Acadia Realty Trust (AKR) Q1 2012 Earnings Report, Transcript and Summary

Welcome to the First Quarter 2012 Acadia Realty Trust Earnings Conference Call. [Operator Instructions] I will now turn the call over to Amy Racanello, Vice President of Capital Markets & Investments.

Good afternoon and thank you for joining us for the first quarter 2012 Acadia Realty Trust earnings conference call. Participating in today's call will be Kenneth Bernstein, President and Chief Executive Officer; Jon Grisham, Chief Financial Officer; and, Michael Nelsen Senior Financial Principal. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward looking statements within the meaning of the Securities and Exchange Act of 1934. And actual results may differ materially from those indicated by such forward looking statements due to the variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC. Forward looking statements speak only as of the date of this call April, 25, 2012 and the company undertakes no duty to update them. During this call management may refer to certain non-GAAP financial measures including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliation of these non-GAAP financial measures with the most directly comparable GAAP financial measures. With that, I will now turn the call over to Ken Bernstein.

Thank you. Good afternoon. Thanks for joining us. On our yearend earnings call, we reviewed both our 2011 and fourth quarter results and also laid out our growth plans for 2012. So today we'll briefly review our 2012 plan. We'll update you on our recent progress of various initiatives discussed with variations we're seeing. And then Jon will conclude with a more detailed review of our first quarter earnings and operating metrics. As we stated on our year end call, for 2012 our team will be focused on creating value through two broad components of our business. First is within our core portfolio. The key are drivers are in the short-term, our accretive re-anchoring and lease-up projects at 3 of our existing shopping centers then coupled with the acquisition of a host of high-quality assets as part of our asset recycling and core acquisitions initiatives. The second component is through our external growth platform where we'll execute new opportunistic and value-add acquisitions as well as continue to develop, lease-up, stabilize and then monetize our existing investments. So I'll begin today's discussion with our corporate folio activity then followed up by an update on our funds activity. First, with respect to our core portfolio operating fundamentals when we look at our first quarter results and strip out the noise from our three re-anchoring projects, same-store NOI increased by 230 basis points on stable occupancy numbers and positive leasing spreads. And this is somewhat consistent with the continued mild and somewhat uneven recovery that we appear to be in. As we look forward over the next year, we expect the vast majority of our occupancy and NOI gains will be driven by our three previously announced re-anchorings, first in Bloomfield Town Square and then two properties that formerly had A&P supermarkets as…

I'll briefly touch on earnings and then turn to our core portfolio performance and then lastly cover 2012 guidance. FFO for the first quarter of $0.21 was as expected. One notable item is that this includes acquisition costs of $500,000 or give or take a $0.01 related to the closings on a portion of the Chicago portfolio and our Cambridge Whole Foods location. Turning to the core portfolio, also consistent with expectations, same-store NOI was minus 3.9% and excluding the impact of our Bloomfield Hills in A&P re-anchorings, this result would have been a positive 2.3%. This 6% drag will moderate in the second quarter as Bloomfield will be fully online by this June and then following this, same-store NOI should turn positive for the second half of the year. And consistent with our previous guidance, we should achieve between 2% and 3% same-store NOI for the year in total, inclusive of these re-anchorings. On whole, our tenant basing collections are sound. One tenant we are keeping a close eye on is The Avenue, for which the parent company, United Retail Group, filed Chapter 11 in February of this year. We have four locations in the core, totaling about 25,000 square feet. They have not rejected any of our leases to date and 2 of our locations are here in the New York area and are at comparatively higher rents, as one would expect. And in general, the 4 locations are at market rents. Core occupancy as of March 31 was at 90.3% with the anchor component at 93% and small shop occupancy of 84%. And taking into account signed leases, we are at 94% overall occupancy, which is consistent with our projected year-end occupancy target. Looking at earnings guidance for the balance of 2012, the core portfolio is performing…

[Operator Instructions] Your first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

I'm on with Jordan Sadler as well. First question on leverage. Your net debt to EBITDA is creeping up a bit with some of these recent acquisitions. It was about 6.2x in the quarter versus just under 5x last quarter. And you've always operated at a conservative level. It's still fairly conservative. But I was just wondering how you view your current debt levels today and sort of going forward as you continue to acquire properties.

We target a six multiple as the right range, the right amount of leverage. So anywhere plus or minus around that level we think is appropriate. So you'll see us hover around that level.

And then sticking with financing, for some of the recent street retail properties, I know you're on some of the Clark & Diversey and other Chicago properties together. I wasn't sure if I saw anything, but I was just wondering if you could give us an update on the financing of the Trader Joe's and the Urban Outfitters property. And then also maybe you can just talk about what you're seeing from lenders for this type of product today more generally.

I'll touch on that. In general, for longer-term borrowing, which is what we're in a look for, and that's in a range from at the short-end 5 years probably out to 10 years, we're seeing strong lender demand to finance high-quality, high barrier-to-entry assets like that, spreads ranging from 150 at the tight end to 200 on the wide side. And then depending on leverage levels, we won't finance every asset at 40% leverage. We probably will use a little more debt on some and then keep more unencumbered. So in the range of plus or minus 200 over the 10-year treasury, it's a very attractive time to lock down long-term debt. I think that's what you should expect to see, for instance, on that Diversey asset. And the lenders seem to be continuing to separate and far more interested in pursuing high-quality assets. Street retail certainly falls into that category.

In fact, we've seen a lot of interest in the West Diversey asset and you'll probably see us close on some financing during this quarter.

And then just lastly, I was just curious about the Lululemon lease, the acquisition. How does that yield compare to some of your other Chicago area acquisitions that you've discussed? Can you provide any details about that lease, maybe what kind of sales they're doing and what the lease term looks like?

Without getting into specifics, which we are not permitted to do, it's a very strong performing store with a long-term lease. Equally importantly, it's the fourth building on Oak Street and Rush that will be part of our collection. And that area is rock solid and tenant demand for the few vacancies that are showing up there is really strong. So we expect strong performance out of not just that store, but the rest of what we have on that Rush Street, Oak Street corridor. In terms of cap rates, we don't break out individually, but what we've said is our acquisitions have blended in the Chicago Street area to about 6.5%. This is below that. It's at the lower end, but it's a very high-quality corner there on Rush and Oak right across the Elysian Hotel, and we're very pleased with that addition.

Your next question comes from the line of Craig Schmidt with Bank of America-Merrill Lynch.

Ken or Jon, whatever, how does the revenue recognition or the NOI growth for Urban Street compare to that of suburban shopping center format?

It can vary. And if you're talking about SoHo in New York, it will be at the highest end of this. But Georgetown, D.C., would be another example. In general, what we're seeing is about 100 basis points higher. So if you're penciling 2% growth for a well occupied, stabilized suburban center, not taking into account financial crisis and major recession, et cetera, you're probably 100 basis points higher or 3%. In some markets, though, Craig, what has been fascinating to see is the market rent growth. For some of these key street retail has so far outstripped what we've experienced in our suburban that when you have the reset opportunities that while I certainly welcome the re-tenanting that we're doing at our A&P and our to suburban New York, those re-tenanting opportunities when they occur on street retail are even more meaningful. So what's going to be hard to gauge, but we'll see over the next five or 10 years is as one gets the opportunity to recapture space will the growth, once you take that into account as opposed to just the contractual growth that I was talking about, 2% versus 3%, how much does that then create additional growth opportunities, that's going to be down the road, because we're not buying assets that we're expecting the tenants to kick out short-term. If anything, it's providing stability short term. But in the long term, we see stronger market rent growth in the urban and street than we do in the suburb.

And then, Craig, in terms of the revenue recognition obviously with the increased contractual growth on a GAAP or straight line basis, the yield obviously goes up on these assets on a comparative basis because of the embedded additional growth.

Just thinking about your street urban, in Chicago, you've got Lincoln Park, Gold Coast and Wicker Park. In some ways, it's very different, but the one thing they seem to share is the density and the high shopper traffic. Is that what's making you interested in these properties or is there other commonalities that I'm missing?

The first and most important because we're not a retailer, listening to our retailers and hearing where do they want to be and where do they think that in this changing environment their sales growth and their profits will enable them to continue to pay us rent and pay us more rent. And what we have heard from a wide array of our tenants is whether it's Lincoln Park or whether it's Lincoln Road in South Beach, Miami, they are certain must-have locations, because they're viewing these locations not just in terms of sales per square foot, although that's obviously a critical piece, they're thinking about these locations from a branding perspective. They're thinking about these locations from order fulfillment perspective as their multi-channel initiatives continue to gain steam. They're thinking about these locations as a positive type of showroom as opposed to some of the showrooming negative aspects that we've all been reading about. And so these are positive shopping environments. Now, they can be suburban locations as well. But areas where our tenants can utilize all of these different components seems to be where they're most excited about stepping up and signing leases that are attractive to us.

Your next question comes from the line of Quentin Velleley with Citi.

It's actually Manny [ph] here with Quentin. Looking at your street retail platform and the fragmented existing ownership of those types of assets, how do you build scale on your existing markets. So if you own the second and fourth building on a block, how do you get that third building so that you have contiguous ownership?

It's not always easy. With some level of patience and some level of persistence and it helps to be small enough that we can add a building here and a building there accretively. I expect this business to remain fragmented, but over time, as is the case for a lot of commercial real estate, it makes sense for more of these high-quality assets to end up in responsible institutional well capitalized hands. We're going to just have to be patient and where we see the opportunities we'll take them.

Sort of in the same line, how do you enter new markets with the same type of fragmented ownership?

So if we have to be patient and persistent in the ones we're in, we have to be very thoughtful about where we're at. Think about Chicago. We were on Clark & Diversey for probably a decade. But we waited for the right time, the right portfolio, it was north of $100 million, to really have the right entry point. We waited a long time to do a $50 million entry point on Lincoln Road. In Manhattan, we will probably be willing to do smaller deals, because it's right here in our backyard, but we look at what is the right size, what is the right timing. And thankfully, it's just one piece of what we do. So between urban acquisitions between some of these recapitalization that we're beginning to see, there are a handful of markets that we'd love to be more active in, and our team is pursuing those aggressively. But if we concluded that, we would only expand in terms of street retail. In those markets that we currently have a presence, I think for our sides, we could continue to execute and grow quite significantly, because we love M Street in Georgetown, happy to do more there, happy to do one building in a time. We love Chicago, and we think there will be continued opportunities there. We like Lincoln Road. It's getting very competitive down there, but that's great for our existing investments. Greenwich, Connecticut; Westport, Connecticut, Boston, there is plenty for us to do within those that we're already in without having to explore new markets. But when the new opportunities show up, we'll pursue it.

I think Michael [ph] has a question for you as well. Ken, just a question on where you are in terms of Fund IV, I mean how far are you in terms of that capital raising documentation and how we should think about when that comes about?

So what we have said and I think I hopefully we'll deliver on what we've said is we hope to have, expect to have the documentation done and that Fund launched before the end of the second quarter. We are working with our existing Fund III investors in terms of their re-up, and we are very positively encouraged by that. But the reality in the institutional discretionary fund business is that re-ups don't get you to 100%. So thankfully, through primarily reverse inquiry, there has been a bunch of new investors who have also stepped up to circle what probably will be the lion's share, if not the balance. Let's get all that done before the end of the second quarter. That's our expectation. If there is a little tail left, if the conflicts don't arise, I'll let you have it.

In discussing with the new investors, I assume the old investors are pretty familiar with you and the returns. What have the discussions been with the new investors in terms of to assume this has been going on for the last 12 months? How have their return expectations changed? In terms of the fees that you're putting in, how have those changed that all?

Our expectation is that in terms of fees and structure, we are going to try very hard to keep it the same. And I think it's fair and balanced where we could have a good discussion about whether it's too attractive one direction or another. We think it's fair and balanced to all our stakeholders, both our public shareholders and our fund investors. And in general, the response has been consistent with that. In terms of returns, there is a recognition to a point that in a low-return environment, returns are coming down. That being said, for the opportunity to invest in illiquid turnaround opportunities, I think that institutional investors are correctly saying, just because the 10-year treasury is at 2, please don't talk to me about single-digit returns being attractive. I think they're right. So we've shown ourselves to be disciplined in the past and not lean in too hard when deals don't make sense. We will continue to do that. And mid-teens net return we think is achievable. The deals that we've announced over the past year will meet those goals, if not exceed it. Our institutional investors seem to be embracing that, and it provides a good diversification for those investors looking for vertically integrated focused companies with a commitment to buying assets, fixing them up and then liquidating them.

Ken, how much time are you spending on buying retailers' real estate or buying retailers for the real estate? It certainly has gotten probably a little bit more airplay given what some of the retailers are doing with the real estate and certainly some of the activism that's going on?

Yes. We've been buying the real estate underneath broken retailers on purpose or by accident for as long as we've been in the shopping center business, because inevitably if you wait a couple of years, some of your retailers brake on you. So the initial purchase of real estate whether it was anchored by Caldor, Ames or far more Grand Unions, would fall into that category. And then there was that window of time where through our RCP investments we were buying both the real estate and the OPCO or participating in that. And that was a relatively finite window in time, and thankfully our investments have already returned north of 2x on our equity. Thankfully that was profitable, and we don't need opportunities during that window. What you are seeing us do now and if you think about some of the more recent transactions, we are back to buying the real estate underneath broken retailers. So we've announced purchases where Shaw's was the anchor and we know with conviction that if they were to depart, it would be a very accretive event for us. We did two deals that had A&Ps where we quickly replaced them with ShopRite supermarkets. And there is a nice arbitrage there. And then in our Lincoln Park Centre deal, for instance, right across from a brand new Apple store. We bought a center street retail, but that was anchored by Borders Books. I think it's in the fall more into those categories, we were not finding the real estate from Borders per se, but the fact that there is retailer volatility, as you just mentioned, creates an opportunity for us maybe on a portfolio basis, certainly on a one-off basis.

Your next question comes from the line of Christy McElroy with UBS.

Just following up on some of the Fund questions, regarding your efforts to opportunistically monetize some of the Fund assets that stabilized, are any of the ones that you named being actively marketed and ultimately what kind of IRRs are you expecting on the sale of some of these assets?

Let me dance around that a little bit. We are beginning to entertain various levels of conversation with a wide array of those assets, and I think it would be fair to assume that in one form or another we will be marketing or monetizing all of the assets that I mentioned. Remember, Christy, our Fund model is buy something, fix it up and sell it. In terms of the IRRs, I'm not going to discuss those right now. What I will say is the cap rate compression for these kind of high-quality urban assets whether they're street retail like in Westport, Connecticut, or urban more like Fordham Road in the Bronx or Canarsie, Brooklyn, is that cap rates have to the best of our knowledge pushed well through 6%. And so it should be a good profitable execution depending on when and how we do it. Exactly when and how we do it, we'll have to see. But as one of my favorite real estate executives recently wrote in his letter to shareholders, everything is on the table.

And just with regards to the storage portfolio, is this something that you would look to sell as a complete portfolio? And did the recent sale of Storage Deluxe portfolio make you a little bit more optimistic about the kind of pricing that you could potentially maybe a little bit more willing to monetize that asset?

Sure. It was I think a win-win transaction where the folks at CubeSmart seem to have planted a very powerful flag in a market, New York, that's just so hard to gain any level of scale. So I think a very smart move from their point of view. And then as you point out pricing, when you look at per square foot relative to our basis, certainly made us feel good. But we don't get to collect anything from the sale of Storage Deluxe. We get to collect when we monetize Storage Post. And I'm very open minded to how we execute that. I don't really care other than our sole goal is to maximize our stakeholders' investments. And so I think there's a bunch of different choices and any of them could work very well for us.

At Lincoln Road in Miami, I'm wondering if any progress has been made on that portfolio, since we were there last about 6 months ago?

Yes. Nothing we're going to announce just yet. But the first thing is probably more so that almost anywhere else in our portfolio tenant demand and thus market rents, where new tenants are executing leases is heating up very nicely. So even with respect to some of our existing tenancies that you saw there, the opportunity to get back some of those spaces and re-tenant them profitably is looking surprisingly attractive. Then there were 2 effective boxes or more significant leasing opportunities and the team is making a lot of progress on that. But I would caution you that the longer-term, those big leases are multiple quarters away, our goal was not, our pricing was not, and we don't need to see that happen overnight.

And then just lastly, both of you I think talked about the 3.5% to 4% of additional occupancy starting to impact the numbers in the second half. Can you sort of walk us to how the progression of occupancy should look like through the year end and where you expect to end the year?

Sure. So if you look at our current occupancy now, which we talked about, you add another give or take 300 basis points, gets you to the 94%. And that will be in place and open and paying rent by yearend. And then for the remaining balance of the A&P space that Ken, spoke about that is not yet executed at least. That's another 90 basis points. So upon that being signed and then occupied, that gets us closer to 95%.

And is that sort of your target for year end and does it take into account any expectations for store closing?

Well, 94% is the yearend target. That additional 90 basis point, it might be later year end, but could very easily be in early 2013. So I think it's probably more likely 94% at year end. In terms of other movement, there really is nothing else significant on the rate our screen plus or minus. Obviously, as things develop we'll keep you posted.

Your next question comes from the line of Paul Adornato with BMO Capital Markets.

Just as a follow-up question. You talked about maximizing the return on that long list of assets that are ready for harvest. I was wondering if you could also talk about, how that goal would play into the opportunities for new acquisitions and how you're going to balance the timing of dispositions versus acquisitions?

So I don't think, Paul, from a timing perspective we're going to be overly concerned about, which quarter, which hits. Our view is we have plenty of capital. When we see good opportunities, we should do them. And when we don't see good opportunities, then we should remember, it was just a few years ago that a lot of people were looking their wounds from having pursued opportunities that were just mediocre. So the acquisition side isn't really focused on when the monetization occurs. On the monetization side, what we're seeing is a very strong absolute demand in terms of returns for low cap rates stabilized assets, and the timing is starting to feel good. So if we're seeing assets trade sub-6 cap, we can sit there and say, well that's 400 basis points over, or 350 over, or 300 over the 10-year treasury or look at it relative to triple these. And we may try to guess exactly when the maximum value is, we're not that good. So to the extent that we're able to sell these assets over the next year or 2, at pricing that the market seems to be at, we should do it. And no one has ever gone broke selling assets profitably.

And then with respect to the A&P or the potential A&P expansion at Crossroads, what can you perhaps run through some potential economics or order of magnitude? And would the expansion currently entitled or is that a whole separate process?

I don't want to get in too much detail. It is not going to be a significantly fee change in terms of the amount of square footage there. And we wouldn't do it, if it's going to be a complicated or anything like an entitlement process. If we can do this expeditiously, we'd be really excited about the addition. And in West Chester, it's hard for tenants to get decent sized boxes. So it's certainly worth our effort. I think we'll know a lot in the next 30 days. But I just wanted to give everybody a heads up that while we love to deliver on a quarterly basis. When we see opportunities like this, even if it causes a bit of a delay, it's in your interest and thus ours to pursue this.

Your next question comes from the line of Sheila McGrath with KBW.

Ken, now that the storage occupancy is up substantially and Fordham Road is now at 100% occupancy. I was wondering, if you could give us some detail on how the NOI or rent levels look versus your original underwriting? And also how's the timing to stabilize looked versus your original expectations?

Yes. So the good news is, we got the rents that we originally expected. We spent $1 that we originally expected. The bad news is that the financial crisis when it hit, it froze a wide variety of these assets, almost all of them. So thankfully we've earned all the leverage. Thankfully we're able to be patient. But, whether it was Westport Connecticut, we got the rents that we expected. We just got them a year or 2 later than we had originally hoped. And in a low interest rate environment below leverage, the impact of that is not nearly as painful as in a higher interest rate environment or if we had over levered ourselves. So we'll get there, thankfully in terms of the NOI. We just had to talk about them for far too many quarters. And it will be fun to start monetizing.

And the cap rates right now are much lower than you originally expected?

I can't count this low, but I also didn't expect a 4% borrowing cost and I didn't expect all of this to play out in terms of the huge and I think continuing differentiation from high quality, high barrier to entry, what's perceived as stable and well insulated against some of the issues of e-commerce type of retail. And the more generics stuff that's still having a harder time executing.

And after all the recent acquisitions which a lot of have included street retail, I was wondering if you have an estimate of how the portfolio breaks down kind of on a product forma basis, the street retail urban versus the suburban strip.

In general, when we think about our portfolio overall, not just our core but the roughly $2.5 billion of assets to that we are responsible for owning operating through the funds and/or the core. Roughly 40% fall into the urban or street retail component. The balance, the 60% that is suburban. It used to be equally split 50-50 but as we are slowly deemphasizing some of the supermarket anchor, it's now slightly weighted more towards our discounter side. But the first piece is the urban street being 40%. Our ability to grow that and our expectation is that, that probably grows. We like and we're open minded to all three different types, urban street as well as on the suburban side both supermarket anchored and discounter. It's just that we're seeing the better at this juncture risk-adjusted returns.

And where if you had to roughly estimate cap rate differential on the different asset types, what you're going to rule of thumb be?

We are stabilizing. We're 98% leased, great asset in Bloomfield Hills, Michigan. So that's a great suburban asset. But I bet that trades are on the use of broad range in a low of a 7-cap and a high of an 8-cap. And if it's at the lower end, it's over the past 6 or 12 months than it is coming to the lower end of that range because a year ago, the market was telling it was a north of an 8. On the street side, we're seeing trades done on a relatively consistent basis sub-6 and we saw fairly sizable trade done up in Boston at the sub-5 cap range. So that's kind of a spread. The real issue is and we're fond of Bloomfield Hills for instance, that asset has held up relatively well considering what's gone on there. And the issue is over the next decade, what's your perception of growth for high quality suburban retail versus some of the street and that's what's really causing this relatively wide gap to date. Then for secondary, tertiary assets, not Bloomfield Hills but other properties elsewhere in Michigan. I don't they are trading the cap rates. I think they're trading per pound and I think those are tough in many instances, value traps not just in Michigan but elsewhere in the country, it's not clear where NOI will stabilize over the next 5 or 10 years as we work through some of the issues. So I wouldn't consider ourselves a expert on that kind of real estate but you got to be prepared to buy it by the pound and you got to be very careful.

Your next question comes from the line of Rich Moore with RBC Capital Markets.

Ken, on the acquisition front, how would you characterize that? Is that accelerating or is it starting to soften a bit?

When you say accelerate soften, you mean in terms of our deal flow?

Yes, what you're seeing in the pipeline, what you guys are kind of reviewing at this point?

There is a few interesting cross wins going on. For well marketed, unlevered, high, high-quality assets, Rich, we've never been particularly good at buying those unless there is a major financial crises like when we picked Cortlandt Manor and the competition for that stuff is fierce, always has been. And I would expect that to remain fierce. For assets that have a twist to them. Think of Lincoln Park Center, great location, but vacant Border's Books where we are doing a restructuring, where debt has come due or is about to mature or where there is recourse. What we are seeing, if anything is in increased catalyst if you will. As financial institution, in today's Wall Street journal for instance, you're seeing more and more of the European lenders shed their debt, when that debt sheds and end ups into the hands of opportunity funds or otherwise, that's a pretty big accelerant. And the existing borrowers highly motivated to transact quickly, they need someone who can quickly in a matter of days wrap their head around the moving pieces at real estate level and with certainty, meaning money in place, execute. So we're actually seeing that deal flow increase, which we like. So all in all, no one quarter even remains the same as the previous, things are changing. We think that there will be more and more demand for re-equitization, deleveraging, solving peoples' problems as their debt comes due and it is not kicked down the road. But we also expect fierce, fierce competition for high quality, stabilized well marketed deals and you probably won't see us be the winning bidder of those.

So say again, I think you mentioned this but how much have you left to deploy in Fund III?

We said about $50 million of powder. So it's more than enough to keep us active. But not so much that I worry about it burning a hole in our pocket.

Would that just go into Fund IV as well?

Yes, directly or indirectly, exactly, Rich. So it is not a sin, although some institutions thought it was an they probably are not going to get re-upped that easily. It's not a sin to not spend every last dollar. It is a sin to put money to work irresponsibly, we won't do that.

Then on The Avenue, that's only about 1% as I look your review of your annualized base rent. Did they give any indication on what they're thinking, like how long the Chapter 7 process might take or what percentage of the stores they might think of closing, are they to that point, yet?

No, but first of all, it's Chapter 11 versus 7, so their intention is to emerge from this. Chapter seven just means full liquidation. And it's not significant but Jon always needs something to complain about. And what they said, is they do want to emerge and they recognize that in order to emerge they're going to have to, well try to get lower rents where they can, we're not inclined to do that. And our rents are at market. And I think as Jon pointed, out the higher res are in the New York market, but that would make sense. So we would expect hear from them in I think their in day 20 of that 90-day process. So we'll hear from them the next month or 2. And we wish them the best of luck, but we never buy real estate counting on our retailers. We buy the locations in that way the retailers don't make it we usually end up, okay.

And then on the G&A if you take out, I assume, Jon the acquisition expenses are in G&A for the quarter. If you take those out, is the run rate for the first quarter a good run rate for future two quarters.

Our guidance is $23.5 million and $24 million for the year and that's a good number to use in terms of G&A for the year. So that's what I would look at.

Your next question comes from the line of Cedrik Lachance with Green Street Advisors.

Jon, earlier you talked about, you desire to buy assets or/and strips some of the food group asset that will outperform the sector. And what you've been doing obviously of late is primarily focusing on street-retail. And what it's resulted in I think is that on the gross re-anchored assignment is becoming less and less important in your portfolio. What is now from a big picture perspective, what is less appealing now in the gross re-anchored segment versus what was appealing previously in that segment?

And I wouldn't read too much into any single move we make, because as a small company, it can often be more anecdotal than not. We very much like the supermarket anchored, shopping center business. We are cautious about the potential misperception in the marketplace, that our supermarket anchored centers are immune to some of the changes both cyclical and secular that are occurring in terms of e-commerce et cetera. Because how our supermarkets are selling today and how the customer is shopping at them is shifting, so that customer is now having several different choices in terms of where they do their more traditional food shopping. So their supermarkets are competing with the Targets and Wall Marts of the world. They're competing with the cost goes in Costcos and BJs of the world, Whole Foods, Trader Joe's and then on the other end diapers.com et cetera. So it's not that they are immune, I think it's over simplified and I think the market perhaps is pricing perfection on that side. But otherwise, we're happy to buy and hopefully will continue to buy supermarket anchored centers when they are really well located, when the tenant demand is strong, when the shops space is right sized, so that we're comfortable as the evolution in retailing occurs, that will be able to continue to keep the shops space leased as well.

And if we think about the power center segments with somewhat of the same question there, what's the level of interest that you have in power centers versus gross re-anchored and street-retail?

It's funny, a unfortunate series of articles a few weeks ago regarding one of the big-box electronics guys, all of a sudden it seems the capital market wakes up and says, my gosh, Amazon all of a sudden exists. Amazon's been around for a long time, intermediating a bunch of these box retailers. And we're still in the early stage of that intermediation process. Those retailers who are not providing a good shopping experience and only are offering best pricing are in what I think we're reading more and more about is that go-broke-last mentality and that is going to be a tough business. So if we're going to be in that business, they'd better be great locations so that as some of these retailers shrink or go away, is that they're strong enough demand in general. We think that there will be significant opportunities in that space. So I won't reject it. It's just the pricing and the right assets are going to be have to be there. And I think we'll have to be a little patient as we see how that's all fix out.

Your next question comes from the line of Michael Mueller with JPMorgan.

Jon, I'm just wondering, can we walk through the buildup to that $0.30, because its looks like you start off it around and strip out the acquisition cost this quarter, say it around $0.22, the re-tenanting being it looks like it probably has another $0.02 to $0.03 a quarter, you bring fund for online, that's maybe another $0.02 a quarter that get you closer to it but not quite there, what's the difference?

Yes, the balances is acquisitions, current new acquisitions.

So that current, you mean, closing 2011 or?

2012.

And 2011 also, while once you close that that will add incrementally as well, but it's that plus 2012 acquisitions.

And then can you just run over again what's the target for, I guess the core and as well as for the funds?

Core is $100 million to $200 million over the course of the year. Then in the fund it's a $150 million to $300 million over the course of the year.

And then I think, Ken, you were talking about the Fund II assets, Fund III assets being either monetized or marketed, what's the difference between being monetized or marketed, I was under the impression that they were just to be sold?

Yes. It's all different ways of saying whether we market for sale or someone comes in preemptively. We just need to make sure we get that pricing. And so monetization could include a wide variety of specific ways. But I think you would expect to see many of these assets being marketed.

And then last question, I think you use the ATM a little bit in a first quarter. Can you talk a little bit about how you view equity into the capital equation for 2012?

So our current leverage is about 30% to total market cap. So when we look at acquisitions and the right amount of leverage versus equity, we look to maintain that about that same amount of balance. So we will match fund as we close on these acquisitions as we make acquisitions. And we'll use the ATM more or less to keep that proportion.

And at this time I'd like to turn the call back over Kan Bernstein for closing remarks.

I'd like to thank everybody for their time. I am sure you all on to your next call. We'll speak to you again next quarter.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect and have a great day.