Welcome to the Acadia Realty Trust Earnings Conference Call. My name is Paulette and I will be your operator for today’s call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Amy Racanello, Vice President of Capital Markets and Investments. You may begin.

Good afternoon. And thank you for joining us for the second quarter 2015 Acadia Realty Trust earnings conference call. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the Company’s most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, July 29, 2015, and the Company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia’s earnings press release, posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. President and Chief Executive Officer, Ken Bernstein will kick off today’s management remarks with a discussion of the Company’s core portfolio, including existing investments and our external growth strategy. He will also provide an overview of the Company’s Funds platform, after which I will review the Funds’ second-quarter highlights. Then Chief Financial Officer, Jon Grisham will conclude today’s prepared remarks with a review of the Company’s operating results, earnings, and balance sheet metrics. At this time, it is my pleasure to introduce Ken.

Thanks Amy. Good afternoon. Thank you for joining us. This was another solid quarter for Acadia as our team was able to drive value on multiple fronts. First of all, operating fundamentals remain strong. This is evidenced by our 3.7% same-store NOI growth in our core portfolio which was at the high end of our expectations. You may recall we originally projected 2015 same-store NOI growth to be between 3% and 4% and that that growth would be somewhat back-ended due to the timing of a few releasing projects that are set to kick in, in the second half of this year. Given the strong performance year-to-date and with the anticipated additions in the second half, as Jon will discuss in further detail, we now expect to achieve the higher end of our guidance. Consistent with our investment thesis, street-retail continues to be the key driver of this strong performance. Now, we recognize it’s dangerous to read too much into quarterly results but anecdotally, street-retail delivered same-store NOI growth of more than 5.5% during the second quarter. While we can’t count on this kind of growth every quarter, we’re seeing continued retailer enthusiasm and support for the street and urban components of our portfolio in discussions with our retailers. While they certainly remain focused on rent and are appropriately focused on sales, they continue to reinforce the importance that these high-traffic, high-density unique locations have for them. Whether it’s our street retail in Tribeca or Soho in New York, or in the Gulf Coast or Lincoln Park in Chicago, whether it’s urban properties in San Francisco or in Cambridge, retailers are keenly aware of the importance of differentiating their brand, of reimagining the shopping experience of capturing their customer where they live, where they work, where they play. These type…

Thanks Ken. During the second quarter, we continued to make steady and important progress on our fund platform’s buy-fix-sell mandate. Given the variety of important activity within each of our funds, this quarter we discuss them sequentially. As you know, in 2001, we launched our first fund as a public company. This past quarter, in Fund I, we generated $420,000 of net promote income, resulting primarily from the continued monetization of our Mervyns investment. As you recall, Mervyns Department Stores was Acadia’s first investment in its retailer controlled property or RCP venture, with Klaff Realty and Lubert-Adler. We’ve now harvested nearly all of the value that we created in Fund I, generating an overall 34% internal rate of return and 2.3 equity multiple since the fund’s inception thesis. Fund II also invested in Mervyns. Additionally, Fund II participated in four other RCP venture investments, most notably Albertsons supermarkets. In total, Fund II allocated roughly 15% of its capital to the RCP venture and to-date has realized a 100% internal rate of return and a 2.6 multiple on its aggregate equity investment. Fund II has already achieved a 3.7 multiple on its $23 million Albertsons equity investment and still owns about a 1% economic interest in Albertsons, which represents the majority of Fund II’s remaining RCP venture NAV. Aside from this venture, we deployed the balance of Fund II’s capital primarily in urban developments in the New York City boroughs. In May, we sold one of only a handful of these remaining developments, Liberty Avenue in Queens, New York. This property includes 26,000 square feet of retail, anchored by CVS and a 70,000 square foot self-storage facility, operated by Storage Post. Our development and sale of this asset, which was the last of Acadia’s self-storage properties, generated a strong mid-teens return…

Good afternoon. Our operating and financial performance is on track through mid-year. Operationally, our core portfolio performance is strong. At 96.4% occupied, 97% leased, occupancy remains high. And as Ken mentioned, same-property NOI was 3.7% for the quarter, and this is at the high end of our expectation. On previous calls, we discussed the anticipated tenant rotation at three locations and the related downtime that would impact the NOI for the first half of this year. And consistent with this, there was about 50 basis points of NOI drag through June, most of which occurred in the first quarter. Two of these tenants, Union Fair [ph] at our 17th Street property at Union Square, and Warby Parker in Chicago at 851 West Armitage are now in and paying rent. The third lease, also in Chicago, is scheduled to open in the second half of this year. And rents for all three of these locations on average are about 75% above that of the previous tenants. A positive year-to-date NOI driver has been very low bad debt expense, which has mitigated much of this short-term drag from this rotation. So, as a result, we are now expecting full year 2015 NOI growth at the higher end of the 3% to 4% forecasted range. And although we still experience the law of small numbers in any given quarter, as we continue to add to our street and urban retail segment and as Ken mentioned, we are seeing a divergence in relative performance between street versus suburban. NOI growth in the street and urban segment outperformed suburban by over 300 basis points this quarter. And keep in mind, about a quarter of our total in-place core NOI is not included in the same property pool, as it relates to properties which are primarily…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Craig Schmidt from Bank of America.

I know you’ve answered this before. But Ken, could you give us a read on the Asian international luxury shopper, and what you’re hearing from the retailers?

Sure. I was chatting with the CEO of one of the retailers just last week on this specific item. At the highest end of luxury, they have seen some fall-off as a result of some of the political changes, economic, et cetera. In this retailer’s case, though, some of their more mid-priced items seem to be gaining traction in that. So, it didn’t seem like an all-on or all-off as much as a shift perhaps to slightly lower price, less gift-oriented items, things such as that.

I know you’ve answered this before but Ken, could you give us a read on the Asian international luxury shoppers and what you’re hearing from the retailers?

Sure. I was chatting with the CEO of one of the retailers just last week on this specific item. At the highest end of luxury, they have seen some fall-off as a result of some of the political changes, economic, et cetera. In this retailer’s case though, some of their more mid-priced items seem to be gaining traction in that. So, it didn’t seem like an all-on or all-off as much as a shift perhaps to slightly lower price, less gift oriented items, things such as that.

Okay. And then, given it’s such an aggressive transaction market, does it make sense to hold off before launching Fund V or is that just overthinking it too much?

It’s a year away, Craig. So, it’s just early to plan one way or another. It is very difficult to match up the best buying opportunities with the best times to raise capital. What we have found over the 15 plus years we’ve been doing it here is it is really good to have dry powder on call with these institutions, ready to go because things change and they change at times when you and I may or may not exactly predict it. So, I would expect us to maintain plenty of dry powder throughout this portion of the cycle. We’re going to find plenty of opportunities because of our value-add capabilities. But most importantly then, when there is a shaft, having that capital on call will be a significant benefit to us. So, it’s a year away and a lot what will happen in the next year but almost irrespective of that there will be plenty of dry powder on our balance sheet.

And I’ve noticed you’ve maintained your acquisition guidance for the core; is that the value-add that you think you will be able to get that done?

Yes, whether it’s value-add or just specific to certain transactions we’re seeing. We have a broad enough geographic footprint, a broad enough style of acquiring that the markets as competitive as they are, and they’re competitive, there’s always going to be inefficiencies, and there’s always going to be spots for us to create value. And by the way, if I’m wrong, of all the different components of our business that I want to make sure continues to kick in, acquisition volume has never been the key guide point for our Company, creating NAV growth is, and we do that through same-store NOI growth; we do that through redevelopments; we do that through our fund business. So, it is a metric. Based on the deal flow that we’re looking at, I believe we’ll hit our target but we have never been a growth for growth’s sake company, so don’t read too much into it one direction or another.

And next question comes from Jay Carlington from Green Street Advisors. Pleased go ahead.

Just a couple questions on City Point. Where is the incremental capital going to be sourced from for the resi, or is it going to be coming from the resi side for the retail portion? And then I guess relating to that, does Acadia plan on delivering the retail of Phase 3, and what does that ultimately mean for monetizing this asset?

So, the capital is in place already, Jay and it’s in Fund II. There’s no need for additional capitalization on the equity side, and yet sale proceeds from Tower 3 assist in some of that. The opportunity for us to re-acquire, if you will, that retail and expand that footprint, given the retailer demand we’re seeing, was pretty compelling. And the fact that Extell was willing to do that with us, made a lot of sense. Now, in terms of the construction, to clarify, Extell is building this and then they are delivering it to us. So as opposed to what we did in Phase 2, where we delivered the podium to the residential owners and then they built up; in this case they are building everything. When they are completed, they will deliver Phase 3 retail. We will lease phases 1 and 2 commercial retail, irrespective of the timing of Phase 3. We have designed it so that it can be combined; and we have designed it so that it doesn’t have to be. So you will -- this doesn’t change the timing or the Phase 1 and Phase 2 retail. That continues as planned; and as we’ve highlighted before that’s Alamo Drafthouse up on five; that’s Century 21 Department Store on four and three; that’s CityTarget on two; and then we are in the process of leasing up the ground levels. So, Phase 1 and 2, as planned.

Sorry, I guess just to follow up, you’re looking at -- is it a 2020 event when Extell is done with that and I mean how -- the fund investors have been in this for a while, so I’m just wondering, do you monetize it soon or is this something that we’re looking at 2020 now before an ultimate sale of your interest in it?

I don’t think it’s going to materially change the timing. We have a wide variety of choices. And the good news from our investors’ perspective, from our perspective is there is so much continued demand and growth in Brooklyn that unlike some assets that you see us aggressively moving to monetize today, this property, Brooklyn just keeps getting better. It was a dynamic city a few years ago. And if you look at the number of cranes, the amount of construction that’s going on, it’s a dynamic city getting built on top of and supplementing. So, the fact that we may have product that is available to lease in 2018 is good news from my perspective and good news from our investors’ perspective. Whether or not we choose to monetize next week, next year, three, five years from now, we will figure out based on the growth profile of the asset, prospectively. Our fund investors have made a lot of money with us. None of them are pushing us to head for the exits prematurely. All of them are happy to see us though, head for the exits as you have seen us do when it’s the right time. So, I wouldn’t read too much into any of this other than we are acquiring another 65,000 square feet of very valuable retail in Brooklyn, in a market that’s really hard to get your hands on good retail like this. So, we view this as just good news.

Okay, thanks. And maybe one quick question on the structured finance investments. Are those part of your acquisition guidance? And I guess, what’s the incentive for these owners to borrow from you versus maybe a bank in this environment?

So, I can speak to the guidance. So, the $41 million of first mortgage loans that we invested in, in the second quarter, are not part of the $300 million to $400 million core guidance. So that’s separate and apart. Ken, perhaps you want to speak to the other.

Two aspects to it: If there is a redevelopment that a buyer borrower can achieve traditional commercial financing quickly enough to close, they will do that. And we don’t hold ourselves out as in any way a competitive alternative to that. What we have found, especially where it’s mixed use and the developer’s long-term goal is the residential component or for whatever other reasons, what we have found is that we can be a good source of entrepreneurial capital at a safe level. And these are first mortgages. So, what you’re looking at is unleveraged yield going in. We can provide that capital in exchange for something. That’s something, at different points in the cycle, has been really high returns. And what you saw shift over the past couple of years is rather than have that capital, as we did on 72nd Street in Broadway for instance, earn high-teens plus returns, we have shifted towards more market appropriate returns but then having the opportunity to acquire that retail component, that asset, in the future. So, it’s not part of our guidance for 2015 but you have seen us add, one, two, three years down the road, assets on Spring Street, assets elsewhere in our portfolio as a result of having made these somewhat opportunistic loans. And thus trading off high yields for what we call ROFO or right of first offer to then acquire those assets, have an option to purchase. And so that’s the rationale behind it, not the return upfront.

And next question comes from Christy Mc Elroy from Citi. Pleased go ahead.

I just wanted to follow up on the idea of sort of funding acquisitions and development with current dry powder within your leverage comfort zone, which Ken and Jon, you both mentioned several times. Given all the moving pieces, what does the leverage trajectory look like over the next year, if you didn’t issue any more equity over that time frame? And can you maybe put some parameters around your leverage comfort zone?

So, if you were to look at the balance of our acquisition goal for the core for 2015, and for the sake of this discussion, assume that it’s capitalized entirely with debt, our net debt to EBITDA would go from 5.0 to close to 6.0, a little bit under 6.0. That’s probably as high as we want to take it. Much more above that, and we start to get [Technical difficulty]. And we think that weakens the balance sheet. So clearly for 2015, we’re well within that comfort zone in terms of meeting the acquisition goal without being overly beholden to the capital markets, the equity markets; and still keeps us relatively speaking, lowly levered and not overly exposed.

So through year-end, you’re fine but then, going into 2016, you start to get beyond that comfort zone.

Yes.

Correct. You ought not read into what I said that we believe now is the time to leverage up, we do not. You should not think that we’re changing our long historic focus on maintaining very conservative leverage, we won’t. We were just -- or I have been commenting on the disconnect between the public markets and private pricing and just pointing out that because of capital that we’re getting back through capital recycling for a host of other reasons, we could readily finish out this year. But if there was a material disconnect for any extended period of time, our solution will not be to leverage up as associated with that. And then on the development side, just so we’re clear about that, any kind of investments that would have long-term additional capital commitments, we have first of all, done them in the funds so they are pre-funded and we don’t have to worry about coming back to the public markets, the capital on that. And there’s every reason to think it would stay that way. And there is no reason to think that embedded into our core portfolio, we would be adding any material amount of risk without appropriate pre-capitalization. It strikes us that as painful as it is to be disciplined, match funding over any extended period of time is the responsible way for us to accretively grow our NAV. And that’s not going to change.

So what are your thoughts, given that disconnect, what are your thoughts around asset -- core portfolio asset sales, to match fund?

That’s certainly a possibility. Stay tuned. And secondly, my thoughts are I’m really happy with the portfolio we have. I like the embedded growth, the embedded opportunities in it. And I really like the fact that we have this fund platform so that we don’t wake up every morning saying oh my gosh, the REIT market is responding to events overseas having to do with interest rates and not with real estate, we are somehow out of the value-add business. We’ve got plenty of levers that we can focus on and push. And so, whether it’s continuing to expand and complete City Point; whether it’s selling and getting to our carry in Fund III; whether it’s putting new dollars to work in Fund IV, all of those things are great alternatives to what would strike me as a silly move of acquiring core assets that are dilutive to NAV. We just won’t do that.

And next question comes from Todd Thomas from KeyBanc Capital Markets.

First question, Amy provided some historical context around the funds, some of which included the Fund I and Fund II RCP investments. And there’s been an increase in retailers looking to monetize their real estate holdings. It’s probably picked up a bit more in recent weeks or months. Does this strategy or anything out there seem more interesting to Acadia these days?

Yes. And Todd, you need to put it into two categories. There are those instances where retailers are in some level of distress and looking to monetize their real estate owned, and monetize it in a way that enables the re-tenanting, redevelopment, the recapturing of FAR, so that there can be additional densification. And so, put that into the value-add distressed retailer bucket. And then there are those that are more sale leaseback oriented, and that’s a different type of animal. We are seeing increased interest in both instances. And there very likely will be more transactions announced by retailers, transactions announced by owners, where some of the troubled retailers whether it’s A&P supermarkets who is going through bankruptcy et cetera, are looking to maximize the value of their real estate. And that’s something that we have an historic track record in facilitating, making money in and I would hope, if it’s the right opportunity, we’d participate in it. But do keep in mind that is different than when a company is simply spinning off some or all of their real estate in a sale-leaseback transaction. That’s purely a financial transaction and then may not be appropriate.

And then just sticking with that, with A&P actually, any exposure in your portfolio? I think the Elmwood site is reportedly on tap to be acquired by Acme but what about Cortlandt? And is there any other exposure in the portfolio?

So, if you would have asked us this question six, seven years ago, we would have said, a hard swallow; we’ve got significant exposure. But those are the only two locations as we sit here today. So it’s Elmwood Park, which as you mentioned is Pathmark and then we have an A&P at our Cortlandt Town Center, which is a Fund III asset.

And that also has been identified, at least according to the records by a purchaser. And in both instances Todd, and as was the case, historically we’ve generally been pretty aggressive in trying to get back these spaces and re-tenant them and doing so profitably. It is worth noting that the supermarket industry is going through a level of consolidation and that I think it’s better for our industry overall but there will be fewer mainstream supermarket operators. They will be stronger, but there will be fewer of them. And as you’ve seen us shift our portfolio from ones -- the majority of our assets were supermarket-anchored, to now it’s probably 20%, 25% at most. Some of that is in response to these shifts where it used to be there were four or five, very solid supermarket-anchored centers in a submarket and now it’s probably three or four. And they’re going to be strong, and it’s always going to be a good business, but it is narrowing some.

And then just lastly for Jon, just looking at the 2016 maturities in the core, you have a number of maturities, $270 million, including Brandywine, which is a big slug, $166 million. What’s the thought process about handling those maturities? Will you look to refinance those mortgages or unencumber those assets? What are you thinking about at this point?

Right. And we’ve discussed this before, developing our capability as an unsecured borrower. So we will continue. And in fact, this quarter we closed on another unsecured term loan, $50 million loan. So, we will continue to develop that capability. So, we have a couple more CMBS loans that are available to pay off this year, and we will do so. And most likely, what we’ll do is we will use unsecured debt to replace those financings. And then looking forward to 2016, as you noted, Brandywine is the largest maturity that we have. We’ll look at the best cost of capital and the best solution when the time comes. But our thought right now is potentially that that’s another area where we could increase our unsecured capability and perhaps replace that with unsecured debt. So, we’ll keep you posted. But the good news is, is our options are -- we have many options as it relates to that, both in terms of the real estate and cost of debt et cetera. So, we’ll obviously, as the time approaches, look at that and derive the best solution.

And our next question comes from Jeremy Metz from UBS. Pleased go ahead.

As I look at the urban portfolio, you did the one San Fran deal earlier this year; you have just one asset up in Boston right now as well. Can you just talk about those two markets? Are you seeing any opportunities to grow there and therefore, warrant being there and then where are deals pricing in those markets today?

So, the markets where we are active and own also include, we own in Queens, Brooklyn, so the five boroughs are part of that urban portfolio as well. And I would probably limit to those markets that we are currently active in, our continued interest in urban. So there’s no reason that you wouldn’t see us do more urban or street in San Francisco, urban or street in Boston, dense suburban in all of those, and the pricing is aggressive across the board. It’s appropriately balanced appropriately balanced, as I see it, between street retail which has the highest contractual growth, probably still the strongest market rent growth affording the lowest cap rates because it’s a growth-oriented and location quality focused pricing. Then next is urban and urban is not that far behind street. So, it depends on how much growth is embedded into that urban asset. The box leases tend to be contractually lower growth. So, if it is a Walgreens in an urban market with no growth for 15 years, it’s still going to price real aggressively but it might price slightly higher as a result of that lack of growth. Then next would be high quality, dense suburban and then in more generic suburban or ex-urban retail. What you haven’t heard me do is quote cap rates. You see as much of the data as we do. We’re seeing trades that are dipping below four for some of the most aggressive stuff, and then into the fives, sixes and sevens as you move on up and out that continuum, which makes total sense to us when we then measure growth and quality and replaceability and optionality that there could be some kind of additional upside as we get those assets back. So expect to see us add into those markets, expect us to be disciplined as to the pricing and cap rates, and relatively agnostic as to whether it’s street; urban; or dense suburban, but those will be the areas that we continue to grow the core portfolio.

So, just to be clear, there is no exact near-term mandate to expand in those markets, maybe versus some of the New York, it’s just wherever you see the deals at this point?

Yes. We would love to expand in all the markets that we are active in and there is no near-term mandate to add any additional markets. And in all instances, the first mandate is, is this investment accretive to net asset value, because if it’s not, there’d better be, and I’ve yet to come up with a great excuse for doing it. So, if it is, if we can acquire on a leverage-neutral basis or using recycled proceeds in a way that’s accretive to NAV in any of those markets, great. And we have different people focused on different markets and they all are keenly focused on adding to those markets. But then, we sit back and look, and if the answer is none of the above, and frankly last quarter that was the answer in terms of what we actually announced and closed, so be it, because we’ve got a really good portfolio and will continue to watch that rental growth. So, I wouldn’t -- if I predicted which market was next to hit beyond what we currently have in our pipeline, chances are I’d be wrong. We’ll respond to the opportunities as we see them.

And then in terms of disposition, if my numbers are right, it looks like you sold the CVS box for sub 4 cap, it’s clearly a dense location in White City, looked like a 6.5 cap. So, just as we think about further asset monetizations, how should we be thinking about yields and then how much more sales at this point are baked in the guidance for the back half of the year?

So, with the guidance we have given, and Amy, chime in, is we have circled a 6 cap in general as hey, if we achieved a 6 cap, this is what the numbers would look like. And I assure you, some will be higher and some will be lower. As the -- we don’t have to sell anything in our funds or otherwise. So you’re not going to see us force or be forced into the market at cap rates that we don’t think are appropriate for those assets. Where there is upside or other incremental benefits, you’re going to see very low cap rates; and where we have completed an added value then, -- or if it’s in a suburban market and a 6.5 cap -- I’m not commenting on the specifics of that number, but that doesn’t strike me as inappropriate. In terms of the guidance for the year, Amy?

We’ve said that we have about $24 million in Fund III of equity that we need to return from sales before we are into the promote. Jon had previously guided to our thought that maybe in the second half of this year that that would likely happen.

So, our guidance assumes that we sell a couple more Fund III assets and that we actually get into the promote, second-half, fourth quarter of this year. But it does not presume an entire liquidation of Fund III right here and now, obviously.

Our view on Fund III, and we went through this on previous calls, is, it’s probably a two to four-year process. So, if you needed to pick a time period, you could split it out over three years, and you wouldn’t be materially off. Just like almost everything else in our guidance, we’re going to make the right decisions to sell when they show up and not based on a quarterly timeframe, we will and we’re very comfortable monetize our assets in Fund III. Consistent with the general guidance that Jon and Amy have discussed, if it takes a few months in one direction or more, what I really care about is that we achieve the pricing that we set out for, that we achieve the returns that we’ve set out for. And so far the returns have been very strong, as Amy has walked through. So, it’s sure it’s about the next six months, but it’s also about the next two, three years, and we feel real good about it.

And our next question comes from Michael Mueller from JP Morgan. Pleased go ahead.

Just a quick one, going back to the two structured investments; Ken, you mentioned right of first offer; do you have the right of first offer on both of these?

Yes. And that right survives the loan. It’s up to five years post a maturity on the loans.

Okay. Because one of them is pretty short, right? It’s only a year or so?

Right.

And is that effectively what the play is on these?

Yes. And Michael, you lived through 72nd Street with us where we were clipping 18% and then we weren’t. And people were worried, oh my gosh, are you ever going to get paid back? And then we were; and then there was dilution. Our strategy has shifted more towards lending only to those assets that we are happy to own on a friendly basis and where the optionality belongs whether it’s a ROFO or an actual option to purchase, inures to our benefit.

And actually one other one. If you’re looking out over the next -- based on the pipelines you see now and you think it hit over the next year or so, I mean are you seeing more that feels investable on the core side or more that feels investable on the funds?

To the extent that, and we are, focused on matched funding, we generally feel better on the core side when the REIT market is feeling better and feel worse when the REIT market is feeling worse. And while we can navigate through minor periods of time where we’re not utilizing the public markets to match fund, either because we are selling assets and capital recycling or because we have enough dry powder on hand, but our mood does tend to be dictated to some degree by the REIT market. Conversely, the fund business is absolutely agnostic to REIT prices. And there what we are responding to is, where are their primarily value-add opportunities at this point in the cycle? At other points in the cycle, it can be opportunistic, and so it can just be distressed sellers. But there’s not a lot of distressed selling right now, what there is, is value-add. There are a lot of entrepreneurs out there who may be focused on the residential components of a mixed-use project and want us to come in and do the value-add on the retail. There are a host of our retailers who we work with that create opportunities. So, I like that side of the business, marginally more as we look at where we sit right now with the following caveat, which is we know everything changes, often. So, stay tuned.

And our next question comes from Rich Moore from RBC Capital Markets. Please go ahead.

So, on that same thought, Ken, are you seeing -- I mean, you mentioned at the beginning that retailers are increasingly looking for street-retail kinds of spaces. So, are you seeing more competition or anything changing in the competition dynamic for street-retail?

I see some positive trends that are associated with increased competition. And most specifically I am seeing some higher quality companies, meaning both public and private institutions, now focused on street retail. And people look at it and say, oh my gosh, so and so is now in that business. The business has always been crowded, so one or two entrants is not a net negative in terms of competition and is a big net positive for a few reasons. One is these are really high-quality companies that can help hold retailers’ hands as they work their way through the transitions from their business model a few years ago to today. And they can do it and we are all doing it so that as Warby Parker recognizes that they must have physical bricks and mortar locations; they are going to go to high-quality landlords as best they can; and the more of us that are there, I think it’s a net positive, at least at this point. In terms of pricing, Rich, the markets are competitive, the markets are inefficient but we’re good at this. We’ll find enough of our opportunities based on our size. Look, we’ve doubled the size of our core portfolio over the past few years focused on these kind of things. We’ll see enough opportunities just because the market is, has dislocations, is not perfectly efficient. But it is competitive. If there was any question a few years ago as to whether street retail was going to be an important asset class, whether urban was going to be important, that question has been answered. It is going to be a critical piece of our retailers focus over the next coming years and decades, as we just see the demographic shift and the way we shop. So, we like being in that business; we welcome the fact that there’s competition; and we’ll find our fair share of opportunities.

Then, you mentioned also at the beginning of your remarks that you were seeing increased leverage in some of these higher-risk investor types for higher-risk assets. Where would increased leverage, for that kind of investment, be coming from, do you think?

So there is more and more capital in the system, shadow debt or otherwise. And I would not blame this on the lenders. I think lenders overall are being responsible about how they are financing. But what we are seeing is, people taking on more, call it land in one form or another, so not an acquisition based on just existing cash flow. And sooner or later, they are going to need to capitalize for those redevelopments. In some instances, they are doing it by prudently under-leveraging the assets they won and in other cases less so. And then implicit in that and just watch carefully -- and I’m not suggesting it -- it’s really not in the public market nearly as much as I’m seeing it in the private, it is clear to me that many of these acquirers have not thought through how they get their final phase, financings through. And that’s okay because the markets tend to then rebalance that. But development deals are very capital-intensive, and in our case, we pre-fund them in our fund platform, we make sure we have the capital on call. So when the financial crisis hit for instance, we didn’t have to abandon any properties because of the lack of capital. But that’s the exception to the rule for many private developers and otherwise. So, stay tuned.

And our next question comes from Jay Carlington from Green Street Advisors. Please go ahead.

Just a quick follow-up on -- I don’t know if I missed this or not, but was there a redevelopment contribution in the quarter to NOI?

No, none.

And when I think about that street-retail and kind of suburban NOI delta there, is that inclusive of redevelopment as well?

No. So, the delta has to do both through contractual steps, but also when you look at some of these -- of these three leases, a couple of them did start to come on line in the second quarter, and that favorably pushes up the street-retail results. So that’s what’s driving that delta in part.

I will now turn the call back to Kenneth Bernstein for closing comments.

Thank you, everyone for taking the time to join us today. Hope everyone has a pleasant balance of their summer and we look forward to speaking with you again soon.