Rithm Property Trust Inc (RPT) 2017 Q4 法說會逐字稿

Greetings, and welcome to Ramco-Gershenson Properties Trust Fourth 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, Dawn Hendershot, Senior Vice President of Investor Relations.

Please go ahead.

Good morning, and thank you for joining us for the fourth quarter and year-end 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.

2017 was an interesting year in several respects.

First, we set a goal of completing the transformation of our shopping center portfolio by year's end.

In the fourth quarter, we sold 4 centers, including a large Michigan power center, bringing our total dispositions for the 12 months to $226 million, and as a result, we reduced our Michigan exposure to 20%.

The cap rate for the last quarter's dispositions averaged 7.6%, which included the Michigan power center sale that generated a capitalization rate of 7.8%.

On the acquisition side, we had identified 2 attractive centers, which we purchased in the first quarter of 2017, for approximately $168 million: one, a dynamic town center in Nashville, Tennessee; and the other, an urban infill asset in Lincoln Park, Chicago.

Our 2017 capital recycling program brings to completion our shopping center portfolio transformation, which commenced several years ago.

Interestingly, 2/3 of the shopping centers we now own were not part of our center roster in 2011.

As a result of these efforts, we finished 2017 with a portfolio predominantly comprised of dynamic town centers, urban infill properties and strategic neighborhood centers located in affluent growing submarkets in the top 40 MSAs.

As we discussed with you at our Investor Day, our focused market strategy and roster of high-quality shopping centers, with an emphasis on value, variety, convenience, experience and entertainment, ensures that our properties will be the dominant consumer destination in their trade areas.

This evolved portfolio of shopping centers provides a solid foundation for our ability to prosper in Retail Inc.'s future, as we continue our efforts to be the best-in-class shopping center REIT between the 2 coasts.

Our second focus in 2017 was to grow our existing pipeline of redevelopments as well as to identify a healthy list of future value-add opportunities, all of which include either retail densification, place making and/or the ability to bring to our properties a variety of mixed uses.

Many of these value-add generators were a significant factor in our decision to acquire the shopping centers we purchased over the last 24 to 36 months.

I am also pleased to say that we are realizing upon redeployment opportunities in centers that we have owned for some time.

Lastly, although we, along with our peers, have been impacted by a number of retail bankruptcies that have occurred over the last several years, the desirability of our centers have and are attracting those retailers who are in expansion mode.

Thus, as a result of our market repositioning, a transformed portfolio and an improved anchor tenant roster, our management and leasing teams are energized to produce results, which will position our company to outperform starting in the second half of 2018.

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

Thank you, Dennis.

Good morning, everyone.

We have now completed our second full year for this management team.

And while there have been challenges in this evolving retail environment, we are set up well to continue the 3-year growth plan we outlined at our Investor Day in December.

Let me spend a couple of minutes to highlight a few areas.

First, on leasing.

Conversations with our retailers during the end of 2017 and the beginning of this year certainly indicate that retailers are more confident coming into 2018 than they were a year ago.

They are starting to understand their consumers' changing demand and are seeing the value of their physical store network and serving that demand.

And thus, they are once again investing back into their stores.

As I mentioned at our Investor Day, 80% of our top 25 tenants added stores in 2017 and grew their store networks by 4% on average.

While deals are taking longer now to complete, this demand is reflected in our reported results.

Our square footage of new deals was the highest in the last 12 quarters.

Also, this is now our third straight year with comparable rollover spreads of over 8.5%.

Our retention rate remained high as well at 80% compared with a 5-year historical average of about 74%.

This leaves us with 5% less square footage expiring in the next 2 years than what we had at this point a year ago.

While 1 or 2 outlier anchor deals may impact spreads for a given quarter, we generally expect the strong leasing results to continue in 2018.

Our overall lease occupancy at year-end was 93.3%, 110 basis points lower than year-end 2016.

This drop in occupancy was largely driven by 3 chain bankruptcies that occurred in 2017: Gander Mountain, MC Sporting Goods and rue21, that totaled over 200,000 square feet.

While we're able to lease 40% of the space before the end of the year and are in active negotiations to fill the majority of these stores, the unleased space for these tenants alone result in nearly 100 basis points decline in our occupancy.

Our plan was to sign more of these active deals before the end of the year, but as I mentioned, deals are taking longer to complete in this environment.

Therefore, several projected fourth quarter deals have rolled into the first part of 2018.

That said, this does not impact our new rents start -- forecast for the year, and we still expect to finish 2018 with a physical occupancy of 93% to 94% and a lease occupancy of 100 to 200 basis points higher than this.

Dragging small shop occupancy will certainly be part of this occupancy growth in 2018.

And as we discussed at Investor Day, adding 300 to 600 basis points of shop occupancy is an important growth opportunity for us in the coming years.

Even with this lower occupancy in 2017, same-center with redevelopment finished the year up 2.4%.

This growth was driven by a 2.6% increase of minimum rent, largely driven by the $51 million of redevelopment projects completed in 2016 and 2017.

Note, however, the full year same-center number was impacted by more than $250,000 of higher-than-expected bad debt and other tenant reserves at 3 properties in the fourth quarter, which together results in a nearly 20 basis points decline in our final same-center number for the year.

We expect 2018 same-center with redevelopment to be 2.25% to 3.75%.

Remember, this growth is very much back-end loaded, as improved occupancy and the $74 million of redevelopment projects that stabilize in 2018 are skewed to the second half of the year.

In fact, we expect growth in the first half of the year to be 250 to 300 basis points lower than the second half.

One reason for the current wide spread in same-center guidance is our reserves for tenant failures.

We included in our guidance a range of bad debt as well as unexpected vacancy and rent relief that may occur related to tenants on our watch list.

As I mentioned, we have and continue to aggressively release space impacted by 2016 and 2017 bankruptcies.

The most recent bankruptcies of Charming Charlie and Toys"R"Us will result in short-term rent relief, which is reflected in our same-center guidance.

We expect our 2 toy stores to stay open through the year and expect to only lose 1 of our 6 Charming Charlie stores.

Our exposure to these asset bankruptcies and all other identified near-term retailer risk, which includes 2 Winn-Dixie stores, the most recent of our retailers to be rumored to file bankruptcy soon, represents just 3% of our total AVR.

This is essentially a consistent level to where we had been at this point in the last 2 years.

So as was the case in 2016 and 2017, this reserve is our largest variable in our current year forecast.

While we expect our range of reserves to cover all exposure for the year, we should be able to tighten this range in the next 2 quarters.

Finally, I want to talk about our redevelopment pipeline.

As you know and as Dennis mentioned, execution of our pipeline is an integral part of our business plan to create sustained same-center growth and value creation.

Right now, our active products add 230,000 square feet of new retail GLA, that are substantially pre-leased, a total of $74 million in cost and will create $35 million to $45 million of value from 9% to 10% average return.

This quarter replaced one project in service, a single-tenant outparcel building in suburban Cincinnati.

We expect to complete the remainder of these current projects in 2018.

These projects not only generate returns on their own but also enhance the remainder of the assets.

An example of this is a project we highlighted at our Investor Day, where we are completing a 3-building street-size development at one of our premier Oakland County Michigan assets, Troy Marketplace.

We are adding 13 tenants in 27,000 square feet, including our curated mix of fast, fresh, casual restaurants and specialty eateries, which together pay an average rent of $35 to $40 per square foot.

These rents are 63% more than our company average for small shop space and will start to come online in the second quarter and stabilize in third quarter 2018.

In the next few quarters, we will be adding additional active projects as we work through our multiyear $190 million shadow pipeline, an impressive 8.2% of our current enterprise value and place $45 million to $55 million of projects into service on average per year.

That's all I have now in prepared remarks.

Now I'll turn the call over to Geoff.

Geoff?

Thanks, John.

Hello, everyone.

I'm happy to report we had another solid year of financial performance in the face of a difficult retail landscape.

Operating FFO for the fourth quarter was $0.31 per share, down from $0.34 per share in the fourth quarter of 2016.

The year-over-year decrease in operating FFO was primarily the result of higher G&A of $0.03 and $0.01 from other expenses, partially offset by higher cash NOI of $0.01 from same-store growth.

During our earnings call in August, we discussed our expectations for G&A to finish the year at approximately $24 million after considering severance cost.

The increase in G&A expense in the fourth quarter was primarily the result of the out performance of our common equity, as it relates to a portion of our long-term incentive plan, requiring the company to record almost 3 years of expense in the quarter as the plan moved from out of the money during the year to in the money during the fourth quarter.

For the full year, operating FFO was $1.36 per share, less than our results in 2016, as our operating team continue to maximize their performance in a difficult environment.

Last night, we affirmed our 2018 operating FFO guidance initiated at our December Investor Day with a range of $1.31 to $1.37 per share.

The guidance assumptions outlined in our Investor Day includes $50 million of dispositions in the first quarter of 2018.

Those dispositions were accelerated and completed at the end of December 2017 and are part of the $226 million of dispositions that Dennis previously mentioned.

Our guided assumptions do not contemplate any additional sales.

Further, we feel confident that we can reduce G&A cost in 2018.

Excluding severance cost and nonrecurring LTIP cost, G&A was approximately $6.1 million for the fourth quarter.

And adjusting for additional nonrecurring cost in the quarter, G&A would have been approximately $5.7 million, which we feel is a good stabilized run rate for the company.

Before I turn the call over for questions, I'd like to take a moment to touch on our balance sheet.

We have focused a fair amount of effort to build flexibility into our balance sheet in 2017, as we use the net proceeds from our capital recycling of $51 million and our $75 million notes offering to reduce the outstanding balance on our line of credit, repay mortgage debt and extend duration.

The result of these activities has effectively eliminated our short-term funding needs with no debt maturing in 2018 and only $3.4 million maturing in 2019.

And we enter 2018 with undrawn availability under our revolving credit facility of approximately $320 million.

We plan to use our free cash flow and a revolver availability to prudently execute our capital plan and drive value for our shareholders during the year.

While we anticipate ending 2018 at 6.5x to 6.7x net debt to adjusted EBITDA, our intermediate leverage target remains in the low 6x area, and we believe that asset-level EBITDA growth will drive our leverage lower in the future.

This concludes our prepared remarks.

I'd like to turn the call back over to the operator to open the line for questions.

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

First question, John, the bad debt reserve that you talked about, sorry if I missed this, but can you quantify what that amounts to in 2018?

What that was also in 2017?

And then can you just clarify, is the rent release that you noted for the 6 Charming Charlies and the 2 Toys"R"Us boxes, is that in the reserve or is that outside the reserve?

And what about the 2 Winn-Dixie stores?

Todd, it's John.

Sure, I will try to hit all of those points.

First off, on bad debt, we basically are assuming a fairly standard run rate that we've seen in the last couple of years for bad debt, and we're assuming that in our guidance range for '18.

So that's factored in.

One thing I mentioned, the fourth quarter from a same-center standpoint came in a little higher than our forecasted expectation, but it's only like $50,000 or so more in the fourth quarter, but obviously that's a definite impact on our same-center number at the end of the day.

And so to your question about the rent release for Charming Charlies and Toys, yes, that number now is in our guidance range.

Obviously, it's not completely resolved at this point, and -- but that is in our range.

And the same for Winn-Dixie.

Our 2 Winn-Dixie stores, we actually do not know -- it's just a rumor at this point that they are going to be heading towards bankruptcy, and obviously, we don't know what will happen.

If they do go into bankruptcy, I'll tell you those 2 stores that we have, have a average rent of $7 a foot in rent.

So we feel very good about our backfill opportunities if we do end up -- filling those back.

So I think I hit everything.

Let me know if I missed anything.

Yes.

No, that's helpful.

So the reserve, we should think about that as sort of a cushion in the budget for Winn-Dixie.

Anything sort of incremental that might happen regarding Toys"R"Us and then anything else that sort of might surface throughout the balance of the year?

Sure.

Absolutely.

In that 3% that I talk about, as people were worried about, I mean, we basically have some kind of form of cushion for each one of those in the range of our guidance at this point.

Obviously, some of those had no impact like the Winn-Dixie.

If we end up with no impact, there could be upside.

If there ends up being more than our reserve, there's -- I mean, outside in our midpoint, but if there is more, it would be -- we'd expect it to be covered in the upside of range of our watch list.

So that's why it's -- at this point in the year, it's a little too early to tighten at this point, but we should know more in the next quarter or 2.

Okay.

And then shifting over to the dispositions.

So Millennium Park, the Michigan power center, can you just share some details there around the partnership and discuss the rationale for moving in that direction with the joint venture?

You had cleaned up and wound down partnerships over the last several years, so I'm just curious there.

And then how are leasing and asset management responsibilities being split?

And will there be any fee income to Ramco?

Todd, it's Dennis.

Good morning.

What happened in that transaction is, just a week prior to closing, our purchaser notified us that he had lost a significant investor, and that he was going to put in additional dollars, but he came in approximately $3 million short of the amount that he needed.

Our preference would have been to have done a second mortgage, which is a mortgage he didn't allow, but we do have an understanding with the buyer that at his earliest opportunity, we will be taken out of that interest.

We thought it was prudent to sell the asset, and so we proceeded with the sale.

And this was the best way to bridge that gap.

Just to finish the thought that we -- again, we are not an active participant in the management of the asset.

So there are no fees associated with it.

Obviously, we're a knowledgeable investor, so we get monthly information on that.

And there is upside in the cash flow, based upon the leverage that is on the asset.

But again, we expect to be a short-term holder.

Okay.

And just lastly then, it sounds like there is no other dispositions in the guidance, but can you provide an update on Jackson Crossing?

You have pulled that from the disposition pool for the time being, just given the MC Sports vacancy and some other leasing initiatives?

Any update there?

And is that still an asset that we should expect to be sold in the future?

Over the long term, yes, it does not fit in our overall model portfolio.

We are working on a number of opportunities to backfill the MC Sporting Goods space, but it's certainly not in our projections of a sale for 2018, at least at this juncture.

The next question comes from Craig Schmidt of Bank of America.

I guess on the 2 Winn-Dixie, if they were to close, would you backfill them with another grocer?

Or would they work as a general merchandise replacement?

Craig, it's John.

Yes, at the moment we've been actively anticipating this issue with Winn-Dixie.

And we've been actively actually talking with other grocers, who are looking to enter the market.

So at the moment, I would think there would be backfilled with grocers.

Great.

And then on -- if you could outline the strategy to driving up the small shop occupancy?

It seems like you're giving yourself a pretty hefty goal there?

Right.

So the near-term goal, the 300 to 600 basis points is a goal over the next few years are -- our near-term goal is to try to drive at least 100 basis points a year there, so by the end of '18 adding at least another 100 basis points.

Obviously, the biggest driver that helps that is to continue to drive our anchors that would end up being filling -- backfilling anchors and upgrading anchors, places and the like that we have done at places, like we're doing at River City and we placed back, something like Gander Box there, also, as we backfill the Sports Authority boxes.

We saw that helped to drive small-shop demand when you can trade out of the failing retailer to a retailer that can be productive.

It certainly drives demand overall.

So I think, in general, the 2 occupancy overall will go up together.

And just, in general, as we finish our -- keep in mind, couple of our centers were in significant redevelopments, like at Woodbury and Deerfield, where we are finishing up the redevelopment, the upgrades both at Woodberry adding anchors at Deerfield, adding significant place making that impact all other small shop areas.

That -- and those 2 centers are really driving a demand for shop occupancy.

So that's where I get comfortable that we'll be able to really execute on that opportunity, which I see as the -- the occupancy, in general, is a great growth opportunity over the next few years.

The next question is from Collin Mings of Raymond James.

First, just going back to the prepared remarks on G&A guidance.

Can you maybe just touch on -- it sounds like that you're talking about maybe a little bit of core G&A savings.

Maybe talk a little bit more about what's driving that?

And then going back to the long-term incentive comp that kind of weighed on 4Q results, how should we think about potential swings in that here in 2018?

Collin, it's Geoff.

I think as it relates to the '18 guidance, yes, we're going to be able to squeak out some core savings like you said.

Part of the bridge was really just trying to give you a sense of what the adjustments were and where we think our run rate is going to be.

But we're very focused on that number, for sure.

Okay.

Can you -- I mean, can you elaborate a little bit more maybe what's driving that?

Again, to what extent any sort of variability in that long-term comp could impact that number for modeling purposes?

So I think part of it is the long-term comp when you look at kind of a stabilized run rate.

We had -- as you pointed out in your note, we had some significant volatility in the fourth quarter.

So that's a large part it at the end of the day.

Now volatility will get reduced because we've changed the composition of the outfit.

And so the fact that we're settling it in cash is the reason why we have the volatility.

We've changed our methodology last year, and we'll continue this year as well with a lot less volatility and visibility into that G&A number.

Okay.

That's helpful.

And then as far as the core, just going back to the TI.

And again, I recognize this number can bounce around a little bit, but the TI number looked higher on renewals than it typically had been for you guys.

John, I don't know if you can touch on were there any specific leases that are driving that?

Or maybe a little bit more detail there would be helpful.

Sure, Collin.

The -- there is -- I mean, obviously, I hate to look at any 1 quarter to dictate a trend, especially with the size of our portfolio.

But because that was -- that higher number was driven by, I think, 1 deal at the end of the day, so that skews the overall numbers.

But the 1 trend that certainly is the case -- there are cases where we will be investing and we did this quarter, but we will be doing it, too, is that will be investing -- doing possibly more investing in renewals, investing in capital, ask tenants to buy longer-term renewals and to get upgraded -- lock in tenants longer-term but also get upgraded stores there.

So you might see that number be higher than normal.

I think we end up getting paid for it.

I think if you look at our net effective spreads this year, and again, I look at it from a yearly basis rather than any given quarter.

If you look at those spreads this year versus last year, you'll see that improved.

So I don't think -- I think it seems to be -- you are getting paid for our capital, which I feel good about.

Okay.

I appreciate the color there, John.

And maybe just going back to some of the comments going back to the Investor Day and some of the prepared remarks again about no plans to make additional dispositions without making any acquisitions.

Can you maybe just update us on what you're seeing in terms of acquisition opportunities?

How aggressively are you looking at them right now, given the kind of where the stock price is?

And just any sort of trends in terms of asset pricing is -- again, if you look at potential acquisitions?

Well, let me start, Collin, by saying that our total focus at the moment is on utilizing our capital for leasing of the vacant space and the delivery of our redevelopments.

That is and will continue to be our primary focus.

It doesn't mean that we don't still have an oar in the water as far as maintaining our finger on the pulse of what's going on in the acquisition market.

Interestingly, the assets that we find most desirable may have begun to move with as far as increasing cap rates, but it's very slight in part because there aren't a lot of buyers out there buying those types of assets.

But at least at this juncture, our focus is, as I just mentioned, and we don't see an on-balance sheet acquisition in the near term.

Our next question is from Vincent Chao of Deutsche Bank.

Just sticking with the investment markets.

I think there is a lot of concern about a number of strip players' plans to dispose a lot of assets in the coming quarters.

It does seem like there was some success in terms of getting some deals done.

I'm just curious, at a higher level, have conditions changed much on the sales side?

Are you seeing some stabilization of pricing and some maybe increased demand for assets today?

This is Cathy.

So I think in '18, we'll continue to see a fair volume of those kind of B-type properties.

A lot of our peers have come out and said, there -- they are going to be big sellers.

And I don't really see much change in the cap rates.

It really depends on deals in that space, is there growth, what's the tenant risk depending on the market, et cetera.

But it seems like the B kind of properties have stabilized maybe in the 7.5 to 8 or 8.5 range, just depending.

Then that's for power centers?

That would include power centers under the category if not all real estate is created equal.

I think there is some -- there are some capital formation around power centers, where people are looking at buying those for yield, but I think that that is in that range still.

Okay.

And then maybe going back to the same-store performance for the quarter.

John, you mentioned a couple of headwinds in the bad debt expense and things like that.

But it looked like that your comparable expenses were down quite a bit year-over-year.

Can you just provide some color on what was driving that?

It doesn't seem like that carried through into the reimbursements coming down on an equivalent basis?

So the recoverable operating expenses on a comparable basis -- the one thing you will see, I mean, to your point about the operating expense recovery, you remember, it was the timing of true ups.

You will see our recovery rate is essentially high for this quarter versus same quarter last year because of basically the fact that we trued up recoveries in the fourth quarter of last year.

And if you remember, last quarter, I said that was part of our issue last quarter, and we were comping into bad comp.

The recoverable operating expenses this year, I think, also includes basically the timing issue and the fact of lower -- no expenses and incurs a maintenance generally that were more of a onetime items last year less so than going forward trend.

I mean one thing we didn't mention on Investor Day is the fact from an expense control standpoint, we have been able to keep expenses basically flat to negative basis over the last couple of years.

And we do expect to maintain basically flat going forward from an expense control standpoint over the next couple of years.

So I think you have to have some expense control there and also some of the benefits from some onetime expenses last year.

Got it.

Okay.

And then just maybe a question on the delays in the leasing that you mentioned that then pushed out into the first half of '18.

Is there any sort of broader themes that are driving that?

Anything in particular?

Or is it more just lease-to-lease?

Yes.

I don't know necessarily that there is any trends.

I mean, I think, generally, tenants are more cautious.

And this is something I've mentioned a couple of times, since the recession, I mean -- since the recession when the tenant went into real estate committee, it used to be before the recession.

It was basically a slam dunk going into real estate committee.

Nowadays, it's more 50-50, and operations is definitely dictating things.

So you end up having to have several running parallel path to lot more than you used to.

And tenants are just slower to get into document deals, in general, to do both their internal approval process and get things done.

Now in our case, there is a couple of larger deals that impacted us from an occupancy standpoint -- lease/occupancy standpoint.

So we do definitely have a couple of deal-specific items that you will -- I should expect you to see in 2018.

You'll see that benefit, but we just didn't get it done at the end of last year.

The next question comes from George Hoglund of Jefferies.

Just looking at the 2 Winn-Dixies and I guess those are in the Miami MSA.

What would market rents be on average in those 2 centers?

George, it's John.

So I mentioned the fact that they are in -- the in-place rents for Winn-Dixie is actually in the mid-single digits.

I actually said $7.

It's actually closer to $6 on a base rent standpoint.

And -- I mean, I would expect it to be in the low teens to be from a market standpoint.

Obviously, it depends on how much capital you end up putting into the deal.

But generally you would hope it's low teens.

Okay.

And then also are there any grocers in your portfolio that are -- faced any issues?

I don't think you guys have any tops in your portfolio.

Do you?

No, we do not.

No, besides Winn-Dixie, that's the only 1 that really comes to mind from a chain standpoint.

So -- I mean, we just -- we sold 2 jewels.

I mean, obviously, there is just news about Albertsons this week, but we just sold 2 Jewel-Oscos, so that leaves us with just 1 Jewel.

But generally -- no, I can't think of any grocers that I'm concerned about today.

The next question comes from Floris van Dijkum of Boenning and Scattergood.

Dennis, maybe if you could give an update on your replacement search and where the board stands at this stage and whether that's going to be potentially someone from the outside or inside or any sort of information would be helpful?

Well, Floris, this much I can tell you, when we announced the search commencing in December, it really began in earnest after the first of the year.

As we articulated, John is the internal candidate, and we are vetting the market for potential external candidates.

And I'd like to think that the opportunity that exists here and that we've articulated this morning with what we believe is a strong portfolio and good upside will be attractive both to John and to a potential additional candidate.

That's about as much as I can tell you at this point.

As we make progress, I will certainly be more than happy to update you.

(Operator Instructions) Our next question comes from Chris Lucas of Capital One Securities.

Just 1 question for me.

John, you had mentioned earlier in the call about rent relief related to the Toys and the Charming Charlies.

We've heard from others that besides rent relief there were also duration -- shortening the duration of the leases to essentially out 1 year.

Did you guys go through some of that as well?

Yes.

It seems to be a fairly consistent approach they are taking.

They tend to be basically 2-year terms that they are looking to have with 2-year fixed terms, which from our standpoint is a good opportunity than to find as a backfill replacement tenants during that time period.

But yes, that's been basically same terms that we've been talking to them about.

Our next question comes from Hong Zhang of JPMorgan.

Sorry, if this is mentioned earlier on the call.

Could you guys give an update...

We can't hear you.

Hello.

Can you hear me?

Yes, now we can.

Sorry, if this got mentioned earlier on the call, but did you guys provide an updated cap rate on the dispositions done in 4Q?

What?

Cap rate.

Yes.

We talked about an overall disposition cap rate of 7.6%, and we specifically called out the power center in Michigan at 7.8%.

(Operator Instructions) We have a follow-up question from Todd Thomas of KeyBanc Capital Markets.

Just a quick follow-up on the capital recycling.

I think at the Investor Day, so you had talked about $50 million of incremental dispositions that would match fund $50 million of acquisitions.

Just some of the commentary on the call, I just want to make sure I understand.

So the dispositions that you anticipated in the first quarter were accelerated a little bit.

They closed before the end of the year.

What's the update with regard to the $50 million of acquisitions?

It sounds like there's nothing in the pipeline right now.

And I just wanted to check on that and also see how that might impact the guidance.

Well, you've got it exactly right, Todd.

To complete the capital recycling, we had the opportunity to move the $50 million in dispositions that we talked about into the fourth quarter of 2017, which we moved on.

As we look at the landscape today, never say never as far as an acquisition is concerned.

However, at this juncture, our feeling is our capital is most intelligently used in the areas of our existing operations which includes leasing up vacant space and completing our redevelopments.

And I think, Todd, just not doing the acquisition is in our guidance range.

And so right now our guidance reflects our current outlook on our business.

And I think as Dennis says, if we end up finding something or pursue something, then we'll update appropriately.

There are no further questions at this time.

I would like to turn the call back over to Dennis Gershenson for closing remarks.

As always, ladies and gentlemen, we thank you for your interest and your attention, and look forward to speaking to you at the end of the first quarter.

Have a good day.

This concludes today's conference.

You may disconnect your lines at this time.

Thank you for your participation.