Kite Realty Group Trust (KRG) Q2 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the Second Quarter 2014 Kite Realty Group Trust Earnings Conference Call. My name is Denise, and I’ll be the operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now turn the conference over to Mr. Adam Basch, Manager of Finance. Please proceed.

Thank you and good afternoon everyone. Welcome to Kite Realty Group’s second quarter 2014 earnings call. The Company’s remarks today will include certain forward-looking statements that are not historical facts and may constitute forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking statements. The Company refers you to the documents filed by the Company from time-to-time with the SEC, which discusses these and other factors that could adversely affect the Company’s results. On the call with me today from the Company are Chief Executive Officer, John Kite; Chief Operating Officer, Tom McGowan; and Chief Financial Officer, Dan Sink. And now I would like to turn the call over to John Kite.

Thanks Adam. And welcome everyone who’s joining us today for our second quarter earnings call. We would like to extend a special welcome to those of you who are listening to our call for the first time today. Our team had a large list of action items leading up to and coming out of the merger, and I am pleased to report that we’ve already executed on a number of those items. I’d like to start with a brief overview of what we’ve accomplished since the merger. We completed all of our pre-merger objectives including the sale of all the single tenant assets, the sale of two of the three apartment assets with the third under construction. The sale of the securities portfolio and we’ve successfully assumed all debt on the date of the closing. We successfully welcomed approximately 40 new team members into our organization. We added a number of individuals with strong operational and management experience, who are immediate impact with the assets and our regional team structure. We fully integrated and converted leased and accounting data from the former Inland Diversified systems. This will allow many of our new IT infrastructure components to begin streamlining data analysis to further enhance decision-making. We have reached out to our over 1,000 tenants, our new 1,000 tenants introducing our Company and operating policies and making sure all parties are aware of the transaction and have access to anything they need through our Company. We’ve amended our line of credit and term loan, extending the maturity and credit capacities above. We’ve completed a full review of the portfolio and identified several opportunities to enhance assets, as well as dispose of non-core assets. I’d like to take the opportunity to thank Barry Lazarus our former President of Inland Diversified and his transition…

and:

(Operator Instructions) Our first question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed.

Hi, thanks. Good afternoon and congratulations on closing the merger. Just curious now that the deal is closed, I am guessing you have had about a month of insight and are working with shareholder services more closely with regard to your new investors. Any sense what the reception has been like or the posture from your new investors? KeyBanc Capital Markets: Hi, thanks. Good afternoon and congratulations on closing the merger. Just curious now that the deal is closed, I am guessing you have had about a month of insight and are working with shareholder services more closely with regard to your new investors. Any sense what the reception has been like or the posture from your new investors?

Well Todd it is -- we don’t have exactly accurate data on what you are looking for in terms of having shareholders retain the stock or not. But certainly everyone we have talked to, has been very positive, everyone we talked to, sees a great a deal of potential value moving forward. So, all of our comments have been positive and obviously over the past month, we have had significant volume, so there has obviously been quite a bit of volume but the stock has performed okay in light of that volume but of course we think there is a lot of upside from where we are today.

Okay and I was curious regarding the one for four reverse stock split, I was just wondering if you could run through the Board’s rationale there? KeyBanc Capital Markets: Okay and I was curious regarding the one for four reverse stock split, I was just wondering if you could run through the Board’s rationale there?

Sure, I mean there is a bunch of -- there is a lot of rationale and several points to it but one of the things that we were very focused on coming out of the merger was that the Company had really gone through a transformation in every way in terms of the size and scale of the business, the quality of the business, having an equity market cap in excess of $2 billion and all the great growth that we have had, that we have generated already. And so the fact that we were a single-digit stock was a concern for various reasons. One of which was that the single-digit stock tend to be stock that higher frequency trading revolves around the percentage movements are large so that creates a volatility that’s kind of unnecessary. There are some funds that will not own single-digit stocks, so those were a couple of things that were important to us. Also one of the things we looked at was having 330 plus million shares outstanding is a large number of shares to have outstanding and in order for our investors to have material stakes in the Company when you are trading at that level can be expensive to trade in the shares based on commissions paid per share that was another thing we thought about. So, we looked at a lot of different things and mainly just the transformation of the Company and the fact that it is such a stronger Company led us to the top process and then when you look at those individual data-points of volatility, cost et cetera, it just made a lot of sense to us.

Okay, that’s helpful. And then, your original guidance when you announced the merger, you had talked about incremental G&A between $6 million and $8 million and you talked about your G&A expectation through the back half of the year 3.5 million to 4 million for the combined Company now. Is that sort of a good run rate to think about going forward? Is the integration sort of complete from your perspective? KeyBanc Capital Markets: Okay, that’s helpful. And then, your original guidance when you announced the merger, you had talked about incremental G&A between $6 million and $8 million and you talked about your G&A expectation through the back half of the year 3.5 million to 4 million for the combined Company now. Is that sort of a good run rate to think about going forward? Is the integration sort of complete from your perspective?

No, that’s not a good run rate but I will let Dan add.

Hey Todd, so if you look at this year we wanted to get some visibility in the last two quarters of 2014. So, if you look at it from a run rate for 2015, I think one of the key points and as you mentioned -- we have mentioned in incremental 6 million to 8 million and I think when you look at where we are from a property operating perspective and the recoverability or the non-recoverability of a portion of that and the additional G&A, I would say we are going to be at the high-end or slightly above the high-end of the 6 million to 8 million. So, when you look at the next year, I would say you are probably in between 4, 4.5 a quarter versus what we are looking at this year between 3.5 and 4.

Okay. And then just lastly for you Dan, actually on Page 8 of the financial supplement, I think Footnote 4 where you provide the adjustment for the mid-quarter rent commencements. Do you have that number I think it’s missing from the supplement? KeyBanc Capital Markets: Okay. And then just lastly for you Dan, actually on Page 8 of the financial supplement, I think Footnote 4 where you provide the adjustment for the mid-quarter rent commencements. Do you have that number I think it’s missing from the supplement?

Yes, we -- I can get that for your Todd. We pulled that out as we got the combined company. It didn’t have as larger impact on any of these. In addition, we were not doubled at size, so we dropped that out. I can definitely get that for you, my guess is it’s probably going to be between 100,000 to 200,000 but we will pull it out.

Our next question comes from Christy McElroy with Citi. Please proceed.

Hi. Good afternoon. This is Katy McConnell for Christy. Within the new guidance range can you talk about the non-cash impacts to revenue and interest expense from the merger, so as the deal is still roughly neutral in AFFO basis? Citigroup: Hi. Good afternoon. This is Katy McConnell for Christy. Within the new guidance range can you talk about the non-cash impacts to revenue and interest expense from the merger, so as the deal is still roughly neutral in AFFO basis?

Yes. When you look at the FAS and the debt marks, I think when you look out into 2015 as well as '14 the mark-to-market debt, we’re still finalizing these numbers but let’s say that that’s going to be probably in the neighborhood of a 1 million to 1.5 million a quarter from a debt mark perspective. And then straight line rent and lease marks, again we’re finalizing those but those are probably, as well right around the $1 million a quarter. So that’s initially for 2014 now we’re those numbers for ’15 obviously when you talk about the straight line rent that’s just, that can move around a little bit as far as lease marks and debt marks, that gives you good projection. Now something important to point out is from the lease mark perspective, initially there is as we talked about on the call, when we were walking through the transaction we had $20 million of above market leases and $90 million of below market leases. I think what’s important is that $20 million above market leases are going to burn off quicker so then our FAS adjustment in the first two years will be less than that in the future when the $90 million starts to roll through. So hopefully that is helpful, but that’s generally what it looks like. And again we’re finalizing the numbers with evaluations and walking through them as we will just have the final numbers in June.

Our next question comes from Craig Schmidt with Bank of America. Please proceed.

Thank you. I just wanted to dig a little more in the divesting of the non-core non-strategic assets. Did you say that you're in early discussions to possibly sell the entire group subset of those assets? Bank of America: Thank you. I just wanted to dig a little more in the divesting of the non-core non-strategic assets. Did you say that you're in early discussions to possibly sell the entire group subset of those assets?

Yes. Craig, what we said is we have identified up to 15 properties that we want to dispose out or to sell. And then we are in early conversations with someone who's interested in all 15 so yes. That is what we said.

Okay. And then would that include assets that maybe do not make a lot of a sense from a geography standpoint? Bank of America: Okay. And then would that include assets that maybe do not make a lot of a sense from a geography standpoint?

Yes Craig. It's generally -- these are geographically driven and we talked about in the past that some of the assets kind of in the mid-central part of the country that we're -- geographically not suited for us. And then a couple smaller assets that really aren't suited for us that they are less geography-driven and more just the scope of the property. But we spent a lot of time on it and we feel comfortable that that's the right set of properties to sell. And then we would a lot of opportunity to redeploy the proceeds in a lot of different ways. So we are -- again, it's early. So anything can happen. But we are in early conversations right now.

Our next question comes from Tammy Feak with Wells Fargo Securities. Please proceed.

Hi. I guess just following up on Craig’s question if you sold all 15 properties, can you give us an idea what the range of values would be, just total aggregate dollars you could raise from that. And then I guess after selling those 15, you’ve identified, what can we expect from Kite on an annual basis in terms of capital recycling? Wells Fargo Securities: Hi. I guess just following up on Craig’s question if you sold all 15 properties, can you give us an idea what the range of values would be, just total aggregate dollars you could raise from that. And then I guess after selling those 15, you’ve identified, what can we expect from Kite on an annual basis in terms of capital recycling?

In terms of the second question, I mean the annual recycling is something that’s -- again, once we would, if we get through this initial phase of selling these 15 properties then we’re down to, feeling as though we have the portfolio that we want and that we think we can grow. But I think we’ll always be on the margin looking at kind of that bottom 10%. Now that account is really a smaller number because it’s not really 10% anymore as we have tweaked the portfolio and believe that we saw a lot of growth left in it. But we’ll continue to sell assets more on a one off basis then on a bulk basis is what I am trying to say. In terms of the proceeds it’s early to get into that, again 15 properties isn’t as you can imagine that’s not [$20 million] it is a significant number but I think it’s too early for us to get into the number.

Okay, thanks. And then with regard to NOI growth guidance for 2014, I guess it didn’t change when including the Inland portfolio and I guess I was under the impression that the growth profile of the Inland portfolio was slightly lower than that of Kite. I guess I'm just sort of curious if it implies that the NOI growth of the Kite Portfolio is better than you expected or if the Inland portfolio is better than you expected. And then does that guidance include the impact of ground leases? Wells Fargo Securities: Okay, thanks. And then with regard to NOI growth guidance for 2014, I guess it didn’t change when including the Inland portfolio and I guess I was under the impression that the growth profile of the Inland portfolio was slightly lower than that of Kite. I guess I'm just sort of curious if it implies that the NOI growth of the Kite Portfolio is better than you expected or if the Inland portfolio is better than you expected. And then does that guidance include the impact of ground leases?

Well, a couple things. And first of all in terms of our 2014 guidance, that Kite same-store NOI guidance, the diversified portfolio won't be in for a year typically as our -- we don't put it in for a year once we bring in a new property. So right now we're dealing with Kite’s guidance. And in terms of what we had said earlier and I know a few people had written on the notes around decelerating second half. I mean, the bottom-line is we're halfway through the year. We still have two quarters to go. We've tried to make clear in our prepared remarks that are same-store NOI guidance will be at or above most likely the top-end of our guidance. And if we're at or around that 4% level as we have projected, we're outperforming the sector by over 100 basis points so we're very happy with where we are and we were trying to point out that our portfolio is generating top-tier if not very close to the top same-store NOI growth over the last 14 quarters. And it is with the assets that we own which over that period of time haven't included assets in California, in Los Angeles, or San Francisco or Boston. So the point we're trying to make is we drive results. And we think we can drive those same results when we combine the portfolios as we are now. And we have very set goals in terms of how to do that and I think what I was trying to -- one of the things we wanted to get the point across to the market is the fascination with geography relative to quality is clearly missing the boat in terms of companies that can drive NOI growth and cash flow growth. And the other thing this NOI that we are driving is also a part of this cash flow growth. I mean, if you look at the two deals that we just completed, beyond this transaction and the diversified merger, I mean, we've grown our free cash flow by $0.12, $0.14, $0.15 a share big numbers so anyway that was a long answer to your questions but we feel very good about that right now and we feel good about integrating it and continuing to drive.

Okay. And maybe just one follow-up to that, with regard to the spread between leased and occupied, do you know that was for the second quarter? Wells Fargo Securities: Okay. And maybe just one follow-up to that, with regard to the spread between leased and occupied, do you know that was for the second quarter?

Yes, for the second quarter Tammy for the whole portfolio it was about 230 basis points, spread between leased and occupied and if you look at the same-store pool economic occupancy there was about a 50 basis point spread.

Okay so, on the same-store portfolio last quarter it was 350 basis points and this quarter it was 50 basis points? Wells Fargo Securities: Okay so, on the same-store portfolio last quarter it was 350 basis points and this quarter it was 50 basis points?

Yes just to be clear that -- and that's why there's a -- it's physical and economic accuracy last time we gave the physical occupancy discrepancy and right now on the physical occupancy side it's probably closer to 192 to 200 basis points versus 300 some odd that you had last quarter, so we're going to put that in, in future quarters in the supplemental and make it clear that it is economic occupancy versus physical.

Okay, great that’s very helpful. Thank you guys very much. Wells Fargo Securities: Okay, great that’s very helpful. Thank you guys very much.

Thank you.

Our next question comes from RJ Milligan with Raymond James & Associates, please proceed.

Hi. Good afternoon guys. John, I was wondering if you could give us a little bit of color on how the Ogzif portfolio is performing, it was a pretty big addition to the asset base it’s not in the same-store pool, I was wondering if you could give us some color as to how it’s performing relative to the how you guys underwrote it and maybe you could give us an NOI growth number for that portfolio? Raymond James & Associates: Hi. Good afternoon guys. John, I was wondering if you could give us a little bit of color on how the Ogzif portfolio is performing, it was a pretty big addition to the asset base it’s not in the same-store pool, I was wondering if you could give us some color as to how it’s performing relative to the how you guys underwrote it and maybe you could give us an NOI growth number for that portfolio?

Yes, I mean it’s performing very well RJ, in terms of we’ve already made significant leased enhancements, I can’t give you today the same-store number on it but bottom-line is it is definitely performing above where we thought it would. And then we are about to embark on we are looking at a couple of redevelopment opportunities there. So, I think we are very pleased with it and yes, I mean it was a -- at the time we acquired it, it was 20% increase in the size of the Company. So, it was a big deal and that was one of the points I was trying to make is that in terms of integration, we integrated that very quickly but we feel as though that result will be generally in line with what we are producing in the rest of the portfolio is what I would tell you.

Okay, and with the performance above sort of how you guys underwrote it, is that outperformance being driven by better lease up or quicker lease up than you would had expected, is it better rents, what’s driving that outperformance? Raymond James & Associates: Okay, and with the performance above sort of how you guys underwrote it, is that outperformance being driven by better lease up or quicker lease up than you would had expected, is it better rents, what’s driving that outperformance?

Yes, first of all we’ve underwrote it from an IRR perspective with a vacancy factor beyond the existing vacancy. So, we wanted to make sure that we didn’t have any enterprises and that has not happened we haven’t had a lost vacancy really across the board in anyway, so that’s one of the reasons it’s outperforming that we just were very conservative from an IRR perspective. We have begun to push rents in the portfolio. We have one property specifically in Jacksonville where we are being very cautious around doing new deals, so that was is more of a redevelopment play, so that will be a little slower. But for example we are pushing rents in both Houston properties pretty significantly. I think we have announced the deal that we are working on in the Woodlands to replace a tenant that we are doing a lease termination with but that is a box deal that will be significant for our spreads to the previous rent. So, yes, I mean we are just applying our elbow grease to that portfolio that didn’t have it before and it’s a real similar scenario where the properties were, the structure was such that the way that we kind of do the business, the way that we operate gives us a lot of runway to jump in there and really leverage our retail relationships and push rents. So it’s a combination of those things and it’s just great real estate, I mean that’s really the most important thing.

Our next question comes from Carol Kemple of Hilliard Lyons. Please proceed.

Good afternoon. How do you all expect your merger and cost to be spread out over the third and fourth quarter? Will they all be in one quarter, or will it be about even? Hilliard Lyons: Good afternoon. How do you all expect your merger and cost to be spread out over the third and fourth quarter? Will they all be in one quarter, or will it be about even?

Yes Carol, this is Dan. I think we are going to have to -- we will wrap the merger cost up in the third quarter, so we will have everything booked and I think when you look at in totality I think we estimated originally about $25 million. I think the third quarter, you will see roughly about $19 million in Q3, so we have pretty much got it. The total is ironed out and so in totality it will be about 27 million versus the 25 million we originally projected primarily relating to a couple of million dollars of debt assumption cost that just to get the 50 loans over to the over and assumed on a timely basis that was the primary difference.

Okay. And then your parking revenue is up about four times what it was last year. Was there anything specific related to that? Hilliard Lyons: Okay. And then your parking revenue is up about four times what it was last year. Was there anything specific related to that?

No, I mean I think typically in the parking revenue column we will have, in this quarter we had probably some NBA genes in there and then we have got the Daytona 500. So, there are some things that go through that line item that are up and down a little bit.

Our next question comes from Chris Lucas with Capital One Securities. Please proceed.

Good afternoon guys. John, you mentioned that cap rates have drifted down over the last x number of months. Hazard a guess as to what the clearing price would have been for the Inland deal today versus when you nailed down the negotiations for it? Capital One Securities: Good afternoon guys. John, you mentioned that cap rates have drifted down over the last x number of months. Hazard a guess as to what the clearing price would have been for the Inland deal today versus when you nailed down the negotiations for it?

Obviously tough to say Chris, but I think cap rates in general have compressed when you look at deals that we look at. They compressed anywhere from 25 to 50 basis points, so I think it would be logical to say that. This would be in that same kind of arena, and so instead of at being a high 6, more of a low 6 in that range depending on -- but again I mean it’s just a big deal, big portfolio, lot of things have to line up for the buyer but if the assets were priced individually, I don’t think there is any question that they would have compressed that kind of 25 to 50 basis points.

Okay. And then you mentioned that you had a pool of assets sitting on the disposition side. Can you maybe give us a sense as what the percentage of the NOI coming from Inland that those assets represent? Capital One Securities: Okay. And then you mentioned that you had a pool of assets sitting on the disposition side. Can you maybe give us a sense as what the percentage of the NOI coming from Inland that those assets represent?

That’s kind of another way of giving you the number. It is 15 properties, it’s probably I don’t know it’s less than 20% probably. But again it’s fairly significant it’s 15 properties, so it’s fairly significant but it is probably less than 20%.

Okay. And then you guys have had it now for a month, how long do you think it will take for you to full vet all of the assets to the point where you know exactly what your business plan is for both leasing and potential redevelopments? Capital One Securities: Okay. And then you guys have had it now for a month, how long do you think it will take for you to full vet all of the assets to the point where you know exactly what your business plan is for both leasing and potential redevelopments?

Well, I can answer that, when that was done, and we are done with that, we know exactly plan. One of the benefits of the deal was that although we announced the deal in February, we began working very hard on the deal in the summer and fall. So, our knowledge of the assets was strong and we feel very comfortable around that. Now, obviously operating them and understanding them from a distance are different, so we are operating them now and we have had no surprises of any magnitude that concerns at all. And if anything, we have seen a lot of upside that we thought was there but now we know there is definitely some potential upside there on the redevelopment side which is why I said that in the combined portfolio we are kind of analyzing around $100 million of different projects. Now there is a couple of those would include stuff that we have within our own portfolio, but we feel I mean we are there today in terms of our operational efficiency, we haven’t missed a beat that was what I was trying to get the point across that for a small company prior to this for us to deliver the results that we just delivered and to close on this thing seamlessly we are very proud of that fact. So, you don’t get that by accident, you get that by grinding hard by working hard and by having great team members which we do. So, I think we feel very good about it Chris and we will begin to seek value right away.

Yes, Chris this is Tom a point or other item I would add is we picked that over a 1,000 tenants and one of the things that we have initiative to do is get out and personally speak each and every one of those 1,000 tenants across 60 properties and that has been accomplished and that was one of the big goals that we have to maintain that customer relationship attitude. So, that was one of the big things we wanted to do because ultimately it starts will the customers.

Okay, great. Thanks a lot guys. Capital One Securities: Okay, great. Thanks a lot guys.

Thanks.

(Operator Instructions) Our next question comes from Nathan Isbee with Stifel, please proceed.

Hi, good afternoon. Stifel Nicolaus: Hi, good afternoon.

Hey.

Would you be able to update us on where you guys stand going forward with the dividend policy, given the bigger-sized Company and perhaps to hit the -- if you desire to make some of the legacy shareholders somewhat whole from a dividend perspective? Stifel Nicolaus: Would you be able to update us on where you guys stand going forward with the dividend policy, given the bigger-sized Company and perhaps to hit the -- if you desire to make some of the legacy shareholders somewhat whole from a dividend perspective?

Sure, I mean when you look at it Nate just clearly from a payout ratio perspective we are obviously very conservative in our dividend. Now, historically we have always over the last few years, we have had a great deal of need for an external capital to fund developments and redevelopments and TIs et cetera, but now we are clearly in a much-much different place as it relates to free cash flow. And again one of the things we talked about was the fact that we have significantly increased our free cash flow not just from this deal but also from the Ogzif deal so our last two major acquisitions were extremely accretive to cash flow and that’s what runs businesses. Free cash flow is what runs businesses not demographics or NOI or anything else it’s free cash flow. So, we are really excited about that. I think that we obviously in terms of, we really look it as though we have a shareholder base. Obviously we have more retail shareholders today than we did that will evolve overtime and so we really view it as we have a shareholder base that we want to return results too and so total shareholder return is a big thing. So I think we are going to look at that, going into next year and we are going to see where we think our where our net cash flow is and what our opportunities are internally but as we’ve already said I mean we certainly are in a much better position to look at raising that overtime.

Did you consider doing a significant raise around the time of the merger? Stifel Nicolaus: Did you consider doing a significant raise around the time of the merger?

Well, if you remember right, we did increase the dividend 8% I think last quarter not this quarter.

Correct. Stifel Nicolaus: Correct.

And that was not part of the equivalent deal it was really driven off of the Ogzif and all of our development deliveries, et cetera. So, we obviously thought about it relative to the Inland deal we thought about the dividend and clearly their shareholder base is very sensitive to it but we also explained that there is a lot of raising we can do with our capital driving IRR internally. So, I think we thought about it but I think at this point we felt like it was too early but even now we have good visibility certainly through the year and into next year and we feel very good about free cash flow. So, we’ll have lot of choices which is a good thing.

Definitely, and then could you break out the components of your same-store growth this quarter before 4.4% growth how much of that was rent growth versus occupancy growth maybe what economic to the occupancy increase was year-over-year? Stifel Nicolaus: Definitely, and then could you break out the components of your same-store growth this quarter before 4.4% growth how much of that was rent growth versus occupancy growth maybe what economic to the occupancy increase was year-over-year?

Yes that economic occupancy grew year-over-year was about 50 basis points Nate so, I mean base rent was the primary driver in economic occupancy went up 50 basis points so I mean if you walk through, we are getting a lot of good momentum off of the objectives of annual rent bumps and just driving rent increases as you’ve seen in our cash rent spreads.

But how much of your, I’m sorry, go ahead. Stifel Nicolaus: But how much of your, I’m sorry, go ahead.

So, when you look at base rent was probably 5.5% of that increase and recoveries were off like 1.3% let’s say so that’s in the ballpark where we were on the 4.4.

So help me understand that, I mean if your economic occupancy is only up 50 bps, how much of your portfolio rolled over the last year? Stifel Nicolaus: So help me understand that, I mean if your economic occupancy is only up 50 bps, how much of your portfolio rolled over the last year?

When you look at that, I mean those are not significant, I mean one of our objectives is to try to maintain in excess of 80% in our many renewals, so I think we have been doing better than that recently, but…

Yes, I mean I think Nate what you got to look at is the element of that are, if you look at this quarter, the cash spread on renewals at almost 8% was way above our historical number which has been, I don’t have it in front of me but more like a 4% number. So, we drove a lot of that through renewals which is a really good sign. And then when you look at just the general rollover, obviously when you look at the cash rent spreads just in the general rollover we grew it. So, I don’t think I have an exact number for you that you are looking for in terms of how much of that was new tenants coming in versus renewals. But you can tell by the renewal jump that that was a big part of it and some of this is the fact that we started our initiative three years ago in terms of requiring these kind of 3% annual increases on small shop rents. So, some of this is going to notch, not the exploration but just annual increases in rent so you are not going to really see through the exploration schedule, that makes sense?

Yes, well I mean how much your average leases, what would you say is the average bump on an annual basis from your lease? Stifel Nicolaus: Yes, well I mean how much your average leases, what would you say is the average bump on an annual basis from your lease?

Yes, I mean I think if you are looking for the just what we are getting out of the, how much of that 4.4 is just the guys paying more rent every year that’s probably like a 1.5% number, that contractual that goes into that because not everybody is falling at the same time and this is something that we have just begun to do over the last couple of months. So, it’s probably around there.

Okay. And then finally question and it is a question that I guess has to be asked. Can you just talk a little bit about the changes in the executive comp that’s taking place since the merger? Stifel Nicolaus: Okay. And then finally question and it is a question that I guess has to be asked. Can you just talk a little bit about the changes in the executive comp that’s taking place since the merger?

Sure, it has to be adds it that like an -- is there like something in the bible about that or I mean I didn’t see that but thank you for bringing it up, because it is good. No, I mean basically we were trying to point out that and it was very confusing for everyone over the last couple of months because we have had so many filings around the merger over the last month particularly, so a lot of the stuff gets lost. And really what happened here is that in addition to obviously, again this is my view of what the compensation can be looked at but obviously they have -- they do things independently of what, just independently. So, bottom-line is that in addition to the transaction and looking at the company being in a completely different place relative to market cap, size of the company, complexity that was one thing that was looked at just in terms of comparable comp. And another thing that was looked at was the fact that the company has really transformed, not just in this deal but over the last three years or four years the company has really transformed. So, we had old employment agreements that take back to 2004 that really has never been updated, that’s just been rolled over. So, frankly some of the provisions within those agreements were really not market and not very friendly in terms of shareholder rights. So, those were amended and updated and we did point that out, so that was also a part it, a part of how they view the comp and the grants in particular were more global and they weren’t transactions grants so to speak, they were really global in all these elements of new agreements, bigger company, more complexity, great performance, all that stuff that’s what we have looked at.

Alright that’s helpful and let me just be clear as I am sure you know I know nothing about the Bible. Stifel Nicolaus: Alright that’s helpful and let me just be clear as I am sure you know I know nothing about the Bible.

My guess you do. Thanks Nate.

We have no further questions. I would now hand the call back over to management for closing remarks. Please proceed.

Again thank you everyone for joining us. We just want to reiterate how excited we are to move forward with the new company. We have got a lot of opportunity ahead of us and we look forward to continuing to drive top-tier results. Thank you.

This concludes today’s conference. You may now disconnect. Have a great day.