Brixmor Property Group Inc. (BRX) Q1 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the First Quarter 2015 Earnings Conference Call. All participants will be a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Stacy Slater. Please go ahead.

Thank you operator, and thank you all for joining Brixmor's first quarter conference call. With me on the call today are Michael Carroll, Chief Executive Officer and Michael Pappagallo, President and Chief Financial Officer, as well as other key executives who will be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures. Further information regarding our use of these measures and reconciliations of these measures through our GAAP results are available in the earnings release and supplemental disclosure on the Investor Relations portion of our Web site. At this time, it's my pleasure to introduce Mike Carroll.

Thank you, Stacy and good morning. Our results this quarter reflect the ongoing progress of our raising the bar efforts as we reposition our assets with best in class anchor retailers to drive occupancy, rents, cash flow and ultimately NAV. Driven by the over 150 anchor openings in the last 24 months, we are seeing significant momentum in our small shop leasing and we are winning on rate. Our rental rate on new leases signed was 27% above our in place rents. And we increased small shop occupancy a 130 basis points year-over-year and 60 basis points sequentially. These gains were achieved in the same quarter as the expected rejection of 36 RadioShack leases aggregating 85,000 square feet. Leasing in this category, during the quarter with a balanced mix of national, regional and local retailers. These local retailers are again playing an increasing role in the service and restaurant categories. They are tenants with established businesses, such as bar and yoga studios or specialty gyms like Orangetheory Fitness or with expanding restaurant chain as such Pacific Fish Grill. Our location will be their fourth for Pacific Grill with the original opening in 2008. Fruitful Yield is also new to our portfolio in the Chicago suburbs. They are a health food store with 12 locations in Chicago land founded in 1962. The characteristics of these small shops illustrate the increasing caliber of retailer we're achieving as raising the bar against momentum. On the QSR front, we signed our first Starbucks modular drive through and walkup shop in California. This is a pilot program for them, and with no leather chairs or free power outlets, in fact there's no space for customers at all. Starbucks pay's a significant ground rent for the space and it is great example of creative densification. We are in discussions with Starbucks regarding additional occasions. We also executed our first Buffalo Wild Wings deal since 2011 and we have more in the pipeline as they continue to expand with 90 locations planned this year. Last quarter we introduced our direct to franchisee program by targeting the franchisees directly along with their corporate real estate teams, we created another avenue for growth with the security of corporate credit. During the quarter by proactively reaching out to existing franchise owners in our portfolio, we signed six small shop leases including five brand name wireless stores and with the fast growing sandwich concept called Quickwich. Overall occupancy trended down slightly, as we anticipated during the fourth quarter conference call. Primarily as the result of proactive recapture of three of the fourth Kmart boxes effectuating this quarter for 265,000 square feet. The aggregate income committed in rent for the Kmart boxes recaptured is about $2 million with 80,000 square feet of space still to be leased. We're more than happy to trade short term occupancy loss for long-term value creation. In addition, consistent with our raising the bar efforts, we've been focused on a disciplined reduction and exposure to certain merchandise categories including new office supply space. During the quarter, we did not pursue the renewal or option exercise of three office supply stores averaging $8.25 per square foot, impacting our lease GLA by 60,000 square feet. We believe the market rent on these locations is at least 40% higher than the current rate. The importance of our national platform in providing strategic access to our retailers is again demonstrated by the key anchor leases executed this quarter. For example, in Cincinnati we executed lease with Burlington Stores for their first small format store. This new prototype at 45,000 square feet is an important growth vehicle for them. We also execute five Party City leases, bringing our total new deal count with Party City to seven in just the past six months. As well, two new leases with Ulta during the period. We're also seeing the benefits in the small shops space. Habit Burger has been rapidly expanding in our portfolio over the past 24 months and this quarter, we executed two additional leases with them, one in California and one in New Jersey. Importantly, by leveraging our pioneering relationship with them, we're playing an important role in their expansion from the West Coast to the East Coast. Piada Italian Street Foot is another rapidly expanding fast casual chain started by the founder of the Bravo Brio Restaurant Group. Customer select fresh ingredients along in assembly lines similar to Chipotle. After signing a lease in Dallas this quarter with another underway, we're working with them now to enter the Florida market. An underappreciated benefit of our portfolio breadth and the associated diversification is that we have created a grocer anchored portfolio populated with a diverse mix of market leading grocers, many of which are strong regional operators like HEB, Giant Eagle, ShopRite, and DeMoulas Market Basket. These grocers are printing sales performance exceeding or on par with our peers for the across more diversified markets with a lower credit concentration and risk. In fact, our top 20 tenant exposure is among the lowest in the sector, a 27% of ABR. When the rent growth for the quarter was a very strong 13.7%, as our teams were able to push rate in the backdrop of our improved merchandise mix and strong retailer demand. This is our third consecutive quarter of blended spreads approaching 14% and we're approaching almost two years of blended spreads above 11%. In addition to having realized two years of new lease spreads over 20%. New lease rates increased to $15.45 versus last year's average of $13.45 and are indicative of the tremendous mark-to-market opportunity inherent in our portfolio within average ABR per square foot of $12.19. This is a wow opportunity and unlike others in the sector, all upside with minimal downside risk. As I've said before, this is a long run way given the structure of our expiry schedule in the maturity of our assets. As a result of these ongoing gains and rents, we delivered same property NOI growth of 3.4%, of note, over 80% of the change in same property NOI was from rent growth, indicative of our ability to grow cash flow while at the same time repositioning our portfolio for the long-term. And while our same property NOI growth, maybe similar to our peers on a quarter-by-quarter basis. We are also laser focused on producing outsides top line revenue and cash adjusted EBITDA growth with corresponding peer leading FFO growth expectations. Moving forward, with very little anchor space available on our portfolio, our raising the bar effort is a critical mechanism to meet the demands of our retailers in today's supply constraint environment. We continue to believe that a meaningful change in new development is at least five years away. Against that backdrop, we continue to allocate capital and accelerate our anchor repositioning program. During the quarter, we added an additional 12 projects to an anchor space repositioning and outparcel development pipeline, a big number in just one quarter. We now have 32 active projects for an aggregate investments of $107 million. There is a big runway ahead of us with many opportunities for value creation and we're accomplishing it the best way by leasing and operating our portfolio. We also welcome the new Director this month, Tad Dickson. Tad is the former CEO of Harris Teeter Supermarkets, where he played an instrumental role in their real estate strategy which was very similar to the approach that Brixmor takes. He also served on the board of the pantry until it's acquisition earlier this year. We look forward to the benefit of his grocery industry experience. As our board continues to evolve, we will seek retailer knowledge and expertise to keep pace with an ever changing landscape. I’ll now turn the call over to Mike to review our earnings results, balance sheet initiatives and updates regarding our 2015 outlook.

Thanks Mike, good morning. We were pleased with the underlying strength of our business activity this quarter which translated into solid operating metrics in earnings and those results are easily track with the simple math of higher NOI and lower interest expense generating new improved earnings, while the remerchandising of centers with higher caliber retailers are enhancing the valuation of our property. Same property NOI grew nicely at 3.4% right down the middle of our full year guidance range and reflective of strong rent spread and a slight occupancy uplift versus a year ago despite the elevated downtime from our repositioning activity. As in prior quarters much of the increase was driven from top line growth, but we also saw improvement in expense recoveries and better credit quality. This growth rate was relatively consistent across different cuts of the portfolio, be it grocery-anchored versus non-grocery neighborhood versus community or top 50 MSA versus non-top 50. This speaks to our progress across a broad opportunity set. While the transformation of the former K-mart boxes in Maple, Syracuse, New York and St. Louis who are the largest contributor to the downtime drag on a still very solid NOI growth rate. There are other repositioned boxes that will come online in late 2015 or 2016 including the Burlington stores deal that Mike mentioned earlier and in new LA Fitness in Connecticut as well as the activity with the former office supply space. On a capital structure front, the improvement in interest expense reflects the impact of $1.2 billion of pre-financing activity since the beginning of 2014, driving down our average debt cost by 55 basis points to 4.37% as well as an $81 million reduction in the debt stack. We still have more opportunity as we go through the year, as we refinance the remaining $494 million of maturity that carry an average interest rate of 5.4%. We will continue to pursue unsecured debt structures to effectuate the refinancing consistent with our program to simplify the capital structure and provide maximum flexibility to our property level strategies. Some investors have asked about the large maturity tower in 2018 of $1.5 billion, recognized that this is a term loan that is prepayable in whole or in part without penalty and interest rates swap fixes the instrument through mid 2016. Rest assured that we will address and balance out this maturity well before 2018. The combination of the quarters' cash in a NOI growth and lower interest expense added about $0.04 per share of increased earnings representing about a 9% jump from comparable 2014 results. However, the headline FFO was held back somewhat by a non-recurring non-cash equity comp charge. The $9.9 million charge taken in the quarter accounts for the previously unrecognized equity compensation expense related to the awards granted to management prior to the IPO. A portion of the non-cash expense was recorded at the IPO, another portion was being amortized over time while the final piece could not and would not be recognized until Blackstone achieved its minimum performance hurdle on the Brixmor investment. After the last equity offering in Greenshoe, Blackstone confirmed that the minimum hurdles were met and as a result we accelerated the full remaining charge in a single period as required under the accounting rules. So let me be clear this was a non-cash charge that has no impact on our operating cash flow. As a result on a go forward basis there will be no further expense related to these pre-IPO award hitting our financial state. As a consequence of that latest sale, Blackstone interests are now 42% on an economic basis and 41% on a voting basis. The two offerings to date in calendar 2015 have reduced their economic stake by over 14% and although, the quarterly numbers were impacted to a degree by the comp charge, we remain comfortable with the previously issued full year FFO guidance of $1.94 to $2 per share on a NAREIT defined basis. Further update of the guidance during the year will of course account for events and transactions that have occurred but won't consider any potential acquisition, disposition, or additional cost arising from any further Blackstone stock sale activity. With that, I'll now turn the call over to questions.

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Christy McElroy from Citi. Please go ahead.

Hi, good morning everyone. In regards to Blackstone reaching this 15% IRR hurdle that triggered the comp charge, do you see any potential implications in that for Blackstone for a strategic standpoint, so it does change anything for them?

I don't think it changes anything for them, I think they're -- through what they've articulated is they are going to continue to be responsible stewards here and will continue to monetize overtime, I don't think it causes any real acceleration in anything that they do. Also saying just on a retrospective basis here is, Blackstone has been a really good partner for us, they provide a lot of capital, they help to see lever the business. But I'll also say that Blackstone they acquired a team and a business plan here that really helped us be a successful investment for them. NOI has been positive in this company every quarter since they acquired 15 straight quarters. The last 12 quarters have been 3.4% or better. And so I'm really proud of that, I'm proud of the team here we have a great team. They’ve executed well and I noticed they'll continue to execute well for our shareholders because we have tremendous upside here and a great plan and a great team of operators to execute it. So just on a retrospective basis we feel very good about it.

Okay, and then Mike you also talked a lot about your efforts to recapture and re-tenant anchor boxes. Do you see it being able to recapture additional Kmart boxes in the near future? And you talked about the office suppliers, but are there any other retailers that you are going after aggressively turning your boxes back more than others?

Well in some instances, like office supply is retailer specific and Kmart can be retailer specific. But broadening out beyond that, it's really where we see space that's being underutilized. We own grocery stake where we think the location is a great location and we don't think we have a right grocery operator in there and then we would like to make that change happen at some point and we got a couple of those things with the Baron's market opening in California and we have another Fresh Time deal that we are working on in Minneapolis. So it's a mix of different thing. I will say there continues to be -- I had a conversation with Kmart last week, there continues to be a willingness to engage there and do something with us and we're actively trying to bring things to fruition there but they need to make sense to us on an economic basis. They also need to fit with capital plans of retailers who are looking at those sites. So we're very focused on minimizing downtime and where we thought it was, if I think about the office supply spaces this quarter we thought, it was very compelling to take those back and it was bite size enough that we could do it and we felt good about where we were with potential tenets. Although we don't have anything locked down yet completely, but we felt like that we were in a right space But that's a different story between taking down a 20,000 square foot store and taking down a 100,000 square foot store, so we are just trying to balance that all out and try to be consistent in our approach.

Our next question comes from Jeff Donnelly of Wells Fargo Securities, please go ahead.

Good morning guys, a few questions. I guess Michael on the re-anchoring projects, you've attacked a lot of those and they've been very helpful to you guys generating the NOI growth in lease, gradually seen in the past few years. Going forward do you expect to able to maintain that sort of mid-teen spread and seems NOI growth pays given that -- I guess giving a rollover schedule and maybe a slightly higher bar in expanding anchoring?

We do, look I mean we've given the guidance this year, I think one of those few who actually gave guidance on spreads that we think we're going to be mid teens in that 12% to 17% range. So I think we can continue with, and then look I think it's one of the things that we feel most confident about our business. We look at our expiry schedule and expiries for the balance of '15 are under $11 a square foot, '16 they're $11.26 a square foot. I think huge market-to-market opportunities and if anything I could be expecting people on your side of business to be pushing us for a stronger spreads, so we feel good about it, we think the business has this great runway because of just the maturity of the assets and just embedded mark-to-market opportunity, I think it's unlike any other.

We can push it harder if you want. I guess just a couple of follow-up's, I mean on the small shop side, what's your outlook for small shop occupancy growth. I mean I think that's been a big part of your story, just curious what you’re outlook is there?

Jeff, this is Brian, it's definitely is part of our story and it's direct result of what we've been doing in the anchor repositioning, we've had a simple thesis that basically said when we put better operators in, they're going to drive more sales, more foot traffic and it's going to lead to better follow on shop leasing and that was a direct result of it. Results this quarter were a direct result of that and further in the last two years when we put a new anchor in, small shop occupancy has increased over 400 basis points. So it's something that we think there's a lot of runway for us, we continue to bring these projects online. At the right rates too, I mean that's important to us as to make sure we're getting this at the right rate and we're doing that and team is doing a really good job. Winning on rate as our mantra here and we've got to do that. They're doing a great job doing it.

Has there been change in the nature of the tenancy that you are signing or there's national or local on small shop front?

It's similar to last quarter, Jeff, it's till about 60-40 for us in terms of national and regional versus local tenants, but we had seen a pickup in strong local operators looking to expand. Mike mentioned Pacific Fish Grill in the West Coast. A number of our restaurant tenants were similar to that strong restaurant operator's that are finally seeing that it's time to may be open a second or third location. Our guys were out there canvassing the market and aware of those opportunities. We're optimistic in terms of local retailers but overall we are still pursuing national regions where we can -- they typically have stronger brands, better credit profiles, so we think it's a good mix.

And just one last one on yield to floor. Mike I saw that Brixmor was hiring some folks, I guess on the acquisitions and dispositions team, I'm not sure if that's new people or replacing existing, but I was curious that might mean that you are looking to turn up the volume a little bit on capital recycling overall or on a particular geography?

Look we have added people, I mean effectively we're building our team backup to support doing some external growth and I think and it's more capital recycling, I think maybe misspeaking a little bit on external growth, but it's more capital recycling. So I think you'll see us continue to look to prune or just normal asset managers as we achieve our targets on different assets and buy a few things here or there.

Thank you. Our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.

Hi, good morning everyone, I just want to go back to the same store performance for the quarter which right at the mid-point of guidance, but I think expectations were for it to come in a little bit lower on the first half and certainly in the first quarter you think with the seasonality that it might be lower. So just curious, one if there were some out forms in the quarter; was that primarily driven by better leasing volumes and therefore better occupancy rates? Or if there was something else that was driving our performance in and you know all has been the same, obviously it's early in the year, does this put you ahead of plan in terms of the full year outlook for same store?

Vince, Mike P. I would say end of first quarter, I think what was favorable is the amount of small shop leasing that did happen. So on the margin it was a better than expected performance, that said the repositioning effects or the downtime affect to repositioning, well really happened in the second and third quarter, most of the major anchors their leases expire at the end of January, post holiday time frame. So we did get some incremental rents from those tenants that were leaving. So there will be most likely more of a dip in the second and third quarter and then the reacceleration towards the fourth quarter, as many of these new tenants in these repositioned boxes come online in advance of the 2015 holiday season. Exactly where those numbers are going to be, that's why we have the range because there's lot of things that could influence things on 10 or 20 basis point level.

Okay. And just looking at the rent spreads, mostly less than 10,000 versus greater than 10,000. This quarter the less than 10,000 actually was better than the large tenants and that hasn’t been the case for a while. Can you fly a little bit of color on what you're seeing there? Obviously the demand is good, but anything in particular that cause that rent spread to reverse between the large and small size deals?

Vince, this is Brian. I think it has to do with the quality and caliber of tendency that Mike mentioned, when you look at Buffalo Wild Wings, when you look at to have a deal, these are strong operators that perform very well, they ability to pay higher rents. So I think it was a matter of the type and qualities of tenants that we put in this year.

Okay, and then the larger tenant seem like -- the spread was little bit lower than it's been, just curious if there was anything that's pointing that down this quarter relative to past quarters?

I don’t think so. I think last quarter there was -- we had a number of the K-mart leases in advance to the being in, so I don’t think it was anything other than just the comp of what was rolling off versus what was coming in.

Got it, okay and I think I probably know the answer to this, but just curious if you could shed some color on what you're seeing in the Houston market for you guys? Any notable impacts from either lower gasoline prices or just fall off from the oil and gas sector?

You know I'll say one thing. Just on a macro we have not seen any real kick from consumer -- from any discussions we have had with retailers just not feeling that added stimulus that you would think would be there from lower gas prices, so that’s been a delayed phenomenon, it continues be a delayed phenomenon. As far as Texas, it's a little bit of same story if I looked today our first quarter in Houston, our leases spreads on abundant basis they were 14%, our same property NOI was above 6. And Texas in total it was just below 5%, same property NOI growth, so we are not seeing anything yet but I think retail -- it's going to need to be something that's prolonged. I think for retail, I mean look at our space, its necessity driven retail, it's contractual leases, we're in the grocery space. So I would make case that our properties are going to see it last if you will because if people are trade down to eating at home as oppose to eating out in different and if you think about that piece, so necessity and value in our centers is something that would play well into a little bit if a downturn of that market. But we're watching it but as we see today we don't see anything.

And just one last one from me. Just on the acquisition question, I know in the past you've talked about just doing smaller size deals nothing major but just curious if you have any thoughts on the Morris portfolio that's out there, I think that's more of a power center portfolio. But just curious if you could share your thoughts on that?

Dean speak up, it's the Prologis, this was part of Prologis's acquisition and it was retailed that's in there that's out in the market primarily Northeast and I think little bit of Florida, but its power center assets, Dean has got probably more color there.

We're looking at it, and I think it's a mix portfolio, I think it does include a lot of power which is not exactly what we're looking for but we're certainly going to give it a good look and it's just coming out in the market now.

Our next question comes from Todd Thomas of KeyBanc Capital Markets.

Sounds like a lot of the growth is in the food category on the small shop side and you mentioned a handful of concepts and retailers; this is consistent with what we've heard for some time and from many landlords. I am just curious how much restaurant and food exposure is too much for a community center. Are you concerned at all with this segment of the market growing too quickly and how deep is the market here for additional growth in this category?

Todd this is Brian, I would say like there is a lot of food retailers that are spending but there is also a tonne of other uses in personal services category in the health and fitness category, we did deals with Bar 3 with Orange Theory fitness, core power yoga is coming to the East Coast. So we think that it's more than food, obviously there are lot of strong restaurant concepts and we look at our centers we see where we can add them, we see where this could be an impact on parking but for the most part we don't see that run way slowing down at all and we were happy with the fact that there is a lot of other uses out there, just besides restaurant.

I think one another thing, Todd I think one another things that's driving why there is so much food, there is a major shift going on in the way people think about the food they're buying and what they're eating. You see it in the grocery space with the movement towards fresh, local natural organic, and you're seeing it in the restaurant space where it's fresh ingredients made the order and there is an emerging class of restaurants coming up to take advantage of that at the expense of McDonalds and Burger King and Taco Bell and these other guys who are the old way of doing things. So there is this mind set shift and we're uniquely kind of positioned to plan, because these are not all three standing restaurants that have to have drive through, that's not their business like the fast food business. So I think there is a shift going on and that's why it may be seems more elevated than it is, I think it's just a cycle of what we're seeing out there between decline of fast food and the emerging of this made order fast casual concept.

And then when we look at your MSA breakout in the supplement, it seems like it's really the 81 properties outside of the top 100 MSAs at screen below the portfolio average in terms of occupancy base trends and demographics. In the past I know you have commented that you are seeing relative strength in some of your secondary market properties. Is that consistent with the properties outside of the top 100 MSAs? I mean how are they performing from a growth perspective and is there any thoughts to [strengthening] off those properties to some point just given your comments around capital recycling.

Well I think there is opportunities there and we're trying to mine those opportunities, and if I look at our properties that are just in general outside top 150 or top 50 MSAs rather, we're at $11 of in place ADR and we're signing new leases at $18 a foot in those assets. So we've got great growth there and are we wed to those all long-term, the answer would be yes in some cases and no in others. But where we see a $6 or $7 delta on the rents, it's certainly our job to mine that and try to maximize that and really focus on that effort. So we're trying to do that, I think as you see some of things that we sold, we sold something in this quarter we got other things that we think we maximized, say happen to be in smaller markets. But I don't think there is a major, I wouldn't read into a major sizing off. I think the opportunity has been too strong and just look at our spreads in those markets this quarter we're almost 15%, so the opportunity is strong and we're and kind of continue to focus on it.

Thank you. Our next question comes from Ki Bin Kim of SunTrust Robinson Humphrey. Please go ahead.

Just going back to your comments by external growth, you sounded like maybe you're going to recycle capital but I was just curious it would be net acquirer over the long, over to next couple of years, or is it a dollar neutral and maybe FFO dilutive in the short-term?

I think, this year our guidance is to be net zero, I'd say for next year, I would assume similar but we're starting to see some off market opportunities out there at some places where we think we can be effective, so I think, I reserve the right to change but as we sit here today, we generally would consider ourselves to be just mainly in the recycling business.

And just a couple of follow up's here, the G&A adjustment, is that something that we could possibly see again next year, if your stock price goes up a couple of dollars, would there another possible adjustment in the first quarter?

No Ki Bin. That is it in terms of the special one-time adjustments and it represented accumulative and an acceleration of what was going to be recognized over time. Going forward it will be much more normalized G&A levels, particularly as it relates to the existing the current compensation plan will be amortized on a very ratable consistent level.

And just last one from me. Are there any possible potholes in terms of maybe in the [opposite] there's been a lot of M&A activity in your tenant base, haven't seen a whole lot of store closures impact you yet but just curious what are you, if any, are you expecting space to come back in the next year or so?

Look this business there is always potholes in this business. Retail is very dynamic concept come and go, who would have thought Target would completely be out of Canada one year after opening, right? Not many. So I think we continue to monitor the normal watch list of tenants, I think private equity owners of some of these businesses may ultimately spur more store closures and so something like a safe way or Albertson could spur some store closures. But generally its bankruptcies that are going to have material impacts on occupancy. So we would not anticipate non-bankruptcy store closures having big occupancy impacts. Does that answer your question?

Our next question comes from Rich Moore of RBC Capital.

I'm curious you mentioned, you mentioned that you have all these great grocer relationships and I'm curious if any of them are asking you to may be build them a new center, finding a new location where they want you to actually do something ground up for.

We've had a couple of discussions with Kroger about that, yes, there is not many -- one of the things there's been a nice tailwind of our business, there is not been many new grocery developments out there and that really kept new centers in check. I don't think there's an acceleration coming from any of our tenants any time soon, I think there may be some spot opportunity but I don't see at the end material mainly because there's just not a lot of demand to open new stores, there is lot of demand to renovate, remodel, expand; not a lot of net new demand out their Rich.

And then just going back to acquisition for a second. It sounds like you guys have a team and you're pretty actively underwriting potential acquisitions. Is that accurate?

It's Dean, Rich. Yes, I'd said we are looking, and it's just the matter of opportunity in this market and it's tough to find opportunities but we are finding some selective off market opportunities, we've a few things in due diligence but we remain disciplined and selective in the process so we don't see major activity but we expect some activity this year.

And then last thing is the economy has -- it was up and now it seems like it's slowing down again it's in the Target say I guess nobody really knows exactly where things are going to go. What do you guys cheer overall, you gave some good color Mike on some of the different retailers that are opening stores, but in general, I mean are you seeing any kind of slowdown in terms of how these guys are thinking of broad retail communities thinking about a store opening plans?

Well, I think you'll see, you really have to look at the large format of retailers, the large format of retailers are effectively going to track, where retail sales are heading because they are the ones who effectively trade across the macro-environment. And because it's been a soft recovery with taped sales those guys have been, generally all time lows -- I'm talking about the home improvement stores, the Targets, Wal-Mart continues to go down in store openings. The major grocers continue to be kind of flat in store growth and so those are the guys who generally trade off of a bit now -- continues to be -- continue to fine good demand underneath in the junior category where we think the off price guys are taking a lot of business from the department stores and so they continue to ramp a lot of stores and we continue to see whether it would be small shop operators or regional category killers like Bed Bath and Beyond where they've got runway for some of their concepts they're active. So, I think you can -- find good, very good demand that's operator driven underneath but when you look at the macro, the retailer who trade more of the macro basis, they continue to tepid and be focused on their existing stores.

Our next question comes from Ryan Peterson of Sandler O'Neil. Please go ahead.

You talked about doing some more unsecured addition this year, could you give us an idea of what kind of magnitude you're thinking and also what your thoughts are on interest rate hedging whether you think that's worth while in the current environment or whether you just kind of let it play out.

As I mentioned earlier, we have just under $500 million of remaining maturities for the year. So that amount is I think a good estimate to think about another unsecured issuance later in the year. Similarly in 2016 we have roughly a $1 billion of maturity and we would look to I think the unsecured markets on a couple of occasions in 2016 as well. At this point we're not actively considering any sort of hedging product in the market right now.

And then just one more question back to kind of the strong performance in small shop, 70 basis points was really strong gain especially the time of the year, is there anything abnormal about that to seem like really strong for the first quarter?

No, it's simply as a matter that we had and tenants coming online and as we said earlier look at to the record while the anchor repositioning that we have been doing in our guidance of field have been marketing of that. So I think it's a matter of kind of [fruit] coming to bear into lot of this and we expect to continue.

Our next question comes from Jeremy Metz with UBS.

So Mike, you mentioned increasing conversation with mall tenants in some recent comments prior calls including meeting with sacks -- I just wonder if you can you give us an update on what you're seeing there?

We think there is good attraction, there is still as I said, this is kind of test lab for us and we're putting some effort behind it because that's for feedback we're getting from retailers and we're having lots of discussions. And so we think that we're going to continue to build momentum there but it's pretty early days into that, maybe we've got 15 leases signed to date -- something along those lines. So, it's an emerging, kind of emerging business and as we gain attraction here and as our program continues to gain attraction because we've got to re-merchandize with our anchors through a way that is suitable to bring in some of these tenants and so as we sign more leases with also DSW and some of these and TJ Maxx's and Ross and Rack and some of the others of the world, that really helps us create the right merchandising environment to gain further traction there, so it's evolving, this is the probably best way I can describe it.

And then in terms of the selling -- potentially selling out, you give a lot of color on why it may make sense to weigh in some of those that are lagging the rest of the portfolio given some opportunity there. But it also seems like it's a very good time to be a seller given the demand out there. So I'm just wondering how you go about weighing the time and effort to release those, just selling them our rent focusing more intention on the existing portfolio opportunities and recycling that capital into there. And second part to that would be if there was any sort of agreement out there with Blackstone not to show any dilution in their earnings and maybe therefore until they clear out the stock release return or hit some of those return hurdles and therefore maybe with that and happening there is a chance to accelerate some sales here.

Again the last part of your question, there is really no relationships there at all. I should say again Blackstone hitting hurdles doesn’t doesn't have any impact on how we run business so there is nothing in place of that. The upfront it's very specific on an asset level, I'll just say it again. I think, we think whether it be waiting for an anchor to exercise on options to have term to be able to sell it, there's a lot of things that -- it's a good market to sell assets that have the right characteristics, right. You need some in the -- a year or two years away from an anchor expiry you -- we wanted to lease up where we can around it and so there's some structural things that lead to whether it's a good time to monetize something or not. I will assure you we've focused on this very much and we look opportunistically where we think we have the right thing in place to do it but the right metrics and place to sell it but where we see growth that can continue at the rate we've been continuing it at, those are assets we want to hold where we still think we have value. We're in a, we're in a market where it's a good time, well maybe it is time to sell assets, it is also a very good time to own assets. You look at the spreads that we've been claiming here for three quarters running at roughly 14% and continuing to grow revenues every quarter. If we can't replace that it doesn't really make a lot of sense for us to be selling streams that I think the things that we believe will continue to grow.

If I could just add a little, it's that focus in trying to maximize the value of the assets that we're very persistent maybe even stubborn with we are not inclined to win those the portfolio to remove assets and making market that don't fits certain demographic screen, do we see an opportunity to create value and execute our base we will. And then position potentially for distribution to make sense, so it's just seeing these [cycle] part investor community, we are not going to undertake dilutive or short sighted activities when there's a value opportunity.

Our next question comes from Michael Mueller of JPMorgan.

Just a small numbers item here. What triggered the fast straight line adjustment for guidance, the change?

Mike it's Steve Splain, it was really just the write off of any un-amortized lower market rents as we tend to space those, anything at tax retentive leading into early or the end of a lease options that had value, we have to write that off. It's not accounting adjustments that you would write something off or at least that terminates but that is exactly the accounting rules.

And all that incurred in the first quarter or is some still expected for the year?

There is as we look at there is more coming [indiscernible] as we expect.

[Operator Instructions]. We have no more questions; this concludes our question-and-answer session. I would like to turn the conference back over to Michael Carroll for any closing remarks.

Thank you all for joining us this morning, we appreciate it and we look forward to seeing many of you at both ICSC and NAREIT in the coming weeks. Thank you.

The conference is now concluded, thank you for attending today's presentation. You may now disconnect.