Our ability to consistently improve the Company's core metrics is complemented by the substantial external growth initiatives and capital markets activities we undertook in the first 90 days of this year.
I would like to take a few minutes to review with you first, how our recently signed anchor leases and expansions support our philosophy of constantly improving the quality of our shopping center portfolio and increasing net asset value.
Second, I will provide color on our Clarion acquisition. Third, I will briefly cover our redevelopment and development activities. Fourth, I will review our progress on our capital recycling program. And lastly, even with the aforementioned significant growth initiatives, our actions in the capital markets confirm our commitment to maintain and improve our strong balance sheet.
At the end of last week, we announced the signing of new leases with Marshall's, Gordmans and Whole Foods. We also sold Wal-Mart their land lease parcel plus additional acreage to facilitate their expansion to a super store at our Roseville Plaza in Roseville, Michigan. All of these transactions validate the premise that our shopping centers are the place where retailers want to locate, where national tenants are producing sales volumes that demand that they expand their footprint and that our centers are the destination of choice for the consumer.
Also, by adding Gordmans department store, a leading apparel and home furnishings retailer to replace a furniture outlet with term left on their lease at our Lakeshore Marketplace, we demonstrate that our Company is never satisfied leaving an asset with almost 100% leased well enough alone if we believe there's an opportunity to upgrade the quality of the tenant roster and increase net asset value.
It is also interesting to note that this Gordmans store will be one of their first operations in the state of Michigan.
The announcement that Whole Foods will be expanding their Indianapolis store, their second store expansion with us in less than 18 months, and that Wal-Mart is expanding their Roseville Michigan operation speaks to the sales volumes these retailers are able to achieve at our shopping centers.
In March, we acquired our Clarion Partners interest in 12 large market dominant shopping centers in Florida and Michigan. Each property is located in a densely populated trade area with healthy household income profiles. The centers are tenanted with a lineup of outstanding national, credit quality anchors. In addition to the quality of the markets and tenant mix, we saw a number of advantages in pursuing this rather sizable acquisition.
First, based on the purchase price, the transaction was immediately accretive and our return will improve on a full-year basis. These 12 properties increased the Company's total assets from $1.2 billion to over $1.5 billion.
Additionally, our intimate knowledge of these centers significantly reduces our acquisition risk and in spite of the number of centers purchased we will not need to enlarge our operating platform. This transaction also secures for Ramco-Gershenson 100% of the property's upside as we lease up several boxes and small tenant vacancies, expand existing anchors which plans are already in the works, and develop or sell adjacent land parcels and out lots.
All of these factors combine to make this acquisition a homerun for Ramco.
During the quarter, we also completed the Whole Foods redevelopment at our Shops on Lane in Columbus, Ohio. In addition to the previously mentioned anchor retenanting and the complete redevelopment of our Roseville Plaza, we have a number of additional value add redevelopments in the queue which will enhance the value of our centers, produce a healthy return on investment and contribute to our NOI growth.
On the development front in the first quarter, we opened our newest project, the Parkway Shops in Jacksonville, Florida with over 98% occupancy and simultaneously sold our first outlot at the site for a substantial profit. You will remember that Parkway Shops sits adjacent to our 900,000 square-foot River City Market Place.
At our other development of size, Lakeland Park Center in Lakeland, Florida, we continue to make progress on signing our anchor and large format tenant leases. As I have stated in the past, we will commence this project as we did with our Parkway Shops in Jacksonville when we have secured commitments from the critical mass of national retailers who ensure the success of this development. We are optimistic that we will reach that threshold in the second or third quarter of this year.
Over the last several quarters, I have outlined for you our development plans for the future. They involve purchasing acreage adjacent to our newest acquisitions where we believe that we can ripen additional tenant interest in these centers. We demonstrated the benefits of this approach as we facilitated the expansion of our newly acquired Fox River shopping center in metropolitan Milwaukee by the addition of T.J. Maxx, Ulta, Charming Charlie and Forever 21 on adjacent land.
Both at this center where we have 12 additional acres and at Harvest Junction in Longmont, Colorado, where we also purchased adjacent land, we are in active negotiations to expand these properties at accretive returns on cost.
An important element in the process of improving the quality of our markets, centers and tenant mix is our capital recycling program. In April, we sold May's Crossing in Stockbridge, Georgia which is anchored by a Big Lots. Additional sales will occur throughout the balance of the year. A number of these dispositions will most likely will include Michigan assets as we move over the next 18 months to further achieve our goal that no one state represent more than 25% to 30% of pro rata annual rentals.
Concerning our balance sheet, Greg Andrews will discuss the particulars of our successful first quarter. I would just like to state that our Board of Trustees and the management team are committed to ensuring that we promote an ever stronger capital structure as we grow the Company.
With a successful first quarter behind us, you can expect that we will continue to post positive comparative portfolio statistics throughout the balance of the year. We will make additional acquisitions in our targeted markets of St. Louis, Chicago, and Greater Denver where we are seeing an increasing number of quality shopping centers coming to market. You can expect that we will be a net acquirer from this point through the end of 2013.
Our ability to make significant acquisitions and raise capital while we improve our debt metrics and increase our FFO guidance speaks to a company on the move. As we combine our internal operating increases with our aggressive internal initiatives, we are writing the next chapter in Ramco-Gershenson's growth story.
I would now like to turn this call over to Michael Sullivan who will put our operating activities in context.
Michael Sullivan - SVP Asset Management
Thank you, Dennis. Good morning, ladies and gentlemen. Our first-quarter results are in line with expectations and confirm that we continue to execute on our 2013 business plan.
In the first quarter, we maintained strong leasing velocity and positive spreads from both new and expiring leases. Our total lease transactions for the quarter exceeded 335,000 square feet and on a comparable basis, the cash spread was up 9.1%.
In the first quarter, we renewed 81% of expiring leases with a rental growth of positive 6.1%. Of the approximately 85,000 square feet of shop leases executed in the first quarter, 82% were with national and regional retailers. The impact of this activity continues to improve the quality of our tenant roster and tenant mix as well as the predictability and sustainability of our rental income stream.
With little new space coming on line, retailer demand for existing spaces in Ramco's high quality assets remain strong. We see these trends continuing throughout the year.
During our previous call, we spoke of the anticipated temporary fluctuations in occupancy in the first quarter which we viewed as consistent with our historical portfolio trends. For the first quarter, total portfolio physical occupancy dropped 110 basis points which we projected at year-end. This decrease was due primarily to the lease expiration of a Kmart box at Martin Square, a joint venture asset in Stuart, Florida. This expiration was anticipated and therefore we have been proactively pursuing redevelopment opportunities for this asset which highlight the broader growth potential within the portfolio.
The important positive changes to the trade area coupled with strong retailer demand and impressive demographics along Florida's Gold Coast convinced us that we will unlock the embedded value of this asset soon.
Another example of our ability to drive growth within the portfolio is represented in the leasing team's success in reducing the number of dark and paying anchor spaces. At the end of the first quarter, we had just one at Merchant Square in Carmel, Indiana. Again we see growth opportunity in leasing this space as we are close to finalizing an NOI for the national retailer whose presence at the center will create additional lease-up momentum and increased rental streams.
The combination of our aggressive leasing efforts and the continuing retailer demand for spaces in our portfolio continues to create upside opportunities for Ramco in 2013. This is clearly evidenced in our ongoing success in minimizing the number of anchor vacancies in the portfolio.
Although we ended the first quarter with six because of the Martin Square vacancy, we are confident that based on the active lease negotiations we have, we will have fewer than five spaces that we posted at the end of 2012.
Our occupancy was also slightly impacted by the closure of six Fashion Bug and three in-line Footlocker stores. To date, we have replaced two of the Fashion Bug and one of the Footlocker stores with national retailers and we are in active LOI negotiations for all of the six remaining stores. Given the current leasing velocity and the growth possibilities we see in 2013, we are comfortable in confirming that this occupancy drop is in fact temporary and will reverse itself throughout the year to the point that leased occupancy at year end should be in the high end of our guidance range of around 95% in the core portfolio.
Our plan to drive quality in the composition of our top 25 retail tenants is bearing fruit as retailers like Ross Stores, DSW, LA Fitness, Lowe's and Gander Mountain move up the list. Ramco's team remains aggressive in its campaign of persistence portfolio reviews with at risk retailers.
Achieving our leasing renewal income and cost containment objectives has also improved our same center NOI performance. We posted a same center NOI gain of 2.5% for the quarter and expect this trend to continue in 2013.
Ramco's asset management team in 2013 is committed to building on the success we achieved last year with an emphasis on continuing to drive rent and increased portfolio quality through tenancies with best in class retailers.
With that I will turn it over to Greg.
Gregory Andrews - CFO and Secretary
Thank you, Michael. Let me start by covering the balance sheet and then I will review our income for the quarter and conclude with our outlook for the year.
During the quarter we closed the purchase of our partners 70% interest in 12 properties owned by Ramco/Lion Venture. This acquisition has a dual benefit of being both a value driven real estate transaction and a meaningful strategic event for the Company. Ramco bought great real estate at a great price and took a large stride forward as a Company.
We funded the $256 million purchase price with 65% equity and 35% debt. This 65/ 35 capitalization further strengthened our balance sheet and enabled us to pay down our line of credit by $10 million during the quarter.
In addition, we raised the equity component through both a [bought] offering and at the market sales making the cost of raising this capital highly efficient.
The debt component consisted of assumed mortgage loans on seven of the 12 properties. Subsequent to quarter end, we paid off two of these mortgages and we intend to pay off a third one in May. When this is done, over 80% of the property we acquired will be unencumbered.
Adding these properties to our unencumbered pool will increase its size, quality and diversification. By the end of the next quarter, the total pool is expected to reach $[1] billion and three of the top 10 properties in the pool will be ones we bought in this transaction.
Because we now own 100% of these properties we have consolidated them on balance sheet at a value of $367 million. As a result, our underappreciated property expanded by nearly 30% during the quarter. At the same time, our investment in joint ventures decreased to just $28.5 million.
In addition to the benefits from outright ownership of these 12 properties, we believe that the simplification of our capital structure, the increase in our market capitalization, the improved liquidity in our common stock and the lowering of our overhead ratio will all add value for shareholders.
So let me sum up where we stand following this transaction. Our total market capitalization is now over $1.8 billion with debt comprising just 37% of that amount.
Our interest coverage improved to 3.3 times and our fixed charge coverage remained strong at 2.2 times. These are healthy ratios but we anticipate they will increase with a full quarter effect from our acquisition. At the end of the first quarter, we had over $200 million available under our existing line of credit providing us with ample capacity to meet upcoming debt maturities and capital needs.
By the end of the second quarter, we anticipate our unencumbered assets will allow us to borrow up to $250 million of incremental unsecured debt. In short, our financial position has never been stronger. We are excited about how our financial strength and flexibility will enable us to execute in the current climate.
Now let's turn to the income statement. FFO for the quarter was $0.31 per diluted share. Here are some of the key items driving FFO this quarter. On the operating side, cash NOI of $24.3 million was $3.5 million higher than in the comparable quarter. As Michael noted, same center NOI increased 2.5% driven by minimum rent growth of 2.3% as well as higher percent of rent.
On the expense side we continue to reap the benefit of property tax appeals which will lower our operating costs but also reduce our tenant recovery.
We posted a provision for credit loss of $286,000 this quarter compared to $441,000 in the previous period. Notwithstanding the lower provision, our allowance for capital accounts remains conservatively positioned relative to the amount, aging and credit quality of our receivables. We expect future provisions for credit loss to remain in the current range of approximately 1% of revenue.
Finally, we had negligible lease termination income this quarter compared to more than $800,000 in the comparable period.
General and administrative expense of $5.5 million for the quarter was higher than the $4.9 million a year ago. As shown on page 12 of our supplemental package, the difference reflects two items.
First, the first is long-term incentive plan expense which is tied to the Company's relative performance. Our relative total returns have been strong of late so the true-up of this item and layering of a new year added approximately $400,000 to expense this quarter.
The second is over $200,000 of acquisition costs compared to almost no such cost a year ago. As a result of these two items, our revised forecast for G&A expense for the full year is between $20.5 million and $21 million.
During the quarter, we booked gains on land sales of $3.6 million or approximately $0.06 per share in two sales. We recorded a $0.05 per share gain on a land sale to Wal-Mart at Roseville Towne Center. As you may recall, this budgeted gain was part of the guidance we provided on our last earnings call. In addition, we had a $0.01 per share gain on a land sale at our Parkway Shops development.
Losses from joint ventures were $5.7 million for the quarter. This amount includes our pro rata share of the loss on sale from the 12 properties sold by the Ramco/Lion Venture to us. Excluding this loss, our share of earnings from joint ventures was approximately $700,000. However, earnings from joint ventures as well as related management of fee income are expected to decline from first-quarter levels as a result of our smaller joint venture platform.
Now let me say a few words about our outlook. We are increasing our 2013 FFO guidance by $0.03 to a range of $1.06 to $1.12 per diluted share. This increase reflects primarily the benefits we expect to realize as a result of acquiring a 12 property portfolio in the first quarter.
For those of you modeling earnings please note that at this range of FFO we anticipate our convertible preferred stock will be dilutive to FFO for the year and will therefore be reflected as converted in our full-year per-share calculation.
In closing, our financial position is solid, our leasing pipeline is healthy and our investment opportunities are bright. We look forward to executing our business plan for the remainder of the year.
With that, I would like to turn the call back to the operator for Q&A.
Operator
(Operator Instructions). Todd Thomas, KeyBanc Capital Markets.
Todd Thomas - Analyst
Good morning. I am on with Jordan Sadler as well. First question, Dennis, you mentioned last quarter that you are confident that acquisition volumes for the year would at least match 2012. Did that thinking include the Clarion deal at all or is that outside of the joint venture deal? I am just trying to think about acquisitions for the balance of the year in context with your comments about seeing increasing opportunities in St. Louis, Chicago and the Denver market?
Dennis Gershenson - President and CEO
Todd, we have been talking with Clarion for some time, however, the transaction came together really at the beginning of the first quarter. So our projections of our acquisitions for the year will exclude the Clarion and we still expect somewhere in the vicinity of $75 million to $100 million in acquisitions.
Todd Thomas - Analyst
And then it sounds like in the Clarion properties that you acquired that there is some near-term and I guess long-term upside here selling some out some outlots and pads and also some anchor leasing. I was just wondering were there any constraints in place with the partnership that prevented you from realizing that upside together? Why are those opportunities there now?
Dennis Gershenson - President and CEO
No, we had an outstanding working relationship with Clarion and if we would take the time we could go back through a number of redevelopments that we did of consequence with them. I think that the primary rationale is that Clarion has changed its direction and is interested in owning different types of assets van these shopping centers and so we were able to come to an agreement that was advantageous to us and obviously satisfied their basic requirement.
They were well aware of the opportunities to further improve those centers that were well leased. One of the reasons -- and it may or may not be a question that would follow -- is that the three assets that were left in the joint venture just basically had -- and Martin Square is an example where Kmart, Sears, their lease ended and they didn't renew. It is a very good asset but on their books they had a value that was significantly higher than what would be reflected with the vacant Kmart. And therefore, it just didn't make any sense to attempt to come to agreement on a price. And that is why these three assets remain in the venture but it also allows us to have a platform to make further acquisitions in the future once they truly have defined the box that they want us to move ahead with.
Todd Thomas - Analyst
That was going to be my follow-up so the new acquisitions going forward, I guess some of that is still being defined but how should we really think about how you will differentiate between what Ramco buys for its books versus a joint venture. I mean is it your sense that it will be geographic in nature or is it more core versus value add? And also what will the split on those deals look like going forward? Will they still be the similar 70/30 structure?
Dennis Gershenson - President and CEO
We are still operating under the existing agreement so it would be a 70/30 split and you are absolutely right. They are very focused on absolute core assets albeit again, they haven't wholly fleshed out the definition of the types of centers they want to own. And so there will not be a conflict between the centers we want to buy that we really see we can still add value to and the ones that they are looking for that are absolutely stable.
More likely than not relative to the assets and stability, we have the flexibility to take a smaller percentage interest in those assets if it suits our purposes.
Todd Thomas - Analyst
Okay, great. Thank you.
Operator
Vincent Chao, Deutsche Bank.
Vincent Chao - Analyst
I just wanted to go back to the fundamentals real quick. Very nice trends in the renewal spreads over the last couple of quarters and I think Dennis, I think I heard you say that you expect the positive fundamentals to continue over the balance of the year.
I was just wondering is the 6.1, is that a good run rate or was there something that was driving that a little bit higher than it normally would be? Because I mean again the trend has been fairly consistently higher. So I'm just trying to think about how we think about the rest of the year on that front?
Michael Sullivan - SVP Asset Management
This is Mike Sullivan. We really see 2013 continuing along pretty close to that number. Our internal goal is to end the year at a minimum of 5%. We had a little [kits] at the end of the first quarter but the indications are from leasing that we are going to be able to sustain similar renewals throughout the air.
Vincent Chao - Analyst
Okay, so there is no big lease that really drove that higher, it is just a general improvement it sounds like?
Michael Sullivan - SVP Asset Management
A general improvement, a trend for us.
Vincent Chao - Analyst
Okay, that is helpful. And then Greg, maybe just a question for you just trying to reconcile I mean it sounds like the same store NOI performance in the quarter was pretty good at sort of midpoint of the yearly guidance. But I think at the time that it was provided it was supposed to be a little bit more back half weighted. So given that we are starting off a little bit stronger here, rent spreads are expected to continue to be solid and it sounds like you are pretty positive on the overall leasing from an occupancy perspective.
Just wondering do you think we are trending to the high end of that range or do you think -- does that range move from the 2 to 3? And just I'm trying to figure out why that wouldn't have impacted the FFO guidance a little bit more than it did?
Gregory Andrews - CFO and Secretary
Yes, there are a number of things as always I feel went into the FFO guidance. But let me just start with the same center. We provided our guidance 2 to 3 for the year and we are right at the middle of that. We did indicate previously that we thought it would be somewhat more back-end weighted as you pointed out. So potentially, there is the chance that we end up toward the high end of that range.
But at this time we are not changing that guidance yet until we have a better outlook for the rest of the year.
Then in terms of the FFO again for the same reason because we are not changing that outlook, we haven't sort of baked anything into the FFO for the full year from that upside. There are a couple of things I pointed out in my prepared remarks that cut a little bit the other way including the slightly higher G&A this quarter as well as the coming decrease in earnings from joint ventures and management fee income.
Vincent Chao - Analyst
Okay, that is helpful. And just on the acquisitions, can you provide a little bit more color in terms of the three markets that you noted, Dennis, that you noted that you're seeing increased opportunities? What is causing the increased opportunities for you?
And then as you think about your own cost of capital which is coming down relative to what you might be able to pay, I'm RIAA just wondering at a high level how you think about what an acceptable spread on your cost of capital would be to acquire the $75 million to $100 million that you are thinking about?
Dennis Gershenson - President and CEO
First of all, we are seeing a trend in more assets coming to market almost universally. We get a lot of packages having nothing to do with the areas that we are focused on and there has definitely been an uptick in that. I think that's certainly in part driven by the fact that there are more people acquiring.
I think one aspect of this especially in the non-coastal areas is that the cap rates have been driven to such a low level on the coasts that people are beginning to look closer at the interior of the country where they can find high quality assets at certainly prices better than five caps.
As far as we are concerned in the trade areas that we are focused on, it gets absolutely critical that anybody looking at our Company because as we look at these trade areas whether it is St. Louis or Milwaukee, there are very wealthy pockets in these trade areas. And if people take the time to take a look at the demographic profile of the centers that we are buying they will see that we are only focused in the St. Louis market and in the Milwaukee market and even the assets that we have just acquired in the metropolitan Detroit market that we will stack up against any coastal community other than in the heart of Manhattan.
So we are maintaining a focus on those markets that meet the criteria which is that they have got to have a strong demographic profile and very high quality tenant mix of retailers that we know are here for the long run.
So again, combining the increase in assets that people I think are just feeling that this may be an appropriate time, interest rates still remain low therefore there is more competitors out there who will put a lot more financing on these assets than we will. It is just a much frothier market than we found in 2012.
Vincent Chao - Analyst
Okay. Then in terms of how you are thinking about your cost of capital versus the cap rates which sounds like even on the interior may be coming down a little bit just given the increased number of buyers --? Can you just --?
Dennis Gershenson - President and CEO
I think when all is said and done and remember that in each of the acquisitions we are making we would like to think that there is a value add component. Some of that value add is what I referenced as far as acquiring adjacent land. But I think still in the mid 7s is a realistic number maybe leaning more toward 7 than toward 8 but anywhere from 7.3, 7.7 I think is a good range at the centers we are looking at.
Vincent Chao - Analyst
Okay, thank you.
Operator
Nathan Isbee, Stifel Nicolaus.
Nathan Isbee - Analyst
Good morning. Dennis, you had mentioned in your prepared remarks about as much as you just had bought some more properties in Michigan, you are now focusing on perhaps trimming your exposure there. Can you talk a little bit about some of the recent trends especially as it relates to investor interest and transactions in Michigan to give us a sense of what you might be looking to sell, what you might be able to command on the open market with your properties?
Dennis Gershenson - President and CEO
Sure, Nate. First of all, there has definitely been an acceleration in the buyer interest in the state of Michigan, a number of institutional players have come into the state of Michigan to buy assets. We have absolutely seen the trends in the cap rates coming down. There have been a number of sales in the 7s, certainly in the low 8s for Metropolitan Detroit.
The assets we will primarily focus on as far as the sales for Michigan will fall into that secondary market and where we might have maximized the value of the assets. I think I have said in prior calls that the centers that we are looking at selling now are not the ones that were distressed that we disposed of in 2012 but really will be reasonably fully leased for 2013, for 2014. Again in secondary markets and I would assume the cap rates would help trying to pin down a number within 50 basis points or so would be in the higher single digits at least for Michigan sales.
Nathan Isbee - Analyst
All right, thanks. Then you had also mentioned earlier about you expect to be a net acquirer for the remainder of 2013. Are you planning to do that on a leverage neutral basis or are you willing to let your debt pick up a little bit from the current 6.5?
Dennis Gershenson - President and CEO
Again hopefully I communicated to you in my remarks and especially that is the focus of our Board. If our interest ticks up at all you are talking about a very small percentage. But what we really are focused on is maintaining something right around the mid 6 times rate and we do not see it fluctuating higher than that.
Nathan Isbee - Analyst
And then just perhaps Michael can comment, I don't know if I missed this earlier, can you give us an update on your office exposure and what you might have come up with over the last few months vis-a-vis the OfficeMax, Office Depot events?
Michael Sullivan - SVP Asset Management
Yes, we are staying very close to the situation. I can tell you that we are in constant communication with what used to be three, now there are two office. As we have discussed in the past, found some pretty detailed analysis about competing office stores in a one and three mile range from all of our centers that contain -- trying to evaluate sales, trying to evaluate what the future is. We are confident that we will be able to reduce our store count in 2013.
We are actively working on that but we are not hearing a lot of communication out of the newly merged Max and Depot although we constantly speak with them. I think it is still early but we are doing our homework to make sure that A, we reduce our store count and that B, we are on top of the positioning of each of these stores in our trade areas vis-a-vis competitions.
So again, we are all aware of the movement in the market. Staples, we are still in constant communication with Staples about any downsizing or relocation opportunities. But I think what we can take away from what is currently happening is we will in fact be able to reduce our store count from the three office suppliers in 2013.
Nathan Isbee - Analyst
All right, thank you very much.
Operator
Ben Yang, Evercore Partners.
Ben Yang - Analyst
Good morning. Thanks. Dennis, you had mentioned that investors are increasingly looking at some of the non-coastal regions. It sounds like cap rates are compressing a bit in your core markets. And then I also believe you had given a disposition target through 2015. I think it was selling 15 of your non-core centers over the next three years.
So I am just curious why you guys aren't considering accelerating dispositions for the year, maybe take advantage of those buyers and maybe not take on the risk that cap rates could rise by 2015?
Dennis Gershenson - President and CEO
Certainly all of those factors, Ben, are considerations for us. I think we have articulated a conservative disposition program. We are constantly looking at prospective buyers and having conversations with them relative to their interest in centers that we have identified for sale. So it is entirely possible that you could see an uptick in our disposition program in 2013 and definitely in 2014 but we are sensitive to the specific comments that you made and as long as a disposition makes sense for us, we will move that as far forward as we can.
Ben Yang - Analyst
But is that opportunistic?
Gregory Andrews - CFO and Secretary
This is Greg. Just to add to what Dennis said included in that kind of three-year plan are some assets where we still feel like we have value to add which is why the plan goes over three years. We want to make sure we have maximized what we can do at any of these properties prior to the sale.
Ben Yang - Analyst
Fair enough. It sounds like that target could tick up for this year or next. I mean is that more opportunistic dispositions maybe buyers approach you or do you guys engage brokers to try to sell this stuff sooner rather than later? How does the process play out?
Dennis Gershenson - President and CEO
We do both. There are certain players that we know just from what we learn in our markets that they are active and therefore we go to some of them directly and with other assets, we are interested in marketing them through brokers who will get a much wider distribution of our product for opportunities.
Ben Yang - Analyst
Okay, great. And then just one final question. When you guys unwind joint ventures like you did with Ramco/Lion, I think Greg or Dennis you mentioned you got a great price. I am just curious how you come to an agreement on price at a 7.4 cap rate?
Dennis Gershenson - President and CEO
Again because of our relationship with Clarion and because of their change in direction, what we did is we worked very closely with them. In each of the markets that we were in we jointly sought out recent sales, we engaged a number of brokers and again together with Clarion. We got there input as far as value was concerned.
So it was a relatively easy process to then take that information and sit down at a table because you truly had a willing buyer and a willing seller and work out a prize so no one gains an advantage over the other. We both walked away from the transaction feeling very good about it.
Ben Yang - Analyst
Okay, so it sounds like there was a mechanism to incorporate maybe like a current market value and then price. So kind of building on that in your experience, is there typically a discount when only partial interest in centers like a sale versus if you were to wholly sell the assets to a different buyer?
Dennis Gershenson - President and CEO
I think each case varies. There was a lockup period in our relationship for five years. But once that lockup period was over, Clarion could have forced a sale to -- in the market place. So they weren't at all constrained, if they didn't feel that we had come to an amicable price they could have said if that is the way you feel then we are going to market this asset. I think at least in this situation it was at fair value.
Ben Yang - Analyst
So you bought it at a 7.4, you could probably sell it at a 7.4 today as well?
Dennis Gershenson - President and CEO
Well, again I think we bought it at a 7.4 based on 2012 numbers. We expect 2013 numbers to be better and as I alluded to, there are a number of plays in these assets that we are already moving on that will increase the value even further.
Ben Yang - Analyst
Okay. Then just finally what is the cap rate based on 2013 NOI for those assets?
Dennis Gershenson - President and CEO
I think you are talking about somewhere between 7.5 and 7.6 without any of these value add activities that we are talking about.
Operator
Michael Mueller, JPMorgan Chase.
Michael Mueller - Analyst
I guess if we are looking at the development and redevelopment pipeline out over the next few years, what do you think the annual spend or the total spend over the next years could amount to if you looked at everything that seems pretty visible when you roll it all up?
Gregory Andrews - CFO and Secretary
It is Greg. So as we pointed out, we have added one new project to our redevelopment schedule and then one rolls off. What we anticipate happening over the next 12 to 18 months is a ramp up of activity in both the redevelopment, development and even expansion category. We talked about some land that we acquired adjacent to centers we bought which provides an opportunity to expand those centers.
We are working diligently on a couple of opportunities there that we hope will come to fruition over that 12 to 18 month horizon. We have the Lakeland Park development that Dennis referred to where we are still working on signing key leases but we are hopeful of moving that project forward during that period.
And then finally some redevelopment at existing centers. So all told I think we are ramping up to kind of a $20 million to $30 million-ish number just depending on the timing of all of it.
Michael Mueller - Analyst
Got it. Okay, that was it. Thank you.
Operator
RJ Milligan, Raymond James & Associates.
RJ Milligan - Analyst
Good morning, everyone. Michael, I was just wondering if you could give a little bit more granularity on what you are seeing in terms of leasing trends for your two larger markets both Michigan and Florida, who is taking space specifically I guess within the small -- who is taking space and is it more national retailers or have you seen the mom and pops come off the sidelines?
Dennis Gershenson - President and CEO
RJ, we are pretty bullish on not only our leasing philosophy but our leasing prospects. Certainly in Michigan and Florida especially as Dennis mentioned, as we stack up these assets in these demographics to mostly any trade area in the country we are very confident that we can continue this leasing velocity in Michigan and Florida and quite frankly as a side note, really across the portfolio we are seeing similar trends.
Clearly based on the recurring composition of our executed leases, we are focusing on nationals and retailers. We believe with the quality of our assets, with the open to buy programs and the relocation programs with these national regional retailers, we have some great opportunity to get them into our centers. We are certainly seeing that in the mid-box category. We're making some great strides as we have spoken about in the past with national larger format shop uses and that is a great category that we are executing on.
The truly small shop executed lease trends still rests in our minds with nationals whether they are corporate stores or they are franchise related operations.
The one thing we want to be very careful of and selective of really would be the selection of local mom and pops to fill spaces there. We want to make sure that they have compelling business plans. We want to make sure that there is a low default risk and we want to minimize landlord capital outlay in these deals. You might see some of these local mom and pop shop deals be maybe of a shorter term but they are out there. The deals are there to be made but we are being more selective.
So the take away is that our emphasis is still national and regional from mid-box on down to truly shop and we are seeing a frothy environment for all of those different uses and the different size categories.
RJ Milligan - Analyst
So as you are looking at national retailers, would you say that demand is pretty similar between Michigan and Florida or is there one of those markets that you think is stronger in terms of leasing velocity and lease spread prospects?
Michael Sullivan - SVP Asset Management
We look at them as really being similar and I think if you looked at our opportunities moving forward and maybe even looked at a snapshot of the last 12 months you will see we have had some good activity with nationals in both markets. But we would see them to be similar in the minds of nationals.
Dennis mentioned we have gotten some nationals and some regionals actually enter the Michigan market and consider Ramco assets but we see that's going to continue.
Dennis Gershenson - President and CEO
If I could just add one thing to that and that is we have very little Michigan small tenant space to lease because of how well leased we are both for the big box and for small shop in Michigan. So there is a lot more opportunity obviously in the state of Florida and little opportunity in Michigan -- knock on wood -- because of the great areas that our centers are located in have been vibrant enough that we have maintained those tenancies.
RJ Milligan - Analyst
Okay, great. Thanks, guys.
Operator
(Operator Instructions). Todd Thomas, KeyBanc Capital Markets.
Todd Thomas - Analyst
Thanks. Just a question for Greg. You noted that the two mortgages from the Clarion deal were retired subsequent to the end of the quarter and that a third will be retired shortly. Those three mortgages if I'm not mistaken, that is roughly $70 million of mortgage debt that had in place a coupon of about 7.5%. I was just wondering how were those mortgages retired?
Gregory Andrews - CFO and Secretary
I think it is actually more in total debt I think it is closer to $100 million at 100%. But we are currently using our line to pay those off and then we are looking at longer-term financing options to pay down the line. But as I've pointed out, over $200 million of capacity on the line so plenty of room there to work it that way.
Todd Thomas - Analyst
Okay. So if I kind of dig into guidance a bit, I am wondering what the assumptions in our (inaudible) guidance are for permanently financing those? I guess if I think about the composition of a $0.03 guidance revision, it seems like there is an incremental penny from the additional land sale gain and then I guess $0.02 per share from the transaction overall. Is that about right? I know there was a little bit of an offset from G&A but it seems like there would be more accretion given the above market debt that was in place that you are probably going to realize a 300 to 400 basis point positive spread on?
Gregory Andrews - CFO and Secretary
Well, recall we have always had an interest in those properties and we forecast as part of our budget and guidance for the year that those mortgages would be rolling and the interest rates would be coming down -- so --
Todd Thomas - Analyst
But your forecast for the year, your forecast for the year didn't necessarily include for 100% interest, right? You weren't forecasting that you would buy in these assets when you gave the original guidance?
Gregory Andrews - CFO and Secretary
No, but we -- no, but --
Todd Thomas - Analyst
So you got another $70 million, $80 million, $100 million at 7%, 8% that will roll down to 4% and that is pretty significant savings.
Gregory Andrews - CFO and Secretary
Yes, and that is part I think of the benefit from the transaction overall is the pickup in income that we are getting both from the Ramco income as well as the ability to reduce the interest expense associated with those properties. So the strategy is to seek long-term financing at current market rates which certainly are a lot less than 7.5%.
Todd Thomas - Analyst
And that is not necessarily in guidance?
Gregory Andrews - CFO and Secretary
No, I'm sorry, that is in our current guidance.
Todd Thomas - Analyst
The savings is then guidance so a 300 or 400 basis point savings on the 100 million?
Gregory Andrews - CFO and Secretary
Yes, I mean the mortgage -- yes.
Todd Thomas - Analyst
Okay. We will follow up with you after the call. Thank you.
Operator
(Operator Instructions). It appears there are no further questions at this time. I would like to turn the floor back over to management for any concluding remarks.
Dennis Gershenson - President and CEO
As always we thank everybody for their interest and their inattention. Please watch for additional announcements throughout the quarter and we look forward to talking with you again in about 90 days. Thanks again.
Operator
Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.