Rithm Property Trust Inc (RPT) 2017 Q1 法說會逐字稿

Greetings, and welcome to the Ramco-Gershenson Properties Trust First Quarter 2017 Earnings Call.

(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, Vice President of Investor Relations.

Thank you.

You may begin.

Good morning, and thank you for joining us for the first quarter 2017 Earnings Conference Call for Ramco-Gershenson Properties Trust.

With me today are Dennis Gershenson, President and Chief Executive Officer; John Hendrickson, Chief Operating Officer; Geoff Bedrosian, Chief Financial Officer; and Cathy Clark, Executive Vice President of Transactions.

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 quarterly press release.

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

Thank you, Dawn.

Good morning, ladies and gentlemen.

Rather than take your time today to review our observations on the state of the retail marketplace, I would merely say that retailers and retailing in general, are experiencing significant changes that are separating the irrelevant and the obsolete retail models from those vibrant retailers who are either presently immune to these changes, like T.J. Maxx and Ross or our rungs who are restructuring those strategies to meet the changing pace and times.

In light of these changes and challenges we want you to take away 3 conclusions from this call: first, based on the steps that Ramco has taken over the last several years, and the transformation of our shopping centers that we are completing this year, our portfolio is strong.

Our shopping centers are located in healthy growth markets.

They are truly the dominant retail destination in their trade areas.

The overwhelming majority of our tenants are the most desirable and creditworthy national retailers, who not only continue to drive but are open to grow their store counts.

Our leasing efforts continue to pay dividends through solid rental increases.

And based on the strength of our regionally dominant locations, those retailers who have stumbled won't prevent us from maintaining and growing our earnings.

But instead, their departure will afford us the opportunity to replace them with even more desirable retail uses.

Second, our capital recycling plan is accelerating.

In addition to the 2 centers sold in the first quarter, we are in contract for, or in the midst of taking final offers on a number of properties that will generate approximately $90 million to $100 million by the end of the second quarter or soon thereafter.

And third, in this evolving retail landscape, our company is focused on owning a portfolio of properties in key growth markets, which include both regional-dominant and urban-oriented infill shopping centers.

Each of which have built-in value-add opportunities.

By owning large, regionally dominant centers, we have positioned our assets to be the properties of choice as successful retailers rationalize their store counts and store sizes as they chose to close moderately profitable and unproductive stores or conclude that they can generate the same sales volumes from fewer physical locations as they pursue an omnichannel approach.

Both the successful retailer and the modern shopper will gravitate to our regionally-dominant shopping destinations, leaving behind those properties that, although reasonably sized and located, do not provide the breadth of merchandise, value, convenience or experience that our properties do.

Our focus on urban infill shopping centers, which are supported by a large population base, respond to the changing trends and lifestyles of the up-and-coming generation who favor an urban environment and the immediate availability of quality restaurants, entertainment and value shopping.

This dual philosophy is reflected in our first quarter acquisition of 2 shopping centers, which represent both aspects of our portfolio approach.

Providence Marketplace at 800,000 square feet, represents our regional dominant focus, and Webster Place in the Chicago neighborhood of Lincoln Park, is a true, urban-oriented shopping and entertainment destination.

At both of these properties, in addition to aggressively pursuing our recent goals, our value-add redevelopment plans are taking shape.

The goal of our 2017 capital recycling plan was the geographic diversification of our portfolio, achieved through the acquisition of shopping centers that reflect the characteristics of the 2 aforementioned types, funded by the sale of non-core properties, primarily those located in the state of Michigan.

It is our stated intention to reduce our Michigan presence to 20% or less of average base rents.

We are on track to achieve both our acquisition and disposition objectives as all of the Michigan properties we've identified for sales are presently in the market, and we've already acquired 2 high-profile, well-located, regional-dominant and urban infill shopping centers.

Thus, we feel that our plans for 2017, our belief in the future direction of retailing as the insightful retailer, as well as our appreciation of the changing consumer tastes and trends, positions our portfolio and company to deliver consistent operating FFO and same-center NOI growth, which in turn will drive our earnings as we move into 2018 and beyond.

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

Thank you, Dennis.

Good morning, everyone.

2017 is certainly shaping up to be a transitional year for retail real estate.

But the headline tenant failures have produced no surprises for us today and are in line with our projected business plan.

In fact, our first quarter operating results reflect our high-quality, stable portfolio poised for growth, and our expectations for the rest of the year remain consistent with the goals we laid out last quarter.

Same-center NOI grew 4.1% during the quarter, driven by favorable, comparable bad debt and strong minimum rent growth of 2.7%, which is 40 basis points above our average quarter minimum rent growth for the last 2 years.

Note that our same-center pool now only excludes 2 JV properties and 3 recent acquisitions, and thus, is a very good indicator of the strength of our portfolio.

While there might be additional quarterly choppiness due to year-over-year comps and the timing of new lease starts, we still expect to achieve our guidance of 2.5% to 3.5% for the full year 2017.

As we discussed last quarter, our forecast for the year does anticipate bad debt and down time related to closures of tenants on our loss pool, including Gander Mountain, rue21, Gymboree, Payless and others.

Growth elsewise the portfolio, including from the more than15-acre additions in 2016 and $45 million of completed redevelopment expansion projects, combined with good operational execution, will more than offset the impact in 2017 of these (inaudible) tenants.

Regarding leasing.

During the quarter, we completed 70 comparable lease transactions with a roll-over spread of 7.7%.

While this quarter's spread is lower than last quarter, the more relevant number is a trailing 12-months spread of 8.9% from 261 transactions, which is right in line with the trailing 12-month results we have achieved since 2015.

As we look forward to the rest of the year, we still expect to maintain transactional quality, while we achieve high single-digit spread and leasing volumes consistent with last year.

We finished the quarter at a leased occupancy of 94.3%, generally in line with last quarter, despite the closures that typically happen after the holiday season.

Our value, entertainment and fruit tenants still have significant open to buy.

So looking forward, we expect new leasing to largely offset the forecasted (inaudible) impact, and thus we are projecting to finish the year and at a lease occupancy of between 94% and 95%.

The business is certainly changing, and there will be more changes in the next 12 to 24 months or longer.

However, when we finish our significant portfolio repositioning this year, we will have a solid mix of regionally-dominant, infill and (inaudible) centers, which are well leased to best-in-class takers, but also have nearly 30% of GLA dedicated to small shop tenants, thus providing the right balance of stability and growth.

Also, more than 90% of this portfolio is located in high quality and growing submarkets of the top 40 Metro markets.

This, combined with our creative, energetic team within a focused operating platform, allows us to succeed where others may not.

I'm still confident our 2017 operating results will demonstrate this strength.

That concludes my comments.

I'll now turn the call over to Jeff.

Thanks, John, and hello, everyone.

I'm happy to report another solid performance by our operating team.

Operating FFO for the first quarter was $0.35 per share, up from $0.34 per share in the first quarter of 2016.

The year-over-year change in operating FFO is a result of higher cash NOI from our same-property pool of $0.01, lower interest expense of $0.005 and higher noncash items of $0.005, offset by higher D&A expense of $0.01 as a result of onetime items we've incorporated into our guidance.

As John mentioned, same-property NOIs for the quarter increased 4.1%, driven by higher minimum rent and lower bad debt expense.

The combination of solid leasing spreads, contractual rent increases and accretive development projects generated approximately 280 basis points of same-store rent growth.

Lower bad debt expense contributed an additional 130 basis points of growth on a comparable basis, as we recorded a reserve in the first quarter of 2016 with the Sports Authority bankruptcy.

As a reminder, a majority of the TSA reserve was reversed in the second quarter of 2016.

During the quarter, we completed $168.3 million of acquisitions and 2 property dispositions, generating net proceeds of $26.1 million.

The acquisitions are temporarily being financed on our revolving credit facility and proceeds from our asset sales will be used to reduce the outstanding balance on our line.

Additionally, we did recognize an impairment of $5.7 million in the first quarter, primarily related to 3 properties in our disposal pool.

The impairment is added back for purposes of driving operating FFO.

We are reaffirming our operating FFO guidance of $1.34 to $1.38 per share and our expectations for investment activity remain unchanged at this time.

Turning to the balance sheet.

Net debt to adjusted EBITDA was 7x at the end of the first quarter, up from 6.3x at the end of the last quarter as a result of our year-to-date investment activity.

Additionally, proceeds from our first quarter dispositions have been deposited in a 1031 escrow account to facilitate a tax efficient execution from our capital recycling strategy.

Adjusting for the cash escrow balance, our net debt to adjusted EBITDA would have been 6.8x.

And as dispositions are completed over the remainder of the year, we anticipate net debt to adjusted EBITDA ending 2017 in 6.5x to 6.7x range.

Before we open up the call for questions, I want to mention a few changes we made to our supplemental reporting package this quarter: First, we've included information around our covenant calculations for our revolving credit facility; second, we modified the reconciliation of same-property NOI to net income to include a calculation of total cash NOI; and the third change was the classifier portfolio by Metro Market rather than state.

We believe that grouping our properties by Metro Market provides better insight into the quality of our portfolio.

Finally, I want to highlight that our balance sheet is in good shape and our very manageable maturity schedule gives us the flexibility needed to execute our capital recycling program.

Our core portfolio is performing well and the Ramco team is working diligently to position the company for long-term growth.

With that, I'd like to turn the call back over to the operator for questions.

(Operator Instructions) Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

First question, Dennis or maybe Cathy.

Can you just shed some detail on how far along you are with the other assets that you're in the market looking to sell?

Dennis you noted $90 to $100 million, is either on under contract or where you're taking final offers.

How much of that is under contract and how comfortable are you with the $250 million guidance for the full year?

I'm going to let get Cathy answer the questions for you.

So in the main we've had good interest in our sales properties and so far we are maintaining our cash rate guidance.

In terms of the numbers, in round numbers, so we closed down about $28 million, we have under contract right now another $20 million.

We have under LOI another about $50 million and we're taking offers now on another $27 million.

So call it $125 million, about 50% of our guidance.

And I think based on that we feel we're on track for what we've projected.

Okay.

And in terms of pricing, can you just remind us what the average cap rate on the sales is projected to be for the year?

And then, maybe can you just talk about the profile of the buyer for some of these assets.

Particularly, those in Michigan, where you're looking to reduce some exposure and sort of how demand for these assets has been?

Sure.

I think on the midpoint of our range was probably right about 8, and then what we closed and have under contract and under LOI, we are, I would say, blended at about 7 3/4.

The buyer pool that we're seeing are generally private buyers.

Some cash from these being debt depending on property size.

The one change that I think that we've noted is the deals are taking, in some cases, a little bit longer to get done.

We're doing it a little bit more hand folding to get to the finish line.

But we're getting there.

Okay.

And then, John, shifting gears to Gander Mountain.

Any sense there what the expectation is for those 2 stores, just in light of the acquisition, I guess, by Camping World?

And do you expect both stores to stay open?

Are you anticipating any lease modifications?

And then of that, $3.8 million I think it was, of bad debt expense and unexpected vacancy loss or NOI loss that you budgeted for the year.

How much of that has already sort of been utilized?

Or I guess how much is left as a cushion going forward throughout the balance of the year?

Sure.

First off, starting with Gander.

Just a reminder we have 2 Gander locations.

And the acquisition of Campers' (sic) [Camping] World, it appears that they're just looking to operate a handful other stores.

And will actually continue to market the remainder of the leases.

So we don't expect at the moment that Campers' (sic) Camping World will actually operate either of our 2 locations.

But we do know that there has been interest, at least, in 1 of the 2 from other operators.

We would expect them to continue probably to bid on the location.

But to be honest, in both cases, we have -- we're been working through backfill.

We're currently assuming that they -- we get both of the spaces back and we're working on leases at or above current rents.

So we think we can actually create some value there overtime.

But -- and asking about the overall watch list, we -- I think we've covered -- we've assumed a lot of the headline risk in our forecast right now.

We've talked about Gander, I mentioned about Gymboree, and Payless and rue21.

We're assuming to get at least some of the stores back later this year.

So we think -- we certainly think in our guidance number that we're in very good shape as it relates to watch list.

Our next question comes from the line of Collin Mings with Raymond James.

Just going back first to Todd's question.

Just curious if you could talk a little bit about the latest thinking as far as the timing and maybe potentially pricing to selling that enclosed mall you reference on the last call.

Just trying to get a sense for how that might fall into the year.

Hi Collin, it's Dennis.

We certainly have that specific asset in the marketplace.

There was a tenant in the mall, was it MC Sports?

MC Sports filed for bankruptcy and that kind of put a damper on the immediate disposition of that asset.

We're reassessing that disposition in light of our overall plans.

But whatever we do, it is our goal to reduce Michigan to 20% or less of our AVR.

Okay.

And then, maybe Geoff, if you can expand upon what drove the impairment during the quarter?

Yes, Collin, I think from an impairment standpoint we look at impairments on a quarterly basis and we look at our estimated hold periods with respect to certain properties.

And as we went through the quarter and finalized our disposition pool and we did our quarterly impairments, that's what the impairment was driven by.

Okay, so overall, just to make sure I understand this correctly.

It sounds like again the overall disposition plan is unchanged but maybe some of the moving pieces might change a bit, but ultimately it's still going to be obviously Michigan focused.

Is that a fair way to characterize it?

Absolutely.

Yes.

Okay.

And then, just going back to some of the comments about the same-store NOI, given the obviously the strong number here, albeit somewhat fueled by the bad debt number.

Just Geoff, it sounds like there's maybe a pretty meaningful deceleration into 2Q as far as that comp.

Is that a fair way to think about it?

Or is there any other color you can provide on the trajectory?

Yes, Collin, I think you're right.

And you know the way we kind of were thinking about it for the second quarter, it's going to be about 100 basis to 120 basis points, is kind of what we're thinking about right now as far as second quarter.

Of deceleration.

Of deceleration, yes.

And that's related to the fact that, if you remember last year, we had a benefit -- I mean we had a -- the bad debt hit related to Sports Authority in the first quarter and then had a benefit in the second quarter.

Just to -- but as I mentioned, this is John, as I mentioned in my prepared remarks, we're still very comfortable with our 2.5% to 3.5% guidance for the year.

Okay.

And then, one last one for me and then I'll turn it over.

Just as far as that acquisition plan for the year, obviously you made a lot of progress on that in the first quarter, you talked a lot about that on the last call.

But just anything else under contract, I think it's about $80 million or so to hit the guidance number for the year.

Anything else, again, under contract of how's that pipeline looking again, you know that you guys have a tilt maybe towards up to some of those urban infill locations in particular?

Yes, hey, this is Cathy.

So yes we were happy to be able to close on 2 great acquisitions in the first quarter.

Since then, deal close have been a little bit light, and I didn't expect that to pick up either at the midpoint of the year or later.

And so we are still looking.

We don't have anything under contract right now, but we still have a couple of things we're looking at.

And we'd like to get a couple of the sales under our belt before we execute on the buy.

Our next question comes from line of Craig Schmidt with Bank of America.

It sounds like that there's going to be a greater focus on food dining than entertainment in your properties.

If that's true, do you anticipate an increase in capital expenditures on tenant improvements?

Hi, Craig, this is John.

The -- right now entertainment and food is about 15% of the total portfolio.

As we talked about last quarter and previously we certainly view that as an important part of the future of the business.

And so we -- and as I've said in the past, 30% to 40% of our small shop tenants over the last couple of years has been food already factored in.

So I'm not sure that you necessarily see over the last couple of years.

But going forward, I'm not sure you'd see much of a change in the makeup of GIs, et cetera, related to that since we've basically been doing that over the last couple of years already.

Yes, I noticed you hadn't increased it in the first quarter so [it's] possible.

And then, just the reduced exposure to Detroit.

Is there a sense of what markets might grow in importance on your top metro penetration?

Well we -- as you know, Craig, we purchased the National Center.

So we continue to look in that National area.

We certainly like the Denver market and we would move ahead in that area as well.

And we have our eye on 1 or 2 other markets that would be possibilities.

But the assets that we're going to pursue will have to really weigh in similar to either the Providence or the Webster asset that we liked.

Remember, however, that any centers that we buy will be focused on growth markets.

Your next question comes from the line of George Hoglund with Jefferies.

Just in terms of the enclosed mall that had the MC Sports.

Kind of what's the plan there for potentially back filling that space?

We already have a prospect for that space.

And we are negotiating a deal with them now, that's not to say that, that transaction will ultimately be concluded.

But we feel pretty good about this tenant taking it.

And it's of a very similar ilk.

Okay, so that means the plan would be to essentially market it once that space is filled.

At this juncture, that's the plan.

Okay.

And then, just looking at overall tenant demand.

When you're looking at your ICSE schedule coming up.

Sort of how does your schedule look relative to last year?

It's every bit as full this year as it was last year.

We're looking for a very energetic group of tenants coming to talk to us.

And our people are very enthusiastic about the tenant interest that we've been receiving.

Just remember, George, and anybody who's listening on the call, we have moved our booth so please look for our new location.

Your next question comes from the line of Vincent Chao with Deutsche Bank.

Just wanted to clarify a couple of things.

So I know you guys have done a good job of sort of prepping for this environment that we're in today by reserving not just bad debt but also reserving some occupancy loss.

Can you just repeat the number, was it $3.1 million for the year, is that what I heard?

Yes, hey Vin, it's John.

What we talked about last quarter was a number at $3.6 million, which was basically in line with last year's overall reserve, even with the fallout of Sports Authority.

So there's obviously a lot of moving targets within that.

But in general, as I said, we just still feel, based on the names I mentioned and other names out there that might have near-term risk.

We think we're very well covered for the full (inaudible) watch list, including downtime and for the year.

Okay.

And then just for a guidepost perspective.

If you think about just the retailers that have declared bankruptcy already.

What's your total exposure on occupancy level?

I know that they're not all going to close every single store and anything but can you (inaudible) ?

Right.

Well so If you think about those names that we have and that are still in occupancy.

There's Family Christian, which we only have 3 locations.

The Gander that we talked about.

MC Sports that we mentioned, which we only have 2 locations.

And then Payless, which we have 7 locations.

The total is actually 227,000 total square feet.

But as you say, I mean most of that, obviously, only the Gander is our anchor sizes.

So as I already mentioned, we have very good interest for that.

So from a leased-occupancy standpoint, none of that worries me, at all.

Obviously there might be choppiness, but again the choppiness, the downtime we have -- we think we have it covered in our guidance.

Okay.

And beyond the bankruptcy declarations.

I guess a number of stores announced additional closures.

rue21 is coming to mind.

Is there any exposure there?

Yes, absolutely.

But again, we factored in -- rue21, they've already announced store closings.

We have 12 locations, total of 61,000 square feet.

They've already announced, of those 12 that they expect to close 8 of ours.

Not if they don't file bankruptcy there wouldn't be economic impact to us because they would continue to be rent.

But I think, as everybody's heard, we're expecting a filing any day now there.

So in that guidance that we talk about, we're expecting to get those 8 stores back from them.

Gymboree has also been mentioned is out there.

And again, we factored in some reserve for them.

But -- so in all of that, I think, again, we're covered and we also see these -- we've mentioned in the past, we see this as opportunity to trade out low-performing tenants with higher-performing tenants and create value overall in the portfolio.

Right, I get that.

Okay.

And then since some of these are still (inaudible) it sounds you're assuming that rue21 declared bankruptcy at some point.

So maybe you didn't book anything on this front.

But are you also assuming some elevated level of lease termination fees that correspond to some of the closings in the guidance?

No, we are not.

Our expectation is that they'll terminate the leases via the bankruptcy court.

I didn't just mean rue21, just in general, I guess.

Just (inaudible)

No, in general.

But that's the -- we're not expecting any -- not this year.

We're not expecting any higher level from anybody.

Okay, and then just maybe switching topics a little bit on the asset sales.

I think, Dennis I heard you say that all of the Michigan assets that you want to sell are now in the market.

But I guess if you were to sell all the Michigan assets at prices that you find reasonable, roughly how much of the $250 million does that account for?

Well as a matter of fact, we either approximate or maybe slightly exceed the $250 million.

Okay.

So all you have to do is sell the Michigan assets to hit your number?

That's correct.

(Operator Instructions) Our next question comes from the line of Kite Bely with JP Morgan.

This Nikita on for Mike Mueller.

Got a quick question on the redevelopment.

So I'm just looking at this quarter compared to last quarter, not a tremendous amount of changes.

So can you just a talk a little bit about that the pipeline which we're seeing, if you're expecting that to grow and how meaningfully?

And then, maybe a little bit more broadly, how would you look at opportunities for acquisitions versus redevelopments in today's market?

Sure, hi Kite, it's John Hendrickson.

That tilt to hit on the redevelopment pipeline at the moment.

So we have $69 million of active projects right now that it is unchanged as you pointed out from last quarter.

We certainly are working to stabilize several projects as they're indicated on the schedule.

And so, as we do that, we do also have several in the pipeline that we'll be adding over the next few quarters.

So we still expect to stay within the range we talked about, $65 million to $80 million is typically our range that we've been talking about.

So I think you'd expect at the end of the year we'd certainly stay within that range of those active projects that we're working on.

Kite, just to add to John's comment.

Just relative to redevelopment versus acquisition.

Hopefully, as we look at the landscape, they're not mutually exclusive.

But obviously, we can reap as we have in the past, somewhere between 9% and 11% on average on the redevelopment.

So they are truly much more accretive in making a new acquisition.

And then one last one.

On new leases, new lease spreads were a bit below -- quite some below fourth quarter in the trailing 12 months.

Is there anything unusual that drove that?

I don't think there's -- that we can take any trends from that.

It's a low number of leases, it's just the timing of when we we're doing leases.

I'm still comfortable, overall, to stay at the high single-digits.

But if you note our -- this quarter, our renewal spreads were, I think, probably the highest since fourth quarter of '15.

And our overall capitals are net effective rents overall.

This quarter we're very strong compared to our historical averages.

So I don't take anything, I don't think you should take anything from that -- those -- the new tenant spread this quarter.

It does work out for the rest of the year.

Our next question comes from the line of Floris van Dijkum with Boenning and Scattergood.

Dennis, I had a question the -- on your same-store guidance.

Does that -- that would -- obviously one of the things that we always try to parse through is look at your same-store, excluding redevelopments because it costs money to get the redevelopments and to get that additional growth.

So your same-store guidance that you put out of 2.5% to 3.5%, does that include, just like in the first quarter, 120 basis points of redevelopment boost to that?

Yes Floris, it's John Hendrickson.

If you remember our guidance -- the guidance we gave was 2.5% to 3.5% for same-center with redevelopment.

And our guidance for without redevelopment is 0.5% to 1.5%.

Now keep in mind, it depends on what's in the bucket for redevelopments.

And there's several anchor repositionings that would be in the -- with redevelopment bucket.

So if you were to add those back to the without redeveloping you'd be more -- you'd probably add the 120 basis points that you're talking about and the same-center without redeveloping guidance would be 1.7% to 2.7%.

Okay.

Great.

The other question I have for you, and maybe this is something for Geoff.

Obviously your debt has ticked up a little bit.

But at what point would you consider buying back shares, because you're trading at a pretty decent discount to underlying NAV rather than buying out.

Yes, it's Geoff, Floris.

Thanks for the question.

I think -- we look at stock buyback as our capital allocation alternatives.

And when we think about stock buyback, we need to think about impact on balance sheet, impact on liquidity and the relative risk and return related to our alternative investments and then we think about it from creating a long-term shareholders value perspective.

It's in our analysis.

That would obviously be a board decision.

And we are in dialogue, we have to had dialogue with the board with respect to that.

So we are thinking about it.

Our next question comes from the line of Christopher Lucas with Capital One Securities.

Dennis, you mentioned that the mall had -- might have to change plans based the MC Sports box that went out there.

As it relates to the overall disposition pool, are there other assets that were impacted by anchor issues during -- that have occurred so far this year that's changed some of the disposition pool that you've booked out for this year?

Thanks for the question, Chris.

No, the Michigan assets have stayed very steady, and really with the exception of the Gander Box in Oakland County, which as John referenced, either there was dialogue with a suitor for the -- who was bidding on the Gander space.

And as John also mentioned, we have immediately behind that and we're actually negotiating an LOI with another tenant not waiting to see how that specific situation plays out.

So that we're ready to move immediately if indeed the lease is rejected.

So our Michigan pool has stayed very steady.

It has -- I know I said to you, the assets that are in that grouping are ones that -- for under other circumstances that we like, but we just realized that the concentration at Michigan is just too significant going forward.

And then, I guess, just I'm curious as to if you're getting any color from any of the potential bidders, botters for assets as it relates to the availability or underwriting that's been done by debt providers in this environment, if that's changed become more challenging, proceeds rates coming down.

Anything along those lines that you might be able to prove some color on be helpful.

Yes, Chris, this is Cathy.

I think we have seen a little bit more conservatism from the lender.

Proceeds are still there but maybe higher rollover reserves or something like that.

Because the money is still there, but there has been a slight change I think which is why I reference before that some deals are taking a little bit longer to get done.

But in the end they're getting done.

Okay.

Great.

And last question, just any update on -- or change maybe, to the expected rent commencement for the boxes that you've backfilled.

And are -- you've to remind me, are all of the Sports Authorities and Golfsmith stores that were vacated, are they leased at this point?

And then, again is there an update as to sort of when the rent commencement would be for those that are leased?

Sure, Chris, this is John Hendrickson.

The -- first off, the 50 acre repositions that we talked about last year, those all commenced before the end of last year.

The 4 Sports Authority boxes that we had, we have 3 out of 4 have been leased, 1 has already -- the one to decks down in Florida has already commenced and commenced at the end of the first quarter.

The other 2 that have been leased will open in fourth quarter and potentially 1 will open in the first quarter of '18.

So the fourth one that we're are still working on alternatives there has not -- we wouldn't expect in 2017 to commence.

The other tenant you mentioned was the Golfsmith, we have 2 Golfsmith locations.

One was assumed by Golf Galaxy, which is Dick's so there's no downtown there.

The other is we're working on a couple of alternative there and are projecting, I think, probably at this point a first quarter '18 opening for them as well.

So I think I hit that.

Our next is a follow-up question from Vincent Chao with Deutsche Bank.

Just I want to go back to the acquisitions side.

On the (inaudible) place do you guys share a cap rate on that?

Just back of the envelope on the ABR it looks like maybe mid-6, low-6, cap?

Yes the cap rate for Providence was approximately a 6.1% cap.

6.1%.

Okay.

And then how do you guys think about the longer term return on that, the 99% leased or maybe on an IRR basis if that's how you do it, I guess?

How do you think about that?

Well, when we bought the center, the statistic at that specific moment of time doesn't really talk to the amount of leasing that we're going to be able to do through the balance of '17 and into 18 where there is a number of opportunities to mark-to-market.

We will be including in our roadshow for the ICSC in NAREIT a site plan of Providence that will demonstrate where we can add value.

So between the value-add opportunities and the ability to not only re-lease but to release at the center, plus instituting our healthy community first program, we see a very bright future for that asset.

There are no further questions.

That does conclude our question and answer session.

At this time, I'll now turn it back to Mr. Dennis Gershenson for closing comments.

Thank you, Audrey.

Just a word, if I may.

We believe that our portfolio, including our new acquisitions, is in great shape.

Our disposition program is proceeding at pace.

We feel that all of our plans for the 2017 acquisitions, dispositions and operations are proceeding on track, and please look forward to great things to come.

Talk to you next time.

This concludes today's conference, and thank you for your participation.

You may disconnect your lines at this time.