Greetings. Welcome to the Regency Centers' first quarter 2017 earnings conference call. At this time, all participants are in a listen-only mode. An interactive question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your cell phone keypad. 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. 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 may be discussed on the call. Forward-looking statements involve risk 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've 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. Thank you for joining us. I'm 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 continue 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 unequal 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. Four, we benefit from a special culture and a deep team of talented professionals.
This compelling combination will grow cashflow 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 40 years I've 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 abounds with 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 rent 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.
If the user vacates, bad news is typically good news, as we're able to attract a better user at higher rents. Finally, our experienced team has a proven track record of navigating major disruptions and 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 management. 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. There is no better evidence that Regency owns the winning shopping centers than our minimal exposure to recent bankruptcies, as well as our substantial re-leasing 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 now turn the call over to Mac.
Thank you, Hap, and good morning. I'm 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 addition of projects acquired through the merger, which our team has successfully transitioned. Our in-process development and redevelopments are expected to generate returns of 7%-9%, 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. We're 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 D.C.
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 in mid 2018 at a 7.5% stabilized yield. Our second development start, Pinecrest Place, is located within a premier infill sub-market 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 foot 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 acquisition to 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-$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 meet 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.
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 spreads 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 a 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. 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 1st, and our team has been focused on a successful integration, allowing us to proceed toward our primary objectives of the merger. One, achievement of enhanced same-property NOI growth. Two, execution of a larger development and redevelopment program. Three, realization of synergies. All of these lead to accretive core FFO results. I'm very pleased to report we've 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. I'd like to discuss our revised guidance in more detail. We've 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, $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 impacts to core FFO from these non-cash items. It can be a bit complicated, but I'll 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 6 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%-4%. The increase is primarily driven by our strong first quarter outperformance. I'd 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'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from Christy McElroy from Citi. Please go ahead.
Everyone. 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? Maybe you could talk about your approach to sort of development investment in general as you look forward to 2018.
Sure, Christy. This is Mac. I'd 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. We're very excited just about the locational attributes. We will take a step back. That's what our teams are doing now, and we're looking at them. The redevelopments could be a straightforward retail redevelopment, in which case there's great NOI growth profiles going forward. We're also looking at more complex retail redevelopments and then also mixed-use formats. We haven't, at any of these large projects, determined our path yet.
We're still considering these various alternatives. We're going to take a hard look at those in light of the fact that several of these projects take two, three years down the road, actually, to get entitlements in hand, even though they have great underlying entitlements. We'll look at them just like we have for decades here in our development program. We'll look at risk, 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 non-retail partners, such as a multifamily developer. We have great relationships with the very best players, partners who are well-capitalized and experienced.
There's been no change in sort of your overall approach to development in the current environment?
There hasn't, no. We are conservative by nature, and we are diligent as we look at these projects, and we don't see any change to that. As projects get closer to being realized, we'll look at the current environment at such time. Many of these Equity One projects will take shape in the months and years to come as they flesh themselves out with the entitlements.
The ground-up developments that we're looking at basically are very consistent with Regency strategy, strong anchors, strong demographics. Many of them are going to be delivered two and three years out. We also not only have strong anchor sponsorship, but we also have a good inclination and indication from the side shop retailers how the project's going to be well received. It's not speculative development, and it involves, as Mac alluded to, maybe even a little bit more of a rigorous approach today.
Just my second question. In the past, part of your capital-raising strategy has 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 as you think about sort of funding this potential deal in the Northeast that you're working on? How does that impact your willingness to do deals?
Christy, I'll take that. 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 in 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'll remind you that we have the forward equity that we priced last March at a very nice, attractive price of close to $80 a share that we can draw down to fund that acquisition. Going forward, again, nothing's changed. The same strategy we've always had. We will access the equity markets when it's priced attractively. I think, we typically will say it's not our job to tell you what's NAV, but I know right now that we're trading at a discount to NAV.
I think that's pretty obvious. I would not say that our equity is attractively priced today. Today, we wouldn't be accessing that market. We would be sourcing from dispositions to the extent, one, to fund our development spend, which is what our guidance incorporates. We do have an acquisitions team, and if we find a very compelling investment opportunity which has attractive a future NOI growth profile that is accretive to what we have. Quality accretive, growth accretive, we could potentially increase our dispo's to match fund that.
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 the extent of any acquisitions. Between free cash flow.
I was going to say, I neglected to mention free cash flow. Free cash flow this year will be approximately $150 million. That is growing at a pretty good pace in future years.
Got it. Thanks for the time, guys.
Thank you, Christy.
Our next question comes from Nick Yulico from UBS. Please go ahead.
Hi, good morning. This is Greg McGinnis on for Nick. 2017 synergies appear to be kind of accelerated from prior guidance. Looks like you're actually achieving $27 million of actual savings versus run rate savings. Just wondering how you're able to achieve this goal so quickly.
Actually, what's interesting is we still have some open positions. As part of the merger, we had to add 65 positions to Regency, and we have not filled all of those positions. Our updated guidance does At the midpoint, we've increased G&A approximately $1 million. The fact of the matter is that on day 1, a substantial amount of the G&A went away. As we go through the year and we fill those positions, we're going to get closer to what will be the run rate.
Is there any expectation, I know you've only had a couple of months to be looking at this merger, but is there any expectation for more savings potentially?
We had a pretty rigorous analysis when we actually evaluated the merger and feel really comfortable with the $27 million of synergies. Going forward, we'll see the company grow as it typically would.
Great. Thank you.
Thank you, Nick and 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, this part of the discussion. Do you still anticipate 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'll see that we've really already achieved the substantial majority of that $27 million. It's in place, and 2018 will be a typical run rate for Regency.
Okay. 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'm just curious what's left in terms of the integration. Was there any issues in terms of involuntary turnover or anything like that as a result of the two companies coming together?
I'll answer the last question first. We're really pleased with the retention of the people that 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. Hats off to David and Matt and Mike for that. That's gone extremely smoothly. In fact, we have most of them in the office here today for an event. In terms of 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 of the 65 positions, approximately 40 of those were in the field/supporting the field. 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. Can't imagine why. Jacksonville is a wonderful place to live. 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 1st of April. It's been a really short timeline, and right now we're still working on it. Our Q will have provisional purchase accounting. I think we mentioned that. You'll see that when you read the Q. That's what's left to do. Again, it's complicated. The team has done tremendously well and really sprinting to get everything finished and integrated.
We're really excited about the future of this company.
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've got the quality of portfolio to support that. I'm 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 the prior guidance.
We've incorporated, obviously, tenant fallout/bankruptcies, future bankruptcies into our guidance. In the first half of this year, we're obviously feeling the effects of the 16 bankruptcies. The first quarter, in fact, the impact from bankruptcies was 70 basis points. As we get towards the end of the year, those leases that I talked about being 95% re-leased, those will begin to rent commence in the latter half of the year. That will help our same property, and then at the same time, we're expecting that we may have some fallout. Incorporated in our guidance is about 25-50 basis points of total impact from bankruptcies. Flat more or less from the 16, and then additional for this year.
Thank you very much.
Our next question is from Wes Golladay from RBC Capital Markets. Please go ahead.
Hey, good morning, everyone. Can you talk about what's going on the small shop? What are the local tenants doing? We hear every day about all the national retailers that are struggling on the big box side. 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 small shop folks, accounts receivable, bad debt, move-outs, those metrics all remain at relatively low levels. We're obviously closely monitoring those. Our leasing pipelines continue to remain solid. We're seeing best retailers are making more disciplined leasing decisions, which we think is very good. It's also quality, not quantity kind of attitude today. Overall, I think the small shop program today is consistent to what we've seen in the past.
Being 92% leased is a historically high level. It's not the highest we've ever been at, it's historically high level. I think it reinforces, as you indicated, the quality of the portfolio.
The other thing I'd add is, Lisa touched on, I think the production folks that came over from Equity had shared a very similar vision to us, 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 and the quality of the tenants. On Regency cases, through 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 are up 70 basis points is pretty impressive, hats off to the team.
We're not taking anything for granted.
Okay. Yeah, going back to the bifurcation of the winning centers versus the losing centers, are you already starting to pull a meaningful more amount of tenants from the adjacent centers, or is this all people just looking new retailers getting into the market for when you-
It's primarily expanding retailers, because we've, 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, Jim, I'd say it's primarily retailers opening up additional stores in the market or going into the-
That's fair to say, I think.
Okay. Thanks for taking the questions.
Once again, as a reminder, if you'd like to ask a question, it is star one. Our next question comes from Michael Mueller from JPMorgan. Please go ahead.
Yeah. Hi. Looking at the current development, redevelopment pipeline, it's about $500 million, 50/50 split between new and redevelopment. If you're looking out over the next, say, three to five years, do you think you'll roughly have that same sort of split?
It's a little early to say that, what I will say is, what we like about Equity One, one of the things we really like are some of these tremendous embedded opportunities within the portfolio. A good chance that could be the case. On many of the specific opportunities, the range of how extensive of a redevelopment you could do varies, and that will depend on market conditions. I would not be surprised if it moves that direction, our teams are set up to take advantage of that. That's one of the great things about our platform is our development teams are also the redevelopment teams, we're in the field, and we're prepared to take those on. We certainly wouldn't be disappointed if that was the case. We'd be equally as pleased.
Yeah, from a cycle standpoint, I think as Mac alluded to, having these redevelopments come on, we may see a downturn in ground-up development opportunities, having these redevelopment opportunities will be a great fit for our development program.
Got it. Okay. I guess on Serramonte, how are you viewing that? Is that a long-term hold for Regency, or at least in the current form where it's fully owned?
I'll say this, 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 team. Let me start off with that. Secondly, 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 Silicon Valley and downtown San Francisco. 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 would 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 know 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 JCPenney's are two of the best locations in the mall. You may also be aware that Macy's is closed within, I think within five or 10 miles of Serramonte. Two of their other stores, there was announced closings of those, and at the JCPenney store that they just opened up, a Sephora that seems to be anecdotally performing extremely well. The center is a good center, and I think it's continuing to get better, and it's a good center and a fabulous location, and we feel very good about its future prospects.
Okay. Thank you.
Our next question comes from Craig Schmidt from Bank of America. Please go ahead.
Yeah, thank you. Prior to the merger, the small shop occupancy of Regency versus Equity One was separated by about 300 basis points. My assumption here is that at some point, the Equity One will reach the level of Regency, If that's the case, how long do you think that takes to achieve?
Craig, this is Jim. I'll answer that. As I mentioned, I think we've had excellent leasing progress from both companies over the past several years on the side shop. I think we're obviously operating at high levels, closing in on 92%. We think there's probably some opportunity to grow that. Really, I think we're nearing full capacity in that side shop regime. Yeah, we're focusing on continuing to increase that. For us or for our investment partners, our shareholders, to expect anything more than that would not be appropriate. Obviously, the team is focused on taking 92% up to 93%. Any expectation, as Jim indicated, wouldn't be warranted.
Okay. Then just the winning centers versus losing centers. Have you ever measured a benefit of maybe sales transfer when you saw a neighboring center closed, and what lift you might have gotten at your own center?
I don't think we've measured that, it's going to be interesting to see how this plays out. 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're convenient to the communities and neighborhoods that the winning retailers who excel at being relevant to the customers want to be located.
Do you have a sense of why that is accelerating? Because we've been over-stored for quite a while now.
I do think that the combination of my sense is, it appears like there may be some acceleration that's occurring, that's kind of what we're believing is going to happen, there's no guarantee that that will happen. As we've always said, we're not going to be immune to the overabundance of space, e-commerce, our retailers are not going to, but we think we're in a very good place to continue to attract the better retailers. I think a couple of things that 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 where we were impacted, 95% of that space has either been at signed leases or in final stages of lease negotiations.
Great.
One last thing. Our ongoing conversations with our tenant customers reinforces our points of view, whether it's the grocery store or the side shop retailers or the value-oriented retailers that we work with.
Okay. Congratulations on completing the merger.
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, this is the result of operating high-quality properties, I'm just wondering, when you compare the closures that occurred in 2016 versus 2017, 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'll let Jim add, 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, there's really no specific trends. They're across the country. As you know, we're mostly grocery-anchored, most of them are in grocery-anchored centers. One thing I can say, it's going to be in centers that have secondary anchors because they've been anchor space.
Right.
Beyond that
Beyond that, I think so far we've seen more small shop, the RadioShack and Payless.
Yeah.
We've only got two boxes, a Gordmans
Yeah
An Overton's. In both of those cases, we are currently negotiating replacement tenants. We're not seeing the big Sports Authority, which had a pretty big impact last year.
I'll reiterate what Hap said in his prepared remarks, that is that it's not winning and losing centers, it's really winning and losing retailers. Our strategy, and what I believe we own, are the centers where if there happens to be a losing retailer, of 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. It's possible to have a failure in a great center. You know what? We welcome that.
We haven't been perfect. We won't be perfect. We are going to be impacted, our track record is pretty gratifying of navigating those issues.
Thank you.
Yes, sir.
I'm sorry. Thank you. This does conclude the Q&A session. I'd like to turn the floor back over to management for any closing comments.
We appreciate everybody's time and interest in Regency, and hope that you have a very good day, 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.