Federal Realty Investment Trust (FRT) Q4 2012 Earnings Report, Transcript and Summary

Welcome to the Fourth Quarter 2012 Federal Realty Investment Trust Earnings Conference Call. My name is John and I’ll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Ms. Kristina Lennox. Ms. Lennox, you may begin.

: In addition to our fourth quarter and year end 2012 supplemental disclosure package, we also filed our 10-K yesterday. Both documents provide you with a significant amount of valuable information with respect to the Trust’s 2012 operating and financial performance and both are currently available on our website. Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty’s future operations and its actual performance may differ materially from the information contained in our forward-looking statements and we can give no assurance that these expectations will be attained. Risks inherent in these assumptions include, but are not limited to, future economic conditions including interest rates, real estate conditions and the risks and costs of construction. The earnings release and supplemental reporting package that we issued yesterday, our annual report filed on Form 10-K and our other financial disclosure documents provides a more in-depth discussion of risk factors that may affect our financial conditions and results of operation. And with that, I would like to turn the call over to Don Wood to begin our discussion of our fourth quarter and year end 2012 results. Don?

Thanks, Kristina and good morning, everyone. I couldn’t be more pleased with the way we closed our 2012. Topline revenue growth in the fourth quarter of 10.5%, fourth quarter FFO per share growth of 14%, same-store operating income growth of 5.4%, year-end occupancy of 94.9% versus 94.2% just three months before; 479,000 feet new and renewal leases at 12% higher rents and a great new big California shopping center acquisition with under market rents that closed right before year end. This quarter really puts an acclamation point on one of the company's best years ever and I think that we’re set for another strong one in 2013. Let me spend a few minutes recapping 2012 and then springboard into expectations for 2013. 2012 was the year of the leasing agent. A year ago, if you look at our lease expiration schedule in the 8-K for the year 2012, you will see a chart that suggest that 800,000 feet of space would need to be released in 2012 if every tenant exercise our option and 1.3 million square feet of space would need to be released, if no tenants exercise their options. A reasonable assumption would be that we would actually release somewhere in between those two amounts. But unpredictable things happen in the portfolio of highly desirable space. On a comparable space basis, we got the turnover of 1.8 million square feet of space and we did it at 30% more rent than the former lease. Increased occupancy accounts for about half of that difference, with asset portfolio management would be other half. Things like the relocation and upsizing of H&M at Santana long before the lease was up is a good example. So with the relocation of tenants out of Mid-Pike Plaza before their leases were up and the…

Thanks Don and good morning everyone. And as Don mentioned in his remarks, 2012 was a record setting performance for the Trust in terms of revenue, average rents per foot on signed leases, property operating income, total funds from operations and FFO per share. I'm going to walk through some of the key underlying drivers of this outperformance, cover significant balance sheet items and liquidity and finally provide some details on our increased guidance for 2013. For 2012 for the full year, we recorded total rental revenue of $583 million, a record for the Trust and an increase of $44 million or 8% over 2011. As always, our primary driver of rental growth came from the same center pool which continued to benefit from strong roll over growth and increases in occupancy. We also realized the full year of benefit from redevelopment investments in our portfolio including Lavare, our 108 unit apartment building in Santana which delivered and exceeded our projected yield by 200 basis points. 300 Santana Row, our 80,000 square foot office building which met our pro forma yield and the addition of two pad sites to balance headwind which also met our pro forma development underwriting. The benefit of these investments to our properties was offset from a timing perspective by the loss of rent from Mid-Pike as we took down part of that shopping center to commence the first phase of Pike & Rose. Finally, we also realized increases in other rental income from our same center properties primarily in parking revenue. In addition to the same center growth, the second primary driver of the growth in rental income came from a full year of operations for our acquisition of Montrose Crossing and Plaza El Segundo. As Don mentioned, both outperformed our initial underwriting and demonstrated…

(Operator Instructions) Our first question comes from Jeff Spector from Bank of America. Please go ahead.

My question kind of focuses on the East Bay Bridge acquisition. I noted a lot of the leases you have mentioned are nearly 20 years old, so an opportunity to push rents but is there also an opportunity to (inaudible) tenancy.

There is (inaudible). This is actually one of the first acquisitions that we've seen in a bunch of years where literally every tenant is under market, and then a number of them are doing extremely strong sales, a number of them are not and that's rarely where the opportunity lies. Jeff is on the call from California that’s his deal. So let me hand to Jeff back.

Yeah we've got a couple of tenants in the line up and its pretty obvious if you look at the line up and see who the tenants are, who that might be that we either have an ability to really move their rent when their base terms comes up because their fair market value options or potentially recapture and improve the line up. So we will definitely be looking at doing that. The great thing about this asset and the reason we got so excited about buying it and I should probably mention too its something we've been working on as you might expect for a number of years. We've been talking to tell us first one there owned by prologues and then again obviously after they are acquired by TTG about buying those asset and been on the radar screen for a while. I'm very happy that we are able to make deals because its unique in that not only are the in place leases well below market, but there's a significant shortage of box base in this trade area and when we are looking at Boyd analysis for the trade area there is a long list of tenants that aren’t represented and would want to be represented in this trade area. So we are pretty confident that we are going to be able to take advantage of that and there are definitely a couple of retenanting opportunities in the box lined up.

It sounds like there will be some expansion. What can you take FAR 2 at this site?

You know, that’s a big number. You know, the city, the bulk of the properties sits in the city of Emeryville. Emeryville is a very progressive, business oriented community. They are very much in favor of increasing density on the site. Obviously, we have in place tenants with leases that don’t necessarily allow that and that’s something that we will have to work through, and I won't say the sky is the limit but it's close. We just need to work with the existing tenant base and then manage that as we're able to replace tenants and that kind of thing, but clearly that’s in our (inaudible). what we did at Mid-Pike which is now becoming Pike & Rose. We've done that throughout our recent history and throughout our portfolio. So we’ll definitely have an eye towards that as we work the asset.

For anything good to happen at projects like that, you need a city or county or whatever jurisdictions its in to be helpful, and both Jeff and I, I think we kind of look, when this was done within a couple of weeks we had a letter from Emeryville welcoming us as the new owners and things that we should sit down and talk about the future, the property, which we just view as such a positive thing and I wish more city, frankly, would take that kind of approach. So this one started out real well.

Yeah, it seems like an exciting project. I literally had to check the density numbers twice just to make sure I was coming out with the right numbers there.

I guess your comments in the right place there.

Our next question comes from Jeff Donnelly from Wells Fargo. Please go ahead.

Don, just more general question. I mean, with your portfolio occupancy at 95% and I think that’s pretty much in line often times that your sub market vacancy I think it’s certainly relatively lower than your peers. What’s been the recent trend in asking rents for small shop space, and how you think we should be thinking about market rent growth prospects in the next two or three years.

That’s a great question, I will tell you Jeff we went back and looked at kind of small shops over the last 10 years to get an idea of where occupancy really goes and what kind of pricing leverage we have, and often in periods of time in economic distress in our portfolio the small shops get down to 89% and 90% occupied. Having dealt with the case here again in terms of the last couple of years, that is changing. So with that changing obviously comes some pricing pressure, and it is hard for me to not feel an under current probably supported by the housing foundation in the country that is getting better. To the extent that housing foundation continues to grow and it does, it is more likely to happen if it continue to happen in the market I think in which we operate, I can expect more to be able to have more leverage that way. Now in any particular quarter or any three months or six months period that’s not necessarily the case, but I do think we have some more pricing leverage than we’ve had in the past and I would expect that continue into 2013.

And then just if I could a question on the (inaudible) office, your opening remarks were helpful. But it’s going to be a two part question. We’ve had decision that shifts influence at all may be in a change in appetite from Avalon now that they are get their hands full with Ardstone and I guess obviously this is a follow up if I could. I was just curious like sort of flavor of office you are building if you will because you have the biotech buildings obviously just and these Cambridge and are you looking for a single user or is this multi tenant, how you think about?

Very fair question, and let me address the first point. No, it is not. It’s got nothing to do with Avalon actually at all. When we first did this deal, we did the two building with Avalon 1 and 3 and then we were in active negotiations with Avalon 4 for building 2. Building 2 has from a residential perspective there, the question is the best way to (inaudible) and stuff adds cost, as we look at that and had that conversation, that conversation was being dragged out. The negotiation was being dragged out, it was taking time. At the same time that was happening Jeff, those office users, we just got in a lot not in terms of the big campus type office users, but the full floor 70,000 square foot users of, and its broader based its not just biotech, its broader based because Cambridge is filling, filling up very quickly. The Bay is filling up very quickly in terms of where it’s going, we see demand that hasn’t been there in the past few years. So to be able to control the timing of opening the first phase of the project and not have a construction site affectively impacting that first phase and also to take advantage of that increasing demand on that 30,000 foot users; I mean three full floor users would be great, one for the whole 90 would be great. And we have inquiries in both of that, both in those categories. So it seemed very obvious particularly with when we put the numbers together, the numbers certainly look acceptable and accretive to where we were. So that's why the decision happened the way it did. I mean anyway you look at over the full build out of Assembly over 10 years or 12 years or whatever its going to be, an office component is certainly part of the plan in any of our mixed use project, its really important to have that date on population base there and so the ability to do that in the first phase in a very measured and small incremental way may all sense well to us.

And just the last question I guess, on Assembly maybe two parts, one I’ve seen some talk that you guys were looking at signing a way to get the zoning changed there, that you could accommodate a big box grocer, does that imply to Wal-Mart or a Target or even the Wegmans has been sort of looking around this market and…

Are you talking about the IKEA site?

Yes.

No, it doesn't imply that at all. Its simply a matter of flexibility and us trying to look at all options to be able to, you know, look I don't want to land bank 12 acres next to it, so what we have for the next 10 years, I want to get, same good idea of what the opportunities are for value creation and so we want them to do that, we want maximum flexibility, that's what's this is all about.

And is there any update on the Kraft family’s interest in the adjoining soccer stadium, they seemed to have some talk about that in the press?

Yeah, we've seen a lot of talk about it in the press as far as you know, as far as we know there is continued demand and maybe even stronger demand than we thought, but who knows, in terms of the execution or something of that size.

Our next question comes from Andrew Schaeffer from Sandler O’Neill. Andrew Schaeffer - Sandler O’Neill: Two questions, first given that you partnered with AvalonBay on the apartment front in Assembly Row and what was your thought process on bringing on an office partner and why not Boston Properties if so?

Yeah, that's a very good question Andrew and you know we control nearly 50 acres there and so the idea of future phases with a larger office component will undoubtedly we’ll have an office partner, how the structure of that deal will work whether with Boston Properties or somebody else I don't know, but this is much more scale, you know it’s a $40 million incremental investment and only 90,000 square feet of space. So we should control that first phase including the timing, we are happy to do that. We are doing the same thing at Mid-Pike and Pike & Rose with our first phase where we have 80,000 square foot treatable office and again lots of demand there. So we are hardly becoming an office company, but, and we will not become an office company, but certainly that’s a small component of the mixed use project if so its on the table for us.

And just to add to it, it is work worked in Bethesda, where OPNET has been a great tenant of ours on Woodmont Avenue for a dozen years. Andrew Schaeffer - Sandler O’Neill: And secondly kind of going back to your small sub-tenant basis, I wonder if you can break out those lease spreads last quarter?

:

Yeah.

Well, we can certainly do that offline, so have you.

Our next question comes from RJ Milligan from Raymond James & Associates. RJ Milligan - Raymond James & Associates: Just a quick follow-up on Jeff’s question on Assembly Row, you guys mentioned the office demand was increasing, I was wondering on the other side of that did you see a softening in the multifamily demand?

No. Not at all, now again, that's a much better question for Avalon, since that will have the economics, but I can tell you that I was up with Avalon management just last week, had great conversations. They are very interested in doing work on the residential side at the Assembly; those conversations were about and very bullish from what they said on the first phase, so you can get more detail from Tim and his group. RJ Milligan - Raymond James & Associates: Okay. And then my second question is, in your beginning comments, you talked about 2012 being the year of the leasing agent. I was wondering a year from now when we were on this call for 2013, what's going to be the year up; where do you see the greatest potential for upside to your numbers if you can execute; is it acquisitions, leasing again, development, redevelopment, where do you see upside to your numbers?

That’s a great question, RJ, and I got to tell you there is like 15 smiles in this room and in the call right now because they had a leasing over here, when I said it's the year of leasing. All you have to do is say nice things about the sales team and really motivate them like crazy. We still see strong leasing; in all period, we do see strong leasing; I think we're being pretty aggressive in terms of our assumptions. I know we're being very aggressive in trying to get the rents that we're pushing, both small shops and anchor; you know, the development leasing, which is a big piece of the share will certainly not contribute earnings to the share, but as we continue to lease projects that are under construction and so people can see and then feel and everything else, that's where we feel, we feel really good about the potential upside of the future.

Our next question comes from Quentin Velleley from Citi. Please go ahead.

Just going back to East Bay Bridge, I noticed significant rental upside in there and I believe you would sort of paid a low 5s initial cap rate for it, how should we be thinking about the IRR for that project particularly just in terms of rental increases and rate tenanting as opposed to some kind densification?

Very good go ahead Jeff.

Assumingly, we do what we think we can do which is again Don said there is not a lot of risk to not achieving (inaudible) on an IRR 10-year unlevered. Quentin Velleley – Citi: Right and then and the best buybacks there I don’t think you are in that, who earns that I am not sure of this some kind of opportunity there down the road?

You are right we do not own that, that’s owned by a private individual out of Southern California and it wasn't part of what we bought. Quentin Velleley – Citi: Okay.

We talked a lot about the densification of the site; we certainly didn't in anyway underwrite our future development or anything else that way on the site. All I am saying is one of the reasons we buy or we are really attracted to large pieces of land in places like this is because there are things that wind up happening all the time in over a five-year of period time or 10-year of period of time that we never thought would happen because it’s more flexibility on land of this size and these kind of locations. So I can’t who knows about the best buy owner who knows about the densification but when you are downside it’s protected as this one is and you can look at that a pretty sure increase in NOI over the next five years and why wouldn’t you take an opportunity like that. Quentin Velleley – Citi: And then I guess if you look at the West Coast with this acquisition and Plaza El Segundo expansion at Santana and Westgate Mall. So your West Coast book prints increased quite significantly. How are you thinking about the urban and street retail assets you have over on the West Coast, is there an opportunity to expand, are you seeing acquisition potential or alternatively given sort of some pricing is there an opportunity to sell some of our small assets?

You will take that Don or you want me to?

No, go ahead you are the President of the West Coast.

The first part of your question are there other acquisition opportunities, of course we are always looking for those, so as you mentioned the areas where we are investing is right now are pretty expensive, so we are careful in evaluating those opportunities and clearly we understand the market really well, on the 3rd Street Promenade and we understand the market really well on Colorado Boulevard in Pasadena, and so on and so forth but if something comes up certainly because of our base there and our operating capability and leasing capability we take advantage of those but I would expect those to be relatively incremental. In terms of disposing of them, that's not something we are really planning on either and the reason is particularly on 3rd Street and couple of our buildings on Colorado Boulevard, we have the same characteristics there, the way I look at East Bay Bridge which is well below market rent, so we expect to at some point in time harvest and like Don said, you cannot predict what’s going to happen and maybe we get some of that space back sooner than anticipated even if we don't its worth waiting and out because there is good upside in those properties and I hate to part with them at this point.

Yeah, I want to put that question in the context of Federal Realty in its entirety though and you know we are managing a 20 million square foot portfolio and in that portfolio I felt that we were under represented in California despite the issues in California and I know them well but in spite of this I felt that we were under represented and that why Jeff took on the role that he now has out there, that's why he built the team out there, that's why you know the Plaza El Segundo acquisition the point development that will follow, now East Bay Bridge is it does create enough critical mass out there where we are, we've become more of a player. On balance, it is no more important to market or a less important to market than Washington DC or Boston or Philadelphia or for that matter South Florida which I wish we were stronger in. So on balance what happened out on the West Coast has happened very, very deliberately and if you look at the type of things that we do own, we are still all about an increasing stream of cash flows and those type of assets on those pieces of land do that and give us the opportunity for more redevelopment in future years. So I can't level with that (inaudible) on the West Coast

Our next question comes from Christy McElroy from UBS. Please go ahead.

Just wanted to follow-up on some of the small shop leasing questions. I'd actually also love that breakout on spreads between small shop and anchor if you could possibly send that around when you have it. Don, you mentioned and answered to Jeff’s question more pricing leverage versus in the past on small shop, is that more specific to you given your occupancy and the strength of your leasing or would you say that that sort of true of the market overall as well. I'm just trying to get a sense for market rent trends, because obviously there are still a lot of small shops you can see out there?

You know Christy it’s a good question, I'm not sure I'm the best guy to answer it frankly because I don't know because everybody else (inaudible) I only know about our, or I can tell you that even within ours, within our small shop leasing, it's not across the board even, it is clearly the better properties and the better locations that we have more opportunity to leverage in. So its even federal portfolio is a microcosm of the bigger issues I have to say its probably not broad based but I don't know that, that's really an individual company-by-company you know question you know.

And could you comment sort of give your view on anchor demand looking out over the next you know three to five years, this isn't new but given the sort of overhang that's out there among retailers that have too much space office suppliers, book stores, consumer electronics, the likely give back space as leases expire, can you sort of give your bigger picture thoughts on how many closures we could potentially see in this country and what the demand looks like for absorbing some of that excess space?

I will Christy but I'm looking at across the table and Chris Weilminster loved to answer that question first.

I have looked at the total amount of GLA that will come back on the market. I cannot find in that direction but I do think that what you've seen over the past three or four years of amount of supply diminishing because of the demand of new concepts or regional trend given the markets that they were in before, we don't, I certainly don't worry about it clearly as of Federal Realty's portfolio I think we've always taken the anchor boxes by turn over and create a great opportunity and great value for the Trust. So my overall opinion is that there's enough demand that will pick up the excess supply if the book stores and if the electronic retailers disappear.

Maybe more on a, more macro basis on that. You know, I love to hear Chris say that. He is in charge of this portfolio but you know, as I think about that from macro perspective, I do worry about that. I mean I absolutely believe that there is too much space versus demand on a national basis. You know, and then you got to get down to company-by-company and locations-by-locations and it's obviously, the supply all the way around but it's got to be in a place where there are at least two people fighting for one space. It's not rocket science. You have to have that and I don’t believe that that is the case broad based across country nor do I believe it will be the case broad based across the country. I think you see it in the secondary mall area. I think you see it in secondary shopping centers and no, I would not effectively want to run a portfolio of those kind of space from NOI increasing, from an NOI perspective because I don't think that there are two or three or four tenants fighting for each anchor space on a macro basis.

Just one really quick follow-up. Did you guys disclose your physical or commenced occupancy at year end?

Yes we did. We were at 94.9 in our cat.

Our next question comes from Cedrik Lachance from Green Street Advisors. Please go ahead.

Thank you. Just want to go back to Emeryville a little bit. Since you are talking about the potential to add so much square footage there, are you looking at mix use of the portion use at the site?

Cedrik, I will jump on that one. We're not looking at developing and adding anything to East Bay Bridge that’s not why we bought it. We bought it for the steady stream of the income stream there. All we are saying is that when you have big pieces of land like this over the years things turn up and things can happen. We will certainly explore those types of things but you should not expect any significant capital outlays in terms of development at East Bay Bridge in terms of densification for that in at least the next few years.

Okay and just looking at your key market at Washington DC, broadly speaking what do you see from the demand perspective on the part of retailers in the metro area and if you could segment it a little bit between the grocery-anchored space and the power center space that would help to?

Yeah, Cedrik, I got to tell you. I am very (inaudible) about it. I have been nervously optimistic for or cautious for the past couple of years given all of the function in the federal government and uncertainty and it certainly has impacted the office market in Washington DC. I can tell you on the retail side at least in the markets that we are doing business, it remains one of our strongest markets and I think that applies Chris on the grocery side.

I mean, still when you look at (inaudible) when you look at, it would be nothing but outside potential for that any (inaudible) any of our grocery stores back I mean is so much demand for our assets in their locations that we everyday Don saying about the market there is jobs being added to the market I think the outlook is that there is another 40,000 jobs to be added in the DC market next year with everything going on and I wish we had more space Jim and I had a long conversation last night and he said how do we call to give me more space cause we just there is not much demand for what’s going on for our assets. I think Don always brings in more macro picture right, I think the secondary markets where there is not a lot of residential growth are the ones that are more challenged, but the physical locations of our real estate drives very demand and so.

And (inaudible) that sales trend looks strong too for those they report. So we are not seeing anything but (inaudible)

If you really think about rent growth over the next couple of years, do you think DC is going to outperform the west coast in your portfolio?

That's a good question and I don't know the answer to that. I can tell you that when we look at in place rents versus markets rents in those two markets (inaudible) we own and the west coast that those general trends are about equal. As down the west coast we got, we will have a big role down in the best buy building at Santana that will come up. is that late ’14 or early ’14.

Is that late ’14 or early ’14.

In 2014 there will be a big adjustment on that one building and that does, that will probably cost us a $1 million or so a year. But that will be more made up for in other areas, other than one-off like that the difference between in-place and market looks very similar in Washington DC versus the west coast.

Our next question comes from Michael Mueller from JP Morgan. Please go ahead.

Jim, I was just wondering in terms of the guidance, what’s baked in there in terms of funding for the development pipeline over the next couple of years?

Yeah, we have got of that $250 million to $300 million spend over the coming year, and we are looking at a mix ATM and debt issuance. I think we have given in our earnings guidance disclosure where we see our average shares outstanding which presupposes about $150 to $200 million of equity. We are going to be optimistic Mike that’s part of why we began the year with the liquidity position that we have. We don't want to be backed into any one particular strategy and want to make sure we have all our options open to us, so we can maximize our funding costs or optionalize I should say.

Our next question comes from Nathan Isbee from Stifel Nicolaus.

Don you mentioned before that you would like to have some more exposure to South Florida, and you acquired a few assets there few years back but really nothing since. What would you say has been the hold up and where do you see things going, where do you stand in that process.

It’s a good question, the first couple of assets that we bought have under performed. We bought them at the worst time and they didn't work out. The third asset that we bought which was just a year, a little bit more than a year ago was Tower Shops and Tower Shops really has outperformed what we thought. It’s more in line with the kind of assets that we like; again bigger, with more opportunities and more possibilities to be able to move around when in the middle of the redevelopment there, we just risk in and are looking at some other ideas there. That type of product we have not found, has not traded in a way where we thought we could make money. I will tell you we look forward at one in Miami, a couple in Miami, a (inaudible) was at the base in South beach. Well I’d love to have had that but the pricing just went through the roof and we didn't think we could make an IR that made any sense there. So we keep pounding it and we keep looking at it and you know with federal acquisitions are never, we are never going to do them in kind of a big way. It’s going to be a rifle shot approach of one by one or two by two, something like that, when they come available and that could stuff at prices that we can make sense have not. When looking hard now and there are some things down there that do make some sense for us if we can break them free.

Would you say you have adequate boots on the ground down there?

That's a good question and I'm not sure I have the answer to that. I got [Barry Hardy], who’s been with us a long time right on the ground, right there working up now through Jim and whether there's another way to handle that or a way to supplement there we are looking at it.

Jeff Berkes is moving down there.

No he is a west coast guy, he doesn't wear socks.

That goes great in South beach.

Our next question comes from Paul Morgan from Morgan Stanley.

You have a comment in your K that talks about leasing velocity being more in line with your historical average. You know you said you did whatever, 400 or so leases in ’12 and looking for something closer to the 300 that you've done historically in ’13. I mean you alluded to this kind in your opening comments, but should I think of that as being a bar that you could exceed or is there something special about ’12 and I assume it’s on a comment on the state of the what you are seeing in all leasing markets generally.

Listen, let me put it in context for a second. I mean we did it in total, nearly 2 million square feet of space which is roughly 10% of the portfolio, that is not a bar that you should expect us to achieve on a regular basis. I mean, we typically do 1.2 million or 1.3 million square feet of space per year and again a big piece of that was because of the occupancy increases that we [avail] to in 2012, which you won't see in 2013, and so gets yourself down more to our historical averages, maybe a little bit 1.3 or 1.4 million square feet I feel a lot better that’s the [model] length.

Yeah, and Paul, from an occupancy standpoint, as I mentioned in my remarks, we're looking at some roll during the middle of the year but basically ending a near flat from a physical occupancy standpoint, just below 95%.

And then on the lease spreads, I mean you have been kind of steady in this 10% to 12% cash range, you know, pre-recession, the numbers had been higher. You sort of backdoor, you were on same store NOI and occupancy broadly speaking. I know historically, sometimes those numbers were, you got, you quite [reduce] from old anchor leases expiring and maybe just haven't had some of those lately. But should we expect to see lease spreads get back up closer to where they’ve been. What's the kind of obstacle there?

I don't know. It's going to depend quarter-by-quarter and in terms of what kind of deals get done. There are still plenty of anchor boxes in this portfolio that are going to be roll up significantly. That’s for sure. But that ’06-‘07 period of time I am not so sure you really ever get back to that consistent basis, because with such an unusual point of time in terms of the retailers who are really just trying to grow a logically frankly. We don’t see that today in terms of any of the negotiations with retailers. Retailers are, they are better in terms of their ability to run their businesses and ability to control their inventory and ability to underwrite sales more reasonably. So it’s discipline group that’s make everyone of our negotiations a lot harder, including everyone that - even though there is a lot of volume in 2012 I would love I wish I could take the hour spend on those leases versus 2006 and 2007, I can tell you they are lot harder. And that generally means that the economics we are not going to be able to push rent like we are able to do it in ‘06-‘07 that’s a macro comment, it doesn’t apply to any particular space or and what in a quarter any couple of deals that can make or break a quarter in terms of those statistics not in terms of the stability of a cash flow. So that’s kind of where I come out.

Okay just last question on the leverage you’ve got a lot of room, a lot of comfort with respect to kind of where your peers are and where you are and I know you like to run low. You’ve got a big development pipeline, you mention using that as well as the ATM to fund it. How should I think about where you see leverage going as you build out the big developments.

Our objective is to keep our leverage metric stable. We think our balance sheet and the strength of the balance sheet has helped us drive some of our out performance over time. Certainly we are looking at the long-term debt market and favorable rates and we are going to capitalize on that when we can. But I think you should expect our leverage metrics to remain relatively stable.

Yeah Paul the only thing I wanted to add to that is, sometimes it’s easy to say the development pipeline in some kind of as though as one giant single thin. Remember 75 million of that in terms of the building at Santana will be delivered earlier than the rest that will come out. There will be in ‘14 the start of assembly and later ‘14 the start of Mid Pike and that was continue through ‘14 and ’15. So its not just as one big parallel money, its moves and gets reduced in addition to new projects coming on along the way. So the stability of the whole company even with that development pipeline which really is a very modest part of the company's capitalization is $9 billion company and we are talking about $500 million, or so. 6% of it, because the total capitalization of the company, it just shouldn't drive what you are thinking about the leverage.

We have no further questions at this time. Ms. Lennox do you have any final remarks.

Thank you everyone and we’ll talk to you soon.