Rithm Property Trust Inc (RPT) 2015 Q4 法說會逐字稿

Greetings, and welcome to the Ramco-Gershenson Properties Trust fourth-quarter and year-end 2015 earnings call.

(Operator Instructions)

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Dawn Hendershot, Vice President of Investor Relations. Thank you. Ms. Hendershot, you may begin.

Good morning. And thank you for joining us for Ramco-Gershenson Properties Trust fourth-quarter and year-end 2015 earnings conference call. With me today are Dennis Gershenson, President and Chief Executive Officer; John Hendrickson, Chief Operating Officer; and Geoff Bedrosian, Chief Financial Officer.

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. Additionally, statements made during this call are made as of the date 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 fourth-quarter press release.

I would now like to turn the call over to Dennis Gershenson for his opening remarks.

Thank you Dawn. Good morning, all.

We closed 2015 having made significant progress in a number of our strategic goals. First, we simplified our portfolio structure by acquiring or selling all but three of our joint venture shopping centers. We recently expect that these last three assets will be sold over the next 12 to 18 months. Second, our capital recycling program for 2015, which resulted in the sale of approximately $88 million of non-core assets and average capitalization rate of 6.4%, was centered around our efforts to continually improve our shopping center portfolio's quality by focusing on the ownership of large multi-anchored centers in high income [infill] markets, which generate above average rents with best-in-class retailers.

And third, as evidence of the success of our ownership of high-quality regional destination properties, over the last 18 months, we signed 15 anchor leases, with retailers to include the likes of Nordstrom Rack, Saks Off Fifth, Stein Mart, Dick's, and DSW, to name a few. These anchor additions, almost without exception, resulted from the construction of new retail space on our shopping center sites, rightsizing existing retailers to accommodate our new anchors, replacing lower-performing tenancies, or building additional retail square footage on adjacent land. The signing of long-term leases with this number of new anchors, when our anchor occupancy is near an all-time high, demonstrates our ability to consistently create additional value at our shopping centers. These additions to our portfolio will open throughout 2016, with an emphasis on the second half of the year, achieving a full-year effect in 2017. Based upon the pending openings of many of these high-quality national retailers, we expect a lease-up of in-line space to accelerate and produce even higher rental rates.

The simplification of our asset base, the streamlining of our corporate structure, our concentrated market and asset focus, and the value-add re-developments, combined with our emphasis on producing superior operational results, will deliver real value for our shareholders.

2015 also saw significant positive changes in the executive suite. I believe the additions of John Hendrickson as COO, and Geoff Bedrosian as CFO, have formed an incredibly strong team. It will enable our Company to not only continue to grow, but will broaden our skill set and allow us to envision the future in new ways. [Plus], 2015 was a very successful year, capping a successful five-year period, which resulted in average operating FFO growth of over 9%, and increasing portfolio average base rents per square foot of 34%, and consistent same-center growth without redevelopment of 2.6% during that period.

Our plans for 2016 are based on a prudent approach to capital sourcing and allocation. This year, we plan to remain focused on our in-place re-developments that are estimated to yield returns of between 9% and 10% over the next several years. We are also in the process of curating a substantial redevelopment pipeline to replace current projects as they mature. The funds for these capital expenditures will be generated from our 2016 capital recycling program, which will consist of selling fully-valued slow-growth assets in non-strategic markets. Based on the number of our value-add projects, and ongoing re-tenantings, we will be pursuing a more aggressive capital recycling program this year, as a result of our strategic operating activities, including the square footage we've taken off-line for redevelopment, the conscious postponement of leasing certain in-line retail spaces, and the number of non-core shopping centers to be sold. Our FFO projection for 2016 will show only modest growth at the midpoint.

That said, because of our solid portfolio foundation, the further streamlining of our asset base, and the increase in net asset value we are building, we have set a five-year FFO growth goal of between 4% and 5% each year after 2016 while we continue to meet all of our operational objectives.

In summary, our team of skilled professionals are excited about both the opportunities and challenges that lie ahead in an ever-changing retail landscape. We look forward to continuing to generate long-term value for our shareholders.

I would now like to turn this call over to John Hendrickson for his remarks.

Thank you, Dennis. Good morning, everyone.

To expand on Dennis' comments about 2015, 2016, and beyond. I want to provide a progress update on three operational areas I have focused on during my first year at the Trust: leasing execution, redevelopment velocity, and property operation; and then explain how we believe that we [have] well-positioned to generate sustainable, same-center growth over the next five years. First, an update on leasing. We finished 2015 at a lease occupancy of 94.6%. Small-shop occupancy, which has been a significant focus for us, improved a full 100 basis points during the quarter and finished the year at 87.5%. In addition, consistent with the goals I laid out in mid-2015, we have been able to improve the quality of transactions by generating strong roll-over [rents] of 9.1% per year, almost 300 basis points better than 2014. And nearly 70% of new and renewal shop deals included annual increases, while having longer fixed terms.

We do believe we are in the later innings of this economic expansion and are watching closely as the recent market volatility impacts customer and tenant demand. However, to date we have not seen any change in demand for our [space]. Our portfolio of high-quality, value oriented, and necessity-based retailers is continuing to improve and will perform well in any environment. So, we expect our leasing momentum to continue into 2016 and drive small-shop occupancy an additional 100 to 200 basis points before the end of 2016. We therefore expect to increase overall lease occupancy to 95% to 96%, and plan to maintain this occupancy level through 2021.

My second area of focus was to generate and execute on a sustained redevelopment pipeline. In 2015, we completed six projects totaling $33 million and yielding approximately 10%. Our current redevelopment pipeline now totals $76.8 million, including an out-parcel development at one of the joint venture properties we bought last year, Shops on Lane, and the first phase of property densification at the second largest of our 2013 acquisitions, Deerfield Towne Center. We expect to complete approximately $58 million of additional redevelopments this year, which will provide stabilized income to 2017 and beyond; and are currently working on several projects we plan to start in 2016 with the goal of consistently maintaining a pipeline of $65 million to $80 million or more of active projects.

The third area of focus was improving our operational structure. The split of the portfolio in mid-2015 into two largely independent property-level teams continues to yield results and has helped in the execution of our leasing and development goals, with smaller, nimbler teams making quicker decisions. In addition, this small team approach has provided better on-the-ground focus which has allowed us to get closer to our tenants, improve property standard, and provide better cost controls. Controllable property expenses were essentially even in 2015 compared to 2014. And we are currently forecasting no growth in expenses in 2016. Now, with strong operating expense controls in place, we are turning our attention to the generation of ancillary income, both in line and in the common area. In 2016, we are looking at our operating teams to generate approximately $500,000 of additional ancillary income compared to 2015, and then grow this number annually over the next five years.

So, with this operational foundation, combined with a portfolio that continues to improve, we have outlined the ability to generate strong, sustainable internal growth over the next five years. This growth will be generated by continuing to actively manage the portfolio, including maintaining a meaningful redevelopment pipeline. As a result of this portfolio focus, we have now begun to present same-center growth with the impact of our value creation project, as we believe it is the best indicator of our business [plans] achievement and is consistent with our [peer's treatment] of this measure.

In 2015, our same-center NOI growth was driven by our Lakeland, Florida, expansion and two anchor repositions that more than offset the typical increase vacancy caused by other property redevelopment and generated a healthy 3.9% increase in same-center NOI. 2016's growth will be partially powered by the $33 million of 2015 completions I mentioned earlier, 6 additional projects, which will be placed in service during 2016, and 15 new anchor leases that will come online mostly in the second half of the year. And so, in 2016, we expect same-center NOI with redevelopment to grow 3% to 4%, and have set this as our growth target over the mid-term as a material contributor to our top-tier FFO growth over the next five years.

Like Dennis, I'm also excited to have a new partner in Geoff, to help drive the Company forward and achieve these results. So let me now turn the call over to Geoff to discuss our numbers and guidance. Geoff?

Thank you, John. And hello, everyone. I'm very happy I made the move to the operating side of the business to a Company with which I have a long-standing relationship. I look forward to working with Dennis, John, and the rest of the management team to take Ramco to the next level.

It's an exciting time for Ramco, as we continue to focus on portfolio improvement and balance sheet strength. We have a high-quality portfolio of geographically diversified shopping centers with strong tenants; and when combined with our strong and flexible capital structure, the Company's positioned to provide long-term cash flow stability and growth to shareholders. We will continue to improve our balance sheet strength by further unencumbering our mortgage assets, optimizing our cost of capital, and allocating capital to achieve our targeted risk-adjusted returns.

With that, let's jump into the review of our results. Operating FFO for the quarter was $0.34 per share compared to $0.33 per share in the fourth quarter of 2014. The $0.01 increase was primarily a result of a $0.06 per share increase in cash NOI from operating properties and the net effect of acquisitions and dispositions, offset by $0.05 per share from a higher share count, lower lease termination fees, and higher interest and other expenses. For the full year 2015, operating FFO was $1.39 per share compared to $1.27 in 2014. The increase [net FFO] per share was driven by a $0.28 increase in cash NOI from our operating properties and the net effect of acquisitions and dispositions, plus a $0.04 increase in gain on land sales and a one-time benefit of $0.02 from G&A expense related to the CFO transition, and a reduction of an [l-trip] accrual. These increases were offset by $0.22 from a higher common share count, interest expense, and lower lease termination fees.

Turning to the balance sheet, 2015 was a busy year. On the capital spending side, we purchased our partners' interest in seven joint-venture properties for $185.9 million; we incurred capital expenditures related to leasing and redevelopments of $62.9 million; and repaid $92.3 million of mortgage debt with a weighted average interest rate of 5.2%. On the capital funding side, we generated net proceeds from asset sales of $70.6 million, raised $17 million through our ATM, issued $150 million of senior unsecured notes with a weighted average interest rate of 4.15% and a weighted average maturity of approximately 10 years. We assumed mortgage debt of $48.1 million with a weighted average interest rate of approximately 4.1% and a weighted average maturity of 4.6 years. The balance of our expenditures were funded on our credit facility and cash flow from operations.

Our balance sheet remains solid at the end of 2015, but at the upper end of our leverage range at 6.6 times debt to EBITDA. Our coverage ratios are strong and our interest and fixed charge coverage ratios remain virtually unchanged from year end 2014 at 3.9 and 3.1 times respectively. The strategic financings executed in 2015 continued to extend our debt maturities and lowered our costs. As of the year-end 2015, our weighted average cost of debt was 4.15% and our weighted average term was 6.5 years. Additionally, the repayment of mortgage debt brought our unencumbered asset pool to approximately $2 billion. We ended 2015 with approximately $286 million available under our unsecured credit facility, which provides plenty of liquidity for our 2016 business plan.

Finally, as part of our earnings release yesterday, we introduced operating FFO guidance for 2016 of $1.32 to $1.38 per share. As part of that guidance, we are redefining operating FFO to provide a more transparent representation of our property operations by excluding land sales. So, by way of comparison, our 2015 operating FFO, using our new convention, we would have been $1.33 per share when excluding land sales and the one-time G&A benefit.

We believe our 2016 guidance represents the Company's focus on portfolio quality and performance as well as maintaining a strong and flexible balance sheet for long-term growth during all economic cycles. Our asset sales guidance of $100 million to $125 million is higher than historical levels as we build liquidity on our balance sheet and further improve the quality of our portfolio through strategic sales. The asset sales target accomplishes two objectives for the Company. First, it reduces our debt to EBITDA to a more comfortable range of 6.2 times to 6.4 times; and second, brings down our Michigan exposure closer to our 25% or less target. While we made what [forgoing] short-term growth with our asset sales in 2016, we believe the combination of a higher-quality portfolio, leases coming online in the second half of the year, and occupancy gains, will position the Company for sustainable long-term growth.

With that, we would like to open the line for questions, Michelle.

(Operator Instructions)

Todd Thomas, KeyBanc Capital Markets.

Hello, thanks. Good morning. Just given some of the anchor leasing that you discussed and the expected acceleration in small shop follow-on leasing. John, you mentioned the small shop leased rate. You're expecting to increase 100 to 200 are basis points 2016. Is that the peak for non-anchor leasing in the portfolio? Or is there still some upside to 90% or higher?

Hello, Todd. Good question. It's hard to know exactly where we can take the portfolio. Because it's a fairly new portfolio for us over the last five years. But I certainly think there'd be a little bit more upside. I wouldn't expect there would be much beyond. Who knows? But it could be maybe another 100 to 200 basis points. But that's certainly going to be what we're trying to push it to.

Okay. And then I think I missed some of the commentary around the higher year-over-year operating expenses in the quarter. What drove the increase specifically? And then what gives you confidence that expenses will be flat year-over-year in 2016 if I heard you correctly on that?

Right. So what I was specifically referring to Todd, was controllable operating expenses which would exclude real estate taxes and snow and so forth -- and insurance. I think what you're seeing in the increase year-over-year is actually the real estate taxes. For controllable operating expenses we were flat, actually slightly down. And then again we expect to be able to drive back. We maintained flat from focus from our Property Management staff and being able to still leverage vendors.

Okay. And then just in terms of the disposition activity that you're assuming. How much of the $100 million to $125 million do have visibility for at this time? Assuming that you've identified which assets you'd like to sell. But what's the timing look like? And is anything on the market today?

Hello, Todd. It's Dennis. At the moment, we are working with a number of brokerage teams as we're positioning several of these assets for sale. We've identified the centers that we are interested in selling which important to understand is, we are not selling the type of shopping centers that are distressed.

These are all extremely well-leased shopping centers. We have maximized the value we don't see a lot of value-add redevelopment upside to them. And so it's either that or they really don't fit in our picture for the long-term.

So, you will see assets sold. Maybe one or two in the second quarter. But an emphasis in the second half of the year. We feel very comfortable that we are going to be successful in these dispositions as evidenced by the sale of our Troy, Ohio shopping center in the first quarter. And interestingly, this is in a secondary market. It has a shadow anchor of Walmart to it. And we achieved a CAP rate in the high 6%'s. So we are off to a very good start on our dispositions, and expect that to continue.

Do you think you can achieve a similar CAP rate for all the 2016 dispositions? I think you said a 6.4% CAP rate was what was achieved on the $88 million sold in 2015. Is sort of a mid 6% CAP rate the right range of think about for the 2016 sales?

Well I answer that question two ways. The first is as in Geoff's remarks, we will be focused on selling more of the out state Michigan assets. And so we probably assume that the capitalization rate on that probably will be on average somewhere in the mid to slightly higher 7% range.

That will be balanced with -- what you have to understand is, a number of the dispositions, leaving the Michigan sales aside is, with all of these anchor lease signings and the redevelopment schedule we have, rather than raising equity, we're going to be funding this through the capital recycling program. So it's entirely possible that we have a number of very strong shopping centers that say our only supermarket anchored.

That's not part of the our long-term plan, at least in 2015 those were selling in the mid-to high 5%'s. So what we're really talking about as far as a capitalization rate, is something that would be an average of all of those. So I would assume that unlike the 6.4%, we are probably talking somewhere in the 7%'s.

Okay, great thank you

That's long-winded but I hope that answers your question

Certainly very helpful appreciate it. Thank you.

Vineet Khanna, Capital One Securities.

Good morning. Thanks for taking my questions. Just following along when you started the disposition guidance. Can you talk about the depth of the buyer pool for the assets you're looking to sell this year? And the ones that you sold in the latter half in of last year and early 2016?

Sure. (Inaudible). What's happening in the pool of buyers is that the majority of the centers we sold that did not fall into the A quality assets were sold to either private REITS or private buyers. And if you've been following the CMBS market, spreads have widened some. I think a lot of potential buyers are waiting for a little more clarity. Because I think that those spreads probably will come down, if everybody can get -- hopefully when we hear from the Fed. Some type of normalcy, as far as interest rates are concerned.

So, the majority of the assets that we will sell in 2016 will be to the private buyers. We have seen some diminution in the number of private buyers in that pool. But still, the people that we have dealt with in 2014, 2015 that we can count on, will put in a bid who we know will close, are still out there and are still reasonably active.

Okay. And then quickly on disposition guidance. Does that include any JV dispositions this year?

There'll be one JV disposition this year, I believe. But it falls into an asset where we only really have a 7% interest. So it will not have a significant impact on our numbers.

And to be clear, the 100 to 125 does not include the JV dispositions in that number.

Okay, thank you. And then Geoff, you have been in CFO position a couple weeks now. Can you give us your initial take aways? And if there are any plans to make any changes to the financial accounting functions? Or really the Company's balance sheet strategy?

I think like I said my remarks, there is not going to be any change in strategy at all. I think the objective is to make the balance sheet stronger, and nimble, and flexible. From that standpoint, nothing is really going to change. I think it's going to be good to have a different set of eyes as it relates to optimizing cost of capital and allocating it. But other than that, the team is in place, we've integrated quickly like you said over couple weeks. But it's a good team, and we'll move forward with that team.

Okay great. And then last question for me. Can you talk about any changes to the watch list over the past couple of months?

I'll start with that. This is John Hendrickson. Obviously, the Sports Authority is a focus right now. We only have the four locations. And we fell pretty comfortable. At least near-term keepers for the Company.

And then we are still keeping an eye on, there's been no change, we're keeping an eye on the office sector which we continue to try to narrow down, reduce our exposure there, because that is still in question. And beyond that, I'm not sure there's anything more from a concern on our point that's different.

Okay great, thank you.

Craig Schmidt, Bank of America.

Thanks. What would your fourth-quarter same-store NOI be without the re-tenanting efforts?

Craig, This is John Hendrickson. Without a shift in the change in occupancy from a small shop standpoint, I can't say that we really look at it that way. So I can't give you a direct answer on that.

Okay. And then in terms of some of the new small shop leasing that you're hoping to do in 2016. What would you say the breakout is of services; health, beauty, restaurants versus those that sell retail goods?

That's interesting. We continue to see -- I think everyone is seeing still significant amount of food and service. I mean food, I think last year was close to 30% of our new leasing. And service was also a big piece of that; probably 20% to 25% so then rest would be really soft goods and other.

Okay thanks.

Vincent Chao, Deutsche Bank.

Good morning everyone. Going back to the dispositions for a second here. You mentioned, Dennis the disruption the CMBS market, which we've all been watching. And you also said that the you expect a lot of the asset sales to be back-half weighted. Is that a function of the CMBS markets today disrupting the markets? And people not really willing to buy today? Or, is there an opportunity to pull those forward sooner?

Well absolutely there's an opportunity to pull them forward. When you're talking about somewhere between $100 million and $125 million and because the shopping centers are nice and stable, that you have a dynamic pull between locking something up early, and enjoying the benefits of these assets for a greater part of the year.

We don't see anything happening with our assets. And our acquisition disposition people obviously keep their finger on the pulse of what's happening with the buyer pools. So I think our preference is to move these dispositions closer to certainly the second half of the year. To maintain their benefit to the overall portfolio as far as income is concerned. All of these assets all of the information that is necessary to put them in a position to be sold is all there and available now. And we will be working with the brokers.

In addition to Troy, Ohio, we do have keyed up two additional assets that more likely than not will close in the first half of the year. But once again, I think that we'll be as opportunistic in our sales as possible based upon their value, their contribution to the portfolio.

And we also, in a perfect world, would love to tie them to the dollars that we need as we move through the capital improvements that we're doing. The last thing I want is to have cash sitting on the balance sheet, waiting for those dollars to be spent.

Right okay. And going back to the same-store performance for 2015. It seemed like it came in a little bit lighter than the outlook provided last quarter. And it seemed like, as of last quarter, the number was fairly well baked given the commencements that were expected. Was the Delta really just the real estate taxes that you mentioned John? Or was there something else that caused it to come in a little bit below the 2.5% to 3% range?

The taxes definitely was an impact. Obviously, the fourth quarter we are working against a tough comp. Really related to, in the fourth quarter we had a large credit related to insurance claim that offset that. That if you eliminated, I mean sorry the fourth-quarter 2014. That's what we're working on, versus a bad debt number fourth-quarter 2015 that was in the normal range. If you eliminated the bad debt impact altogether, it would've adjusted the fourth quarter same-center about 120 basis points. So obviously that was definitely a tough comp.

Got it okay. And then just thinking about the 3% to 4% for 2016 inclusive of redevelopments versus the 3.9% and 2015. Given the amount of anchor tenants that are coming online. I know that's back-half weighted, but it seems like that should be a pretty good tailwind for you, as well as getting the full-year of the 2015 redevelopments. And you have additional redevelopments in 2016 coming on line as well as the ancillary income target of growth of $500,000.

It seems like it could be a little bit higher. I'm just trying to see if I missing something? Or maybe I'm not factoring in some drag upfront in the first half.

I think there's a couple things you have to keep in mind. One is the fact that there is, all of those items really back loaded. Small shop occupancy gains, anchor leasing, rent starts, ancillary income will all be back loaded. You also have issues, remember as we execute new redevelopments that we start online. The new redevelopments end up dragging you down a little bit. The new (inaudible) service obviously outweighs that. But that also needs to be part of the thinking. At the end of the day, it should be setting us up well for 2017 growth and beyond.

Got it, okay thanks.

Michael Mueller, JPMorgan.

Thanks. Hello. On guidance. What exactly is baked in there for acquisitions? I think the commentary in the release was something like opportunistic. But does that mean there's anything in there or nothing in there?

Mike it is Geoff. There is nothing baked in on the acquisition side which is clearly opportunistic and case-by-case.

Okay. And then John, the ancillary income. Can you run through some examples of what you're looking at to do to generate that incremental income?

Sure. Really it's focused on a large swath of opportunity, mostly stuff in common areas. Either from further sales in the parking lot, to advertising revenue, to recycle revenue. It's a focus we haven't historically done as a Company. We've kind of led it to leasing to focus on the same leasing team doing a permanent leasing with focus on in-line specialty leasing, ancillary income leasing. But we didn't really focus on common area opportunities. So it's really there that I think there's some significant upside to get us more in line of what this kind of portfolio should be able to generate.

If I could add Michael. When I talk about the different ideas, vis a vie both for John and Geoff, when John came with the Company, the lion share, as John has just mentioned, of that ancillary income came from temporary leasing of some of the anchor spaces or retail space that was in line at Federal Realty. They had a very aggressive ancillary income program. And John has brought a number of those ideas over with him. And so we're going to have a focus and move that focus off of the leasing people and into asset management. So we expect to jumpstart that in the areas that John outlined.

Got it. Okay that was it. Thank you.

[Flora Sandicum], Boenning & Scattergood.

Great. Thanks. Good morning. Wanted to ask a question on the operating expense recovery ratio was dropped. I think you alluded to the fact that it was largely due to an increase in property taxes, is that correct?

Well the recovery rate biggest impact would be because of occupancy being different, being lower for the year. That would drive the net impact and the increase in operating expenses was really driven by a real estate taxes.

Okay. If I look at your (inaudible) your physical occupancy actually was changed by 10 basis points during the year. What you're suggesting is it's mostly due to the increase in real estate taxes. Or am I missing something?

If you look at it from a safe-center standpoint, the occupancy is 60 basis.

60 basis points. That's correct. And that was the biggest reason why there was a 2% drop in expense ratio.

Yes. I think there was 50 basis point drop in the recovery ratio.

That's correct okay.

They're basically in line.

Yes okay sorry. The other thing is can you talk us through what the upside is on your tenancies? I think you mentioned there's 46 temporary tenancies three anchor tenancies. Are you moving also from an operational perspective, some of those tenancies to Property Management as opposed to leasing? Or how are you addressing those that attempt to perm potential?

Obviously from an ancillary income standpoint, we're definitely focused on continuing to generate as much as we can from an in-line standpoint. Utilizing vacant anchor spaces, and small shop spaces from an inline retail standpoint. I think you're referencing tenants who are currently month-to-month might be showing up on our rollover schedule. Those are not temporary tenants, those are actually permanent tenants who are month-to-month who are still working through either renewals or they haven't left yet.

The important thing is, a point that you raise is we are definitely one opportunity we do have here is to use temporary leasing as a potential incubator. Especially for tenancy (inaudible) the local operators who could be great from a merchandising mix as we reposition some of these properties. That will be still something that we expand as we expand the ancillary income program that will be part of it.

Thanks.

(Operator Instructions)

Collin Mings, Raymond James.

Hello. Good morning, guys. First question for me is the 4% to 5% FFO growth in the prepared remarks that you are referencing as far as over the next few years. Maybe I missed this, but what type of disposition activity is factored into that forecast looking beyond 2016?

I think that it will be certainly more modest than what we're talking about for 2016. A lot of it will have to do again, with matching whether it's acquisitions and dispositions or significant capital expenditures for redevelopment. It's because, as we continue to narrow our focus on the types of shopping centers that we want to own, and I know we've talked to you consistently about our 20 largest shopping centers which continue to keep on giving, account for slightly over 50% of our NOI. So, that's our focus.

And we will be selective in our dispositions. And again, without saying it's 10% or 5% or 15%, we'll be much more focused going forward. Because again, these are all really very good assets in being selective in how we approach it and what the use of proceeds will be.

Okay thanks Dennis. And along those lines can you update us? I know you've talked in the past about potentially exploring some mixed-use opportunities on some of those higher-quality assets. Just update us on how that process is moving along?

You have to begin with the fact that our primary focus is as a shopping center owner. We, at Deerfield, we have approximately 78,000 to 80,000 square feet of office that existed when we bought the shopping center -- I'm sorry, at Front Range. We have had studies done concerning the depth of the office market there. If you look at some of the site plans that we have put together specifically at Front Range, you can see that over the long-term, we are planning additional buildings and some of those additional buildings can include office.

But, we will be very conservative in that approach. And especially if we're going to consider building any office, it would have to be significantly pre-leased. But because we own these larger shopping centers, the whole concept of live, work, play has become more and more an element in people's lives, especially for the millennials. And we believe that the Front Ranges, the Deerfields et cetera fall into those kinds of categories.

So we'll be selective in what we do. But we certainly are open to the possibility.

Okay. Thanks, Dennis. And one last one from me. Looking ahead to 2017, you have a pretty significant mortgage coming due on River City Marketplace. Any initial thoughts on how you plan to address that?

I think it's safe to say that we will be very proactive in attacking the maturities that we can sooner rather than later, given where interest rates are. So it's certainly on my radar screen or on our radar screen as a Company.

Okay, great. Thanks guys

There are no further questions. At this time I would like to turn the floor back over to Dennis Gershenson for closing comments.

Ladies and gentlemen, as always, we appreciate your interest, your attention. And we look forward to speaking to you in less than 90 days. But, we are very bullish about this year and our activities, and look forward to talking to you at the end of the first quarter. Thanks again.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.