Good day, and welcome to the Regency Centers Corporation Second Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Mas. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us. On today's call, you will hear from our Chairman and CEO, Hap Stein; our President and COO, Brian Smith; our Chief Financial Officer, Lisa Palmer; and Senior Vice President and Treasurer, Chris Leavitt. Before we start, I'd like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. Hap?

Thanks, Mike. Good afternoon, everyone, and thank you for joining us on the call. Through the second quarter, Regency's team continued to take advantage of robust tenant demand and favorable conditions in the capital and sales markets to execute on all aspects of our strategy and make meaningful progress towards our key objectives. Starting with our high-quality portfolio, the 5% NOI growth achieved in the first half of the year should result in annual growth in excess of 3.5%. With respect to our development program, our roster of high-quality in-process developments are approaching 90% leased in creating substantial value on our $240 million investment, and I continue to be excited about the prospects of our pipeline for new developments. I'm also encouraged by the growing pipeline for value-added redevelopments, expansions and renovations. The team has currently identified future projects that represent over $100 million of opportunities. And just as critical, we are cost-effectively strengthening what is already a rock-solid balance sheet while funding our new investments through our ATM and property sales. We're gratified by these advances, but in order to carry this positive momentum through the rest of the year and beyond, our management team will continue to focus on the key drivers for growing net asset value for our shareholders: intense leasing and asset management, together with the addition of high-quality shopping centers and the disposition of those that have been prioritized for sale, which will be critical to sustaining long-term growth in NOI of 2.5% or more; creating value and great shopping centers through developments and redevelopments; astutely and opportunistically preserving and enhancing an already strong balance sheet; and a capital markets environment that, as we experienced during the last 60 days, can quickly become volatile and more expensive; and utilizing Regency's special culture to maintain the team's high level of engagement and focus. Lisa?

Thank you, Hap, and good morning to some of you, good afternoon to most of you. Core FFO per share for the second quarter was $0.67. This is $0.03 ahead of the high end of guidance, primarily as a result of higher net operating income. Year-to-date same-property NOI growth, excluding termination fees, was 5.1%, with a majority of this outperformance coming from base rental income. The balance of our growth was due to the timing of prior year recoveries, percentage rent and other income. With respect to capital markets activity, during the quarter, we raised just over $36 million through our ATM at a weighted average share price of nearly $55. As Hap stated, this, together with dispositions, is consistent with our strategy to cost-effectively fund investments while improving our already healthy balance sheet metrics towards our long-term targets. And to that end, we raised guidance for dispositions -- the high end of guidance for dispositions by $50 million due to the heightened visibility of selling 2 additional centers. Hap also mentioned the recent fluctuations in the capital markets. I think it's worth reminding everyone that more than half of the $500 million of unsecured debt maturing in 2014 and 2015 has been locked at 2.1% and 2.5%, respectively. This represents 10-year treasury rates, plus swap spreads. We continue to monitor future commitments in order to maintain significant uncommitted capacity on our $800 million line, which, as of today, has an outstanding balance of only $5 million. Looking ahead, I'd like to walk through the revisions to our full year guidance for 2013. As a result of the second quarter outperformance, we now expect same-property NOI growth, excluding termination fees, to be in the range of 3.5% to 4%. The impact of base rental income is expected to moderate as we face higher comps from the strong occupancy gains we experienced over the second half of 2012. This results in an increase of $0.04 at the midpoint of the range for core FFO per share Brian?

Thank you, Lisa, and good afternoon. Our focused leasing efforts, the success of our redevelopment and ground-up developments and our portfolio enhancement strategies produced yet another quarter of strong results. The operating portfolio made a full recovery from its seasonal first quarter occupancy dip and closed the second quarter at 94.6% leased. The biggest improvement came in spaces less than 10,000 square feet, which gained 90 basis points quarter-over-quarter and now stand at 88.5% leased. Also, we are experiencing broader leasing demand. Prospective retailers and restaurants are being less picky about the spaces they will lease and are now more focused simply on securing a space. Increasingly, national tenants are seeking to lock in early renewals at today's rents, and negotiating leverage is clearly improving for landlords. For example, it's now typical to get firm outside rent commencement dates, something that was common before the downturn, but not since. This is drastically improving our downtime, which is 45% shorter today than at the end of the first quarter of 2011. In fact, the average downtime is now a mere 3 months for spaces vacant for less than a year. The shift in pricing power also affords us the leverage to drive rents as evidenced by rent growth of 15% on new leases. As a matter of fact, this is the ninth consecutive quarter of positive rent growth. And just as notable, these consistent occupancy gains and strong rent growth figures have led us to NOI growth in excess of 3% for the sixth quarter in a row. Looking forward, we should continue to deliver same-property NOI growth on a long-term basis in excess of 2.5%, supported by embedded growth from a meaningful amount of contractual rent increases, continued interest from retailers and restaurants looking to expand, particularly in the better…

Thanks, Brian. Thanks, Lisa. To wrap it up, I continue to be gratified by the dedicated effort that our team brings to the table each and every day to execute our strategy. I really like how Regency is poised to continue to grow shareholder value. We thank you for your time, and we welcome your questions.

[Operator Instructions] We do have our first question from Christy McElroy from UBS.

Lisa, just wanted to ask a couple of questions on expenses. It seemed like your same-store operating expenses in Q2 saw a pretty big jump. Just wondering what the biggest contributors were to that rise and sort of what you're expecting for the balance of the year. And then on recoveries, you talked about timing of recoveries contributing to the quarter. I'm wondering if you could expand on that a bit.

Sure. And I'll let Brian add some color if he'd like. But we did -- there were some late snowstorms. I think we had a couple of April snowstorms in a few regions of the country. That contributed to the higher expenses spike sequentially and also year-over-year.

Yes. In terms of the operating expenses, they are really only about 2% higher on controllable expenses. What we had was snow, as Lisa was talking about, last year, that was late in the year. And what we used to do is time our building improvements, painting, parking lot resurfacing and things like that. We do that when there's no snow. So usually, those happen later in the year. And last year, just because of the weather, they happened earlier. So that will all level out for the end of the year. And then the other expenses, there were some property taxes that were higher, and -- but the control of expenses are only 2%.

And then with regards to timing, we finished our reconciliations earlier this year. So we completed all of our prior year recs in the second -- by the end of the second quarter. Last year, that was in the third quarter. And it's contributing to current year income approximately $0.02. However, we'll see that reverse because we're going to be up against the higher comp in the third quarter.

Okay. And then just what was physical occupancy at the end of Q2?

You mean physical or you mean rent?

For commenced occupancy as opposed to the leased rate. What was the commenced occupancy rate of the portfolio?

92.9%.

92.9%?

It's 92.9%. Yes.

Our next question comes from Jeffrey Donnelly with Wells Fargo.

I'm not sure if you agree with the approach, but if I look at the sequential change in the dollar rents you're signing on new and renewal leases, they haven't really moved a great deal over the past year. Does that imply that market rents maybe snapped back after 2008 and 2009 but ultimately have kind of flattened back out in the last year?

Well, Jeff, I'm not sure I do agree with that. I know at least on our shop space rents, those rents increased for 8 -- I mean, it was 8 straight quarters before this quarter taking a dip down. That's all shop spaces, excluding ground leases. Sometimes ground lease has thrown [ph] a little bit of noise. But they are now at levels that -- well, last quarter, they were the highest they had ever been, and this quarter, they backed down a little bit. I think they fell about 11%. But they're still, I think, where they were about second quarter 2008. Now the anchors, that definitely distorts things because we had a 34% drop in the average rents signed this quarter with anchors. And that's because 12 of them were at single-digit rents, and all but 2 of those were renewals with fixed increases from leases signed long ago. For example, we had a DBS [ph] with $1.85. And so I think the average anchors signed this quarter was $10.26, but we signed 3 or 4 anchor leases either in the quarter or subsequent to it that average about $20 a foot. So I just think the average rents, especially on the anchors, distorts the picture a bit.

And that obviously is not a same space reported number.

Understood. And just to clarify, I wasn't necessarily looking at spreads per se, it's just that 12 months ago, you guys were doing leases -- new leases at $22.50 a foot, and today, they are around $23.50. But they haven't moved tremendously. But maybe as a follow-up, it looks like TI dollars on small shop tenants has been rising across almost all the REITs out there. Is that a function of maybe companies cutting deeper into tougher-to-lease space as we mature in the cycle or just really kind of a coincidence because of tenant mix?

Jeff, you look at the supplemental, for sure, it shows 3 quarters in a row of increasing rents. And -- but the reality is, if you go back to 4 quarters ago, that was the lowest amount of TI that we had given. It was the bottom literally of any amount that we have on record for how much we've given. So yes, it's been 3 quarters increasing, but it's coming off a very low base. In fact, except for this quarter, the last 10 quarters have all been below our historic average. So this is the first quarter where it's ticked up just a little bit above the long-term average. And the other thing I would say about those TIs is we are giving it significantly less often than we have in the past. I think there's like 42% or something like that this quarter.

And there was one transaction that was a bit of an anomaly, a very difficult to lease -- in California.

Yes, we have a space that's only suitable for a daycare center. So as part of our redevelopment, we combined a couple of spaces to bring in another daycare operator, and that had very high TIs. We did a PetSmart lease. The PetSmart leases always require a lot of TIs for their electrical and plumbing. And then we had a Corner Bakery that took a lot. So we had fewer leases. We had a few that were higher, so it kind of distorts it. But overall, like I said...

We're close to historical average.

We're close to historical averages.

Our next question comes from Nathan Isbee with Stifel. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: As you look at the 5% same-store growth that you generated in the second quarter, can you perhaps break it down a little bit between the occupancy? What exactly was driving that growth? Occupancy is up, but it wouldn't signify a 5% plus same-store growth combined with the 5% leasing spreads.

Yes. Nate, as I mentioned on the call, there's a significant amount that is related to timing, so the timing of percentage rent and the timing of prior year recoveries and also timing of other income. And if you -- we do expect those to literally reverse, so not just normalize, but reverse for the second half of the year. And if you were to level that, we would be closer to the high 3% range.

And a good portion of that comes from contractual.

Yes. A good portion of that, call it 3.8%, is from base rental income, and we've been through that math with you. If you get 1.25% to 1.5% from contractual rent steps, then occupancy is driving, really, the rest of that with -- our rent growth has been kind of low single digits. So it's not contributing as much. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Okay. So when you look at the guidance increase for the full year, would you say most of that is driven by the outperformance in the first half? Or would you say that you've allowed for any, what I would call, core fundamental acceleration in the second half?

It is driven by the outperformance in the first half. Basically to get -- with a range of 3.5% to 4% from where we are today, growth in the second half would be 2% to 3%. And I, again, would point you to the same formula. If we're getting 1.25% to 1.5% on contractual rent steps, the rest is going to become -- is going to be coming from occupancy, with a limited contribution to -- from rent growth. And yes. And the range is -- we're sitting at 94.6% leased, and our full -- our range for the year is down 30 bps to up 40 bps. And that also contributes to the range of same-property NOI growth. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Did I ask my follow-up yet? All right, I'll just jump in. So Brian, just following up on that, when you talk about tenants being less picky and being willing to trade down in terms of space, at what point would you say that's going to start translating to higher leasing leverage in terms of your rent growth?

Well, I think our rent growth is already showing the leverage that we're looking for. We had 90% of our markets generating positive rent growth. And I think we've shown you before that in terms of the number of leases, it's about 3/4 are positive and 2 years ago, it was 1/4. So we've just got still some markets more than anything -- I'd say still Sacramento, Central Valley and Arizona are the ones that are causing the drag. But I think until those markets start improving a lot more than they have, we're still going to see a little bit of the drag. In terms of the spaces, I think we did what can -- if you look at our rent growth for spaces less than 12 months vacant and compare it to the old method of doing it, there's a pretty big difference. And I think what you see there is, there's about 10 properties that had negative rent growth and the average being down for 40 months, in some cases, as long as 80 months. So the fact is that we're starting to see those spaces turning over and leasing that haven't leased in years. So I don't know when that specifically translates into a higher number, but it's obviously moving in the right direction.

And that actually contributes a little bit to the point that Jeff was getting to. So we believe some much more difficult to lease space, a little bit less desirable, so obviously, those rents are going to be lower than our average rents in our portfolio.

Next, from Jefferies, we have Tayo Okusanya.

First question, the potential merger between Kroger and Harris Teeter, I mean, I know it's still kind of early in the process, but do you expect that to involve any consolidation and if that could potentially have any impact to your portfolio?

I think the impact is going to be -- none of us really knows what's going to happen, but if you take Kroger at their word that they're going to let Harris Teeter operate the way they've been operating, I think it's a win for everybody. Harris Teeter has a great brand in the Carolinas, in particular, and the only problem is they have fairly low margins. And I think when -- if Kroger allows them to keep their brand, keep operating as Harris Teeter where they have a loyal following in the Carolinas and then they bring their purchasing power and more savvy systems -- operating systems, I think it's going to be really good for our centers, it's going to be good for Harris Teeter and for Kroger. Up in D.C., I think it's less clear what's going to happen, but I think that's where they view their engine -- their growth engine being. And I'd only be speculating if I said what I thought was going to happen there, but if they would go into the market being #4, Shoppers Food Warehouse is #3. You could see that there might be a potential for something to happen there. And if that were the case, I think that also benefits our portfolio.

And I would add that Kroger has a pretty good track record of assimilating acquired companies.

In our conversations with them, they are very excited about the Harris Teeter brand and their ability, as Brian indicated, to improve efficiencies without adversely impacting the brand. So I think it's a win-win. Also, in the Carolinas, we have one store where there's significant amount of overlap, and that store is a Kroger store that is a bigger size than the Harris Teeter across the street, plus had a gas pad which is important to Kroger. So we feel pretty good about what the impact is going to be to us both in general and on a specific basis.

Okay. That's helpful. And then just one quick follow-up call. Lisa, I mean, in this quarter, did we kind of see the same trend of just move-outs you were expecting basically not happening? Was that also part of the occupancy gain this quarter?

Yes. And I think Brian would love to share actually how we did perform move-outs. So I'm going to let Brian answer that.

If you look at our move-outs, they are about average for a typical quarter. But if you break it down a little bit more, I think you'll see some very positive underlying strength. 170,000 of those -- square feet of those move-outs were for anchor tenants who are temporarily -- have temporarily moved out while we do redevelopments or they've moved out entirely while we bring in a new one. For example, in Texas, we terminated the Randall's lease on our Woodway Center. We'll be bringing in Whole Foods. That's showing up as a move-out. So if you strip those out, we only have 230,000 square feet of move-outs, which is, by far, the lowest amount of move-outs we've ever registered in a quarter. And then if you focus just on the small shops, it was the second lowest amount of move-outs we've ever had for shop tenants. So overall, that average number doesn't tell the whole picture. I think the whole picture is really positive.

And as I've answered on the last question, that is what is driving the outperformance for the half -- first half of the year, which has been causing the raise for the second half.

Our next question comes from Cedrik Lachance with Green Street Advisors.

I just wanted to go back to the same-store discussion. I'm sorry to beat that one. But just want to tie the numbers. You talked about 1.25%, 1.5% coming from rent steps. I guess, about -- from what I understand from your comments, about 150 basis points from timing on recoveries. And then...

Recoveries, percentage rent and other income, all of them together.

About 120.

So it leaves us with about 200 basis points, which is likely -- primarily from occupancy. What's the increase in occupancy that's taken place? So not in the leased occupancy report but in the command store rent-paying occupancy, what's the increase that's taken place there over the last year?

Bear with us one second, Cedrik. Okay. We're about 130 basis points of effective rent-paying occupancy growth.

Okay. And so does that contribute to the whole 200 basis points? Or is there a little more that came from, say, redevelopment as well?

Redevelopment was just a small contribution for the first half of the year. Same-property NOI growth without redevelopment is 5%. So most of it is just coming from -- the amount -- the contribution to same property growth from occupancy change really does depend on the mix and on the average rents. But call it 130 basis points, if you take kind of our -- if you take a midpoint of $25 kind of average rent, that does contribute to full 200 basis points.

Okay. And then just in regards to the rent negotiating process right now, where are you able to push most? Is it on the base rent? Is it on your ability to reduce tenant inducements and CapEx? Or is it on the amount of reimbursements that you can charge your tenants?

Cedrik, really, it's all those. We're obviously pushing rents, as you can see, from our new rent growth numbers. Where we still -- remember, we're renewing or re-leasing 2008 spaces now. So where we do have renewals that were above market, what we're seeing is we're getting lower growth -- rent growth, but we are getting much better steps going forward. We're also getting -- able to negotiate percentage rent better than we used to from the anchors at artificial growth breakpoints lower than would normally be the case. Concessions for the most part are just not even an issue. The only place where the tenants right now are really pushing back would be on control of the space. The anchors want to make sure that they protect their sales through exclusives and things like that. But other than that, pretty much, the negotiations have turned totally in our favor.

Yes, the prior year recovery is an indication of higher reimbursements that we're achieving from the tenants.

Our next question comes from Michael Mueller with JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Looking, I guess, at the guidance for Q3 FFO, it looks like it's expected to be, I think, it's $0.61 to $0.63. Can you reconcile the $0.67 and what causes the drop in Q2?

Yes. Again, I'd start with the fact that we completed our reconciliations in the second quarter, and that's about $0.02. And then the rest is really timing of dispositions.

Our next question comes from Quentin Velleley from Citi.

Can you just speak broadly on the development pipeline? If you include the Miami project, you're getting close to $300 million. Your starts are up to $125 million to about $200 million this year. How should we think about the level of development you are comfortable with? And where ultimately could the pipeline move to?

Sure. With Fontainebleau, we're at $128 million of starts for developments and redevelopments, which is where the low end of the range is. We feel really good that this year, we've got -- we'll get up somewhere near the high end. We've got $49 million worth of high probability ground-up developments, which we rate, in part, high probability because we're confident they're going to happen. We control the land, we have anchor tenant leases signed, but you never know. Something, I suppose, could happen. And we've got another $13 million of high probability redevelopments. So that's about $190 million. And then we've got another development that we think we're going to get, which -- that's not as certain. So that would take us up to -- slightly above $200 million high end of the guidance range. I think going forward, you can expect that we would do somewhere in the neighborhood of $100 million to $200 million of ground-up development, depending on the size of the projects. If we have a bunch of Grand Ridge Plazas or Fontainebleaus, that number is going to be large. Redevelopments and expansions, renovations, I would think that would be in the $50 million to $100 million range. So I think somewhere in the $150 million to $300 million range.

With a good portion of that being redevelopments and expansions.

Okay. Just going back to Jeff's question on the new leases into -- in the second quarter. The TI CapEx was up about $10, and it sounded like there was 1 lease that drove that increase. Can you give us a sense of what TIs would have been on the new leases if you excluded that 1 lease?

There were actually about 4 leases that stand out, Quentin. I mentioned the daycare center. That was, I think, about $78 a foot. It was a big number. And then we had PetSmart leases. I mentioned that use -- whether it's PETCO, any of the pet supply guys, because they have fish tanks, they have a lot of electrical in there, they're going to have big TIs. And then we had Corner Bakery and a -- what was the other one? I think it was a salon, wasn't it? Yes. The salon. So I don't -- we could probably get back to you as to what the number would be. I don't have it.

Yes. I mean, I guess it would be very much in line with historical averages.

Yes. Because we're only slightly above the historical averages this quarter. I think it would probably take you right down to it, maybe slightly below.

[Operator Instructions] Our next question is from Vincent Chao with Deutsche Bank.

Just a question on the leasing activity sort of broadening out and seeing better activity across the board there. I mean, can you just share what the percentage of leases this quarter had roll-ups and how that compares to recent quarters?

You mean increased rents?

Yes.

The percentage of it was like 75%.

Well, yes. It was like -- in terms of positive rent growth, it was about 75%.

And how does that compare to sort of recent trends?

On the long-term trend compared to -- starting 2 years ago, it's much better. It was about 25% of our leases had positive rent growth. Now it's about 75%. So quarter-to-quarter may bounce around a little bit, but I think it's slightly lower than it was last quarter. But, again, long-term trend, we're seeing more and more and more leases with positive rent growth.

And, again, attributing some of that to some of the space that has been vacant for quite a long time.

Actually, the 73% is wrong. It was 60% last quarter, 48% the quarter before. So over the last 3 quarters for the spaces vacant less than 12 months, it's been getting stronger.

Okay. And then just a question, just going back to the commentary about the cap rate environment. And you haven't seen it yet in the B assets in terms of cap rates going up but could -- reasonably could go up. Does that cause you to want to pull forward any other dispositions? I know you raised the guidance for some visibility on some deals. But any desire to pull forward some deals?

We'll continue to be opportunistic and continue to look at our portfolio. And we've made significant progress on those assets that we prioritize for sale, and we're about to start that process right now. And, I guess, Brian indicated, there were 2 assets where we had meaningful leasing progress, one of which we replaced the anchor and we pulled those forward. So that's the kind of decisions that we'll make. I mean, the team had already targeted these for sale for a while, and we -- but they want -- we wanted to wait until we had resolved an anchor issue. And we did in the past quarter. And it looks like we're either under contract or about to go on a contract on 2 centers that we targeted for sale.

Our next question comes from Rich Moore with RBC Capital Markets.

You guys are kind of leading the pack in terms of number of new developments you're doing, and usually, what we hear is -- from the others, from your competitors in the public world is that the rents just don't make sense at this point. What are you guys seeing, I guess, that is leading to -- it looks like a pretty good acceleration in development?

I think -- we had, what? $150 million of ground-up starts last year, Rich. It's not meaningfully more. I just don't agree with that. I think what you've seen is, and we continue to see, is the place where it does pencil is in the better demographic areas where there's much more purchasing power, a combination of average household income and population density. That's where the retailers can generate the sales, and therefore, they're willing to pay the kind of rents that we need. So in terms of why I think we're getting more than our share, some of it is market demand, but like I said, it really is in those better areas. Some of it is financial strength because in those areas, you've got to -- you've got to have some real staying power. I think if you look at our Juanita Tate development, that thing has been -- we've been working on entitlements for 19 years. And Dublin, which is coming down the pike for next year, you're facing lawsuits, lots of money. I think one of the things is that we kept good people during the downturn because it takes years to get these projects through the pipeline to find them, to entitle them. I think some of it is just success breeds success. It gives you credibility with sellers, particularly joint venture partners when they can see how much you've done. We're working on, I mentioned, 12 Whole Foods developments or redevelopments. Yesterday, we were talking to a landowner in a great area who wants to do a development with Whole Foods, and he knows that we've done probably more than anybody. And then I think a lot of it is a skill set. Avon is a property that we're going to close on later this year and start in Chicago, and I think that one -- if you'd ask me about a year ago, I wouldn't have put any money on that we'd actually persevere in getting our entitlements. But the team did an unbelievable job on that one. And I think, finally, it's relationships. We've got a property that we're going to be starting next year in an area that is a true work, live, play environment, again, a Whole Foods development. And that one, there are relationships with the owners of that company and Regency that go way back. One of them is Hap's fraternity brother. So I think the combination of those things, really, is what's helping us succeed.

And I will say, even though we are seeing a pickup in the amount of new developments occurring, it's still well below historic averages. So there's a limited amount of opportunity there. But we -- our focus is extremely sharpened. We, so to speak, have learned our lessons. We're developing those centers that makes sense for the long term, with great anchors in great locations, primarily in-fill or in planned unit developments when it's suburban. And secondly, I think -- and we've been talking about kind of $100 million to $200 million or in the $150 million range. The pickup that we're seeing is more on the development and redevelopment side. And hopefully, I think we've taken that from, say, $10 million to $15 million in renovations a year to hopefully will be in the $25 million to $50 million and maybe even more than that on a go-forward basis or on an annual start basis.

Okay, great. Great Answer. Then on the acquisition side of things, is there any interest from your partners, your co-investment partners in selling their shares or in you approaching them to buy their shares?

I think the opportunities there from our standpoint are pretty limited from what we understand. For the most part, our partners have -- other than the fund, which we -- which is under contract for sale, I think the opportunities there from Oregon and CalSTRS, and First Washington and CalPERS are pretty limited. You never know.

Our next question comes from Ki Bin Kim from SunTrust.

Could you talk a little bit about -- if you've seen -- you guys have mentioned the strong retail demand, and it's reflected in your occupancy. Has that translated into your secondary assets or markets at all?

Yes. One of the things that we are seeing this quarter, we mentioned a little bit on the call, is just how broad the demand is getting. I mean, some of our weaker markets like Michigan, some of our best leasing activity this quarter happened up there. We did about 12 -- I think we signed 8,000 square feet of leases in Fenton, our project in Fenton, and 4,000, I think, have been signed since then. Our State Street project up there, the inline space is 100% leased. In the housing-dependent markets, we've got, for the first time, about 6 properties that have hit 100% leased that struggled during the downturn. So I think we're seeing it in weaker spaces within the center. I'll just give you another example there. We have a BJ's up in Massachusetts. And they went out, and we found a replacement tenant to take about 2/3 of the space, leaving about 30,000 square feet in the back. We actually got somebody to take that backspace. So there's lots of examples of improvement in housing-dependent markets. Weaker markets, Arizona is seeing a lot more activity. The rents are still soft, but you're seeing much more activity than we ever did before.

Let me just remind you, we have 3 centers in Arizona. Now we sold one and down 2 in Michigan. So it's a very limited amount of our space and even becoming more so.

But still, your occupancy growth that you've been reporting, is that still predominantly your better markets, better assets? Or has that actually, from a financial standpoint, shifted?

That's what the majority of our space is, so yes, that's where it's all coming from.

But it's across the board. And as Brian mentioned, we're seeing it in all markets.

Okay. And second question. I understand that class A, B+ assets haven't changed much in terms of cap rate. But given your, I guess, significant development or redevelopment pipeline, have you guys internally changed the way you view IRRs or, I guess, more specifically, exit cap rates? And have those changed to reflect in some way the change in treasury rates?

We're still -- from a development standpoint, depending on where the development is located, where the market is, et cetera, we're looking for returns in the 7.5% to 8.5% range. And from an acquisition standpoint, we're looking for total returns. That's growth, plus going in return in excess of 8%, and at least having growth that's going to be in excess of 2.5% so that the properties we're buying is going to be accretive to our long-term NOI growth rate.

And both of those scenarios that Hap described would have IRRs at or slightly above our weighted average cost of capital.

Particularly developments.

Yes, the developments would be much above, acquisitions at or slightly above.

Our last question comes from Jonathan Pong with Robert W. Baird. Jonathan Pong - Robert W. Baird & Co. Incorporated, Research Division: Just a quick question on the dispositions. I see Anthem Marketplace, you guys got pretty good price on that, 5 9. Is there some upside that you might be leaving on the table there? Or what's the disposition thesis, I guess, on that asset?

I saw the press release that the buyer thinks there's upside. We wouldn't have sold it if we thought there was. We had an anchor tenant, The Grocer [ph]. The sales were weak, they were not trending right and we thought that was -- represents some significant risk for us. That particular property is, I think, at the outer reach of the market, if you will. And frankly, I think it's not really that well-positioned compared to some properties in the market. So beauty is in the eye of the beholder and, for us, it represented risk and no upside, but...

We hope the buyer does well, like we always have, but we have no regrets about the sale. And as indicated on the 2 properties that we're now bringing to market, we waited until we were able to do a substantial amount of leasing before we sold. We're always making those evaluations. But look, we've sold a lot of property, and we hope every one of our buyers does extremely well with their investments. Jonathan Pong - Robert W. Baird & Co. Incorporated, Research Division: Got it. And then following up on Juanita Tate. I think you guys mentioned it earlier, but can you talk a little bit about how that development sort of plays out in terms of the sweet spot of what you guys like to develop and own? And I think the household income number there is much lower than what you guys typically do. Is this just sort of a vestige of what you guys have been working on for the last 19 years like you mentioned? Or is this something that we could see more of in the future?

Yes. I mean, the key thing there is when you look at the purchasing power there, I mean, what we shoot for is an excess of $200,000. That's average household income, plus population density. And there are, I think, 450,000 people, Brian?

Yes.

And even though the household income is typically below our $100,000 average, the purchasing power there is substantial. We've got a great grocer who's going to do very, very good. It is -- it does happen to be a presale because that's part of the deal, but we would be happy to own that asset long-term. It's got a Starbucks Coffee in there. I mean, the lineup of side shop retailers is excellent.

Yes, I mean, you got CVS there, Panda, Starbucks, Little Caesars, Chase Bank, yogurt, dental. It is lower income, but I'll tell you what, not only does it have the population Hap talked about, but if you look at the Hispanic grocers in the area, there has not been a center built in there in 15 years because of the obvious high barriers. They all do about $800 a square foot, and not one of them that you can point to has good real estate fundamentals. Usually, they're not on the main street. They don't have good access. They don't have good visibility. They've got really bad physical property. And the other thing is, in those Hispanic areas, we have not changed our strategy, but I don't think you can ignore the demographics. It's not only the fastest-growing part of the population, but they spend so much more on groceries. The average Hispanic household spends 46% more on groceries than the general population per week, and they visit the grocery store 3x as often. So I think that is more where the priority is to spend money. And with the anchors we got there attracting the best retailers, that's also true in Fontainebleau.

Getting back to a prior question because I indicated 19 years, I think it was Richard's question, I mean, having the team, the capabilities and the persistence and the dedication, this is a key part of our business. And if and when we do it right, we create substantial value. A lot of hard work.

That does conclude our question-and-answer session. I'd like to turn the call back over to our speakers for any closing remarks.

Prior to turning it back over to Hap, I'd like to close the loop on the TI question, excluding the 2 anomalies. So if you exclude the daycare center that Brian talked about, as well as the PetSmart, the TI for new deals would be $5.31.

Yes, I think $6.75 is about where it usually averages.

Thank you. We appreciate your participation in the call. Everyone, have a great day. I know it's a busy day, and we thank you for your attention.

That does conclude today's call. We appreciate your participation.