Whitestone REIT (WSR) 2012 Q2 法說會逐字稿

Well, good day, everyone, and welcome to the Whitestone REIT second-quarter 2012 earnings conference call. Today's conference is being recorded and, at this time, I will turn the conference over to the Chief Financial Officer, Mr. Dave Holeman. Please go ahead, sir.

Thank you, operator. Good afternoon and thank all of you for joining the Whitestone REIT second-quarter 2012 earnings conference call. Joining me on today's call will be Jim Mastandrea, our Chairman and Chief Executive Officer.

Please note that some statements made during this call are not historical and may be deemed forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements, due to a variety of risks and uncertainties. Please refer to the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K and Form 10-Qs for a detailed discussion of these risks.

Acknowledging that the facts that this call may be webcast for a period of time, it's also important to note that today's call includes time-sensitive information that may be accurate only as of today's date, August 6, 2012. The Company's earnings press release and second-quarter supplemental operating and financial data package have been filed and the Company's Form 10-Q will be filed with the SEC shortly. The filings will also be posted on our website, WhitestoneREIT.com, in the investor section. Also included in the supplemental data package are the reconciliations from GAAP financial measures to non-GAAP financial measures.

And with that, let me pass the call to Jim Mastandrea.

Thank you, and thank you all for joining us on our call today. Today we're going to review our second-quarter operating results and update you on the recent progress of our initiatives.

My comments will focus on the continued execution of our business strategy, which is built upon and operates around a community center of property model. Dave's portion of our call will focus on our financial results and the overall strong financial condition of Whitestone.

As we have stated on our previous calls, our focus for this year has been on creating value through lease-up of our core operating portfolio, redeveloping and repositioning properties, and acquisitions of value-added properties. We acquire, own, lease, and manage and redevelop community center properties, which we define as visibly located properties in established or developing culturally diverse neighborhoods and our high-growth target markets. We focus primarily on service-providing tenants rather than traditional goods-oriented retailers. This tactic drives cross traffic into our centers.

Our tenants provide a strong base of revenues which minimizes Whitestone's downside as no tenant impacts our revenues by more than 1.5%. Our tenants tend to occupy smaller spaces, typically less than 3000 square feet and meet the needs of individuals and families within a five-mile radius of our properties. We continue to grow our customer base. A year ago we had 813 tenants. Today we have nearly 1,000.

Our average small space tenant tends to sign shorter term leases which we prefer, because it gives us the ability to go back to the market and raise rental rates with an average of 3.7-year lease term where our small space tenants sign in the second quarter. We've grown our occupancy through increases in our tenant base with new tenants, the expansion of the existing tenants and the acquisition of new community centers. Small space tenants account for 72% of our total and provide a 60% premium per square foot rental rate when compared to our larger space tenants. Our small space tenants also provide an investment premium on a square foot rental basis and revenue growth as their businesses grow and expand. Small space is quoted on an absolute rent dollar basis rather than a square foot amount, which places the rent into relative perspective to the tenant's business and provides a premium to us.

Entrepreneurs by nature are our tenants and tend to incubate their businesses from a small space while they are growing their businesses. When they decide to expand, we are positioned to provide the expansion space opportunity.

Our tenants represent a diverse range of industries and at each of these, our centers tend to fall within one of four categories of retail services. Medical, education, casual dining, and convenience. A typical nearby resident at a community center may drop off a child for tutoring, visit their dentist and pick up a pizza for dinner, along with their dry cleaning, and then pick up their child all in one visit.

Overall we ended the quarter with total property occupancy of 87%, a 6% increase over a year ago. The quality and quantity of our tenants continues to increase and our total value from our centers improved, along with the other key financial metrics.

Revenues for the quarter grew by 36% as compared to the prior year to approximately $11 million. Our property and net operating income for the second quarter was also up year over year by 35% and funds from operations core also increased 45% in part due to the judicious expense management.

We currently own 46 properties, of which 44 are community centers and two are land parcels which we have inventory for future development. Our properties are located in growth markets of Houston, Dallas, San Antonio, Phoenix, and Chicago.

In addition to our overall operations, I would like to highlight our value-add, redevelopment and acquisition activity. Our development and redevelopment team is focused on value-add transformation and development of adjacent land and outparcel projects within our current portfolio.

We will develop and construct new space for lease on our two expansion parcels that we purchased in late December of 2011. These projects are expected to begin mid- to late 2013 with occupancy slated for 2014 and include a 4.5 acre parcel Phase 2 of Pinnacle of Scottsdale in North Scottsdale and a 2.7 acre parcel to the Shops of Starwood in Frisco, Texas.

We have continued to redevelop centers we own with larger vacant or partially vacant spaces and dividing them into smaller spaces to accommodate our small space business model. Our redevelopment of Windsor Plaza, a 200,000 square feet community center property located in San Antonio, is substantially complete with several new tenants and is now fully leased. Our value-added redevelopment project we have in Houston and includes our Asian center, Lion Square and Hispanic Center, South Richey. These redevelopments are moving forward with new tenants under lease as we expect the construct to be completed by year end.

Let me now discuss our acquisition strategy. We pursue a balance of mix of value-added community centers that are significantly discounted with greater lease-up opportunities and stabilized centers with proportionately higher in-place cash flow. All of our acquisition targets are located in large growing cities with culturally diverse and strong demographics.

In Phoenix we continue to see value-add opportunities showing some modest signs of opportunity recovery. In our Texas market, where we own 75% of our properties, we continue to see the state lead the nation in job and population growth. In Chicago, a market in which we have significant past experience we own one property that is performing exceptionally well, and we continue to evaluate the market trends and opportunities that could or could not fit with our strategy.

Based on our financial results, our strategy has yielded year-over-year growth of occupancy, revenue, and funds from operations. During the second quarter, we remain very active in pursuing opportunities from our extensive pipeline that continues to be over $500 million and primarily off-market properties. In Phoenix, our focus on growth -- on the growth market we now own nearly 700,000 square feet of leased space. We continue our focus on locating solid properties from sellers who are experiencing financial stress, as well as those that, through the service relationships we have cultivated in the market over the last two years, that lead us to opportunities. The Phoenix and the North Scottsdale markets remain a long-term growth market with early signs of strong recovery, adding population especially in the 35 to 55 age group and range ranking in third growth behind Dallas and Houston, two of Whitestone's other markets.

We remain committed to acquiring properties at the right price that are creative to Whitestone's shareholders on a per-share basis. We also are committed to strict underwriting and due diligence standards in our acquisition process. We will not do a deal simply to do a deal.

In the second quarter, we closed on one high-quality value-added acquisition and, additionally, we are under contract on another $40 million in community center property acquisitions that we expect to close very soon. Let me comment on the second-quarter acquisition and provide some perspective on the other communities in our contract.

As we previously announced on May 29, we closed on the purchase of The Shops at Pinnacle Peak, a 42,000 square feet, 76% leased community center in North Scottsdale where $6.4 million or $154 a square foot. The purchase price is the 32% discount to estimated replacement costs. The Shops at Pinnacle is strategically positioned in the marketplace.

We now own a relatively large share of small service-based tenants over 183,000 square feet within a two-mile stretch that includes The Shops at Pinnacle in the North Scottsdale suburban market. We have an immediate transformation plan for the property [net] value with complementary enhancements to the common area that will welcome and serve local communities.

Now, let me provide some color on the pending acquisitions I just mentioned. The three communities under contract represent approximately $40 million in purchase price with 266,000 square feet of leasable square feet at an average cost of $150 a square foot which is a significant discount to the estimated replacement cost. All of the properties are located in the Phoenix marketplace and high barrier to entry trade areas serving affluent neighborhoods. We expect these transactions to close shortly and begin to contribute accretively to our results.

We are also in discussions with several other potential property sellers and expect the pace of our acquisition activity to accelerate over the next few quarters. Our focused development and training of our people remains a priority as we have said before on previous calls and the execution of our strategy allows us to meet our growing needs and effectively service our tenants.

With that, I would like to turn things over to Dave Holeman, our Chief Financial Officer. Dave?

Thank you, Jim. I will start by reviewing or covering our balance sheet or financial position then turn to a review of our key operating results and conclude with a few comments regarding our outlook.

During the quarter, we maintained a strong and flexible capital structure. We ended the quarter with a conservative debt to total market capitalization leverage of 43%. For the quarter, our interest coverage ratio which we define as EBITDA divided by interest expense, was a healthy 2.9 times.

Our pool of unencumbered properties -- that is, properties without secured mortgage financing -- continues to grow. Shops at Pinnacle Peak which we acquired during the quarter was added to the pool, bringing our total unencumbered properties to 20. Our pool of unencumbered assets now exceeds $120 million which is approximately 40% of our total assets.

Our $125 million unsecured revolving credit facility remains largely available with $100 million undrawn as of the end of the quarter and available to us. We currently have no debt coming due for the rest of 2012 other than a small $1.3 million loan. We are also already preparing for the four mortgage maturities we have in 2013.

During 2013, we have approximately $14 million of debt which matures in June and another $66 million in debt which matures in October. The majority of this debt is with insurance companies and was entered into during late 2008 with conservative underwriting standards. We estimate that the four loans which mature in 2013 are all at or below market standard loan to value ratios. We have begun renewal discussion and expect to renew this debt at rates or terms similar or better than our current rates and terms.

We also have availability under our credit facility should we be unable to find similar or better financing.

Now let's turn to the operating segment. Funds from operations core or FFO-Core which adjusts the NAREIT definition or FFO by excluding acquisition expenses for the quarter was $2.9 million, a 45% increase from the second quarter of 2011. On a per-share basis, FFO core was $0.23 per diluted share in the second quarter as compared to $0.20 a year ago. FFO core this quarter included three unusual expense items that reduced FFO core by approximately $0.025 per share. The first was a non-cash expense related to an annual grant of common shares to our trustees at a cost of approximately $80,000 or $[0.006] per share the second was an employee separation costs recorded in the quarter for approximately $110,000 or $[0.009] per share in the last with an approximate $100,000 expense or $[0.008] per share related to the settlement of 2011 disputed property taxes.

We do not expect these three unusual items to occur in future quarters. On the operating side we had a solid quarter. Property revenues for the quarter were $11 million, an increase of $2.9 million or 36% from the second quarter of 2011. The increase in property revenues of $2.9 million was a result of same-store revenue growth of 6% or $400,000 and revenue from new acquisitions of $2.5 million.

The increase in same-store revenues was attributable to increased average occupancy of 3% from the prior year and a 3% increase in the revenue rate per average leased square foot. Property net operating income increased $1.7 million or 36% to $6.7 million in the second quarter. As previously mentioned, included in the property operating expense during the quarter was approximately $100,000 of expenses related to the settlement of 2011 property taxes which we do not expect to repeat in future quarters.

The primary reason for the increase in property NOI is new acquisitions. Interest expense for the quarter increased 20% or $289,000 in the prior year. This increase is a result of an increase in our debt, which has been used for financing acquisitions of $34 million, and a decrease in our effective interest rate to 5.1%, which is down from 5.6% a year ago. During the quarter, we continued to scale our general and administrative expenses across a larger base of assets. Our employee headcount has remained essentially flat over the last 12 months as a percentage of our revenue G&A expenses, excluding acquisition expenses, were 15% of revenue in the quarter, a decrease of 5% from the same period in the prior year.

We remain very focused in our cost savings efforts and expect our G&A costs as a percentage of revenue to continue to decrease as we grow over time.

Now, let me turn to some of our key operating measures. Our total portfolio occupancy rate which represents physical occupancy and does not include tenants under lease which has not yet moved into our property grew to 87% as of the end of the quarter. This was up 6% from the second quarter of 2011. Approximately half of this increase was from our same-store properties and the other half was the result of our new acquisitions.

We increased our total number of tenants to nearly 1,000 from approximately 880 year ago. We had an increase of 19% in the number of new and renewal leases signed with 92 in the second quarter of 2012 as compared to 77 in the prior year. During the quarter, we signed 190,000 square feet of new and renewal leases with an average size of 2,100 square feet and an average term of approximately 3.7 years.

During the quarter, our leasing spreads for comparable leases were a 6% increase on a straight line basis and a 1% increase on a cash basis. For the rolling 12 months, our leasing spreads for comparable leases have been a 5% increase on a straight line basis and a 3% increase on a cash basis. Our approach to leasing remains quite unique and effective.

As Jim mentioned, we typically seek shorter leases on smaller spaces which gives us greater tenant diversification and provides a premium rental rate per square foot. Our typical tenant becomes ingrained in the neighborhood surrounding the center and other, then growing within one of our community centers they tend not to relocate. With shorter leases we are able to take advantage of their growth and adjust rental rates more frequently, usually to our benefit.

Our marketing and leasing teams continue to have robust pipelines of potential tenants and we remain confident in our ability to continue to increase occupancies in all of our markets. Let me take a moment and reflect on our recent history. Whitestone REIT completed $80 million of acquisitions in 2011 with approximately $47 million of that amount closed during the last two weeks of December. This is a perfect example of the lumpiness of both our acquisition volume as well as the timing.

As a result, we thought it would be helpful to provide some additional perspective and discuss the key drivers of our near-term financial results. For the first six months of 2012, our FFO-Core was $0.47 per share and was reduced by approximately $0.025 of expenses we do not expect to repeat in the second half of the year.

Including our prior acquisitions in 2012, and the approximately $40 million of acquisitions we have under contract and due diligence, we expect to have added almost $50 million in acquisitions with two quarters left in the year. We project the impact to FFO-Core from these acquisitions will partially contribute to 2011 and fully in 2013 by approximately $0.17 per share.

For the balance of the year, we will continue to focus on enhancing the value of our existing portfolio through our leaseups, cost control, and increases in revenue per square foot. We will also focus on external growth by acquiring off-market value-add community centers in markets with strong demographics.

We want to remind the investment community that we have a strong although short track record of revenue, EBITDA, and FFO growth. We have liquidity, an outstanding pipeline of actionable off-market acquisitions, and the quality of the deals is beginning to increase. With that, let me turn the call back to Jim.

Thank you, Dave. In summary I would like to highlight a few items from our call.

Our Community Center property business model continues to support our very successful investment strategy. We continue to see significant growth opportunity for Whitestone through the acquisition of high-quality accretive assets. We remain focused on some of the highest growth markets in the country. We have a strong leasing we have achieved in 2012 that is driving occupancy which, in turn, will increase cash flow of 2012 and beyond.

Our internal growth opportunity remains robust, given our headroom and occupancy, our redevelopment opportunities, and our short-term leases. Our substantial acquisition pipeline offers opportunities for additional external growth and our balance sheet continues to strengthen, providing us with the financial flexibility to grow and the opportunity to further enhance our returns through lowering our overall cost of capital. We will continue to make decisions and execute on our strategy for the benefit of our shareholders.

And with that I would like to conclude the review of our results and, operator, I will turn the call back over to you.

Paul Adornato, BMO Capital Markets.

I was wondering, Jim, if you could tell us a little bit more about the most recent acquisition, The Shops at Pinnacle Peak. Why was it only --? Why is it only 76% leased and could you talk about cap rates today and after you've had a chance to implement the plan there?

Yes, I can. Paul, The Shops of Pinnacle is strategically located halfway between our property on Piedmont and Pinnacle Peak and our other property on Scottsdale and Pinnacle Peak. And what we wanted to do was to control the entire market there, which gives us three levels of pricing so that tenants who are at the Citadel will be priced more on the higher end of the square-foot price range; and at Pinnacle, they will be at the midpoint and then Shops will be at the lower end. And they still get an opportunity to capture the marketplace.

That property was in a CMBS pool handled by a servicer, and it had no attention given it for about the last 2.5 years. It was because of its size that it didn't appeal to any other REITs and there weren't many buyers of it. So we found that it gave us an opportunity to fill in that one hole that we had and we have been looking at this property for, I would say, at least over two years. Originally when this property came to us back in 2007, of course everything was priced much higher, it was fully leased and it had a tag on it at $18 million. So we felt this was an exceptional purchase for us.

With regard to cap rates, it's interesting because the first half of the year we spent time on three particular deals and what we found ourselves, we were invited to make some offers on some deals that were off market, and once we made an offer they became market types of transactions. And we found that we had others bidding against us. And it will give you an idea of what's happened to some of the deals when you get into the market-type transactions.

The first was a property that had a Bosch as anchor, grocery store which was the community center but it had a Bosch with it and it had a note that it was being discounted by a major bank by about 30%. We had -- it was the first deal that we bid on that with a discounted note like that. And as we got into the transaction, and we were doing the due diligence, a couple of things occurred.

One is that we were unable to get the title away from the owner, because he had given a first right of refusal to someone else. So it made no sense for us to try to own the property through the purchase of the note.

And second is that we were unable to use our line of credit -- we could use our line of credit and draw down on it but we couldn't put that back into our borrowing base. So we felt that without the ability to being even partially releveraged that investment that it made no sense and that probably went through about 45 to 60 days on it. So that got pretty competitive with the local person buying the note who had another property from the same developer.

The next property where we looked at was another about a 125,000 square-foot center. But we found ourselves bidding against some Canadians. The Canadian money, we think, came in through Vancouver but really Asian money and it was priced about $5 million higher than we wanted to pay for it. Our cap rate was based on about a 7.5% cap rate.

Ultimately the deal closed for somewhere around what we had originally offered. But we weren't the buyer and we put some time on that. The reason we didn't push that deal was that the compression on the cap rate, because it was almost about a 90% leased property, was that it had a large box, 40,000 square feet. And that was being -- that had a tenant in it that overall revenues were declining and we felt that that price was too rich for a box that could go empty on us.

The third deal is probably the closest to a market deal that we've seen and it was almost 100% occupied. We felt that it strategically fit our portfolio. And these deals, the second deal was like in the $38 million range. The third deal was getting was that or better. But we went in and bid on it in the mid-sevens in the cap rate. We were just asked to make an offer for a quick sale. It was a company out of the West Coast.

We ended up taking a pass on it when it traded at a 5.5% cap rate. It's a property that's in the mid to high 90s occupied. It would require very little management time and very little leasing time. But on the other side of it, we weren't willing to buy something at a 5.5% cap rate with little or no upside to our portfolio. So, that kind of gives you some idea of The Shops and what we're seeing on the cap rate side.

Okay, thanks. And could you also touch on the land strategy? You mentioned having a couple of land parcels that were available for development. How much capital will you tie up in land and what are the hurdles or criteria in order to move forward on breaking ground?

Good question. The property in North Scottsdale, we have been -- we've produced some drawings that bring us in around a 55,000 square feet to 60,000 feet square range. We have had some sketches that we like. Not solid enough to do any pre-leasing off of. But we have had our first discussions with the city of Scottsdale to see if they like them. We are estimating the cost per square foot to be in the $150 range, $160 to build them.

We think there is SOME some pre-leasing we could do once we move them along. Our estimate is that sometime in the next -- we probably wouldn't start to be active on it as much as we would think until the first quarter or second quarter of next year and that would carry something around $0.5 million worth of reconstruction costs in terms of approvals and things like that. We would look at this property to come on board some time -- if we started to go through all the process of zoning, it would come on board around 2014 and we think that would be in that $10 million to maybe $12 million total cost build out on that.

Our land on that property is about $900,000 of our cost so far.

So what we're looking at, Paul, is timing this to meet the cycle when the market starts picking up more momentum ,which we do really think will happen in 2013 and that's when to buy properties they get very pricey, would look to bring it on with some pre-leasing.

The other parcel of property is in Frisco, just north of Dallas and that is a property that has also around 50,000 square feet of space. We do have an LOI with the restaurant operator and I'm going to say it's about $34 a square foot. We will deliver them a shell with a dirt floor and allow them $40 of TI. That would be a part of it and then that would be attached to some other buildings.

So we would see that starting -- the restaurant portion of it starting sometime and hopefully delivered in 2013. The balance of the other properties will come on in 2014. That's how we're timing it.

Okay. And just in terms of hurdle rates, in order to compensate for the greater risk of development, what should we think about in terms of modeling?

Hurdle rates? In terms of what we look at? We're looking at double digit returns, somewhere between 15 to 20 -- low 20s in terms of anything we developed in terms of our IRRs. We think that's -- would look at it with the risk relatively low and in a sense of trying to prelease as much as we could before we really get a lot of money out in construction.

We'll look at the best way to finance the construction so it doesn't impact our operations. So that essentially we have -- we deliver almost fully leased properties. We haven't quite corkscrewed that yet. But I would say I would look at modeling that in the high teens, low 20s in terms of what we would expect for returns.

Okay, great, thank you.

Jeff Langbaum, Ladenburg Thalmann.

I was hoping you could talk a little bit more about the acquisitions that you've got under contract. Not necessarily in specifics but just in generalities. What kinds of deals are they? What parts of Phoenix? What kind of -- are they stabilized or are they value-added? Who are the sellers? Those kinds of things and then also wanted to (multiple speakers)?

Could you be more detailed decides who are the sellers on it?

Jeff, this is Dave. Maybe I'll give you some of the financial measures and I'll let Jim talk a little bit more about some of the other characteristics of the assets. So we have -- currently have three properties under contract which we hope to close on very shortly. About 266,000 square feet. The purchase price is approximately $40 million or $150 a square foot. Occupancy of the three properties ranges from 70% to 100%. Probably the weighted occupancy is in the 85% range and then, the cash on cash returns on that 85% level are in the 8% to 9% range. So getting an 8% to 9% day one cash on cash with upside still in the occupancy.

So, those are some of the financial metrics to think about the acquisitions and how they affect our earnings.

Yes, the first property is coming out of a [tech], where they are unwinding their tech investors. The second property is coming out of a bank. We have bought another property from this bank and these were truly -- they began as off market and they stayed off market.

And then the third property is coming out of a CMBS pool and is brought to us by a service or and so we actually have contracts on all three of those. We're going through the diligence. If they clear the hurdles, one could close as early as this week and the other two would close somewhere between 30 and 45 days.

And Dave, I think you mentioned $0.17 accretive to FFO in 2013 on the full-year basis. What kind of financing do you assume in terms of funding those acquisitions? Is that all on the line?

Sure, we've assumed that with those acquisitions, we have one piece of secured mortgage debt which we will assume the rate on that debt is a five-year remaining term. The initial rate is 3.5% and then the blended rate over the term is about 4.3%. And then beyond that, we have assumed that we'll use our line and we have assumed a rate of approximately 3.5%. So, of the $40 million, $9 million of it is secured financing and the rest would be draws on the line of credit.

Okay. And you said you still have $100 million of capacity on the line. So if you take that out by another $30 million does that leave you in a position where you start to think about capital needs? Or are you still comfortable at that level?

We think there are a bunch of great opportunities out there on the acquisition side. We've also got a lot of different sources of capital. I think we've talked in the past we will continue to look at recycling some of the properties we have. We have some properties in the portfolio that we might look to sell and recycle capital. We've got room on the line. We've got our overall leverage is just 43% right now. So, we're going to continue to look at all sources of capital, and that includes debt as well as equity.

Okay. Great. Thank you very much.

Carol Kemple, Hilliard Lyons.

I'm going to ask you the same question I ask you every quarter because our shareholders care about this so much. Are you still comfortable with the current dividend level?

Yes, we are. And in fact, we have had a Board meeting today.

I'll answer it. Absolutely. So just to be definitive we're absolutely confident with the dividend level. We continue to see great acquisitions that when you look at our cost of capital significantly contribute to our FFO per share. We have made steadily, we have made progress and increasing FFO per share. We continue to be very convinced that through the acquisitions we're making that that dividend level is very sustainable. So absolutely, we feel good about the dividend level.

Okay. It sounds like you all could have $40 million of acquisitions coming online in the third quarter. Would you -- is it realistic to assume a similar amount about the fourth quarter?

We obviously are very cautious about giving guidance as to the amount of acquisitions because the timing is somewhat out of our control. So I'll remind you of last year. We did $90 million but a lot of that was in the last two weeks of the year. We are very confident, given the size of the pipeline, the amount of our relationship that we can acquire significant assets.

We also believe that we'll be able to accelerate the pace throughout the year but I'm just hesitant to give you a dollar amount for a specific period of time.

Okay. I understand that, thank you.

Josh Paquin, BMO Capital Markets.

Thanks for taking the follow-up here from BMO. You mentioned leasing spreads on a cash basis went from about 3% to 1% this quarter. Is that something you expect will continue? That trend is about 1% or is it going back to 3?

I'd love to say that we expect it to continue. I think probably the best thing for us is to make sure we have an appropriate amount of time as we look for trends. We are -- we do have a relative small number of leases that renew or sign each quarter. I prefer probably to look more at the 12-month trends than a specific quarter.

We are pleased with the spreads this quarter being a little better than they have been. I'd like to see a couple of quarters back-to-back before we lock in but if you look at our annual numbers I think our leasing spreads have been good. 5% straight-line rent spread is good, given the marketplaces out there.

Okay, great, and then we talked about a big retailer that you are looking to sign on last quarter -- 42,000 feet. Is that deal done or still out there? What do you guys think?

The deal is still out there. We have to go through an approval process from some co-tenancy provisions and we haven't cleared those hurdles yet.

Okay. And then finally on the debt side you mentioned that you secured more mortgages that are maturing close together next year. Would you look at doing an unsecured financing again or have you had any discussions to that effect?

You know, we'll continue to look at the available sources of capital and do what makes sense for this business. We have had discussions about lots of different capital. So we'll look at all the capital available to us. You know, the one thing we feel very good about was as that debt rolls, we think we'll be able to get better rates and terms than we currently have so that will be a positive event for our shareholders.

Whether it is secured or unsecured.

Whether it's secured or unsecured. Yes, we're going to maintain an appropriate balance. We're going to -- financial flexibility is very important to us as we want to position this Company to grow but we'll continue to look at a good balance of secured and unsecured financing.

Let me add, Josh, in the way we put together the bank group in our line of credit that we have a lot of capacity with them. As we grow they'll be able to grow with us. For example, Bank of Montreal and Wells and US Bank is in there and First Bank.

Capital One.

Capital One. So we had a really great (multiple speakers) in our line of credit and all of them have just much more capacity.

Okay. Great. Thank you, guys.

And Mr. Jim Mastandrea, I'll turn the conference back to you for closing or additional remarks, Sir.

Okay, I'd like to thank everyone for attending. We have a unique community center property business model and, it really does prove to be successful for us and we are excited about executing it even further. We find that with this business model in the marketplace, we have very little competition with the kind of deals that we are looking at and we like that. And our track record is really starting to take some root, and we think that that's really good for the shareholders of the Company. It has a strong impact in the marketplace. We've got a solid base of community center properties already. We have a robust pipeline of additional acquisitions. We've got liquidity with 20 unencumbered properties. We've got a line of credit that we have available to us. We've had some very nice trading in our stock price. We think that it will be nice to see our dividends comedown as the price goes up higher on the stock. We think that will happen over time and we are patient to see how that works because we've been able to produce such a solid track record.

So, with that I would like to say thank you all for participating in the Company and particularly on this call, and I would like to thank you and I'll turn it back to you, Operator.

Thank you. Well and, again, ladies and gentlemen, that does conclude our conference for today. We thank you all for your participation.