Rithm Property Trust Inc (RPT) 2016 Q1 法說會逐字稿

Good evening and welcome to the Ramco-Gershenson Properties Trust First Quarter 2016 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Dawn Hendershot, VP of Investor Relations. Thank you, Ms. Hendershot, you may begin.

Good morning and thank you for joining us for the first quarter of 2016 earnings conference call for Ramco-Gershenson Properties Trust. With me today are Dennis Gershenson, President and Chief Executive Officer; John Hendrickson, Chief Operating Officer; and Geoffrey 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 the 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 first quarter press release. I would now like to turn the call over to Dennis Greshenson for his opening remarks.

Thank you, Dawn and good morning ladies and gentlemen. This month marks our 20th anniversary as a public company. During that time, we work tirelessly to deliver value for our shareholders. This quarter is no exception, barring the sports authority bankruptcy, our results were in-line with expectations, and positions us to meet our stated goal of consistently improving our high quality portfolio through redevelopment and capital recycling.

For some time now, we've been telling you that our Company's focus is on large, multi-anchored trade area dominant shopping centers in major metropolitan markets. So, how should you view our shopping center ownership direction of choice in a retail market that is challenging, highly competitive and constantly evolving. First, we live in interesting times. While there is projected to be a net increase in the number of national retailer store openings and open-air centers this year, the marketplace continues to be buffeted by bankruptcies, by both large and small national retail companies.

We are also witnessing retailers rationalizing store counts to reflect changing shopping habits, the integration of omnichannelling and the closing of underperforming stores to refocus on the most highly productive and profitable locations.

All of these trends favor well located market dominant shopping centers like those in our portfolio. With an average of 5 anchors per center supported by a healthy complement of ancillary retailers, our centers are ideally positioned to accommodate the potential needs for an anchor to expand their existing premises as they close under-performing stores in the market or if their plans call for rightsizing their footprint to reflect the benefits of omnichannelling, as we have the flexibility and new tenant interest to accommodate these needs as well.

Further, the number of anchors in our centers insulates our properties from the loss of any one retailer, like Sports Authority, while providing an opportunity to release the vacancy through new exciting concepts that wish to enter the trade area or provide an avenue for an anchor in an inferior located shopping center to move to our market dominant locations.

In addition to the interest by national retailers to locate at our properties, as evidenced by the 15 anchor leases we signed in 2015, and the several additional anchor leases we signed in the first quarter, we are also focused on densifying our large shopping center sites to maximize value across a broad spectrum of users by the development of additional square footage.

Further, we are pursuing our interest in place making, which creates inviting environments where our customers and visitors can linger, and we are committed to our community first programing initiatives, which builds community and customer loyalty with events that include bounce back and inducements.

All of these factors combined to produce a shopping center portfolio that can both weather challenging economic times and thrive in environments where retailers continue to evolve their store formats and locations. Concerning the status of our capital recycling program, we completed the disposition of our Troy, Ohio center in the first quarter for $12.4 million. We are finalizing the sales agreement for two centers, which would close in the second quarter for just over $28 million. Also, we are in contract to sell one of the last two centers in our Heitman joint venture and we have initiated the marketing of three Michigan centers, which we expect to generate at least $58 million. Lastly, we are in the process of receiving final offers for the sale of the [Acquia] office building. (inaudible), we reasonably expect to be able to announce the sale of approximately a $100 million to $110 million by the time we report our third quarter earnings, and there is a reasonable possibility that we will sell a total of $125 million by year-end.

The net proceeds we will generate from the sale of these non-core assets along with our retained cash flow of approximately $30 million will allow us to fund all of our plant redevelopments, retenantings and center upgrades as well as to further our goals of constantly improving our debt metrics and increasing our financial flexibility.

Thus, with a well-positioned portfolio, a strong balance sheet, and active capital recycling program and a talented management team which committed to driving base rents, leasing up small tenant vacancies, retenanting under-performing retailers and executing on our value add redevelopment pipeline, our company is poised to drive future growth. I would now like to turn this call over to John for his remarks.

Thank you, Dennis. Good morning, everyone. As Dennis said, we are clearly in a very transitional time for our industry, but for our portfolio, we generally continue to enjoy a good operating environment. Demand from tenants for high-quality space has remained consistent and this quarter we were able to continue to execute on the leasing, redevelopment and operating goal, I discussed during our year-end call. Let me first spend a moment on Sports Authority, who filed for Chapter 11 bankruptcy in early March, in the last week indicated that it likely will no longer seek to organize [rapid growth liquidity]. We have four Sports Authority in our portfolio, totaling a 172,000 square feet and $1.9 million of annual base rent, which is only 1.1% of the Company's total base rent. Of these four locations, one store, at Clinton Pointe in Metro- Detroit was previously on the closing list, and we already are in active conversations with multiple replacement tenants that not only is accretive for us, but also significant upgrades in merchandizing, which will help to drive value of the asset for years to come. We are currently expecting to recapture the space sometime in 2Q and expect the replacements to likely open in the second half of 2017.

Regarding our other three Sports Authority locations in Colorado, Wisconsin and Florida; it is currently too early to know their outcome. We do know that there is tenant interest for each location and rents essentially equal to or above current levels. But it is uncertain if any or all of these leases will be purchased and assumed within the bankruptcy process.

We expect to have more clarity on these locations in the next 60 to 90 days. Keep in mind, bankruptcy is our natural part of our business and when anchor tenants liquidate, often a net positive long-term, it creates a short-term drag on operating results. The Sports Authority bankruptcy is no exception and likely will have a short-term impact on operating results, but it's too early to know its full effect.

During 1Q, we took $810,000 bad debt charge associated with all accounts receivable including [March timeframe] for the four Sports Authority locations. This charge reduced our same-center growth for the quarter by 200 basis points, since the four locations are all within our same-center [pool]. Without this impact, our same-center growth would have been 3.4% with redevelopment, and 2.5% without redevelopment, right at the midpoint of our annual guidance even against the strong first quarter 2015 comp. While we believe that the closure of the Clinton Pointe location is within our standard budgeted reserve, without further information on the other location, we're currently leaving our same-center guidance for the year unchanged.

Now turning to the balance of the portfolio, first on leasing, we finished the quarter at a least occupancy of 94.9%. Small shop occupancy improved 20 basis points during the quarter and finished at 87.7%. Keep in mind, we typically lose at least small shop occupancy during the first quarter of the year. We lost 120 basis points in first quarter 2014 and 90 basis points of first quarter 2015.

So, this current occupancy expansion shows that we continue to have good demand for our space that more than offset the closure, that typically happened after the holiday season. In addition to gaining occupancy, we continue merchandising upgrade. For example, during the quarter, we converted vacant small shop to anchor space at Jackson Crossing with a Shoe Carnival [addition] added [Francesco] to the Shops on Lane in Columbus, and added a great local operator, HW Home at Front Range Village. Thus, in addition to continuing to upgrade the portfolio of quality, we are well on the way to achieve the small shop lease occupancy outlined last quarter of 88.5% to 89.5% by the end of this year.

Regarding redevelopment, our current pipeline of projects is $75 million. During the quarter, in addition to executing existing projects such as adding new Michael's lease for Spring Meadows. We started another expansion of our Town & Country shopping center, which will add a quality anchor to our already impressive anchor line of Target, Whole Foods and currently under construction's timeline.

Furthermore, before the end of the year, we expect to add $15 million to $40 million of projects including our first phase of the place making and densification at two of our largest assets;. Front Range Village in Fort Collins and Woodbury Lakes in Minneapolis.

These additional projects, added in the next few quarters, will offset the $33 million of project, we will complete later this year. Our redevelopment pipeline is an important part of our internal growth plan, and we expect to maintain a pipeline of at least $65 million.

In summary, we are on target to meet our operating goals this year. Despite a potential short-term issue related to Sports Authority, our properties are performing well. As Dennis mentioned, our regional dominant centers located in metropolitan market not only mitigate (inaudible), but also provide the opportunity and flexibility to meet an evolving retail environment.

Now, let me turn the call over to Geoff for his prepared remarks. Geoff?

Thank you, John, and hello everyone. Operating FFO for the first quarter was $0.34 per share, up 6% from $0.32 per share in the first quarter of last year. Year-over-year increase in operating FFO up $0.02 was primarily driven by $0.05 increase in cash NOI from acquisitions, contractual rent increases and redevelopment properties coming online, offset by $0.03 per share from a higher share count, interest expense, G&A, and lower management fee income.

G&A was $731,000 higher this quarter when compared to last year and relatively in-line with the fourth quarter of 2015. G&A in the first quarter of last year was lower, primarily related to employment vacancy, that has since been filled. We are reaffirming our previously stated G&A guidance range of $22 million to $23 million. I would like to take a moment to talk about our bad debt expense for the quarter, which impacted our operating results and was driven entirely by The Sports Authority. We recorded a bad debt expense of $807,000 for the quarter, comprise of $810,000 related to The Sports Authority, [$248,000] for other bankruptcies and disputes, which is a normal run rate for us, offset by payment resolution and recoveries of previously reserved amounts totaling $251,000. So without The Sports Authority bankruptcy, we would have posted a positive $3,000 bad debt adjustment, which speaks to the solid performance of our overall portfolio.

As John mentioned, we are monitoring The Sports Authority bankruptcy closely, to understand how our four locations will be impacted. We are expecting our Clinton Pointe location, already on store closing list, with this operation at the end of May, and we are awaiting more insight on the remaining three stores. We will update you on our second quarter earnings call as we gain more visibility on how this may impact our full year guidance.

Turning to our capital market activity, we entered into an agreement to extend our $60 million unsecured term loan with an original maturity date of September 2018 to March 2023. In conjunction with the extension, we fix the variable rate portion of the debt to a weighted average spread of 1.84% or an all-in rate of 3.49% when you add the current credit spread of 1.65%.

Additionally, during the quarter, we sold two assets, Troy Towne Center in Troy, Ohio and a land parcel at the Towne Center at Aquia, generating total net proceeds of $12.7 million. We also repaid a $20.6 million mortgage loan with an interest rate of 5.9% on Troy Marketplace in Troy, Michigan, with a drop on our line of credit.

On the balance sheet front, our net debt-to-EBITDA at the end of the first quarter was 6.6 times, unchanged from year-end 2015. Our coverage ratio has remained strong as our interest and fixed charge coverage ratio ended quarter at 3.7 times and 3.0 times, down slightly from the year-end 2015, as a result of our bad debt expense for The Sports Authority.

As Dennis mentioned earlier, we have a number of properties in the market for sale. You can expect proceeds from these asset sales and retain cash flow to be used to fund our redevelopment pipeline and reduce leverage, which will increase our unencumbered asset pool and continue to enhance for financial flexibility.

Finally as part of our earnings [packet] released last night, you may have noticed a few additions to our financial disclosure in the supplement. As part of our move to enhance transparency, I would like to highlight a few changes that include the following.

First on page 11, we added a summary of our portfolio. On page 12, which details our same-store property performance, we broke out our bad debt expense from other non-recoverable operating items. And on page 18, which highlights our leasing activity, we added more precise disclosure on tenant improvements, landlord costs and leasing commissions including recalculating the cost for the previous three quarters.

This change resulted from our desire to provide better CapEx disclosure. So, we performed a detailed review of the costs associated with these lease design. We hope this information is helpful.

So with that, I would like to turn the call back over to the operator to open the line for questions.

(Operator Instructions) Todd Thomas, KeyBanc Capital Market.

First question, I know you have a bunch of anchor leases to sign that are expected to commence throughout the year. Can you just talk about the timing of those in a little more detail, what the commencement schedule will look like through the end of the year and how much annualized base rents attributable to those anchor leases?

Sure. It's John. So, we basically have about 15 anchor leases that we've talked about in the past starting throughout the year. Of those, only two have commenced already and the rest will be phased over the next three quarters really. So, most of the benefit, you'll see in later half of the year. Unfortunately, I don't have the total of the rents in front of me. So, I'll have to get back to you on that.

Okay. And then, you mentioned that the small shop occupancy increase in the first quarter about 20 basis points, a little unusual from a seasonal standpoint. Was the small shop demand greater at the centers where some of these anchor deals were done, are you seeing any impact there, was it more broad based?.

No -- absolutely -- where we've done the anchor operatings were -- even on hot properties were we haven't, where the tenants haven't or the anchors haven't opened yet, but will open soon. We're already able to lease off that and also other things that we're benefiting from is, higher renewal rate overall and I think that's partially driven too -- to the anchor upgrades too from the standpoint that people see opportunity, but they're going to have opportunities in the future and probably chose and just continue to say (inaudible) that otherwise they might not have.

Okay. And then Dennis, just curious if you could talk about the buyer demand for the properties that you're selling where cap rates on the deals in the queue that you discussed relative to what you've previously communicated, I think in the sort of 7% to 7.5% range?.

Well, first of all, good morning, Todd. We continue to see significant buyer demand although it has moderated from what we experienced when the private REITs were incredibly active although we are seeing some private REITs back into the marketplace. We will be selling different types of assets that we consider non-core throughout the year, some will demand healthier cap rates and others, and I still think we'll finish the year in the low to mid-sevens as far as overall cap rate is concerned.

It's helpful. And just a last one maybe for Goeff on -- as you look to sell the Aquia office asset later in the year. I'm assuming, it's a drag on FFO. Is that right and sort of what's the impact that, that asset is expected to have on 2016 FFO, and how should we think about that, once the asset is disposed?

Hi Todd, how are you doing. Yes, it's a bit of a drag, but we've incorporated the timing on the sale and there's a slight drag in our guidance. So, it's not going to move on how we're looking at the year from a guidance range down the way.

Is that sort of a mid-year asset sale as far as we should think about it?

Yes, we got offers on that property right now and so we're working through picking [winner].

R.J. Milligan, Baird.

Hi, good morning guys. I was wondering if you can give a little bit more color about the types of retailers you talk -- potentially backfill some of the vacant Sports Authority space and whether or not you anticipate having to break those boxes up?

Hi, RJ, it's John. So the -- first off, just to talk about the tenants who are out there who we understand are looking to buy leases right now. It's the usual suspects you'd expect really in the sports category; (inaudible) Dick's, [Noodles], TJ for multiple of their concepts (inaudible). So, there was our all, still currently out there, and those have, -- are looking at the three remaining in our portfolio that are, we're unsure about what will happen to those. On the Clinton Pointe, where we expect to have back and we've been working on it. We likely will end up splitting the box and again we're talking to softer retailers potentially especially [grocery], but most likely we will require a split of the box.

And just based on your comments earlier in the call, you anticipate that you could backfill those four spaces for rents, where current levels are above, if in fact, you do get those spaces back?

Yes, I mean based on what we have definitely, there might be, obviously you have put in capital, but from a REIT standpoint, we definitely expect to be at or above where we are today.

Collin Mings, Raymond James.

First question just for Geoff on the balance sheet. Where would you like to get the debt-to-EBITDA. I think following the asset sales, I think you're going to be close to right around 6.3 times or so. Is that kind of where you feel comfortable or do you want to continue to see that leverage go a little bit lower?

Well, Collin, I think I stated on the year-end call, we'd like to get that debt-to-EBITDA number down in the low 6s. So, our stated goal is 6.2 times to 6.4 times by the end of the year. We hovered closer to 6 times as a result of asset sales, we're comfortable with that. So, like I said, I think we will be happy operating in the low 6 times and if we pop up to the higher 6 times, it would be a good reason and a plan to get back down. So, generally speaking, you can think about in below 6 times range.

Okay, and then John, just as you have -- for the last couple of calls, you guys have talked about wanting to drive some more ancillary income from the portfolio. Can you just maybe update us on those initiatives?

Sure, we talked about that. I was open to -- I think, I've talked about having at least $500,000 over what we've done in the past because that is certainly was an opportunity. We're only in the first quarter and that's the kind of thing that doesn't have huge lead times, but the pace we have right now, it certainly will achieve that or exceed it. So, I'm very optimistic about the program, and we seem to be executing it well.

Okay, and then, just may be bigger picture that you guys discussed obviously the bad debt reserve in detail as it relates to the quarter. But may be just update us a little bit more on the watch list and overall kind of struck a more optimistic tone about the retail environment, but just may be touch on what else might be on your watch list as we go through the rest of the year?

Sure, I'll start with that. I mean -- so we basically -- from an underwriting standpoint as we mentioned, we basically had -- we keep, we always budget our reserve both for unexpected bankruptcy and not typical bad debt. And as Geoff mentioned in this quarter, outside of Sports Authority, bad debt has been -- actually good, especially from the standpoint that we've been able to achieve some old collections that helped to reverse some bad debt expense.

So, we certainly don't see anything out there, that is out of ordinary, I mean unexpected vacancy that we budgeted such a way equal to what we saw last year, and we certainly don't see beyond the Sports Authority, any named out there that would concern us. We've had Hancock Fabrics, of five, we only had two of them. And they will be liquidating, but we only have two and half, certainly fits within our reserve. Our (inaudible) was just reported -- filed yesterday, but we have one location where we already planning to upgrade anyway. So, there is nothing big out there that we're worried about.

Okay, and then just one last one, Dennis. As you think about from a strategic standpoint where we are and kind of that focus clearly on redevelopment efforts. Maybe update us on what you are seeing in terms of acquisition opportunities, are you seeing anything that might be something opportunistic that you would look at for your portfolio, or you pretty much focused just on redevelopment right now?

Well, let's say -- our primary focus is absolutely on adding value in core portfolio. We remain selective and opportunistic, we have looked at couple of opportunities. But it needs all of those elements that we've ticked off in the past that you're well familiar with. And more often than not, there is still a very healthy interest in high-quality assets by institutional buyers who are willing to pay significant sums well above what we would consider reasonable. So, if we find an opportunity that makes sense for us, we will go after it, but as of this moment, we really haven't come across any of those.

Jim Lykins, D.A. Davidson.

Good morning, everyone. Just a couple of quick questions. For the TSA spaces, you mentioned possibly splitting those up and with the prospective tenants that you're talking to. You mentioned, being able to probably get better rents, but can you just give us a sense for timing, how you would anticipate it, taking the TI, to be completed?

Sure, Jim . This is John Hendrickson. So, we're actively in negotiations; we're talking to people right now. We'd expect to be able to hopefully a lockdown in announced leases in the next three to six months, and that probably open another nine to twelve months after that. So, I am hoping -- our expectation is to be able to get somebody open by the end of next year, but it's possible, might fall into the spring of 2018. Now that's specifically on the Clinton Pointe location, obviously we'll have to see how the inventory, what happens with them in the bankruptcy.

Okay, that's helpful. And for the rolling redevelopment pipeline, going beyond a 100 to 125 that you've got -- the current projects, could you tell us again what that rolling number is going to be and how long that's sustainable?

Okay. Yes, so and what we've talked about is, at least maintaining, at least $65 million and generally believe that in other range, I've talked about $65 million, $85 million, maybe $90 million. And certainly something we're certainly expect to maintain in the near term because the pipeline that we have is, goes up for at least a couple of years.

Chris Lucas, Capital One Securities.

Good morning, everyone. Just a couple of quick questions. And Geoff, really appreciate the additional disclosures, it's very helpful. I guess one of the questions I had is, can you maybe walk us through the difference in the calculation between how the TI leasing commissions were previously calculated and what the differences to how you're calculating now because there seem to be some pretty big differences quarter-to-quarter?.

Yes, sure, Chris. Thanks. So, we took a review of the cost allocation of our re-leasing -- in our leasing to better reflect the cost associated with each lease, rather than generally use just the incremental cost above the leasable conditions. So, now the information reflects both TIs, tenant allowances, landlord costs and leasing commissions including the white-box costs above -- a white-box cost previously excluded from that number. So, that's the biggest differential, is the delivery of a white-box. And so as we look at that disclosure, we thought it was appropriate to now adjust it accordingly.

Okay, great. Thank you. And then I guess just kind of beating up on the Sporting Goods category, I guess you've got a couple of Gander Mountain, I am just curious as to, since our private companies, sort of what you're seeing from them in terms of sales, trends and whether or not you have any concerns with them, given the weakness generally in the Sporting Goods category?

Yes, that's -- for Gander, we have a couple locations, but we -- from what we've seen, they seem to be able to perform, and they have their niche. And they're -- especially not a bit, we've downsized one of the locations. They seem to be -- and we talked about -- actually about downsizing actually another one, but they seem to be generating, they found their niche for their consumer and they seem to be doing fine. So, that's not what they were worried about at the moment.

Okay, great. Thank you. I appreciate it.

Floris van Dijkum, Boenning & Scattergood.

Thank you. I had a quick question in terms of, yes I guess, capital allocation. And Dennis, if your view is that the market is getting expensive for acquisitions, does that mean that you feel more inclined to continue to call the bottom, 20% of your portfolio at this stage?

Well, let's start with this first, the acquisition market has been floppy for some time, and yet we were historically able to find opportunities in, some weak (inaudible), but we will continue as we look at the portfolio, as we look at our metrics, and as we look at the direction that we're heading for the Company to identify those assets that are non-core to the philosophy that is driving us, and those will be disposed.

One of the things that as I was looking at your portfolio, if I look at your top 50 assets, that's almost 90% of the value of your portfolio. Do you think you're going to have, maybe fewer, but more valuable assets in 18 months' time. Is that the goal?

Absolutely.

And I guess one of the other things is that presumably that also means that -- the reinvestment capital right now is achieving higher returns. I mean, shouldn't that theoretically be all of the focus for the company at this point or do you think that there is an opportunity that you might be able to add on to a particular market with some asset, and you're going to still be opportunistic on potential new properties that come by?

I would say yes to all of those segments. We indeed are achieving some healthy returns 9% to 10% on average, with the value-add redevelopments. We have a very significant, as we've identified re-tenanting program that we're well into, and over the next several quarters, we'll be announcing additional changes in our anchor lineup as we expand centers, et cetera.

So, our primary focus is indeed on driving value in our core portfolio. As I said, relative to acquisitions, we will be incredibly selective in making an acquisition and it will be a compelling reason for us to do that.

Great. One last question maybe. In terms of -- I just noticed that you have three temporary anchors. Could you give any more color -- I mean, the rent is obviously very low. Are these basically backstopped tenants or do you think -- what are the long-term plans with those boxes?

Yes, they are most likely backstop. They're actually, I think, expired right at the end of the quarter. So, it's kind of -- it's a little misleading. So, they're just now mark-to-mark kind of -- but they are just backstop until we find replacement.

And those would be more like -- your average anchor rents in the sort of the low-teens?

Yes, that will certainly be the expectation, Yes.

Vincent Chao, Deutsche Bank.

Hi, good morning everyone. Dennis, just in the context of your comment, in the opening remarks about store rationalization as opposed to just bankruptcies. Just curious as you look at your anchor role over the rest of the year, and also your rollover in 2017, is there anything abnormal that we should be thinking about in terms of -- types of anchors that are rolling there and the risks of some rationalization?

No, not at all. The anchors that are rolling in the balance of this year and next year in the main are all strong performers and we don't expect any surprises relative to any [law].

Okay, great. And then just going back to the guidance, the three stores, sounds like, there's not a lot of clarity in terms of what's going to happen with those three, so no change in the outlook. But I'm assuming the one store that you're expecting to close in the second quarter that, that has been taken out of guidance already or everything has been left in at this point?.

That has been taken out and that has been incorporated in the guidance because that is Clinton Pointe, that falls into our unexpected vacancy category.

Just a normal course type of, is correct, I guess.

Yes, correct.

So no, specific adjustment for that particular property?

Correct.

Got it. And then I guess in a worst-case scenario, I mean, I guess it's 1% [maybe] or we should expect about 100 basis point impact, same-store NOI if everything goes away?

Yes. Vin, it's tough to predict where we're or how that's going to get impacted since we don't have any visibility into what's going to happen with the three remaining stores. Like John said, we have a lot of activity around them from a couple of retailers. So, I would prefer not to give a potential impact because we don't have any visibility. What I can say is, I think by the time we get together for our second quarter call, we should have some visibility on that, we can give you some more precise direction.

Okay and then just maybe a last question, some on renewal spread, it was a little bit lighter this quarter than it has been the last few quarters, we've seen that in a couple of your peers as well. Is that just sort of an option mix kind of thing or was there anything notable on the renewal spread this quarter?

Yes, Vin. It's John, keep in mind especially in the first quarter gets [skewed] this waiver -- renewals over 70% of our option exercises and 80% of those option exercises -- over 80% were anchors which ended up driving it down. The other thing we had is, we had on the couple of these properties where we are going through redevelopments, we've done some short-term [punts] where we kept tenants in place at flat rents which also are driving down, driving that renewal down a little bit. I'd say like 40 basis points was just from that point alone.

Craig Schmidt, Bank of America.

Thank you. Could you talk a little bit about your comfort with the fresh market stores given the recent enclosures?

Hi Craig, it's John again. So, we only have, we have two fresh market locations and the ones that we have, I think we're comfortable certainly in near-term if they are not up, any time soon. Obviously, it is something we're keeping an eye on. And there are recent purchase and I think their credit rating was certainly not the best, but it's not something, it's something we're keeping an eye on, but not something we're worried about even in very short-term.

And how both the Winn-Dixies in the same markets?

So, again we have two Winn-Dixies. There, especially you have, the rents are fairly low, but ones that we have, we would like to get back, and they've actually are choosing to invest in them. So, I think that's a place where again, if we get those back, I think it would be a net positive for sure.

Michael Mueller, J.P. Morgan.

Hi, just quick question, so you're giving us some data points now, 10 improvements leasing commissions. I was wondering, can you give us some data points on maintenance CapEx too for the portfolio and just some general numbers about where that's been running and trending?

Mike. We're working on trying to get a more precise disclosure for you on that number. And I think -- as I think, I've said to some of you, our goal for the second half of the year is to provide that for you in some detail. So, it's work in progress right now, what I can tell you, how that for the back half of the year from a disclosure standpoint.

There seems to be no further questions at this time, would you like to make any closing remarks?

Yes, thank you. Ladies and gentlemen, as always thank you for your participation, your interest and attention. We look forward to speaking with you again in approximately 90 days. Have a great day.

This concludes today's conference. Thank you for your participation and you may disconnect your lines at this time.