Regency Centers Corporation (REG) Q1 2017 Earnings Report, Transcript and Summary

Greetings and welcome to the Regency Centers’ First Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Laura Clark. Thank you. You may begin.

Good morning and welcome to Regency’s first quarter 2017 earnings conference call. Joining me today are Hap Stein, our Chairman and CEO; Lisa Palmer, our President and CFO; Mac Chandler, EVP of Investments; Jim Thompson, EVP of Operations; Mike Mas, Managing Director of Finance; and Chris Leavitt, SVP and Treasurer. Before we begin, I would like to address forward-looking statements that maybe 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. On today’s call, we will reference certain non-GAAP financial measures. In accordance with SEC rules, we have provided a reconciliation of these non-GAAP measures to their most directly comparable GAAP measures in our earnings release and financial supplements, which can be found on our Investor Relations website at regencycenters.com. Lastly, we request that callers observe a two question limit during the Q&A portion of our call to allow everyone a chance to participate. If you have additional questions, please rejoin the queue. I will now turn the call over to Hap.

Thanks, Laura. Good morning, everyone and thank you for joining us. I am very pleased with our first quarter results and with the completion of our merger with Equity One. The team has made extraordinary progress integrating the companies. The combined portfolio is demonstrating its exceptional quality with another quarter of being 96% leased and producing over 3.5% same property NOI growth. Our developments and redevelopments continued to perform well. Substantial synergies are already being realized. These collective achievements are reflected in our increased earnings guidance. I cannot overstate our team’s excitement and enthusiasm with the merger and further enhancement to our four strategic pillars. One, we own an unequalled portfolio of neighborhood and community shopping centers. Two, we have an industry leading development platform. Three, our business activity is supported by a fortress balance sheet. And four, we benefit from a special culture in a deep team of talented professionals. This compelling combination will grow cash flow and earnings, which in turn grow NAV, dividends and shareholder returns. Now, I would like to provide some perspective to the current challenging environment for many retailers and the negative headlines that have become part of our daily reading. Although we will certainly not be immune, there are compelling reasons why I feel that the sky is not falling and why I remain optimistic that well-conceived, well-located and well-merchandised retail real estate will succeed in this environment and Regency’s outlook remains extremely bright. During the 4 years I have been in the business, competition, retail bankruptcies and store closures have been integral parts of the landscape. We fully understand and appreciate that technology, particularly online shopping and an overabundance of space are combining with other factors to accelerate store rationalization. As a result, a number of lower quality centers will be losers, centers which will either struggle or not even survive. However at the same time, it is important to keep in mind that winning retailers who excel at being relevant to their customers are continuing to expand at a notable pace as they will need bricks and mortar space to service and sell to their customers. Regency’s portfolio is a balance of shopping centers, where the winners will thrive, centers that are convenient to the neighborhoods and communities with substantial purchasing power and supply constraints and are well-merchandised to other highly productive winning retailers. The vast majority of our threat comes from best-in-class, local, regional and national tenants that offer a durable combination of convenience, necessity, service, value and better shopping experiences. When disruption causes retailers in our portfolio to rationalize their store count, we have often found that our locations are must-keep or if the user vacates, bad news is typically good news as we are able to attract a better user at higher rents. Finally, our experienced team has a proven track record of navigating major disruptions in the cyclical and secular changes in our business. We employ those lessons learned in a rigorous and proactive approach to capital allocation, recycling and asset manager. These factors have all served to reinforce our conviction that Regency’s portfolio has never been better positioned to withstand the challenges and prosper from the opportunities that we encounter in the shopping center business. And there is no better evidence that Regency owns the winning shopping centers that have minimal exposure to recent bankruptcy as well as our substantial releasing success for those sites that did experience store closings. Before I turn the call over to Mac, I would like to acknowledge his added responsibilities for transactions, along with development as EVP of Investments. I will now turn the call over to Mac.

Thank you, Hap and good morning. I am pleased to share our enthusiasm for the developments and redevelopments we have in process. They now reflect a total investment of over $500 million, including the additional projects acquired through the merger, which our team had successfully transitioned. Our in-process development and redevelopments are expected to generate returns of 79%, representing significant value creation. Regency’s proven development platform has delivered over $1.5 billion in development projects since 2009, at an average 8% return. Our industry leading development team continues to source compelling opportunities as evidenced by our two latest development starts and we are excited about the opportunities acquired through the merger. During the first quarter, we started two ground-up developments, representing a total investment of approximately $60 million. The Field at Commonwealth is a Wegmans anchored 190,000 square foot center located in Metro DC. Commonwealth will benefit from an affluent trade area with strong demographics, including household incomes averaging $140,000 as well as strong daytime population. Though construction has only just begun, the project is already 82% leased and committed. We anticipate project completion at mid-2018 at 7.5% stabilized yield. Our second development start, Pinecrest Place, is located within a premier infill submarket of Miami, with significant barriers to entry. The 70,000 square foot center will be anchored by a Whole Foods that is relocating from a nearby center and shadow anchored by Target. Similar to Wegmans, we continue to value the quality Whole Foods brings to a shopping center through high levels of food traffic and sales volumes, which attracts the best restaurants and side-shop retailers. Pinecrest is expected to stabilize in mid-2018 at a 7.3% return. Please note that we increased our guidance for the year and now anticipate starting between $175 million and $275 million of development and redevelopment projects. While the best development opportunities are limited and competitive, Regency is well-positioned to capture more than our fair share of future projects given our platform depth, enduring tenant relationships and demonstrated track record paired with our well-capitalized and flexible balance sheet. Turning to acquisitions and dispositions, we continue to control the Northeast acquisition opportunity we mentioned in our previous call, which we now hope to close in the second half of the year. In regards to dispositions, we have revised our guidance to $100 million to $200 million commensurate with Regency’s increased development and redevelopment spend. Importantly, our disposition strategy remains the same as we will continue to sell properties as needed to enhance portfolio quality while also funding new investments whether those are developments or redevelopments at attractive returns or acquisitions of premier shopping centers with strong NOI growth profiles. I would now like to turn the call over to Lisa.

Thank you, Mac. Good morning all. I have to echo the gratification both Hap and Mac expressed on the performance of our portfolio in the first quarter and especially the efforts of our team in guiding the merger across the finish line. Our first quarter results were highlighted by combined same-property NOI growth of 3.7%, driven almost entirely by base rent growth. It is important to note we are presenting same-property NOI growth on a pro forma basis. The metrics are calculated as if all properties were owned and made the definition of same-property for the full calendar year. We remain highly leased. The combined same-property portfolio is 96% leased with shop space at almost 92%. Taking into account the combination of the two portfolios, there is essentially no sequential change in the percent lease of the same-property portfolio. And in fact, small shop occupancy is up 70 basis points year-over-year. Overall, leasing spreads for the quarter were 8.2% with shop space leasing spread showing continued strength at over 9%. Rent spreads on new leases, in what was a relatively small sample size this quarter, were substantially impacted by one anchor lease in the center that is targeted for sale. Without this one lease, new rent spreads were over 10%. The bottom line is that we continue to see healthy demand when leases expire and we also continue to have success despite the decreasing amount of remaining space left to lease and that decreasing amount is often some of our most challenging spaces. It is also important to note, as Hap alluded to earlier, that 95% of closures from bankruptcies that occurred last year have been re-leased or are in final lease negotiations. Our merger with Equity One closed on March 1 and our team has been focused on a successful integration allowing us to proceed towards our primary objectives of the merger; one, achievement of enhanced same-property NOI growth, two, execution of a larger development and redevelopment program and three, realization of synergies. All of these lead to accretive core FFO results. I am very pleased to report we have made tremendous progress towards achieving each of these objectives and as Hap mentioned, reflected by our revised guidance ranges. The integration of the two platforms has gone very smoothly. We have clear visibility to achieving the $27 million of operational and overhead synergies that we projected. Now I would like to discuss our revised guidance in more detail. We have provided a full update to our guidance that reflects the merged company. Updated core FFO is expected to be $3.60 to $3.68 and NAREIT FFO of $3 to $3.10. NAREIT FFO includes the impacts of the one-time merger transaction costs estimated to be approximately $80 million in 2017 or $0.50 per share. You may recall when we announced the merger, we did communicate that we expected the merger to be accretive to core FFO before the incremental impacts of non-cash purchase accounting adjustments. In our supplemental, on Page 39, we have provided a detailed reconciliation of the impact to core FFO from these non-cash items. It can be a bit complicated, but I will do my best to summarize for you now. Our pre-merger standalone 2017 core FFO guidance midpoint was $3.47 per share. Our revised post-merger midpoint is $3.64. If you exclude the incremental non-cash impacts, adjusted core FFO at the midpoint is $3.53 per share. That represents a $0.06 to $0.07 per share increase of which the majority has resulted from accretion related to the merger. We also increased our same-property NOI growth guidance to a new range of 3.2% to 4%. The increase is primarily driven by our strong first quarter out-performance. I would like to remind you that upon closing, we did increase same property growth guidance by approximately 80 basis points, simply as a result of the expected growth in the Equity One portfolio. Before closing, I do want to call to your attention that next quarter same-property NOI growth could fall below the low end of our range due to the timing of our CAM reconciliations. This is only a timing difference and does not impact full year expectations. That concludes our prepared remarks and we now welcome your questions.

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Christy McElroy from Citi. Please go ahead.

Just on redevelopment, how are you thinking about some of the bigger, more complex redevelopment and densification projects that had been in Equity One shadow pipeline, sort of in the context of the current environment and maybe if you talk about sort of your approach to sort of development investment in general as you look forward to 2018?

Sure. Christy, this is Mac, I would be happy to answer that. I guess the first thing I would say is these Equity One properties, the ones that are sort of the typical ones for redevelopment are all tremendous properties. Very well located, in the best markets, so we are very excited just about the locational attributes. We will take a step back, that’s what our teams are doing now and we are looking at them. The redevelopments could be a straightforward retail redevelopment in which case there is great NOI growth profiles going forward. We are also looking at more complex retail redevelopments and then also mixed use formats. So we haven’t done any of these large projects to determine our path yet, we are still in – considering these various alternatives, but we are going to take a hard look at those in light of the fact that several of these projects take 2 years, 3 years – they take a few years down the road, actually to get entitlements in hand, even though they have great underlying entitlements. So we will look at them just like we have for decades here in our development program. We will look at risks, reward, timing of all that. If we do bring in a non-retail use, we would typically go out and seek the best in class non0retail partners, such as a multifamily developer and we have great relationships with the very best players – partners, who are well capitalized and experienced.

But there has been no change in sort of your overall approach to development in the current environment?

There hasn’t – no, I mean we are conservative by nature and we are diligent as we look at these projects and we don’t see any change to that. So as projects get closer to being realized, we will look at the current environment at such time, but many of these Equity One projects will take shape in the months and years to come as they flush themselves out of the entitlements.

And the ground-up developments that we are looking at basically are very consistent with Regency’s strategy, strong anchors, strong demographics and many of them are going to be delivered 2 years and 3 years out. But we also not only have strong anchor sponsorship, but we also have a good inclination – indication from the side shop retailers how the project is going to be well received. It’s not specular development and it involves, Mac alluded to, the same and even more – maybe even a little bit more of a rigorous approach today.

Okay. And then just my second question, in the past part of your capital raising strategy have included equity issuance to fund or help fund incremental acquisitions, how are you thinking about your cost of capital today from a funding standpoint given what’s happened in the equity markets, especially, if you think about sort of funding this potential deal in the Northeast that you are working on, how does – and how does that impact your willingness to do deals?

Christy, I will take that. Again, similar to what Mac said about developments, we haven’t changed how we think about, basically sources for our investment opportunities. If you think about how we provide guidance on our business model, it’s not dependent on acquisitions. We do have one that is under our control/under contract in the Northeast, which has been for a while. I will remind you that we have the forward equity that we priced last March, a very nice attractive price of close to $80 a share that we can draw down to fund that acquisition. And then going forward, again nothing has changed, same strategy we have always had. We will access the equity markets when it’s priced attractively. And I think we typically will say it’s not our job to tell you what’s NAV, but I know right now that we are trading at a discount to NAV. I think that’s pretty obvious. So I would not say that our equity is attractively priced today. So today, we wouldn’t be accessing that market. So we would be sourcing from dispositions to the extent; one, to fund our development spend, which is what our guidance incorporates and we do have an acquisitions team and we find it a very compelling investment opportunity which has attractive and future NOI growth profile that is accretive to what we have, so quality accretive, growth accretive. We could potentially increase our dispose to match fund that.

But the key point is we do not need to access the equity markets to continue to invest particularly in new developments and redevelopments or to extend any acquisition between free cash flow…

I neglected to mention free cash flow. So free cash flow this year will be approximately $150 million and that is growing at a pretty good pace in future years.

Got it. Thanks for the time guys.

Thanks Christy.

Our next question comes from Nick Yulico from UBS. Please go ahead.

Hi, good morning. This is Greg McGinniss on for Nick. 2017 synergies appear to be kind of accelerated from prior guidance, it looks like you are actually achieving $27 million of actual savings versus run rate savings, just wondering how you are able to achieve this goal so quickly?

Actually, it was interesting as we still have some open positions. So as part of the merger, we had to add 65 positions to Regency and we have not filled all of those positions. So our updated guidance does, at the midpoint, we have increased G&A approximately $1 million. And the fact of the matter is, is that on day 1, a substantial amount of the G&A went away. And as we go through the year, we fill those positions we are going to get closer to what will be the run-rate.

And then is there any expectation, I mean, you guys have – I know you only had couple of months to be looking at this merger, but is there any expectation for more savings potentially?

We had pretty rigorous analysis when we actually evaluated the merger and feel really comfortable with the $27 million of synergies. And then going forward, we will see the company grow as it typically would.

Great. Thank you.

Thank you, Greg.

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

Hey, good morning everyone. Just sticking with the integration and synergies as part of the discussion, do you still anticipate sort of the full run-rate to be in place by the end of the year or do you think that can be sooner?

I think that with our guidance, you will see that we have really already achieved the substantial majority of that $27 million. So, it’s in place and 2018 will be a typical run-rate for Regency.

Okay. And then on the integration, you mentioned that was going quite smoothly. I guess, at this point, what’s left either from a back office perspective, you mentioned still needing to hire a few more bodies. I am just curious what’s left in terms of the integration? And then was there any issues in terms of involuntary turnover or anything like that as a result of the two companies coming together?

I will answer the last question first. We really – we are really pleased with the retention of the people that brought – we brought with us from Equity One. Equity One had a great culture and I think that their employees and their team members could see that they were joining a team that also had a great culture. So, hats off to David and Matt and Mike for that and that’s gone extremely smoothly. In fact, we have most of them in the office here today for an event. And in terms of the – what’s left to do, most of it is back office. Again, we do have some hiring to do in the field, but very little because we brought – of the 65 positions, approximately 40 of those were in the field/supporting the field and those people we did bring over from Equity One. The new positions that we had to hire were back office accounting, because we are centrally located here in Jacksonville and their accounting department was in Miami and New York. Offered relocation, we just didn’t have many takers. I can’t imagine why Jacksonville is a wonderful place to live. And – but what’s left is mostly back office. The purchase accounting is really complicated. It involves third-parties. I think, as most of you know, we received our third-party inputs, if you will, after the April 1. So, it’s been a really short timeline and right now, we are still working on it. So, our Q will have provisional purchase accounting. I think we mentioned that in our – you will see that when you read the Q. So that’s what’s left to do. And again, it’s complicated. The team has done tremendously well and really sprinting to get everything finished and integrated and we are really excited about the future of this company.

Okay. And just one last question for me on the same-store NOI guide that was increased a little bit from the prior fairly unique versus what a lot of your peers are saying and obviously, you have got the quality portfolio to support that. But I am just curious, what’s being embedded in the future outlook in terms of bankruptcies that we may not have heard about yet or store closures? Just curious if that’s changed at all since your prior guidance.

We have incorporated obviously tenant fallout/bankruptcies, future bankruptcies into our guidance. We – in the first half of this year, we are obviously feeling the effects of the ‘16 – the ‘16 bankruptcies. So, the first quarter, in fact, the impact from bankruptcies was 70 basis points. As we get towards the end of the year, we are going to actually – those leases that we talked about – that I talked about, being 95% released, those will begin to rent commence in the latter half of the year. So, that will help our same-property and then at the same time, we are expecting that we may have some fallout. So incorporated in our guidance is about 25 to 50 basis points of total impact from bankruptcies, flat more or less from the ‘16 and then additional for this year.

Okay, thank you very much.

Our next question is from Wes Golladay from RBC Capital Markets. Please go ahead.

Hey, good everyone. Can you talk about what’s going on, on the small shop? I mean what are the local tenants doing? We hear everyday about all the national retailers that are struggling on the big box side, but just curious if it’s the exact opposite going on with the small shop tenant with the occupancy picking up nicely year-over-year?

Wes, yes, I’ll answer that question. It’s Jim. As we look at our key health metrics for our side shop folks, accounts receivable, bad debt, move-outs, those metrics all remain at relatively low levels, but we are obviously closely monitoring those. Our leasing pipelines continue to remain solid. We are seeing best retailers are making more disciplined leasing decisions, which I think – we think is very good, but it’s also quality, not quantity kind of attitude today. So overall, I think the side-shop program today is consistent to what we have seen in the past.

Yes, being 92% leased is a historically high level it’s not the highest we have ever been at, but it’s historically high level and I think it is – it reinforces, as you indicated, the quality of the portfolio.

The only thing I would add is and Lisa touched on it, I think the production folks that came over from Equity had shared a very, very similar vision to us and both teams have done an excellent job over the last several years on the side-shop leasing.

Not only leasing the space up, but upgrading the quality of the tenants. In Regency’s case, this is our fresh look initiative and approach.

I feel like I have to take this opportunity to reiterate what I said in the prepared remarks, the fact that on a combined portfolio basis, our shops year-over-year, up 70 basis points is pretty impressive and hats off to the team.

Yes, we are not taking anything for granted.

Okay, yes. And then going back to the bifurcation of the winning centers versus the losing centers, are you already starting to pull meaningful more amount of tenants from the adjacent centers or is it just all people just looking new retailers getting into the market?

We are primarily expanding retailers, because we have already – for the most part, already attracted a lot of the better retailers, not that we aren’t able to take retailers from other shopping centers, but Jim, I would say, it’s primarily retailers opening up additional stores in the market or going into them.

Okay, thanks for taking the questions.

And our next question comes from Michael Mueller from JPMorgan. Please go ahead.

Yes, hi. Looking at the current development, redevelopment pipeline, it’s about $500 million, 50:50 split between new and redevelopment. If you are looking out over the next say, 3 to 5 years, do you think you will roughly have that same sort of split?

Yes, it’s a little early to say that, but what I will say is what you like about Equity One – one of the things we really like are some of these tremendous embedded opportunities within the portfolio. So a good chance that, that could be the case. In many of the specific opportunities, the range of how extensive of a redevelopment you could do varies and that will depend on market conditions, but I would not be surprised if it moves that direction and our teams are setup to take advantage of that. That’s one of the great things about our platform is our development teams are also the redevelopment teams and we are in the field and we are prepared to take those out. So, we certainly would be disappointed if that was the case. We would be equally as pleased.

Yes. And from a cycle standpoint, I think adding this, as Mac alluded to, having the redevelopments come on, we may see a downturn in ground-up development opportunities and having these redevelopment opportunities will be a great fit for our development program.

Got it, okay. And then I guess on Serramonte, I mean how are you dealing that, is that a long-term hold for Regency or at least in the current form or it’s fully owned?

I will be saying this is, is that obviously, given its size, scope and nature during our underwriting and since closing, Serramonte has garnered a tremendous amount of attention from our market teams and from our top management teams, so let me start off with that. Secondly, let me – which I think is also very obvious, it is located in a very dense area within 10 miles of San Francisco and strategically located between the Silicon Valley and Downtown San Francisco. So it’s a fabulous location with an unbelievable amount of traffic. I think that’s important to note. The center is performing well. Our mall tenants’ stores average $560 per square foot. Target is one of the best stores in the chain for Target. I will also say that the expansion that’s underway with value oriented retailers on the exterior of the mall, like Nordstrom Rack and TJX and Ross is going to be a great addition. You may also note that Dave & Buster’s recently opened up in the center and it’s one of the top Dave & Buster’s in the chain. The Macy’s and the J.C. Penney are two of the best locations in the mall. You may also be aware that Macy’s is closed within – I think, within 5 miles or 10 miles of Serramonte, two of their other stores, there was announced closings of those. And that the J.C. Penney store that they just opened up Sephora and it seems to be anecdotally performing extremely well. So the center is a good center and I think it’s continuing to get better and it’s a good center in a fabulous location and we feel very, very good about its future prospects.

Okay, thank you.

Our next question comes from Craig Schmidt from Bank of America. Please go ahead.

Yes. Thank you. Prior to the merger, the small shop occupancy of Regency versus Equity One was separated by about 300 bps, it sounds like you might have closed that already, but my assumption here is that at some point, the Equity One will reach the level of Regency and if that’s the case, how long do you think that takes to achieve?

Craig, this is Jim, I will answer that. As I have mentioned, I think we have had excellent leasing progress from both companies over the past several years on the side shop. I think we are obviously operating at high levels closing in on 92%. We think there is probably some opportunity to grow that, but really I think we are nearing full capacity in that side shop regime.

We are focusing on continuing to increase that, but for us, by far investment partners, our shareholders, they expect anything more than that would not be appropriate. But obviously, the team is focused on taking 92% up to 93%, but any expectation, as Jim indicated would be – wouldn’t be warrant.

Okay. And then just the winning centers versus losing centers, have you ever measured a benefit of maybe sales transfer when you saw a neighboring center close and how – what lift you might have gotten at your own center?

I don’t think we have measured that. It is going to be interesting to see how this plays out. But I do think there is going to be this acceleration that’s occurring and bifurcation between winning and losing retailers and wanting to own and owning, fortunately shopping centers that are going to attract the winning retailers because they are convenient to the communities and neighborhoods that the winning retailers who excel at being relevant to the customers want to be located.

And do you have a sense of why that is accelerating, because we have been overstored for quite a while now?

I do think that that the combination of – my sense is and let me say it, it appears like there may be some acceleration that’s occurring and that’s kind of the – what we are believing is going to happen, but there is no guarantee that that will happen and kind of as we have always said, we are not going to be immune to the overabundance of space, e-commerce or retailers are not going to, but we think we are in a very good place to continue to attract the better retailers. And to – and I think a couple of things just keeping it 96% leased, almost 92% side-shop occupancy and as Lisa has now said twice, 95% of the space – first of all, we didn’t experience the bankruptcies – that a lot of the bankruptcies occurred, but that – where we were impacted 95% of that space has either been at signed leases or in final stages of lease negotiations. And one last thing, our ongoing conversations with our tenant customers reinforces our points of view, whether it’s a grocery store, side shop retailers or the value oriented retailers that we work with.

Okay. Congratulations on completing the merger.

Thanks Craig.

Thanks Craig.

Our next question comes from Linda Tsai from Barclays. Please go ahead.

Yes. Hi. Recognizing that your outlook for the impact from bankruptcies in 2017 is low relative to your competitors and this is the result of operating high quality properties, I am just wondering, when you compare the closures that sort of ‘16 versus ‘17, are there any observations you can draw between the types of centers where the closures occurred maybe as it relates to the size of the center or whether it was grocery anchored or are there any other characteristics worth noting?

I mean I will let Jim add, but I mean just thinking about where our Sports Authorities were located last year as well as Eastern Mountain Sports where we had other bankruptcies plus this year’s, I mean it’s – there is really no specific trends. I mean they are across the country. As you know, we are mostly grocery anchored, so most of them are in grocery anchored centers. One thing I can say, it’s going to be in centers with that have secondary anchors because they have got anchor space, but beyond that…

Yes. Beyond that, I think so far we are seeing more small shop RadioShack and Payless. We have only got two boxes of Gordmans and Overton’s that – and in both of those cases, we had – we are currently negotiating replacement tenants, so we are not seeing the big Sports Authority, which have – had a pretty big impact last year so.

I mean, I will reiterate what Hap said in his prepared remarks and that is that there is going – that’s not just winning – it’s not winning and losing centers, it’s really winning and losing retailers. And our strategy and what I believe we own are the centers where if there happens to be a losing retailer, which Sports Authority was one, bad news is good news. That’s our strategy and that’s the real estate that we want to own. So it’s possible to have a failure in a great center and you know what, we welcome that.

And we are not losers. We haven’t been perfect. We won’t be perfect. We are going to be impacted, but our track record is pretty gratifying of navigating those issues.

Thank you. This does conclude the question-and-answer session. I would like to turn the floor back over to management for any closing comments.

We appreciate everybody’s time and interest in Regency. And I hope that you have a very good day and rest of the week. Thank you very much.

Thank you. This concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time.