Federal Realty Investment Trust (FRT) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for your patience. You’ve joined the Federal Realty Investment Trust Q2 2015 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 be given at that time. [Operator Instructions] As a reminder, this conference maybe recorded. I would now like to turn the call over to our conference host, Ms. Brittany Schmelz. Ma’am, you may begin.

Good morning. I'd like to thank everyone for joining us today for Federal Realty's second quarter 2015 earnings conference call. Joining me on the call are Don Wood; Jim Taylor; Dawn Becker; Jeff Berkes; Chris Weilminster; and Melissa Solis. They will be available to take your questions at the conclusion of our prepared remarks. Certain matters discussed in this call may deem 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 these expectations can be attained. The earnings release and supplemental reporting package that we issued yesterday, our Annual Report filed on Form 10-K, and our 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 at www.federalrealty.com. And with that, I'd like to turn the call over to Don Wood to begin our discussion of our second quarter 2015 results. Don?

Well, thank you, Brittany Schmelz, and good morning, everyone. It’s a pleasure to be able to report you today we’ve had a very strong quarter for Federal all the way around our business. Strong FFO growth, strong same-store growth, strong lease rollover, strong occupancy, strong development deliveries and more acquisitions in Greater Miami. Also mentioned an 8% dividend raised may $0.07 a quarter to 94, the 48th consecutive year of increased dividends, great quarter. Now let’s start with earnings. FFO per share were $1.33 excluding of course prepayment premium this year and the retirement of $200 million of senior notes, was 8% higher than the $1.23 earned in last year’s quarter as the first phase of the development project begin to contribute and the core continues to power along. I single out higher and anticipated percentage rent at Assembly Row, a nice residential rent growth San Antonio Row especially encouraging. It’s really good news, because that’s we’ve discussed previously we are very consciously investing in our team with higher long-term incentives in people bench strength to be sure or assure as we can that we are well prepared to execute and deliver on a business plan and doubling NOI in the next decade, hence part of the reason for the G&A increase in the quarter. It’s a very balanced approach toward growing our business and it’s not a quarter-by-quarter business plan. On the leasing side, nearly 300,000 feet, our comparable deals were executed in the quarter, at average rent of $30.41, 15% above the 26, 36, the prior tenant was paying. Leasing strength was broad with both new deals and renewals registering double-digit growth within all three operating platforms of our company West Coast the core and the mixed use portfolios. As an example, we are thrilled to do our first deal with Macy's in the form of their first Macy's Backstage retail stores. Their value based concept opening this month at our Melville shopping center [indiscernible]. In addition we saw strong renewals at newly acquired San Antonio Center in Mountain View, California and that’s a Village of Shirlington in Arlington, Virginia in the health club and theater categories. Both come with significant upgrades to their facilities a clear trend that we're seeing in the theater business in particular as compensation from newer more service oriented companies gain traction. Same-store growth in the quarter was strong at 3% that out the impact of redevelopments and 4.8% with lease termination fees are comparable in both periods. The redevelopment impact really benefited from a great job in Mercer Mall in New Jersey [indiscernible] all opened and this more to come. For an asset pictures in Mercer Mall really reflect the quarterly development competency. It’s a transformed asset. We’ll on enrichment and similarly on its way to transformation to a for more relevant retail side. Occupancy jumps in the quarter to 94.9%, well, the percentage lease claims of 95.7%. Both up a bit compared with last year and the first quarter on a strong leasing momentum. As you can see, this was a really strong operating quarter. Now let’s move on report some development news. First in Somerville, Assembly Row continues to mature beautifully with most restaurants and retailers meeting or exceeding their first year projections. We’ve clearly struck the chord in the community and are providing a need that wasn’t being met. Percentage rent is above our expectations and the office building is basically fully spoken for with virtually all available space occupied or undersigned leased or LOI. The partners’ construction is right on or maybe ahead of schedule and occupancy by partners employees expected to begin next summer. That building is huge and really does wonders adding scale and perspective to the entire site, check it out on any trip to Boston, it’s impressive. Our own construction on Phase II is just now getting underway and will start to deliver in 2017. Future of the Assembly Row section of Somerville is extremely bright and there will be incremental investment opportunities here for at least the next six or seven years as we fully build out. 400 miles south is Pike & Rose in North Bethesda, Maryland and there too lots of construction, lots of progress to report. Let’s start with the residential lease commencement at the Pallas high-rise build. 36 leases signed, 11% of the building in the first couple of months at rents at or above our pro forma with the first step that’s moving underway. I think I just start. The new parking garage will open next month as scheduled and provide an additional 550 plus surely needed spaces. Virtually all available office space in the first space is now either occupied or undersigned leased or LOI more pronounce. At the second phase gets underway, we have signed leases or LOIs with some great anchors early in the process that should give you a feel for the direction we’re going. Pinstripes the 30,000-square-foot bowling and entertainment concept will anchor the industry. REI we relocate from a mile way to anchor Rockville Pike and newly formed Rose Avenue in 38,000 square feet. And we’re closed to a deal with H&M to take 25,000 feet onto levels at one of the best corners in the project. Playing more leasing and have worked with some terrific names we begin construction on the second phase that is so necessary to create the critical-mass at this site needs. Deliveries and store openings in this phase begin in 2017. Frankly, I can’t wait to show the project off a bit at our plan Investor Day there on September 30. I hope most of you are planning to attend. Well there will still be plenty of construction on the interior upper floors of Pallas along with some exterior trim to finish up, aforementioned the second phase which will be well underway at that point. It won’t be hard to see why we’re so bullish about the very significant value being created here now and well into the future. Meanwhile, on the West Coast, the first dozen or so tenants open last week at the point, to capacity perhaps. The point being our 150,000 square foot addition to the Plaza El Segundo shopping complex in El Segundo, California. Thank you by the way the West Coast folks on the phone who e-mailed over the weekend with kind words after visiting the point, it really means a lot. 80% of that space is leased, are fully executed – are in the fully executed NOI. And we will be opening tenants throughout the rest of the summer and fall and what we know will be a favorite gathering at shopping destination for the areas underserved communities like Manhattan, Hermosa and Redondo Beach. Tenants like True Food Kitchen, Lucky Jeans, Madewell, Athleta, Mendocino Farms, and SoulCycle, all around a really large and attractive park like public space to give you the feel of what we were creating here. Significant value creations day one that will get better and better for years to come. And perhaps the newest thing to talk about in this call is our well study commitment to South Miami. We reported on the CocoWalk acquisition with our local partner Gras River, on last quarter’s call, and since that time we have closed on several Coconut Grove’s street retail building and closed proximity to CocoWalk in order to make our presence more intact. In addition, we’ve locked up a larger retail in mixed-use projects just a few miles away also with local partners Grass River with due diligence largely complete and a closing data expected in the new few weeks. Jim will talk more about that to the extent we can in his remarks. My point of talking about is this. We have gone from a non-player in South Miami a few months ago to a very significant landlord controlling hundreds of thousands of square feet in six months time. Roughly $200 million of initial acquisition capital had a tight reasonable yield at first, 5% plus. While we worked hard to figure out a significant repositioning and redevelopment plan that could hopefully allow us to deploy as much as an additional $150 million to $250 million in those assets over the next five years in effect a yielding land time. I am hopeful, confident that our work and our experience on the life of Bethesda Row, Assembly Row, Pike & Rose, Santana Row, and the point so many smaller examples over the past 20 years put us in an unique position to be able to do just that. What if not – we still have great real estate and a very protected downtime. As you can see, there is a lot going on [indiscernible] of our business plan. We remain on track, double our income in the next decade as we have talked about many times in the past couple of years, so far so good. Let me now turn it over to Jim Taylor for additional guidance and explanation and then we’ll open up the lines to your question.

Thank you, Don and good morning everyone. As Don highlighted in his remarks, our results this quarter not only set a new record for the Trust in terms of FFO per share, they further demonstrate the continued successful execution of our long-term plan. A plan that drove the 48th consecutive annual increase in our dividend of 8%. I will provide some additional color on our quarterly results, our balance sheet activity, acquisition and our outlook for the balance of the year. Overall property operating income grew at 9.2% year-over-year. As usual the largest single driver of that growth is our operating portfolio which grew at 4.8% on a same-store basis including re-development and 3% excluding. Cash really expressed this quarter at 15% on deals will take occupancy in the future, we believe that we remain on track to continue to deliver sustainable growth. Importantly as highlighted in our supplement, continue to successfully deliver on our re-development pipeline. As Don noted most notably this quarter stabilizing re-development in Melville and Mercer Mall. In addition, our initial phases of Pike & Rose and Assembly contributed approximately $3.5 million of DOI during the quarter. Finally, this quarter we benefited from the successful integration of our acquisition San Antonio Center in Mountain View, California as well as CocoWalk and Coconut Grove, Florida. As previously discussed, these assets are not only accretive in the near-term, it present compelling redevelopment opportunities given their infill location. Our G&A increased approximately $1.2 million year-over-year due primarily to transaction costs associated with the closing of CocoWalk as well as higher personnel cost, Don mentioned as we continue to invest in our platform for growth. As discussed last quarter even with this incremental investment in our platform, we expect our G&A to remain at about 5% of revenue. Interest expense grew slightly during the quarter due to lower cap interests as we deliver parts of the first phases of Assembly and Pike & Rose, which was offset by lower rates as we continue to bring down our weighted average interest rate, which today stands at about 4.3%. Bottom line FFO per share grew at 8.1% in line with our long-term plan at 7% to 9% even as we continue to invest in the future. As many of you have heard us to say at the conferences and one on one meeting, we could generate higher absolute for us, where we would scale back on that investment and perhaps lever up and then, but that is a cyclical plan only. A track record that is older than many of us on this call, guides our relentless focus on predicable sustainable growth. Turning to the balance sheet early in the quarter, we’ve redeemed $200 million of our 2017 6.2% notes with the proceeds of a third year debt issuance of 4.18%. Importantly, we extended our weighted average tenure to 10 year, which as we look forward provides us with maximum flexibility to access most opportunistic part of the yield curve. Longer sure and still retain the longest weighted average tenure in the shopping centers fact. At quarter end, we had approximately $100 million drawn under our revolver, leading us to more than enough liquidity to fund the growth we have underway. On the acquisition front, we successfully integrated the CocoWalk asset during the quarter have identified near term upside while we execute on our longer-term plan to the asset. In addition, we closed on the acquisition of interest in seven retail assets running the primary shopping streets within the growth, providing us additional opportunity capitalize on the positive runner rate trends within the research in Grove District. Finally, as Don mentioned, we placed another approximately $110 million assets, under contract within the broader trade area, which like CocoWalk benefits from a phenomenal infill location and also presents an opportunity to create significant value through developments to serve the Avalon and that’s population that surrounded. More to come on that asset soon. With our strategic focus on this Miami-Dade market and our partnership with local sharpshooter, Grass River, Comras, we – as Don mentioned we have built the substantial market presence within a short period of time. We couldn’t be more excited about this market and how we’ll benefit our overall portfolios through inevitable cycles. Now turning to guidance for 2015, we have tightened an increase the mid-point of our previously provided range to 529 to 533 or 7.5% growth year-over-year at the mid-point. This updated guidance generally reflects the strength of our opening at Assembly Row, whereas Don mentioned, many of our tenants are now paying additional percentage rent, as well importantly is continue to strengthen our core our team has been doing and an excellent job managing rollover and leasing additional space. We expect to continue to see robust capital over growth for the balance of the year, well above historical average. While we will also see some lag in the same-store NOI the second half of 2015 due to tenant rollover and higher term fees that we realized last year. Even with these timing issues, we expect same-store NOI to average 3.5% to 4% including redevelopment for the entire year. Some of the larger timing assumption that have been factored into our guidance and that will impact the balance for this year as well as 2016 approximately $80 million of office space, Pike & Rose and Assembly, that is being delivered this year. We now have leases in NOI and over 95% of that space. Based on the deals and the place, we expect these tenants take occupancy through mid-2016 and based on free rent period to be fully paying rent in 2017. The retail and Assembly Row at 97% lease to 95% occupied as of the end of the second quarter, with the last few tenants taking occupancy in the later part of this year. The retail is fully leased to Pike & Rose is over 90% of the space now open, including iPic, Del Frisco's, Summer House, City Sport and Sport & Health. The balance of this retail space will continue to open over the next six months. Pallas, the 319 unit high-rise, which represents approximately $110 million of investment as open, it is expected to lease up over the next 18 months. Given that timing, we expect it to be a drag down NOI this year and early next as it reaches the stabilization at the end of 2016. And finally from a timing perspective, the point redevelopment of Pallas House condo, which represents approximately $85 million of investment open last week, extremely well and it project stabilized through mid-2016. Again, as we look forward, we remain confident our plan to continue to generate 79% growth, even as we invest for the long-term on both sides of our balance sheet. While we have not provided guidance for 2016, which we’ll do next quarter, we would nonetheless expect to remain in that range. Finally, we all look forward to seeing you at our Investor Day on September 3. We expect to show up our first days Pike & Rose, which will now be a – and also just two are the best row and show the opportunities for additional investment and one of our first mix these properties. We also provide both to the opportunity meet our broader management team responsible for the execution of our plan, as well as meet members of our Board of Directors. With that, operator I would like to turn the call over to questions.

Thank you, sir. [Operator Instructions] Our first question comes from the line of Christy McElroy of Citi. Your line is open.

Hey, good morning, guys. Just with regard to the point, can you discuss sort of your objective in merchandising the retail and the restaurants and release and supply also going to next store and the other retail in the area and in sort of thinking about it as an addition to the Pallas, have you figured out a way to more seamlessly join the two asset to encourage that cross hopping I know there was an issue with the train tracks between them.

[indiscernible] questions, Christy. Hey, Jeff, you are on the line, you want to take it?

Yes, sure. Hey, Christy, how are you?

Hey, Jeff.

As you know from being out there that we have a sectional pass out, again they call the collection which is about 50,000 square feet of lifestyle, it does very, very well. So thinking about the merchandizing strategy for the point we wanted to build on that success and continue to fill on unmet need for additional Lifestyle retail in that trade area, which we’ve done and we’re doing. We have 25,000 square feet of restaurants space at the point with you that whole market is really underserved for better dining options and also for a collection of restaurants, meeting at some place kind of like Santana Row or you can come and park the car and meet your friends and figure out where you’re going to once you get there, pretty much every other restaurant opportunity in that market is what I will call point and suite in your car, you go to the restaurant, again your car and you leave. So that was a real unmet need in the trade area and I think we’ve done a nice job of filling that. In terms of the connectivity, yes, the rail road tracks are never going away, but we’ve got a couple ideas we are working on with the city of El Segundo right now to make the connectivity better and I think we’ll achieve those find years and work through everything with the city in the next few months and the connection between the collection in particular in the point more improved. Its not super pedestrian front but right now, but really it’s only a two or three minute walk from the front of the collection to the main it’s a boulevard enter point at the point. So it’s really not that bad but we can improve it.

I mean having said that, Christy, one thing I want to mention is, we argue about that and one of the things we argue about is, whether its necessary. And so, with any new project, we are learning, we will be learning a lot over the next few months. And I’m personally not convinced that, it’s necessary to connect them at all. But we’ll see other works out [indiscernible] as we do have some alternatives to do that if we need to.

Okay, and then just secondly, Don you mentioned the $110 million acquisition in part of that you have under contract, maybe you could tell us a little bit more about it, in terms of any value add opportunity that’s related to that with widely marketed and is that acquisition currently in your 2015 guidance range?

It’s not been guidance at all, and I’m not going to specifically going into the asset, I will tell you this, we made a bet on South Miami. Basically as we thought about it Christy, the idea of, South American money, everything that’s going on downtown, there is a lot of players that are trying to capture all that and then we think that will be successful. We didn’t compete with that. This was an idea to say wait a minute. There is Miami is how has been clearly becoming more and more of a grown up city, more and more an important city worldwide, and its got a lot of people like, all those markets that were in, who live there, who do well living there and they need their place for those families and their lives. That’s what we’re doing, and still going to grow that’s what we are doing in that whole area that’s why we are making the incremental investment in total. So I’m looking at CocoWalk, the Street Retail, this other asset which will be able to talk about and then fully in just a few weeks, certainly on next earnings call, to get an idea of the entire bet that were making, all of each of those assets is not expected to stay what they are, because they only work and so as figuring out, what kind of redevelopment plan, how we put that together, we will take time. I’m looking forward to that, and the difference with us, and I love, is that in the meantime, why we figured out, we are making accretive acquisitions. So it’s more raw material in the – for the future of our business plan.

Thanks so much.

Thank you, our next question comes from the line of Jason White, Green Street Advisor. Your line is open.

Good morning, just a quick question on your recent acquisitions over the last two, three years. Seems like these has been minority partners and a lot of those probably just assumption of shaking the properties lease, just kind of walk through the pros and cons of having minority partners involved and those extra seats at the table make it difficult for them to achieve what you want to achieve on some of these properties?

Yes, Jason no question about it, all the balance – let me start by this, I am sure Jim will have and Jeff will have some to say that as you know every deal that we make is not part of a formula. Every deal that we make is part of a specific real estate transaction, where we think we can create the best value. We are talking here about South Miami, which is the most reasonable we can talk through here. There was no question that having a local partner, who truly knows better than we do. The specific ins and outs from dynamics of the marketplace, the leasing person who is involved with that partnership is the best in the marketplace. So we are getting additional expertise there in that particular case, we thought was real important to the whole risk award balance. Now clearly, by doing that we’ve got another seat at the table, clearly by doing that partnerships had complexity. On balance that one for us with the specific way that we want it to go and attack South Miami. As you go back a little bit, you look at Plaza El Segundo it was about shaking it out a little bit, it was about creating how we were going to get control of it.

And also Jason, we will bring in minority interest throughout the union transactions, as well, as we did at the Grove and Shrewsbury, where effectively we own and control the asset. But their ownership is reflected at the asset model. Yes, the key point to that to really understand is – look, we were never going to compromise on the locations that we are trying to get on the value creative part of the equation. And so to do that with the best real estate to the extent it makes sense we are going to look at it really closely and open our minds so whatever structure is necessary to get it done.

The only thing I’d add to what Don and Jim have said is when we are doing a partnership deal for tax reasons for the contributor in the case of boundary or otherwise in the case of something like Plaza El Segundo. The people are staying and really don’t have day-to-day operational say and what goes on. So whether might be a little bit more reporting and little bit more communication here or there. It’s not like we have to get approval to do, we need to do around the property.

Thanks and then another one on – in terms of your realignment and kind of your restructuring at your – of your team. Does this increase the capacity to do other mixed use redevelopment, it sounds like [indiscernible] going to involve some extra time. How much broader tend to be in terms of tackling to this project?

Yes, I’m hopeful it increases our capacity to do all sort of different steps. You know in the case of South Miami, those partners do have very good development expertise and local development expertise. So that’s important, now, how much more capacity over weighted, what we are doing down, I don’t. What we’re talking about is pretty aggressive. When you sit here think about – bringing in Jeff Mooallem or when you think about effectively dividing up the portfolio the way we have. We clearly are – the notion here is to bring in high level real estate talent. That so that we can get to, more of what is a pretty strong growing company. So the answer is yes here – to your questions. It’s all partly – parts are look how we’re moving it forward as a period of time that everybody whether it’s a partner or a federal employee needs to understand what’s going on around here and how to figure out, how to create that value. But I’m very cautious on bringing in that kind of raw skills level and we confident we’ll get there.

Okay and then last one from me is just – as you look you’re releasing spread. Is there any pockets of strength or weakness in the cost of portfolio, whether it’s geographic or property type, small shop centers is there anything it’s really driving or weighing on, I mean any of that releasing effort.

Yes, I still think, I mean it’s just in the market, a geographic market impact here. The West Coast and it’s really, really strong. We’re also seeing strength in Boston, DC is little softer, but – but it is the combination that kind of create that – that overall result and then cut another way timing on particular, anchors or small shop tenants that are below market that we can get it. And we always seem to find some to be able to get through and I don’t expect that change.

Great. Thanks.

Thank you. Our next question comes from the line of Craig Schmidt of Bank of America. Your question please.

Thank you. The partial interest in the Seventh Street retail buildings in the Coconut Grove District, can you say what the percent of the investment is?

Craig, its ranges anywhere from 20% to 80% asset-by-asset, and I think what’s important here is that, we have got a [indiscernible] position in these asset, which we believe we will accrete overtime. In each of these seven building are located or separate buildings are located on the primary shopping streets within the Grove. So in addition to the dominant position we’ve established with Coco, these building will allow us to leverage the street and benefit of what we’re doing in Coco around over time. So you should expect to see us make some additional investments in these particular assets overtime as well as potentially acquire other building in that submarket.

Okay, I was just – you’re answered is good. It’s only to help facilitate the restructuring, you’re also trying to take advantage of such sort of collateral improvement to the neighborhood?

Correct.

Okay. And then the $150 million to $250 million, would that include an expansion, its sound like it would require some major physical restructuring.

Yes. It was – and its not just couple of other assets, that I’m referring to, two and its frankly as the number out of the air at this point in time. But as we underwrite these things and figure out, what it is that we could do with them, yes, you’re all right, that there would significant physical changes to the assets.

But you’re still thinking about focusing on that local consumer.

Very much, Sir.

Great, Okay

That’s really what we see is the benefit of where we are and the opportunity [indiscernible] market in terms of an unreserved population.

Great. Thank you.

Thank you. Our next question comes from Haendel St. Juste of Morgan Stanley. Please go ahead.

Hey. Good morning.

Hi, Haendel.

So understanding your balance sheet philosophy of always having sufficient liquidities fund your business is accretively in avoid and attracted capital raises. I’m curious given the strength of your balance sheet today with your lower roll leverage is very low floating rate. That is wondering, how you are thinking about incremental debt from here. It appeared about you have capacity that’s [indiscernible] that and as we had into higher rate environment, that lower cost floating rate leverage could be a competitive advantage in acquisition precedes given the low yield environment. So just curious on your thought there.

I appreciate the question Haendel and with the recent debt activity that we’ve done. We’ve significantly standard our tenure and its always [indiscernible] to on the call, that does give us flexibility as we go forward to layer and perhaps in floating rate that or place in different parts of the yield curve and still keep up – and a weighted average tenure that would be the longest in our sector. And I think from a long-term perspective having some footing right that is part of the balance sheet, albeit a conservative level 15% or so is a good long-term structure. But what we’ve been doing opportunistically really the last couple of years, just taking advantage of our rates have been and the flatness of the yield curve to get a very healthy Wells Fargo debt maturity profile.

Appreciate that. A question on tenure of conversation with central pillar is – understand that competition for high quality assets. It’s pierced on the capital chasing a higher quality retail asset. But curious given the recent rate [indiscernible] that’s changing the tenure conversations perhaps making more potential pillar willing to come to the table seeing anything notable on that front.

I don’t think it’s changed at all, at this point sellers are pricing expectations and Jeff please comment as well. I do think we both at seen an additional level of activities that perhaps we didn’t see in the prior 12 months, but again, it’s a very expensive environment and difficult to be successful and fully marketed transaction.

Yes, Jim I [indiscernible] absolutely more people willing to talk and more people thinking about selling, but it’s a pricing market.

Got you, okay. And then last one here of some color on the [indiscernible] ramped up a bit to let see [indiscernible] square foot well above your low-single digit reset trend. Can you talk a bit about what’s behind that is it quality space being leased specifically is coming to a reflection perhaps if you are having some…

If not – yes, thanks Haendel. That is one particular transaction, Don mentioned the rollover of the space in Shirlington, it’s the theatre renewal, where we are investing some capital into a higher end maybe experience with the reserve seating and better dining options there that we think we’re really complement what’s going on in Shirlington. So a bit of anomalies if you will, but great return on that incremental invested capital.

Can you share with that return was.

I not prepared to do that now just well above our typical returns.

Fair enough, thanks.

Thank you. Our next question comes from Omotayo Okusanya of Jefferies. Your line is open.

Yes, good morning. Congrats on the quarter. I guess my question really is around developments and redevelopments, I mean its clear, there is a lot of opportunity within the portfolio to do a lot of that and kind of create the next Pike & Rose are create the next Assembly Row, but I guess what I'm still struggling with just how to give you full credit for that in you NAV. I'm hoping maybe you can give us maybe kind of a bit more of a roadmap of just how much kind of development, redevelopment you expect to do with the next few years? And what could likely come up next? I guess Pike 7 the next big one we should be watching or even if we can get some type of roadmap to kind of guidance to that.

Well, Omotayo I really appreciate the question and something that we talk a lot about in one-on-ones and other meetings. And we do intend to address a bit more fully at our Investor Day at the end of September. But look back at our plan, and I think, one of the things you can reliably expect us to execute upon is $250 million to $300 million plus a year of development spend that will be in these existing assets that we have in control today. And when we look at that long-term pipeline, it’s a pipeline that stretches well beyond ten years. So but to that more detailed question in terms of trying to get folks more granularity, we will do that at our Investor Day.

All right. We will stay tuned then.

Hey, let me add one thing to that, I don’t remember, I don’t remember I should whether you were at assembly at our Investor Day two years ago.

Yes, I was.

That the amount of thought and strategy and looking at opportunity to figure out whether we could make the comment that we could double our NOI in ten years and what it would take to do that, that wasn’t just an investor presentation. There was a lot of work that went behind that and we are now two years into the ten and we are right on it and it certainly looks like at least for year three that we’ll continue to that. And I don’t – I would hope that you would see that all the way through. That all includes the number that Jim just talked to you about in terms of $150 million, $200 million a year it does include additional ideas about acquisitions like what we are talking about here in Miami. So if you kind of go back and look at that and I know that’s online, right. We’ve got that on website.

Yes.

To be able to see that’s how we’re trying to run the company. It’s really on a secret. It’s really something that we are as best we can try and to run the company on. And yes, there are more specifics as specific phases and pieces get added on, but it gives a pretty good overall idea of what everybody Weilminster, and Berkes, and Taylor, and that would allow all of us are on. And I don’t know that’s all I would say, just look at that, because there is a lot of good data in that.

Okay. That’s helpful. Thank you.

Thanks.

Thank you. Our next question comes from Alexander Goldfarb of Sandler O'Neill. Your question please.

Good morning.

Hi Al.

Hey how are you? Just a few questions here, the first is the pace that your acquisition activity in South Miami is pretty impressive. Especially you look at your other markets and it takes long time to get at individual assets. So is there something in particular going on like is there sort of a generational shift, down in that South Miami market where either people did own stuff a long time are getting towards retirement looking at selling or what sort of driving the sudden flurry of the deals that we’re seeing from you guys out of that one market.

I’ll tell you where I going that Alex, that is the benefit of a local partner. It is yes, all of these have effectively been sourced through that local partner. That local partner was somewhere along the way on each of those deals and back of the question from before that’s – that is the one of the benefits, that offsets the more complexity and everything else so it’s there with it. So I think and again, we’ll be able to talk about it more when we in a few weeks when do you see the second half. But these are marketing assets that are not necessarily marketed to the full extent and there is no question that having that local knowledge allows us to look at things with a more refined eye. So that in that case is the reason for that.

Okay. And then Jim Taylor question in guidance the pending acquisition is not in there. But if we look at the balance sheet of your cash flow just $22 million at quarter end, then you guys bought back $150 million, and your line of credit is $106 million. So it sounds like there is a bond offering in the back half. Is that in your guidance or that’s not in your guidance?

We do anticipate and I said in our guidance longer term debt issuance in the latter half of the year. But we’ve got the flexibility from a timing perspective, that if the market is not there or away. So but that’s in our guidance.

Okay, great, thank you.

Thank you. Our next question comes from Michael Mueller of J.P. Morgan. Your question please.

Thanks. Hey Jim, when you were talking about leasing spreads, I think, you mentioned something about spreads in the second half of the year something along those lines being stronger or above average. And I was wondering if you can just give us a little more color on that.

It’s from what we can see right now the leasing team continues to do a phenomenal job of rolling tenants and leasing space. So we expect that to be pretty strong. As I’ve always said it’s hard to look at a particular quarter and see a trend. You really to need to look over several quarters and in fact with this company, over a decade of experience and you can see that we traditionally average in the mid teens. Earlier in the year we had a 8%, this quarter we had 15%, right. I certainly see strong signs that will continue to be at or above that historical average.

My teams are excited because there is a big three or four deals that are real good deals in the works that we’re moving along, because it helps themselves put that in the comment. So that’s usually were it comes down to us. There is – it is our efforts on how go get at under market or underperforming tendency and make it better. And there’s a few of things in the works that are good.

Got it, okay. That was it. Thank you.

Thank you. Our next question comes from George Auerbach of Credit Suisse. Your line is open.

Thank and good morning. Jim I’m sorry if I missed this but in the first phases of Pike & Rose and Assembly, how much NOI is being captured in the second quarter results from the $430 million or so of cost spend to date? And how much of the $430 million, has actually been delivered?

We had about, as I said in the remarks, about $3.5 million of NOI. If you look at Pike & Rose at this point roughly half of it in the first stage has been delivered, for a call that we still have the office investment, delivering, as well as Building 10 which is about a $110 of investment. Just now, beginning to deliver in leased-ups subsequent to the quarter. And that Assembly, we are probably about 70% delivered when you factor in the office which is still delivered.

Thank you. I mean it’s the small number compared to what is going be. I’m there is big leg between as you know, cash out even delivery and make them generations for board.

Yes – no just – that seems to be one of those themes of earnings season so far and retail especially is giving credit to companies have stabilized or delivered these big developments that will give you stabilized NOI in six months, nine months, twelve months so just wanted to clarify that. And Jim just 8% FFO growth on the new 2015 midpoint, get’s you to kind of low 570 range. It sounds like X acquisition that’s what people should expect next quarter?

Are you talking about 2016 are talking about 2015, I’m sorry.

Yes, for 2016.

We’re not providing guidance there, what I have that is look George and this is important, we continue to invest in the long-term, we’re delivering developments like these Building 10 at Pike & Rose which initially drag NOI. So again as we look forward we feel very confident about our plan to continue to generate 7% to 9%.

Great. Thank you.

Please try and now to get you out of ahead of George [indiscernible].

Thank you. Our next question comes from Jeremy Metz of UBS. Your line is open.

Hello.

Hey, Jeremy.

Hey, good morning, guys. Sorry, I had a phone issue, a moment roster here. Just couple of quick ones, and I'm not sure if I missed this early in the call, but did you say how much capital at share was for the seven street retail assets in Miami.

Yes, it was just under $6 million.

Okay.

All in terms of initial investment.

Okay. And then just switching to asset sales you still have a handful assets you list as other similar to you heaps and streets, I was just wondering get those additional assets here given the strength in the market, or would it really be more of a timing thing with finding additional acquisitions at this point.

It’s a combination of both Jeremy and I don’t – nowhere where we can say is that you should expect a closing of a sale of one of those assets in the next few months, but I can tell you we’re looking at hard and the idea is always to try to balance it with our earnings growth, within acquisition and make it’s the most efficient transaction. So always on the list and you will see every year one or two.

Okay. And then just one quick one for Jim, just in terms of capitalizing interest, can you just remind us how you think about capitalizing interest and then when do you stop is that delivery or stabilization.

We stop at delivery. So when that space is ready to be leased, we stop even if it’s not leased we stop capitalization.

Okay. Thanks, guys.

Thank you. Our next question comes from the line of Chris Lucas of Capital One Securities. Your question please.

Good morning, everyone. One detail question, on the, I know it was referenced earlier. I guess, you cleaned up the ownership of Pike 7 with the [indiscernible] acquisition I guess does that imply timing or is it just an opportunity to go ahead and clean that up at this point.

Completely opportunistic in terms of when it was. And we wished we owned it all along it’s a vacant building on the hard corner of an important asset for us. So it’s certainly something that we should own, it was not for sale. And when that opportunity came we jump on, we don’t play anymore.

Okay. And then, Jim, just trying to get a hand along the same-store pool as it relates to – its relationship to the overall operating portfolio at this point given the development deliveries. Can you give us a sense – to how much the same-store pool makes up for the quarter of the overall operating platform?

From an NOI perspective, it’s 95%.

It’s still that large?

Yes.

Yes. And that’s been pretty consistent I would assume over the last couple of quarters and assume it should stay relatively in that range over the next couple?

Yes. It should and again it’s an important point because when we look at, we look at our NOI, we included those assets. It’s substantially all of our portfolios.

Yes, Chris, that is such an important. When you know that is not a GAAP measure as you know and therefore there is a lot of interpretation as to what – what same-store numbers means. So I just – I’m really glad you said that because it is virtually all of our analog, lot of our analog.

Okay. Appreciate that. Thank you.

Thanks, Chris.

Thank you. Our next question comes from Greg Schweitzer of Deutsche Bank. Your line is open.

Thanks good morning, everyone. As the lease gets going on the second multi-family at Pike & Rose. So I was wondering how the progress is stacks up so far. And [indiscernible] initial expectations?

I put a cover in my remarks Craig that – that building is called palace. It is the [indiscernible] that is what you’re referring to, right?

Right.

Yes. We just opened it up for leasing at the end of June. We did 36 deals, at or open above or performance in those first deals, which is a really good start, it’s a good product. I mean it’s a really add some nice contrast to the first building that there – it’s more upper end and it’s obviously higher rise versus – stick bills and so that the initial start, we’re underway, good start.

You’re having to do anything extra or definitely in terms of marketing or anything like that – versus the first building|?

Not so far. Although I mean we are always looking at – innovative marketing ways. We’ve got some full things that happen. But with respect to concessions, there are some that are market or less than market frankly so far. I hope that holds up, will see at the big building in an 18 process in order to get there. But the start at least has been – has been strong.

Okay, great, thanks and then just a quick one on guidance. Is there still some level of ATM issuance embedded in that for the rest of the year?

There is, thank you. You know we expect to another $70 million to $100 million for the balance of the year.

Great. Thanks a lot.

Thank you. Our next question comes from Anthony Hau of SunTrust. Your question please.

Thanks. This is Steven. Just a quick one, going back to your CocoWalk asset, you thought a $6 million of buildings is this, if you had a free met this is the first earning of your land, square footage assemblies that around that area or it is kind of halfway through it just given that it seems like the lot more things can by around that neighborhood.

Well, Steve, but I will tell you, its not like with what we’ve done so far, plus what we are planning in the next few weeks is in planning in terms of critical math and that really is that always the first thing can you get critical math that to actually impact a market, its really hard to do. We – it’s not a good job of that, so this is a really good start in terms of landlord its not the first inning I mean it’s the fixed inning in terms of that, what we are it is in terms of redevelopment thought the first pitch hasn’t been drawn.

Right. And I see like – elementary school waiting for the asset, is that something that yes, I would say its permanent resident or something that maybe you can do something with overtime.

That is a permanent resident.

Very permanent.

One of the attracted things about that sub market is that it has some of the very best schools in South Florida. So we get great day time traffic in addition to the office over $1 million square feet of office and that…

And it’s a magnitude for the folks that we wanted to be at our place.

Okay. That’s it from me. Thank you.

Thank you. There are no further questions in queue. I like to turn the call back over to the conference host Brittany Schmelz. Ma’am?

Thank you all for joining us. As we’ve mentioned we will start to seeing [indiscernible] for additional details in the coming week.