Earnings Call: Q2 2019

Aug 2, 2019

Good morning, ladies and gentlemen, and welcome to the Federal Realty Investment Trust Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Leah Brady. Ma'am, you may begin. Good morning, everybody. Thank you for joining us today for Federal Realty's Q2 2019 earnings conference call. Joining me on the call are Don Wood, Dan Gee, Jeff Berkes, Wendy Seher, Dawn Becker and Melissa Solis. They'll be available to take your questions at the conclusion of our prepared remarks. A reminder that 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 in our forward looking statements, and we can give no assurance that these expectations can be attained. The earnings release, the supplemental reporting package that we issued yesterday, our annual report filed on Form 10 ks and other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations. These documents are available on our website. And with that, I will turn the call over to Don Wood to begin our discussion of our Q2 results. Don? Thank you, Leah. Good morning, everybody. Continuing to reliably grow bottom line results despite headwinds remains our focal point and in the 2nd quarter didn't disappoint. FFO per share of $1.60 compared favorably with our internal expectations, The Street and $1.55 recorded in last year's quarter. Growth over last year's quarter was 3.2%, the 30th consecutive quarter of increased FFO per share, excluding of course a couple of debt prepayment charges over that time. No excuses, just bottom line growth. Comparable property income grew at 3.5%, largely the result of some big rent starts from proactive re leasing initiatives like Anthropologie at Bethesda Row, Muji on Third Street Promenade and Bob's Furniture at Los Audienes with a little help from lease termination fees. Lease termination fees are clearly increasing, if not in number than in amount, as numerous retailers are reevaluating the business plans and in some cases negotiating out for a plethora of reasons. When it's economically advantageous for us to engage, we do. When it's not, we don't. Lease termination fees were $2,200,000 in the 2nd quarter compared with $1,600,000 in last year's Q2 and contributed 45 basis points to the comparable property income number. Sometimes the comparison, which includes all sources of property level cash flow in all periods presented is positive, sometimes it's negative, but it's always an integral part of our business plan and a clear demonstration of the strength of our contracts. Lots of deals done in the Q2, in fact, at 113 new and renewed leases for comparable space, more than we've ever done in any 3 month period before. There is clearly pressure on pushing rent overall, but overall we're having pretty good success. Those 113 leases represented 379,000 Square Feet at an average rent of $42.68 a foot, 7% higher than the $39.75 being paid by the previous tenant. As you might expect, it had the most success meaningfully increasing rents at those shopping centers that have been or are well along in being redeveloped and repositioned for sustaining their leading market position. Properties like the Assembly Square Power Center, where the success of the adjacent Assembly Row mixed use community has clearly increased its value. More to come on that power center in the coming quarters by the way. Or Coconut Grove in Miami, where the anticipation of a completely new CocoWalk is translating into higher rents, net of capital at both the redeveloped property and in the adjacent neighborhood. We've got other examples where we'll roll back rates, in fact, more examples than at any time since the 'nine, 'ten timeframe, but always for the solidification of the merchandising base to create long term value at the shopping center overall. Those examples serve as a pretty good microcosm of the shopping center leasing environment for us today. The bar has been raised on the product and place being offered and the importance of a strong location has never been more critical to a retailer's decision. We hear that from retailer after retailer. The G and A spike in the quarter is substantial at about $3,000,000 Roughly half of that, $0.02 a share, is due to the accounting change this year affecting the capitalization of leasing cost, while the rest of it is attributable to strategic investments in our people and a better and more efficient computer systems. So let's talk a bit about future growth generators and a quick update on CocoWalk, Assembly Row Phase 3, 700 Santana Row, Santana West and Pike and Rose Phase 3. First of all and importantly, all five remain on budget and on schedule with the possibility of increasing scope and profitability at CocoWalk if we can find a way to get to the left side of the center earlier than we had anticipated. We'll know by next quarter. That's good news there. All 5 are well underway with Santana West just recently so and require nearly $1,200,000,000 in total capital over the next 3 years. Dan will talk about how well the balance sheet is positioned to handle that in a few minutes. So the initial $80,000,000 or so of annual incremental cash flow to come from those investments will break out roughly as $55,000,000 from office tenants, dollars 15,000,000 from residential tenants and $10,000,000 from retail tenants at these already established mixed use communities. Splunk's full building deal, Puma's North American headquarters, Regis' space concept, Boeing Capital's Kokowap lease and even Federal Realty's new headquarters serve as a great foundation on the office side. On the retail side, strong pre leasing at all projects gives us confidence that we'll be enhancing the places that we've created, nurtured and unabated demand for residential product and assembly all serve as confidence building indications of our continued success at these 5 A plus locations. By the way, and certainly worth recognizing that the boutique hotel that many of you stayed in during our Investor Day in May, The Row Hotel at Assembly Row was just named one of the best hotels in the world by travel and leisure. The ranking was based on a hotel's location, service, facilities, food and overall value. Pretty cool and representative of the type of quality that we aspire to. Okay, but what else? What's new? Darien, Connecticut. Our investment committee and Board approved moving forward with $115,000,000 mixed use redevelopment to our Darien Shopping Center. The plan calls for a newly merchandised 120,000 square foot ground floor retail environment with 122 rental apartments above. Groundbreaking is expected late this year with stabilization in 2023. We expect to yield out of better than 6% cash on cost and create a hugely upgraded place directly at the Norown train station in this affluent suburb. As more than a few of you on this call are quite familiar with this location, we expect that you'll monitor our progress closely. At San Antonio Center in Mountain View, California, some of you have seen from public documents that we have an agreement to sell under the threat of condemnation to the Los Altos, California School District, roughly 11.7 of our 33 Acres San Antonio Shopping Center for $155,000,000 That 11.7 acres will be the site of a new school and will be financed by the municipality primarily with public bonds. We paid $62,000,000 for the entire 33 Acres shopping center at about a 6 cap 4 years ago. Please let that sink in, in terms of what that says about the implied land value in Tech Centric Silicon Valley. We won't be able to keep the entire $155,000,000 as it is our responsibility to use a portion to ultimately pay out existing tenants on the site who will be displaced by the new school. As we're in active negotiations with those tenants, we won't estimate that payment at this time, but it will be significant. Closing on the $155,000,000 is expected late this year. In terms of acquisitions and dispositions, we're getting more active. During the Q2, we closed on the sale of both Free State Shopping Center in Bowie, Maryland to a private buyer and a 4 acre portion of Northeast Shopping Center in Philadelphia to grocer Lidl for combined proceeds of $80,000,000 We also expect to close in the 3rd quarter on the sales of 2 California assets for combined proceeds of nearly $70,000,000 So all told, that's about $150,000,000 in disposition proceeds below a 6 cap being deployed in identifying acquisitions and developments with far better growth prospects. On the acquisition side, we've got a few deals tied up and in due diligence phase in our existing markets on both the East and West Coast for a combined $250,000,000 one of which is in the Primestore joint venture. Closings on all are expected later this year when we'll be able to go through detail and rationale more completely, assuming due diligence goes as expected. We're very excited about those opportunities. And that's about it for my prepared remarks today for the quarter. Let me now turn it over to Dan for some additional color and then open the line to your questions. Thank you, Don, and good morning. I'm going to change up my usual order of things and start my remarks with Federal's dividend. At our Board meeting yesterday, we increased our dividend again by $0.03 to $1.05 per share per quarter or $4.20 per share annually, roughly a 3% increase. That marks the 52nd consecutive year of increasing dividends at Federal. Let that sink in. Federal has been increasing its dividend every year since 1967 at a compounded annual growth rate in excess of 7% over those 52 years. That's through economic cycles, the ebbs and flows of retail, recessions, hyperinflation, I could keep going. This level of consistency and growth is exceptional and unparalleled in the REIT sector and points to the critical importance of driving bottom line growth year in and year out. No excuses. But now let's move on to the balance sheet. From a capital structure perspective, we are extremely well positioned to fund our roughly $1,200,000,000 development pipeline as we move ahead to execute on the growth focused and diversified business plan that we outlined on our Investor Day in early May. Our credit and liquidity metrics are as strong as they've been in years. At quarter end, our net debt to EBITDA stood at 5.1 times versus 5.4 at 1Q. Our fixed charge coverage ratio is up to 4.4 times versus 4.2 at 1Q. We've extended our weighted average debt maturity to 11 years. We had nothing drawn on our credit facility at quarter end and we had over $100,000,000 of cash on hand. And I would like to note that we achieved these improved leverage levels without raising any common shares during the quarter. As we have outlined previously, over the long term, we intend to keep our credit metrics in line with our A- rating with net debt to EBITDA below 5.5 times over the long term and fixed charge coverage above 4 times. As you can see, we have organically created meaningful excess financial capacity. We manage the balance sheet to position Federal to outperform throughout the cycles we inevitably face in our business. As Don outlined, we successfully executed an $80,000,000 of asset sales during the quarter with another $70,000,000 under contract blended at a cap rate in the high fives. Including the expected net proceeds from the San Antonio Center condemnation sale expected by year end and the balance of our condo sales at Assembly and Pike and Rose, we have the prospects for roughly another $100,000,000 of net proceeds, which combined with the executed and under contract dispositions, totals roughly $250,000,000 in net asset sales for 2019, which would bring that blended cap rate down below 5%. This activity meaningfully enhances our sector leading cost of capital and materially derisks our roughly $1,200,000,000 development pipeline. As I just mentioned, we continue to successfully execute on the sale of condos at Assembly Row and Pike and Rose. Of the 221 total units, 210 have closed with another 7 under contract leaving just 4 units left to sell. Further demonstration of the strength of both of these signature mixed use projects. We're also active on the debt capital markets front recently, opportunistically issuing $300,000,000 of 10 year unsecured notes at 3.22 percent paying off our $275,000,000 floating rate term loan that was coming due in November. Further, in July, we recast our unsecured revolving credit facility, increasing its size from $800,000,000 to $1,000,000,000 extending its ultimate maturity with options out until 2025, while also reducing the interest rate spread and lowering the cap rate on our borrowing base. Our capital structure could not be better positioned. A quick review of the numbers for the quarter highlights the record setting $1.60 of reported FFO per share, which was a penny above consensus. The numbers in the Q2 were driven primarily by continued benefit from our proactive leasing activity, lower real estate taxes and demo expense and another solid quarter for term fees, offset by higher G and A and continued drag from our redevelopment and remerchandising initiatives of properties both in the comparable and non comparable pools. As Don mentioned, our comparable POI metric came in at 3.5% for 2nd quarter as well as for the entire first half of the year, well ahead of our expectations. Net benefit from proactively leasing activity boosted the result by 135 basis points versus 2Q 2018 and was better than we had forecast. We had a modest boost from term fees of 45 basis points. We also had a tailwind from Mattress Firm bankruptcy payments of 40 basis points. Although let me highlight that we also again faced headwinds of almost 85 basis points of drag from the repositioning programs at some of our larger assets like Plaza El Segundo in LA and Huntington, on Long Island. As a result of another strong quarter, we are increasing our forecast from about 2% to a range of 2% to 3%. With respect to FFO guidance, we are affirming our range of $6.30 to $6.46 per share. Let me add some commentary here. I just wanted to remind you all that the timing of the start of straight lining rents at 700 Santana has been pushed back into the Q1 of 2020. We discussed this point on the last quarter's call. However, there is no change in the actual cash rent start which remains in the Q3 of 2020. Given the additional opportunities on the west side of CocoWalk that Don alluded to, we expect additional drag versus our forecast at CocoWalk for the balance of the year. Plus, we will have some modest dilution from the $80,000,000 of asset sales completed and the $70,000,000 under contract, which we expect will close in 3Q. This will be roughly a penny or 2 of dilution, which was not reflected in our initial guidance. Let me comment on G and A, which was up for the during the Q2. However, there were some one timers in there. We still expect G and A to run at $10,000,000 to $11,000,000 per quarter per our initial guidance in February. Before I turn the call to Q and A, let me build on one of the points alluded to earlier in the call. The fact that we have grown FFO per share for 30 consecutive quarters and the fact that our guidance reflects annual growth in FFO once again, which will give us 10 consecutive years of FFO growth. This consecutive consistent focus on bottom line growth by management is what drives Federal's performance to the top of our sector specifically versus our peer group, the Bloomberg Shopping Center Index. Over the last 3 years, FFO growth per share has exceeded our peers in the index by 8.2% per annum. Over the last 5 years, that bottom line growth represents 6% per annum outperformance over 10 years at 7.7% higher FFO growth. Over 15 years, the numbers are similar. Other metrics, while instructive, simply shouldn't matter as much. And with that, operator, you can open the line for questions. Thank And our first question comes from the line of Alexander Goldfarb with Sandler O'Neill. Your line is open. Good morning. Good morning down there. Just a few questions. First, certainly appreciate the leasing comments that you guys talked about, but maybe you could just address a few of your tenants and how you're thinking about bad debt for the balance of the year, Notably, obviously, Bed Bath has been in the news over the past few months and ITEC has just come in the news recently for potential bankruptcy. So how are you guys thinking about bad debt year to date versus budget? And what are you thinking of for the balance of the year? I think bad debt, kind of is playing out consistent with what our guidance was at the beginning of the year. Alex, I think that we're probably getting hit a little bit less than I think that we had forecast. But look, there's a lot of news out there and we've got some caution outlined for the balance of the year just because some of those tenants that you alluded to. But I don't think we expect any near term impact from a tenant like Bed Bath and Beyond at this point for the balance of the year and even into next year. I will tell you, Alex, though, when you raise Ipic, it's obviously a name that's been swirling around for months. We have had proactive other companies coming to us for that space. I don't think we'll have any issue there to the extent it does happen. Hope it doesn't, hope they work through it. And all because I do think it's a great product, but again in that real estate, I know you know that well, that won't be if it is vacant from them, it won't be vacant for long. Okay. And then the second question, Don, is just on thinking about Fresh Meadows, you guys had talked about identifying that with mixed use residential, clearly change of rent regulations here in New York. So just thinking about how you guys are thinking about the residential your residential plans, if those have changed for that asset? And then just more broadly speaking, you highlighted the Santana I mean San Antonio condemnation. Is your view that some of these projects where you had sort of land banked may increasingly others may look at those or your plans may change as municipalities change regulations or you guys feel pretty comfortable with residential Fresh Meadows or your longer term redevelopment plans at San Antonio? Yes. Let's talk about both those things. They're very different obviously. First of all, in Fresh Meadows, Queens, we're not at all developed in terms of a plan, what that plan would be, how it would be priced, how it would be entitled, all of that. The point of all that discussion at or that piece of the discussion at the Investor Day was simply to identify something that we have identified and are looking at hard to be able to intensify the use on it. Obviously, it's an amazing piece of land to be able to do that. How specifically that will happen is in the early stages of development. So whatever happens with rent control or anything else in New York will play into that conversation in the early stages, not something that has to be retrofitted later on. So more to come in time, but put that in the back of your head, if you wouldn't mind. In terms of San Antonio Center, look, there are a few areas of this country where economic activity is simply off the charts. Obviously, Silicon Valley is one of them. Obviously, Boston is another. Yes, that's great that 2 of our largest investments in total are in those 2 markets. Things happen on great land in markets where demand exceeds supply. And I'm not trying to give you a Economics 101 course, but that's what that is. And with the amount of people that are moving that that need to be educated in the primary school system, look Los Altos needed a place. They couldn't find what they wanted. They went through effectively with their neighboring town of Mountain View, a threat of condemnation. And that means market value. And market value is a whole lot more than what market value used to be. None of that stuff shows in any of Federal Realty's financial statements or cost basis company like every other company. But when you're in places like that, that while that particular one is exceptional, the general concept of land being worth a whole lot more than what we paid for is not unusual. And that's really what I'm pointing to. Whether that happens again or not anywhere else, I don't know. But it certainly factors into what it is that we how it is that we feel about future investing on our properties. Thank you, Don. Thank you. And our next question on the line is going to be from Christy McElroy with Citi. Your line is open. Hey, good morning, everyone. Don, just on Darian, and I'm obviously one of those people that's going to be checking on it as the train passes. Will Stop and Shop be part of the new 122,000 square feet of retail or what do you envision for the retail there? And maybe you could provide a little bit more color on what makes that redevelopment complex given the location adjacent to the metro stop? I thought I heard something about upgraded plates. Yes, let's talk. I cannot tell you how excited we are about this, Christy, and particularly because we're trying to serve you, your neighbors and your community. Basically, what Stop and Shop will not be part of the long term deal there. We were able to cut a deal with them to have them leave, which obviously causes us dilution as that happens, again, proactively releasing. But I know I've shown you and walked you through Wildwood Shopping Center at the corner of Old Georgetown and Democracy here in Bethesda. And I know I've talked to you about the economics, which are tremendous at Wildwood. And that's because it is a community oriented high end or higher end lifestyle, if you will, type center that we see amazing similarities to in terms of demographics and other factors at Darian. So that equinox at Darianne will remain there and it's in the middle right now being completely redone as part of our deal here. You'll see a Walgreens here. You'll see great restaurants here, I hope. You'll see some cool shops. And you might see, we'll see if we get there or not, a specialty grocer just like Wildwood. If that's the case, at a train station directly at Narott and which by the way is going to be completely redone and rebuilt by the town of Darien, which is just awesome in conjunction and along the same timing of what it is that we're doing. If you think about it, your community is going to feel a whole lot different. The 122 apartments above does make that different than Wildwood. Those apartments will all be parked underground on a tray underneath so that the retail and that ground floor place will be all surface parked, which is just as convenient as it gets in a suburban community like Darien. So I hope that's enough for now. I'll absolutely share the plans and some of the pictures of what this is going to look like as we go forward in the next few weeks, but we're really excited about getting underway late this year. That's helpful. Thanks. I look forward to seeing the changes. And then Dan, I think you had originally expected closer to 1% same store growth in Q2 and Q3. Obviously, in light of the new range, how are you thinking about Q3? Are you still expecting somewhat of a dip there? And then just a follow-up on Alex's question with regard to the bankruptcies and the credit loss. I think you had originally had an expectation for 50 basis points to 60 basis points of known bankruptcy impact and then another 100 basis points of bad debt reserve. How has that changed with the new guidance? Christy, before Dan talks, I just want to make sure that you're clear that it's not same store growth. But this is comparable POI. It's a different concept that includes other stuff. I just want you to know that. I know you'd like to make it comparable to everybody else. It's not. Understood. It's our metric. Dan, please go ahead. Yes. I think just to give you a little bit of color on some of the components there. I think we did outperform. Some of it is what was timing bringing forward some of like demo expense was pushed out a quarter. We had other things that were pushed into the quarter. So you'll see a little bit of muting on our same store growth over the course on a quarterly basis over the balance of the year. Probably something with a one handle in the Q3 is what we have. What Kai currently have in my model and something in the kind of with a 2 handle, maybe a high 2 handle in the last quarter, Q4 of the year in terms of trajectory for the balance. I don't see really any difference in terms of the impact, I think, on bad debt or what we had with regards to unexpected vacancy, rent relief and so forth. We did have the delayed impact in Q4 of last year from bankruptcies that remains with us. As we're working to release some of those bases, making progress, but it's slow. And we're also, I think, getting hit kind of the way we expected. Bad debt is coming in kind of as we forecast. So I don't think we'll see much difference in how we see that playing out for the balance of the year. Thanks, Brad. Appreciate the color. Thank you. And our next question on the line is going to be from Craig Schmidt with Bank of America. Your line is open. Thank you. I wonder if you guys have been in compensation with Hudson Bay and I'm thinking about Bally, Kenwood, Lord and Taylor and is the opportunity if in fact the Lord and Taylor division gets shut down? Thanks, Craig. It's Don. I don't want to go into the deals that we're talking about at that with Hudson Bay at this point. We are talking. We are working through that deal. It is that piece of land certainly is a wonderful place for us to do more than is there. There's no question about it. It's high up on our list. And we do need to make sure that we are squared away with the leaseholder on that site before we talk about what it is that we're going to do. Rest assured, in this portfolio, it is one of the most underutilized pieces of land in a very urban environment, if you will, as it sits right in Lower Merion directly across from City Avenue or on City Avenue. Okay. Thank you. Thank you. Our next question comes from Vince Tibone with Green Street Advisors. Your line is open. Hey, good morning. I have a few on the lease termination fees. Were you expecting to receive this level of term fees at the beginning of the year? Or was there some unexpected tenant fallout? And then also to the extent you can discuss, could you provide the retailers or merchandise categories causing the fees? Sure, Vince. Let's talk about this in a couple of ways. First of all, the don't make the direct distinction that a lease termination fee is always a failing tenant. There's a whole lot of reasons, particularly today and this is what I do see more than it used to be. There's a whole lot of reasons that companies are taking a pile of their money and effectively allocating it to use to reposition their businesses. So I've got a there's a couple in here from of good size from a restaurant company that is getting out of the Washington DC market. And that I find that one particularly interesting, Vince, because here's a case where a company grew. And today it seems to me I don't know whether I'm right or wrong on this, but it seems to me companies are more willing to allocate money and pull the plug out of regions or parts of their business that they want to change. Whereas maybe a few years ago they worked through it a little bit more, even if it wasn't working out as well as they can. There seems to be more of a feeling from my perspective and that's really a subjective thought to be able to move some things out. So yes, I do think we're seeing more of that. Now do we have to deal with them? Depends. Mostly, no. Because mostly our contracts are really strong. And if you sit and you look, let me give you a statistic that I think you'll find pretty interesting. Over the last 18 months of all the lease terminations that we've agreed to and by the way there are many that we have not agreed to, so we didn't do them, right? But of all that we agreed to, we've leased up nearly 3 quarters of them at this point, okay? It's we're talking about $9,000,000 of lease termination fees. And effectively, given a pass to 4 $1,000,000 almost $5,000,000,000 of rent out of that. Now we're replacing it with more rent and those termination fees therefore equate to more than 18 months of rent that's going away, more rent with capital still makes sense incrementally going forward. There are other lease termination fees where that wouldn't be the case and we won't engage in those conversations. So I hope that gives you a little more kind of color around what is not just about a failing tenant. It's really about changes to business plans that almost every retailer and restaurant company is going through today and more and in my view at least, more likelihood to be able to throw money at it to get out of contracts. That's really helpful. Thank you. One follow-up on that is, I would just say kind of in general, when a tenant requests to leave early, what percentage of the time would you say you work with them and reach an agreement versus forcing them to carry out the lease? Yes, I don't have a percentage. I don't know the answer to that question. We don't have a policy. We have a how to create value on real estate you know margin. So effectively as we look through each one of those, we consider what the choices are, where the backfills are, do are we able to now get it the spot. I mean Stop and Shop at Darien is really a great example. Certainly, if all we cared about was comparable POI, we certainly wouldn't be taking out that Stop and Shop before the 2024 lease expiration. We can get at it and do something about it. We're willing to have that conversation now. So every one of those is different. And I kind of when I listen to sometimes the conversation which makes it all sound simple and straightforward, I just don't think that's reality. Great. Thank you. You bet. And our next question comes from the line of Donnelly with Wells Fargo. Your line is open. Good morning, guys. First question actually on a specific asset. One is, it's Queen Anne's Plaza actually near me. You guys have a chunk of excess land behind that property and I think it's been marketed for outparcel development. But I'm just wondering is there an opportunity on that site to put residential behind the shopping center? Or is it really strictly zoned to retail? First of all, Jeff, congratulations. That is absolutely the first question in my 21 years here about Queen Anne Plaza. Thank you for asking that. But it is funny that you're asking because we're looking. And whether the numbers can work or not, we don't know yet. But there is excess land and importantly there is a community there, a township there that would be very interested in us to incrementally invest. But again, it's got to make sense. It's got to from an IRR perspective, it's got to work. And I don't have an answer to that yet, but I love that you asked the question. And maybe as a follow-up, more broadly is what's the reaction of municipalities and I know it's probably case by case, but what's the reaction of municipalities these days to redevelopment and densification? I know you don't have many centers facing the same issues that maybe some of your cousins say in the mall sector are facing. But nevertheless, you're probably speaking to the same types of counterparties. Have you found that planning and zoning boards have been more flexible or creative and see change as a way to protect and improve their tax base? Or are you finding that some of these municipalities are somewhat resistant to change? Yes and yes. When I asked the when I answered Vince at Green Street a few minutes ago about the standard answer on lease termination fees and I couldn't, it's even harder to give a standard answer with respect to municipalities and how things work out. I mean, I can give you an example that you're well aware of in Summerville, Massachusetts where it's been an incredible partnership. And I can probably give you an example in Rockville, Maryland where it has not been an incredible partnership during these same type of economies today, years ago and in between. So it really does depend. What I will say is, it is absolutely critical that it was critical for us. I don't know about everybody else, but for us it really was critical for us to decentralize the company to make sure that, yes, we may be paying a little bit more in G and A, but effectively an answer to your question, unless you're local, unless you're right there, unless you've got those relationships that you can build on and you're not some big outside national company that is faceless. It's really hard, really hard to get what the entitlements that you need and the help that's necessary from the community in which you're trying to business in. So I know it sounds like a little bit of a cop out as an answer, but it really is true. It is very dependent. And all you can do is make sure you're as close to the real estate as you possibly can be. Great. Thanks, guys. You bet. And our next question is from Jeremy Metz with BMO Capital Markets. Your line is open. Hey, thanks. Hey, Don, a big differentiator for the company is obviously the mixed use centers and the various other sources of revenue you're driving. As we look at the comp POI, I think those non retail uses are a little under 10% today. It's obviously growing. The challenge is the headwinds in retail, they're well understood. You talked about them in your opening remarks. I was hoping you could maybe talk about the growth outlook for those other sources. We're seeing some solid recovery in residential rents. And as we think about your comp POI this year, the 2% to 3%, we think about 2020, it seems like those other revenue drivers can really increase in terms of impact on that comp POI figure. Any color there? Yes. Well, first of all, let's put it this way, Jeremy. The we spent a lot of time on exactly at this point during Investor Day. I really would love to sit and I don't think you were there. You might have been listening in, but I would love to spend time with you to have you fully understand this. Absolutely on the big mixed use projects, we happen to be in the phase in the decade or decade and a half long period of time that it does to do this stuff. We absolutely are in the phase where we are where we've created the place on the ground floor. We've often started with residential above that ground floor for the 1st phase. And now it's about filling in around the place that we created. And it's likely that the filling in is in search of daytime population, which means office. And so if you look at Santana Row over the almost 2 decade period at Santana Row, where we are today clearly is adding more office particularly in that market. We're not adding office to run away from retail. We're adding office to supplement the place, the 20 fourseven place that we have created. And the same applies to Assembly and the same applies to Pike and Rose. You'll see so sure there will be more of those uses. Sure, but our comparable POI is about the entire company minus things that are in and out, not acquisitions and dispositions and things that are specifically being redeveloped. That's it. It includes all the rest of it. All the company, GAAP, not making selective decisions on what goes into that. So that will be what it will be. But I don't want you to think that we're running away from retail to resi or office solely. Those are parts of our mixed use developments and just where they are in the 15 year gestation period of us building them. Appreciate that. Definitely wasn't suggesting that, just more highlighting, I think, an important differentiation here for you guys. And so just anyway, as a second thought for me, San Antonio, you did mention having to pay out some tenants, it sounds like that will be going away here. So how should we think about that from an NOI perspective in terms of kind of a lost NOI from that center? Yes, clearly when we get a term fee, we lose the income. San Antonio Center. Oh, San Antonio Center. Oh, okay. I can hear the okay. Antonio Center, we'll lose income from the tenants on the 11.7 acres. That will be when we sell the asset. So let's put it this way, Jeremy, dollars 155,000,000 the lost income is below a 2 cap. As we pay out what we think we'll have to pay out, it will still be extremely creative. I don't want to give you the numbers because we're negotiating But it will still be incredibly accretive. So great news in terms of the value. But yes, there will be NOI loss there just like there will be a Darian for Stop and Shop and other things we're going to tell you about over the next couple of quarters. But to us, that's okay. Thanks. Thank you. And our next question is from Michael Mueller with JPMorgan. Your line is open. Yes. Hi. I was wondering, can you talk a little bit about the dispositions you've knocked out so far this year? What may be on the plate? And what the interest has been? How big the buyer pools have been? Have you been getting multiple offers? Just kind of what it's like when you're selling the assets? Yes. I'll give you a basic and Jeff and Dan just jump in to wherever I thought. Free State, for example, which was the most significant one that we've actually closed on and sold, the buyer pool was way shallower than we had hoped. And that's a giant anchored shopping center in Bowie, Maryland of some size. But it's not one of our best shopping centers. And the interest at cap rates with which we would not sell that asset was very strong. The interest at cap rates that we would sell that asset was very thin. And I do think that's somewhat of a change over the past couple of years. Similarly, on assets that are extremely well located, boy oh boy, there's not only been no deterioration. I actually think there's been some coming in a little bit. There's certainly one that just traded out in Santa Clara County, Campbell, that traded at one big old number out there. So it really depends on the asset and the type of assets from my perspective. The smaller assets have some have more interest in them. They're more easily digestible, they're more easily financeable, etcetera. And so that you know, that's kind of a 3rd bucket, if you will, of differences. Jeff or? Yes. No, I think pricing for us though, despite kind of each process is very different, but I think we met our pricing expectations and we feel good about the prices in which we're executing these dispositions and relative to our underlying internal valuations, we feel good about and we think this is really attractively priced capital for us to redeploy into a higher yielding and higher long term IRR assets. So we'll take this short term dilution and look forward to kind of the growth creation that comes out of that. Got it. Okay. That's helpful. Thank you. Thanks, Mike. Thank you. And our next question is from Steve Sakwa with Evercore. Your line is open. Thanks. Good morning. Don, I know you probably can't get into too many specifics, but could you sort of give us a little bit of the flavor for the type of assets that you're looking at to buy in terms of the upside potential, the redevelopment potential, the densification opportunities that you might have? Yes, they're all different, Steve. There's a prime store asset that we're looking at that's similar to what we have more of that strategic plan that business plan. Here we have another one under contract that is adjacent to something that we already own that create a better piece of land, if you will, for redevelopment on it. To the extent we can take that off the we can get that one over to Transom. And we have some street retail stuff that we really like that can serve as the beginning, we hope of a business development arm in one of our markets that we like a lot. So they're all 3 different and they're all 3 part of our stated business plan of how we create real estate value. And I guess just trying to think, I mean, obviously, these are probably highly sought after and competitive. I mean, does your stock come into play as a currency? Or what do you think I guess I'm trying to figure out how do you look at these differently to ultimately be the winning bidder, but still create value? Are there things that you think you see differently in these assets than others? Well, again, so on the Prime store, we see internal growth of that particular asset that is within the Latino community that we hope we can get through That beats with Arturo and the PrimeStore Group running it, that beats the local ownership, if you will, of that one. Of the adjacent property, it opens up redevelopment. That couldn't happen without it. And on the street retail type of stuff, we think we've got rent growth there and we're also hopeful that effectively it turns into more products with IRRs that makes some sense because of the rent growth. In terms of paying for all of those, you know us, we use every tool including assuming debt that's on some of those assets that is attractive. And we don't initially see any need to issue equity associated with it. So they'll roll right in. Okay, great. Thanks. Yes. Thank you. And I'm not showing any further questions. So I'll now turn the call back over to Ms. Leah Brady for closing remarks. Thanks for joining us today. Have a great rest the summer and we will see you this fall. Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone have a great weekend.