Rithm Property Trust Inc (RPT) 2018 Q1 法說會逐字稿

Greetings, and welcome to Ramco-Gershenson Properties Trust First Quarter 2018 Earnings Call.

(Operator Instructions) And as a reminder, this conference is being recorded.

I'd now like to turn the conference over to Dawn Hendershot, Senior Vice President of Investor Relations.

Thank you.

Please go ahead.

Good morning, and thank you for joining us for Ramco's First Quarter 2018 Earnings Conference Call.

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 Gershenson for his brief prepared remarks, after which we'll open the call for questions.

Thank you, Dawn.

Good morning, and thank you for joining us.

This is my last earnings call with the company, and I'm excited to talk about the changes that are taking place at Ramco.

But first, I have the responsibility of providing information about our first quarter results.

Our operating FFO was $0.32 per share, which includes $0.06 dilution from asset sales in 2017, a $0.02 positive impact from the acquisition of both Webster Place and Providence Marketplace last year and a $0.01 contribution from lower G&A and lower interest costs.

Our same property NOI growth, including redevelopment, was 0.5%.

Our growth during the quarter was impacted by bankruptcies in 2017.

As mentioned last quarter, we anticipated a dip in same property growth during the first and second quarters of 2018, with an acceleration of this number in the second half of the year as we backfill these spaces and complete our Deerfield, Troy Marketplace and Woodbury Lakes redevelopments.

We posted solid comparable leasing spreads of 8.7% on approximately 322,000 square feet with average base rent of $18.47.

For the past 3 quarters, our leasing spreads have been above 8% on higher average base rents, reflecting the strength of our portfolio.

Additionally, we continue to experience positive momentum in our efforts to release our anchor spaces impacted by bankruptcy and store closings.

We reasonably expect to announce replacements for both Gander Mountain at River City and Kmart at our Crofton Center within the next 30 days.

We've signed a lease with 2nd & Charles to fill half of the Sports Authority space at our Front Range Village property in Fort Collins, Colorado, substantially completing the leasing of all 4 of the Sports Authority locations.

As to our future, Brian Harper will be joining the company in the middle of June as our next CEO.

Brian has a strong reputation in the shopping center industry.

We believe that Brian's track record of success and operational excellence positions him as an individual who will be able to allocate capital and drive value in the company's assets.

He comes to the company with a clean slate at the top, affording him the opportunity to pick his leadership partners.

As CEO, Brian will be responsible for developing the company's short and long-term strategic business plans.

With that in mind, we did not feel it was prudent to encumber the new management team with the prior management's expectations.

And as a result, the company is not affirming or updating guidance.

As I look back on the last 22 years, I'm proud of our accomplishments, and I'm incredibly excited about the promise of Ramco's future.

I would now like to turn the call over to the operator for questions.

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

This is Drew on for Todd today.

Dennis, you mentioned the renewal spreads in your prepared remarks.

They were pretty strong on healthy volume.

I'm just curious if that continued over into 2Q at all?

Are you still seeing that strength?

And do you expect that to continue?

Yes.

Drew, as I said, not only did it -- did we do well in this quarter and for the 3 three quarters, but we see no reason why we should not be able to continue to log some very healthy rental increases going forward.

Again, as I mentioned in my remarks, we are also planning on being able to talk about the 2 anchor deals, the replacement for the second Target -- I'm sorry, the placement for the second Kmart as well as other very important anchor leases that we're working on at the present time.

And were there any markets you saw that strengthened, specifically, any, like, geographic regions or anything like that?

Really, I think across the portfolio, we pay as an opportunity to basically see up -- in all of our shopping centers a very healthy interest by those tenants who continue to expand.

Got it.

Great.

And then just one more from me, kind of a granular question.

I know it's a small project but the Shops on Lane Avenue, I noticed that you guys are going to be doing another redevelopment project there for a co-working space.

I just wanted to see if you can talk about that a little bit and maybe speak about some other opportunities for that, that might exist in the Ramco portfolio?

Sure.

There is a second floor on a segment of the Shops on Lane shopping center that really even before we acquired it, had never really been utilized.

We are about 1 mile to 1.5 miles from Ohio State, and there was a tremendous amount of office interest.

And so we were able to make a deal with one office user for the entire space at a very good return on our investment.

And interestingly, at that shopping center, we see an opportunity to add potentially some additional office to the shopping center.

So that's an asset that continues to give.

And I think that over the next 4 to 6 months, once Brian is on board, you're going to see conversations about a number of opportunities that we'll pursue, the majority of which will be in joint ventures.

We're putting the office tenant here because it's one user, it's a limited amount of square footage and where there's very little downside risk because we have the cost to put them in place.

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

First off, again, best wishes to you as you transition to the Chairman role.

Thank you.

Appreciate it.

Recognizing Brian will likely have discretion, but just from a board level, do you anticipate backfilling the COO role as well?

Or is it kind of the priority to just kind of [pass down] the CFO role?

I mean, do you expect to continue to have a COO and a CEO?

Or just maybe talk a little bit about that process as well.

Well, ultimately, that will be Brian's choice.

I -- my gut is that at the get-go, for Brian really didn't comfortable with the thorough understanding of all of the assets, he needs to be touching them, he needs to be touching all aspects of our business.

So I think that his decision relative to a COO will come a little ways down the road.

We did have a conversation about it.

And he does expect at the get-go that he's not going to move immediately to fill the COO role.

Okay, and then maybe just the timeline on the CFO, again, recognizing a lot of moving pieces here, with Brian coming in, in June, but just, again, from kind of a board level, has the search firm been hired?

Or maybe just talk a little bit about the process there on the CFO side of things.

We have identified a search firm whom we worked with in the past.

And I believe that at this juncture, we can say that, number one, we've been contacted by a number of people who would be interested in the position.

And they are out there doing some due diligence.

But obviously, this is going to be Brian's decision, and we expect him to move expeditiously once he's on board to secure the CFO and get him up to speed.

Fair enough.

And then I get the decision to kind of step away from guidance overall.

But maybe just thinking about from a core operations standpoint, you previously had some same-store NOI guidance out there.

I mean, just any shifts as you think about kind of 1Q results and kind of what you're seeing right now that kind of from a -- at least from kind of a same-store pool standpoint you still feel pretty good about prior guidance and the comments, kind of the ramp you expect in the second half of the year?

Or is it fair to say that, that's to be determined as well?

Well, we certainly believe that the first quarter results were absolutely in line with what we had planned.

As I mentioned in my prepared remarks, we have a number of redevelopments that will be coming onstream.

You've seen the increases in rents that we've been talking about, and we expect that to continue at a strong pace.

And it's just that -- pursuant to my prepared remarks, we just hesitate to give any guidance on either FFO or same center until Brian is on board.

All right.

And just last one for me, just along those lines.

I don't know if there's anything else just from going back to the prepared remarks and the line in the press release just as far as some of the strategic things, are there any things in particular that, as you've had conversations with Brian that, are you thinking there's going to be harder focus on or more of a focus on going forward?

I don't think there will be, at least at the get-go, any dramatic changes.

But, again, the strategy that he will employ has got to be Brian's strategy.

Our next questions come from the line of George Hoglund with Jefferies.

Just one question on terms of some of the tenants.

Do you have a sense of how many Sprint, T-Mobile stores do you have?

And whether those existing rents are above or below market?

George, this is Ray Merk, the company's Chief Accounting Officer.

On T-Mobile, we've gained 7 leases currently, a little over 14,000 square feet, and that is ABR of around 440,000.

And on the Sprint, we've got 5 leases, just about 11,000 square feet.

Okay.

And can I get a rent on those?

Yes, the average around $400, I think, or so, right in that ballpark.

All right.

And just in terms of the types of centers that these are in, would you say are these kind of spread out in terms of quality-wise or are they concentrated in kind of an upper lower end of your portfolio?

Sure.

I would say it's pretty well spread out.

It's -- we have a number of them in our Town Centers and then in our Commodity Centers.

So I don't think there's any specific concentration in either one of those groupings.

Okay.

And then just, is there any general update or new tenants on the watch list?

Well, the watch list that we had put together at the beginning of the year, it still is consistent with the watch list that we have at the moment.

Obviously, Toys, GNC, Charming Charlie's, they were at our watch list.

The one thing I would say is as of this juncture, there were no surprises relative to either additions to the watch list or tendencies that have experienced problems.

And our next questions come from the line of Michael Mueller with JP Morgan.

First of all, congratulations.

But also, in terms of the transition, can you talk a little bit about why Brian is the right choice versus internal options?

And were the 2 departures directly related to bringing Brian on board?

Well, first of all, I want to say that John Hendrickson did a very fine job here at Ramco.

We -- I had absolutely no complaints about John's performance.

But the board was committed to do a complete search, not just to include internal candidates but external candidates.

And when Brian came along, he does have extensive experience as a CEO.

The board felt that, that was very important.

You'll get an opportunity to speak to Brian.

His enthusiasm, I think, parallels mine.

Michael, I know you've seen me in action, and I am passionate about this business, as is Brian.

And based upon his background, Brian had an extensive career in leasing.

So, they -- we thought that this would be the smartest move going forward.

And as far as Jeff's leaving, Jeff got an excellent opportunity on the private side, on the West Coast.

He and his wife and all of their kids now, they've gone off to college, and so this was an opportunity for them to relocate to the West Coast, and he was not going to pass up that opportunity.

And so it was a very appropriate time for him to leave, and I think that he felt that it was important that Brian, indeed, has the opportunity to pick his own team.

And so this was opportune, and so he took the job.

Got it.

And then I think you said Brian was going to be instrumental in picking the CFO.

Does that mean if he's coming on board in June, we're not going to have a CFO announcement until a few months after that potentially?

Well, I don't want to say how long after that when the new CFO will be chosen.

But obviously, it will await Brian's arrival.

Got it.

And last question.

Just given, I guess, all the personnel shifts that are going on right now, is there any disruption that you're experiencing in the second quarter on the ground in terms of leasing operations, just any of that?

Absolutely not.

I'm pleased to say that Brian will walk into an organization with a very strong management team.

They haven't missed a beat relative to the departure of either John or Jeff.

And we expect that when Brian comes in, that he'll be very pleased with the professionals that he inherits.

(Operator Instructions) Our next questions come from the line of Vincent Chao with Deutsche Bank.

Dennis, and congratulations on the transition here.

I guess just going back to the commentary about the first quarter being in line, I think we all expected it to be lower than the prior guidance range, at least in the first quarter.

But this was a bit lower than, I think, we were anticipating.

I guess when you think about the backfilling opportunities and the redevelopment opportunities that are expected to come online in 2H, I guess, of what you need to achieve to maybe get, I don't know if it's close to the old midpoint of the guidance, I mean, how much of visibility do you have on things that are sort of already in place and just kind of waiting commencements versus needing to go out and sign something or whatnot?

Well, historically, we have never put anything on the boards that we haven't signed the most significant leases or the majority of leases and had a relatively good handle on costs, et cetera.

So if you look at our supplement, we feel very confident that we can execute on everything that is there.

And we're excited about a number of opportunities that we really haven't announced yet relative to densification in our shopping centers as we move ahead, especially on the dynamic town centers.

So stay tuned for some interesting developments.

Okay.

And then, just on the disposition side of things, nothing really sold in the quarter.

Again, I know the guidance is not in place anymore, but does that, given that you're waiting for Brian to arrive and kind of put his stamp on where he wants to move the company, should we assume the dispositions are on hold until he gets in place?

Again, all those decisions relative to acquisitions or dispositions will all await Brian really not just understanding the portfolio but the balance sheet, and where we want to take all elements of the company.

Okay, and then just a last question on some of the more recent bankruptcy announcements.

I'm just curious if you had an update on the couple of Toys that you have in the portfolio as well as the Winn-Dixies?

Well, Winn-Dixie, we only have a couple of Winn-Dixies and one of them yet.

They had just renewed their lease there, and we're talking about spending money to upgrade the store.

So we -- our visibility as far as Winn-Dixie is concerned is that they plan to stay the line in those two -- there, at least for the short term.

As far as longer-term plans, when Winn-Dixie originally -- we wondered whether or not they would be exercising options there.

We had been contacted by a number of quality supermarkets, who were interested in the space.

So we have no concerns whatsoever about being able to backfill that if Winn-Dixie does decide to change their approach in Florida.

As far as the Toys is concerned, we -- to follow that -- the history of those negotiations at the end of last year, we thought we had an understanding, well, then they changed that understanding.

And then, obviously, the path that they're pursuing now is something what we're obviously disappointed in, but we are talking to replacement tenants at this moment.

(Operator Instructions) Our next questions come from the line of George Hoglund with Jefferies.

Just one follow-up.

Has there been any additional departures or any staff changes since Brian's announcement?

There has not been any additional changes, no.

Okay, and would you anticipate any other near-term changes?

Well, again, Brian's coming in.

I think we have a good team, but he obviously will have to make those decisions.

I'd just like to say congratulations as well from me, and it's been a pleasure working for you.

You're very kind, George.

This concludes today's question-and-answer session.

I would like to turn the call back to management for closing comments.

Thank you very much, operator.

I've been reflecting on the number of conference calls that we have had concerning earnings, and speaking to Dawn, I participated in over 80 calls.

We haven't actually logged the exact number, but the one thing I do want to say is that it's been an absolute honor to interact with each and every one of you, and I wish you all very good luck.

Thank you.

Ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time, and thank you for your participation.