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Edited Transcript of FRT earnings conference call or presentation 2-Aug-18 2:00pm GMT

Q2 2018 Federal Realty Investment Trust Earnings Call

Rockville Aug 23, 2018 (Thomson StreetEvents) -- Edited Transcript of Federal Realty Investment Trust earnings conference call or presentation Thursday, August 2, 2018 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Guglielmone

Federal Realty Investment Trust - Executive VP, CFO & Treasurer

* Donald C. Wood

Federal Realty Investment Trust - President, CEO & Director

* Jeffrey S. Berkes

Federal Realty Investment Trust - Executive VP & President of West Coast

* Leah Andress Brady

Federal Realty Investment Trust - IR Associate

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Conference Call Participants

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* Alexander David Goldfarb

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst

* Christine Mary McElroy Tulloch

Citigroup Inc, Research Division - Director

* Craig Richard Schmidt

BofA Merrill Lynch, Research Division - Director

* George Andrew Hoglund

Jefferies LLC, Research Division - Equity Research Analyst

* Haendel Emmanuel St. Juste

Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst

* Jeffrey John Donnelly

Wells Fargo Securities, LLC, Research Division - Senior Analyst

* Ki Bin Kim

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Robert Jeremy Metz

BMO Capital Markets Equity Research - Director & Analyst

* Samir Upadhyay Khanal

ISI Group Inc., Research Division - Former Research Analyst

* Vince Tibone

Green Street Advisors, Inc. - Analyst of REIT

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Second Quarter of 2018 Federal Realty Investment Trust Earnings Conference Call. (Operator Instructions) And as a reminder, this conference is being recorded for replay purposes.

And now I'd like to turn the conference over to Leah Brady, Investor Relations. Please go ahead.

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Leah Andress Brady, Federal Realty Investment Trust - IR Associate [2]

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Good morning, I'd like to thank everyone for joining us today for Federal Realty's second quarter 2018 earnings conference call. Joining me on the call are Don Wood, Dan G., Dawn Becker, Jeff Berkes and Melissa Solis. They will be available to take your questions at the conclusion of our prepared remarks.

I'd like to remind everyone that certain matters on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information as well as statements referring to expected or anticipated events or results. Although Federal Realty believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information in our forward-looking statements, and we can give no assurance that these expectations can be attained. The earnings release 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.

(Operator Instructions) And with that, I will turn the call over to Don Wood to begin our discussion of our second quarter results. Don?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [3]

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Well, thanks, Leah, and good morning, everybody. Another really good quarter for us and one where it's increasingly evident that we are using our existing real estate platforms to create and enhance real estate value through redevelopment and intensification on both coasts. The focal point is exploitation of our superior locations and cash flow stream, through the lens of a broad real estate perspective. So consider the breadth of these opportunities that are well underway on sites that are already demonstrated in proven retail destinations: First from big pad sites and often multi-talent -- tenants being built and delivered at places like Montrose Crossing in Rockville, like Pike 7 in Tyson's, Willow Lawn in Richmond, Dedham Plaza in Massachusetts, to name a few; to the addition of 2 unique and market relevant hotels at Pike & Rose and Assembly Row, the boutique Canopy brand by Hilton that recently opened at Pike & Rose and the boutique Autograph hotel by Marriott that's about to open any day at Assembly Row; to the reimagining of obsolete CocoWalk into a vibrant mixed-use community, partial, but significant demolition is well underway, and leasing is just as strong; to the first new investment in the Primestor portfolio, about $40 million from Federal, since the formation of the venture in the form of Jordan Down, a to-be developed 113,000 square foot grocery-anchored shopping center in Greater L.A.; to the newly executed lease or about to be executed lease with a powerful and growing technology firm to take the entirety of our 280,000 square foot spec office building anchoring the end of the street at 700 Santana Row, and so on.

Now while most of those initiatives do not yet produce cash flow, and in fact, they were overall dilutive in the quarter to the tune of $0.02 a share, they will and have already significantly enhanced the value of the established shopping centers that they sit on. So while those and many other real estate intensification initiatives are moving ahead at full speed, our core business is doing just fine.

We reported FFO per share of $1.55 in the second quarter, ahead of both consensus and our internal expectations by a couple of cents as well as the $1.49 reported in last year's quarter. Since then, sustainable growth.

Rental income was up nearly 8% in the quarter, reflecting both the Primestor acquisition midway through last year and the fruits of strong leasing over the past few quarters in both the core and mixed-use divisions. When those things are combined with lower operating expenses and G&A in many areas, the overall result is powerful.

So let's get to some of the results, and let me start with leasing: 99 comparable deals for 449,000 square feet at an average rent of $34.75 a foot, 10% above the $31.61 that the previous tenant was paying in the last year of the lease. TIs were high this quarter, largely due to a couple of deals important to our redevelopment efforts, like L.A. Fitness at Brick Plaza in New Jersey.

Let me spend a quick minute on this, because TIs offensively invested as part of a property's repositioning in a strong location are, in our view, an important and productive allocation of capital. And Brick Plaza is a great example of what has to happen in today's retail environment to thrive in the future. Arguably the best-located shopping center in the sub-market with numerous other retail choices, Brick needed a far more relevant tenant base for the future along with commensurate physical improvement and placemaking to assure it was a consolidator in the market. The shopping center can not only survive, but they'll thrive in the next decade.

We're well on our way. Let me tell you about this. It's a 400,000 square foot-plus center that is, up until a few years ago, was merchandised with a failing A&P, a failing Bon-Ton, a failing Sports Authority, an old format and outdated theater, Dollar Tree and an underperforming Ethan Allen. Compare that with the new anchor system that includes TJX's HomeGoods, Michaels, Ulta, DSW, a multimillion complete renovation of the Lowe's Theater and the aforementioned L.A. Fitness. A couple more yet to come as we'll be getting back Bon-Ton the next month or so, and the physical improvements and placemaking are nearly done. Imagine what those changes do, not only to the direct cash flow stream, but also to the future small shop demand and most importantly, the center's cap rate. Offensive capital allocation creates significant value. All TIs are not created equal.

Earnings growth at comparable properties was strong at 3.6% quarter-over-quarter. And our overall portfolio was 95% leased, up 20 basis points since the end of the first quarter, 50 basis points since the second quarter of '17. And while we are 95% leased, we're only 93.7% occupied, a good sign as it relates to upcoming rent starts and their impact on the future income stream.

I also think we've done and continue to do a really good job managing expenses in this environment, both at our corporate -- both the corporate and the property level. We do so without compromising the customer experience at our properties. Property level expense savings achieved through aggressive negotiations and constant focus on scope are shared with our tenants, which has the added benefit of relieving rent pressure to an extent. It is an underrated, but an important balance of professional shopping center management, something we pay a lot of attention to.

In terms of the status of our many initiatives, let's start with CocoWalk in Miami, where the redevelopment is fully underway. Of course, that means we are now in the particularly dilutive demolition stage, which negatively impacted earnings growth by about $0.01 this quarter. Lots of interest and demand from both retail and office tenants now that it's physically clear that's something significant is happening there.

The continued maturation of both Assembly and Pike & Rose is proceeding as expected. With initial residential lease-up virtually complete at Pike & Rose, we're just recently 95% leased and should be similarly occupied by the end of next quarter with average net effective rents approaching $2.40 a foot. And at Assembly, we are currently 85% leased and 73% occupied, with stabilized residential occupancy by the end of the year. Average net effective residential rents approached $3.40 at Assembly.

You will note in the 8-K a cost overrun of about 3% at Assembly Row Phase 2, the result of a more cautious approach to an expected Massachusetts development grant along with an upgraded unit and common area investment at the Montaje residential building. We felt that those enhancements were prudent, given the significantly higher and underwritten rents. Those rents more than covered the higher cost, which will result in a stronger Assembly stabilized yield.

As I touched on earlier, the additions of hotels at these 2 vibrant mixed-use communities adds to a unique destination dynamic that we saw work first hand immediate -- amazingly well at Santana Row. The Canopy is open and it has started ramping up at Pike & Rose, and the Row Hotel at Assembly Row will open any day now and will also start ramping up in the third quarter.

Ramp-up is naturally dilutive and has negatively impacted second quarter results by about $0.01.

Out on the West Coast, we added to our Primestor venture, the first round of development opportunity, $40 million, to construct Jordan Downs Plaza, a 113,000 square foot shopping center anchored by a New York Stock Exchange public company, grocer Smart & Final. That lease, coupled with other signed LOIs, puts us at about 80% pre-committed when construction starts. Primestor has been working closely with the Jordan Downs community and a Los Angeles housing authority for years. The property is located in the Watts section of Los Angeles in close proximity to other assets in the Primestor joint venture, particularly La Alameda in Walnut Park, and of course, is earmarked by its incredible density and lack of shopping alternatives.

Perhaps the best news is the new lease by a large technology firm to take down the entirety of 284,000 square foot office component of 700 Santana Row. Both economics and tenant occupancy timing beat our underwriting. We have been asked by the tenant not to reveal their identity at this point, as they want the opportunity to do so to their employees first, and we'll respect that.

As you may recall, the building is still under heavy construction and won't be turned over to tenants for their build-out till next year. So the strong interest in economics from a number of prospective users, both full building and multiple tenants, so soon is incredibly satisfying to us. We gave lots of thoughtful consideration to a full building user versus splitting it up among multiple users. But economic, credit and other factors led us to the conclusion that this was the best risk-adjusted decision. We would expect occupancy late in 2019.

And before I open the line to your questions, I wanted to acknowledge the contributions and friendship of both Don Briggs and Chris Weilminster over the past couple of decades here. I assume most of you saw the press release yesterday. I'm sure going to miss these guys and wish them the best of luck at Urban Edge. I am also certainly happy to address your questions in this regard in the G&A section -- Q&A session, not the G&A section. And that's about it for my prepared remarks for the quarter. It was a really good one that we hope to follow with another and another. Let me now turn it over to Dan for some additional color and then open the lines to your questions.

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Daniel Guglielmone, Federal Realty Investment Trust - Executive VP, CFO & Treasurer [4]

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Thank you, Don, and hello, everyone. Our $1.55 per share of FFO for the quarter was a few pennies ahead of our expectations and $0.02 above consensus. This outperformance was driven by higher NOI through occupancy gains across the portfolio, less impact from failing tenants and lower property level expenses as well as lower G&A, but was offset by drag from the startup of our 2 new hotels at Pike & Rose and Assembly, the latter of which is yet to open.

Our comparable POI metric of 3.6% is a solid result, and it also bested our forecast as a result of the items I just mentioned. Our continued proactive re-leasing activity this year provided a drag of 70 basis points in that result. Please recall that we project this year's proactive re-leasing activity to weigh on FFO by $0.03 to $0.04, but it will generate roughly 50 to 60 basis points of incremental value creation.

With respect to former same-store metrics, which we will continue to provide for another quarter or 2, same-store with re-dev was 3.4% and same-store without re-dev was 3.5%. Our lease rollover number for the quarter stood at 10% almost 450,000 square feet of comparable leases.

Combined with the 22% in Q1, our growth for the first half of the year was 15%, and on an LTM basis, also 15%. But if I -- as I have highlighted on previous calls, remember this is real estate, where true value creation and growth should be measured over the long term. And let's not get overly focused on any 1 quarter or even any 1 year's metrics.

With respect to occupancy, our overall leased and occupied figures were 95% and 93.7%, respectively, with the metrics growing by 20% and 40 basis points -- 20 basis points and 40 basis points respective -- relative to the first quarter. When compared to the second quarter a year ago, they grew 50 basis points and 70 basis points, respectively. This leasing momentum was driven by several large leases. Floor systems at Pentagon Row, where we converted 30,000-plus square feet of second floor retail space to Class A office, demonstrating both our mixed-use expertise as well as our benefits of -- as well as the benefits of having well located, high-quality real estate, which can be utilized for multiple uses.

We also signed Bob's Furniture, who's taking our only Toys box at Escondido at double the previous rent, as well as the L.A. Fitness Box at Brick. Occupancy was driven higher as Dick's opened at Willow Lawn and Richmond. Target took possession at Sam's in D.C. 49er Fit at Westgate in San Jose. We'll have opened Ferguson's at Crossroads in Greater Chicago and HomeGoods as part of the Brick redevelopment highlighted earlier.

These positive operating metrics put us in a position to revise our FFO guidance upward, shifting the range up to $6.13 to $6.23 per share, up from $6.08 to $6.24. That represents a $0.02 increase and the midpoint from $6.16 to $6.18. I'll caution folks not to get too aggressive in their own revisions higher. And please note that some of these gains are -- relative to our forecast were timing related, particularly on the expense side where we forecast some of those gains to come back in the second half of the year.

With respect to our comparable POI metric, we are also revising our outlook higher to about 3% from a previous range of 2% to 3%, driven by another strong quarter of 3.6% to go along with the 3.8% in Q1.

At this point, I would like to address the new lease accounting standard, which will go into effect on January 1, 2019. While we are still going through a full evaluation of the standard, there was one area that we wanted to highlight. The new standard requires certain leasing costs which were previously capitalized to be expensed in earnings as incurred. This reclassification does not affect cash flow, cash available for distribution, nor AFFO. And as a result, there is no real economic impact. However, it will change FFO. We forecast the impact to be roughly $0.07 to $0.10 or in the 1% to 1.5% range.

The change to our 2017 and 2018 FFO pro forma for the new standard would have been similar. So there's effectively no change to our FFO growth rate on an apples-to-apples basis. With respect to consensus 2019, my sense is that very few of the analysts have this impact incorporated into their numbers.

Now on to the balance sheet, which continues to be extremely well positioned from a capital perspective. We continue to make progress closing on all 107 market rate units at Assembly Row and 52 of the 99 units at Pike & Rose at quarter end, raising over $120 million of proceeds year-to-date. As a result, our credit metrics continue to improve, with our net debt-to-EBITDA ratio improving to 5.5x for the second quarter, down from 5.9x at year-end. Our fixed charge coverage ratio improving to 4.2x, up from 3.9x at year-end.

We expect these credit metrics to continue to trend positively through the balance of 2018 as we raise additional capital cost effectively through opportunistic asset sales, where we have targeted roughly $70 million for the balance of the year.

Now before moving to Q&A, this call signifies my second year anniversary at Federal Realty. As part of that milestone, I would like to bring back a common theme of my first few earnings calls, where I highlighted some of my initial observations since joining Federal. For this call, I'd just like to highlight the fact that, again, Federal has increased its dividend. That's 51 years of increasing the dividend on an annual basis, a record in the REIT sector, where no other REIT comes close to demonstrating this level of stability, growth and execution through cycles and over the long term. That growth still stands at a 7% compounded rate over this 51-year run. That's a truly impressive record and one that all members of the Federal family can be proud of.

And with that operator, you can open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Alexander Goldfarb with Sandler O'Neill.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [2]

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Don, just a question, I guess, to use a baseball analogy, you're a big fan of sort of farm-raising talent and developing people. With these departures, do you think that you'll do sort of a direct replacement? Or do you think that the departures and the people that you're thinking about mean that you may look at the organization a little bit differently as far as what the structure may be?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [3]

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Let me put some perspective on this whole thing. First of all, Olson got 2 great guys here. And he paid up handsomely to do so, which makes me really happy for my guys, and it certainly shows that, I guess, mixed-use is the magic elixir these days in terms of ways to move forward. But let's step back for a minute to your question, right. Our company's goal is not to imprison the team for a lifetime, so that nothing changes, and keep them inside the place. It's rather, as you say, to create a team atmosphere, a great team atmosphere, grow careers, learn from mistakes and build a deep bench of talent who will get their own opportunities as time passes and changes are warranted. Both Chris and Don love Federal, and we love them. And it shows in even the ways this was done. Both of them are committed to be here through the end of the year. Now I don't think it will take that long for the transition. But the fact that Chris is working down in Florida, with Don also to an extent there, it just shows kind of the way they want to go about making that change in the straightforwardness and honesty. I love that. I want that from anybody that works here. And I want them to all feel that way. I mean, if you think about it, if somebody said to you 20 years ago, I'll give you 20 years. We're going to train and build and hire underlings, get better at what we do. Then at the end of 20 years, you get $10 million and twice the pay, I'd say, "Great. I'll sign up for that all day long." So it certainly shows the value of mixed-use. And they're going to do wonders for that platform over the next 20 years, as it takes a while. But with that happening, we can get down to, okay, now what do we do and how will we do it? And the bottom line is, there will not be a plug-in, plug-out replacement for either of those guys. This -- what we've been doing, specifically, over the last 5, with -- you saw last year. We promoted to Vice President, Patrick McMahon up in Boston. We hired a couple of years ago Ramsey Meiser as a Senior Vice President out of Forest City. You think about a guy like John Tschiderer, who has grown up in this organization and created the type of value in not only the core, but in redevelopment and mixed-use, all the way through, and their teams under them. We're ready for this. But what it allows us to do is have a clean sheet of paper, great opportunities for others, but we have the time to figure out basically how to look towards the next way to approach these projects. Don's a visionary man. And he' a damn good one in terms of mixed-use. But at this point, we're not looking for the next giant piece of land to create the next big mixed-use project. We've got a ton to do, executing the specific places that we have already built. So when you look at Pike & Rose, the next phases, Assembly, the next phases, certainly on the West Coast with Jeff and his team, the next phases, that's kind of where we are. So as you think about it, I look today, they're -- I'm not saying we won't add to the team. We probably will add to the team as it goes through. But mostly this will be a re-jiggering of people inside and giving some opportunities to folks that had been dying for it. When you have a senior team that's been here 20 years, one of the downsides of that is you have other people saying, "What about me, and where do I get -- how do I get my opportunity?" So this is net-net -- believe me, I'll miss these guys, but this isn't a bad thing for Federal over the long term.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [4]

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Okay. And then the second question is just going out to California and prime star -- or Primestor, sorry, the Watts development, I mean, it's a good piece of dirt, but maybe you can just walk through the economics. I think it's a ground lease. But if you could just walk through the economics and how you're thinking about it? And then the other thing is, it's certainly a productive portfolio, but is your sense for when you go speak to retailers that they're willing to commit to the rents that really are commensurate with the productivity? Or there is still a bit of skepticism by retailers about going -- about building in Watts and going there versus if it was a center on the west side?

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [5]

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Let me answer that question for you in a minute, Alex. I want to go back to your question to Don and just pile on a little bit. So one thing I think everybody needs to keep in mind about Federal, obviously, you all know we have a great portfolio of real estate, but really what we've done over our 50-plus-year history, if you will, is kind of lead the charge in how you take care of that real estate and how you redevelop that real estate, right? So Federal was one of the first companies to really think about running a neighborhood or a community shopping center better than it had ever been run before, with great signage and a great tenant mix and great landscaping. And 20, 30 years ago, we got into the street retail business before anybody else did. And then we got into the mixed-use business and with the development of Bethesda Row over 20 years ago. Lately, we've built some great mixed-use neighborhoods like Santana Row, Assembly Row, Pike & Rose. We did the Primestor joint venture. We're always forward looking here. We are thought leaders in our business. And I'm really going to miss Don and Chris too. Not only were they great work colleagues, but they are good friends of mine. But I want everybody to be confident that we've built the team here and we will continue to grow and staff the team to be thought leaders and do what's best next for our real estate. So probably didn't need all that detail, but I just wanted to let you know how I was thinking about this as well. As it relates to Jordan Downs and your question, we're really excited about Jordan Downs. Like Don said, Primestor has been working on this for a number of years. Have been working very closely with the community and the Los Angeles Housing Authority. The property sits about 2 miles south of La Alameda and about 3 miles west of Azalea, 2 of our other assets of the Primestor joint venture. What's happening is Century Boulevard, which if you've been to LAX, you've been on Century Boulevard. It starts at LAX. And it goes east and it stops when you get to Jordan Downs. And as part of its development, Century Boulevard is being extended through Jordan Downs to Alameda and making a great new intersection which is right where Jordan Downs Plaza is located. There's 700 not-so-great-looking affordable housing units that are being taken down. And the unit count within Jordan Downs over time will be doubled to 1,400 housing units. So the whole area is undergoing a transformation. There are more people within 3 miles of Jordan Downs Plaza than any of our other Primestor centers, nearly 500,000 people within 3 miles. So the density is just incredible. And when you think about tenant demand and economics, because Primestor did in these communities for a long time, first with La Alameda and then with Azalea, because they know how the tenants do, because they know what the community wants and needs, they put together a great tenant mix for Jordan Downs. Like Don said, we were -- we had a grocery store lease signed before we closed. And we're committed on just north, I think, of 80% of the NOI in the project with other tenants, and there is a strong, strong tenant demand. So I don't think there's -- is there a discount for the West Side? Yes, there is a discount for the West Side for a variety of reasons, but are the rents strong and will the economics be strong based on the cost to build the project? Absolutely. We are real excited about it.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research & Senior REIT Analyst [6]

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But Jeff, can you just give us a sense of the net yields after the ground lease payment, what you guys expect?

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [7]

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Well, it's in the 8-K, right. So the projected return on our cost is 7%. If we have a shot at doing better than that, we'll see. It's a development project. So we'll know better in a year or so.

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Operator [8]

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Our next question comes from Ki Bin Kim with SunTrust.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [9]

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So Don, you guys have some great pockets of vacancy in some of your best centers like Bethesda Row, Village at Shirlington, San Antonio Center and Hollywood Boulevard. Any near-term updates on those projects or those vacancies?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [10]

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Sure. Yes. And I think this probably goes back a couple of years, keeping in terms of our real heavy looking at how these things need to be improved upon, from a merchandising perspective in particular as well as physically for the next 10 years. So in Bethesda, you absolutely see vacancy. You see the vacancy that is a turnover from kind of the old tenancy to what we've done. Virtually all leased up other than a couple of spaces on Bethesda Lane, but not yet occupied, not -- in some cases, not yet -- lease has been signed, but all the way there in terms of the new thought process, the negotiations with tenant, et cetera. Out on Hollywood Boulevard, for example, So Bethesda, there's Hollywood, God, Hollywood, we are close on 2 other deals, there again improving merchandising in that network, in that area.

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [11]

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And that will result in a redevelopment of the property.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [12]

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Yes. And what were the other specific ones, Ki Bin?

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [13]

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I think Village at Shirlington, San Antonio Center, just to name a couple.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [14]

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Right. Shirlington's a great example. Shirlington has been a terrific kind of local restaurant street, if you will, for the last 10 or 15 years in particular that we did it. Today, we want that to be -- to reach further, to be more. And so we are looking at redevelopment opportunities. As a result, we are shortening some leases in the building that would be impacted by that, which causes more vacancy today. But as you sit back, if I took you, we walked through Shirlington, as an example, and told you the plan, not well enough to have it lay down in every dollar that you get at this point, you'd say, I get it. The thing's going to worth a lot more than it is today.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [15]

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And just touching on that. Your shadow pipeline of new development or redevelopment projects that are look -- that are probably a little bit bigger in scope, what is the main trigger point for those projects to be greenlit? Is it the fact that maybe market rents have to rise a little bit more to justify economics or is it just timing of getting space back? Or it is more simply a fact that you have a lot on your plate?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [16]

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It's a combination of that. We always have, and this has kind of been one of the hardest things for me to decide over the years was, how big do you want to scale the company? How big do you want the development group? Could you get to more? Is that better? How much should development be as a percentage of the whole company? I think we got it about right. And so there is a component of capacity on our side, which I do think works in the balance. But it's much more complicated than that. It does get to what -- primarily what are the lease terms of some of the major tenants in there. That's a perfect example in Darien, for example, in Connecticut. And a number of these, so we work through continually ways to get back space, economically does it make sense, would it be better to wait? We also have high construction costs today. And if I were to say, what's the one thing that is making it tougher to pull the trigger on deals, it is the development cost relative to the ability to underwrite the rents necessary to get there. Develop -- look, there is no question that construction costs have risen in a lot of markets that we're in over the past 5 or 6 years faster than the rents have, which squeezes it. But it doesn't change the long-term viability of these assets being intensified and more valuable.

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Operator [17]

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Our next question comes from Christy McElroy with Citi.

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Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [18]

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Dan, just wanted to follow up on the same-store NOI growth forecast. At 3%, so that implies, obviously, a deceleration into the second half. Can you just maybe talk about the moving parts in that? And you mentioned that expenses were expected to come back or some timing issues there? How does that play into it as well as maybe the lease term fees and some of the normalizing of the re-tenanting drag?

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Daniel Guglielmone, Federal Realty Investment Trust - Executive VP, CFO & Treasurer [19]

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Yes. With respect to comparable growth, I would just say that third quarter probably is forecasted to be down -- to be the weakest quarter of the year, primarily given a pretty tough comps as well as the fact that the -- our proactive re-leasing activity will have its greatest impact in the -- in that quarter. And we'll also start feeling the drag from things like the Toys box in Escondido, which we've already re-leased but which will have some downtime and vacancy before Bob's takes possession. The fourth quarter probably will bounce back. So that gives you a little bit of -- to around kind of the 3% range. So that gives you a little bit of a sense of where we expect things for the last 2 quarters. With regards to some of the expense get back, some of it's G&A related. But for the most part, we don't expect much movement with regards to term fees. Term fees probably will not influence or impact in our forecast the next 2 quarters.

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Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [20]

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And then Don, you made a comment about the next phases of Pike & Rose. You recently sent a letter to Montgomery County about the White Flint sector. How do your current views about what's happening there impact the potential for additional dollars that Federal would commit to projects in the area?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [21]

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Yes. Listen, it's a good question. I mean, what -- that letter got leaked, which didn't get leaked from us, but we were -- I have no problem with it being out in the public. What you're seeing is a little bit of the sausage-making of development. And that's what effectively that is, and there is no question that we continually fight to make sure that we are getting the -- an economic deal that make sense. We need in projects like that partners with state and local officials, as the letter kind of stands on itself. There is absolutely stuff, I think you and I talked about it in the past, that should have been done already there that have not been done to this point, by in terms of County obligations. And so we're fighting through that. So in terms of, does it stop the capital allocation or not, we're going to have to see. But we're going to -- I'm not going to negotiate that here on this call, certainly. But that's part of the sausage-making of figuring out how to create acceptable returns. It's nothing more than that.

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Operator [22]

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

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Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [23]

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I'm going to Brick Plaza. The 13% vacancy at Brick Plaza, does that include Bon-Ton?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [24]

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No, it does not, Craig. We'll get the Bon-Ton back. If you -- if I took you there, you would see a property that, it's big, right, it's 400,000-plus feet. So there are sections of Brick Plaza. The first section is complete with respect to its re-tenanting, with most of the tenants that I enumerated in the prepared remarks in terms of its physicality, et cetera. The second part of it is not yet complete. We're working that through. The third part will be Bon-Ton. So there's still -- there's work to do in terms of what we are getting there. The hard part was to get that first group of new merchandising, if you will, in place. And you can imagine what that's now doing to the acceleration of tenant demand for the balance.

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Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [25]

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Yes. It looks like a casebook example of good dirt. You almost had a near complete recycling of the anchor tenants there.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [26]

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Well, you know what, pal, and this is -- to me what this is a flaw, which we believe we have the best piece of dirt in that market. And I think if I took you there, you would agree with me. And yet, if you look at a few years ago, the merchandising in that shopping center versus the other products, six of one, half a dozen of the other. It didn't matter which one a tenant would go to. And that's anathema to having the good dirt. You can't have that. If you've got the best dirt, you need to be able to get there. So this effort to redevelop can't happen without the best piece of dirt, because you're going too uphill against the others. So it is textbook. And I think we'll be talking about it for years. You'll get sick of hearing about Brick.

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Operator [27]

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Our next question comes from Samir Khanal with Evercore.

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Samir Upadhyay Khanal, ISI Group Inc., Research Division - Former Research Analyst [28]

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Don, can you generally talk about your conversations with some of your top tenants in light of sort of the slight moderation in spreads in regards to negotiating rents? I know Ascena, I think they increased their sort of fleet optimization scope recently to like, it's 800 stores versus a former 600. So where do you stand on negotiations with sort of your top tenants in general and maybe Ascena in particular?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [29]

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I sure can. And as you asked the question, I guess I thought of one in particular, and that's Bed Bath. As you would imagine, the negotiations of options coming up and what was going to happen, we knew it was going to be a negotiation. And so -- with that tenant. And yet of the 5 locations that had renewal options coming up and immediately without negotiations, 4 of them were renewed. That speaks to it. That's a testament to the real estate right then and there with respect to that. We had option rates -- rents. And the fifth one is a property that we are looking at redeveloping out on Long Island. And so those conversations are the same type of conversations that have always happened and I believe will always happen. You are trying to create a place where that particular -- whatever particular tenant is there can make money. And they can see a way to make money, you're going to have a pretty good negotiation. If they can't and you don't have choices, you're not. Now Ascena is one that is kind of such in the middle of figuring themselves out and working through their issues, that we've approached them and continue to approach them on a one-by-one locational negotiation, if you will. And so far, there have been a couple that we're going to lose. That's okay. There are others that updated just at option rents or renegotiated rents. And everything in between, that continues, Samir. I don't expect that to change throughout the balance of 2018 in terms of that process.

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Samir Upadhyay Khanal, ISI Group Inc., Research Division - Former Research Analyst [30]

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Okay. I know the retailers always ask for the lower rent if possible, but have you seen sort of the volume or the level of ask sort of come down maybe in the last 6 months?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [31]

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Not broadly. I can tell you that I certainly believe retailers in general are doing better. I believe that the past cuts that happened earlier in this year are having a good impact on consumer spending. I believe that. Accordingly, I believe that executives in charge of retailers are more optimistic. And hence the negotiations are more likely to exercise an option or at terms that the landlord needs. And that's -- but -- so from the standpoint of hopefulness, if you will, in that community, I do think that the last 6 or 9 months of increased consumer spending and sales in a lot of cases has really helped that negotiation process.

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Operator [32]

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Our next question comes from Jeff Donnelly with Wells Fargo.

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Jeffrey John Donnelly, Wells Fargo Securities, LLC, Research Division - Senior Analyst [33]

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Don, if I could just maybe go back to the departures of the other Don and Chris. Look, I will say, it's good to have maybe one less Don there. It makes it a little less confusing.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [34]

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That was the motive.

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Jeffrey John Donnelly, Wells Fargo Securities, LLC, Research Division - Senior Analyst [35]

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Great. I'm just curious, how does their departure affect maybe relationships with retailers or even municipal and joint venture partners, or whom might have seen them as sort of the special sauce of Federal, like they keep one in contact?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [36]

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Well, you remember, Chris went from leasing to the mixed-use side a few years back. And with that came the ascension of other people, more people in our organization doing anchor work, led by Wendy Seher, who worked under Chris. Now she's been here 15 years. At this point in time, absolutely no diminution at all from the retailer side would we expect, absolutely not. And with respect to the development side, in terms of municipalities and relationships, that in particular, sure. So Briggs' relationship at Sunset in Florida could absolutely impact the way we move forward on Sunset. I'm going to send somebody down there. We're going to do a complete relook without any of the biases as to what we should do there. That's a pretty good example of that. In terms of the others, Somerville, for example, close to your heart, we've got deep relationships in Somerville beyond Don. Not that Don isn't the primary spokesperson; he is. But so do I. So do others in the company along the way. And by the way, it's -- the master plan is done. It is now execution of existing things along the way. So just don't think about us, including me, as any one person at this company is -- changes what Federal Realty does and how we're able to take the real estate we have, which is really good stuff, and execute value-enhancement on it.

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Jeffrey John Donnelly, Wells Fargo Securities, LLC, Research Division - Senior Analyst [37]

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You were speaking earlier about -- or maybe it was Jeff, actually, speaking earlier about how Federal was sort of leading the charge in the different areas of retail over the years. Do you look at projects like Jordan Downs as maybe that next evolution, I mean, going into sort of inner-city retail, that's something that many times over the last decade or 2 has actually been talked about as an under-penetrated market, but you haven't really seen many people try to crack it on a bigger scale basis. Do you think that is something that you guys are looking at? I know progress there's a little challenging because it's more of a public-private partnership, but.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [38]

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It's one arrow in a quiver. And I think if you sit back and you think about -- look, this business, the most -- the greatest thing about this business was, if you were going back at 2003 or 2004, there were in the new age, if you will, when REITs were only 10 years old generally, you would have an under-managed shopping center in a great location where it was under private ownership and under-invested in, and you'd be able to take it over, put a little lipstick on it, clean it up and increase rents, some at 20% and 30%, while by the way, cap rates fell from 8% to 6% or whatever it was. That's a great business. That's a tough business today. The ability to create value through development clearly is a better business than trying to find those needles in the haystack alone. Because I don't believe there are a lot of them. When you sit back and go forward, and think, okay, what's next. You are talking about scale of mixed-use, how we should do mixed-use well, how we should look into new markets like Primestor with a demographic that's clearly underserved. There's also a couple of other things that we're looking at. Should probably think about technology and how that's used in terms of data for retailers and for landlords. So maybe the analogy, it's another arrow in the quiver. But there are 2 or 3 or 4 of them that we're all looking through right now.

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Operator [39]

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Our next question comes from Jeremy Metz with BMO Capital Markets.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [40]

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Sorry, if I missed this. I just wanted to go back to the lease spreads here. I know it can be a volatile stag, given the size of the portfolio, and the spreads were good, but below your typical levels in the mid- to high-teens. So I get you're a bit of a victim of your own success on this. But can you talk about the spreads a little bit for the quarter, any deals in particular that impacted things that are worth highlighting? And then I guess, as we look out, spreads balanced to the mid-teens for the first half year. So fair to assume they'll sort of return to that level in the back half?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [41]

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Well, let me talk about this first half. I guess we shouldn't have reported 22 in the first quarter and 10 in the second. Should have just done 15, 15. But it doesn't work like that, right? It is what it is. The -- this company does about 400 deals a year, so 100 deals a quarter or something like that. And that means there are always a few deals that are going to create volatility associated with that. One is a deal that hurt that today is a really important deal out of Plaza El Segundo, and that's the Nordstrom Rack deal. That replaced a Cost Plus tenant. And that was a roll down. That's okay. It does a whole lot more for that shopping center than any other tenant, frankly, that we could have done in that space. But we had heartburn over doing the deal, but we did it. And so there's always -- there were a couple of deals like that. That one was the largest that I talked about in the quarter. And overall, there is no doubt in my mind that market rents exceed the rents in place in this portfolio. And significantly, and I think that slide that we show is my favorite part about that in the roadshow, in place versus what deals are being done at. That we expect to continue. I just can't tell you 90 days at a time, which -- how that's going to continue journey. So that's probably the best I have.

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Robert Jeremy Metz, BMO Capital Markets Equity Research - Director & Analyst [42]

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No, I appreciate the color. It's helpful. And second one from me, just going back to Primestor, you obviously kicked off another deal. But maybe stepping back, this is a bit of a pioneering adventure for Federal in terms of the communities it was targeting in the west. So can you just talk about what unique insights you're maybe gaining there? And then how that could possibly translate across either other parts of the portfolio or even opportunities in other similar markets?

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [43]

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Jeremy, this is Jeff Berkes and that's a great question, although I don't really have a great answer for you. I think it's a little early. I mean, we're closing in here on our first year of kind of running the portfolio we bought with Primestor. And obviously, looking at a bunch of new opportunities. We've got one done in the form of Jordan Downs. What we've thought going into the venture is proving out to be true and that is that there is significant unmet demand. And that unmet demand kind of comes in 2 forms. One, the people are going to live in the communities that need a great place to go shop and spend time with their families, go out to dinner, that kind of thing. The other unmet demand is there's a bunch of tenants that are not in the market yet that should be, right, which creates competition for space and which creates upward pressure on rents. So we thought that going in and that's absolutely proving out to be true. Where we can take that beyond Southern California, which is really Primestor's expertise, TBD, something we're always thinking about, talking to my counterparts on the East Coast about similar type things, but no definitive next steps as it relates to that at this point. Little bit too early.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [44]

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But what I will say -- let me just add to that, Jeremy. The important thing about the concept, I do think this pioneering, if you would call it that, is not really pioneering at all. I really do think it's -- I know why you're saying that and it is, from that perspective. But when you look at demand versus supply, I mean, the one thing -- the one worry I have about this is that I think we're doing a lot to bring this idea into the forefront, which brings down cap rates of these type of properties, because you can see the -- that demand obviously exceeds supply. And so, I think it's harder for companies to get into this. I think you'll see more companies trying to do this. I know there are a couple of private guys that are talking to us about trying to do more and having us invest with them. And I don't know how I feel about that for purposes of this call. But I don't think you're going to feel that this is pioneering 2 years from now. And that's just an opinion.

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Operator [45]

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Our next question comes from Vince Tibone with Green Street Advisors.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of REIT [46]

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Now that your cost of capital has rebounded some from earlier in the year, how are you thinking about acquisition opportunities today? And can you also just touch on any trends in cap rates you're seeing in your markets?

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [47]

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I'll take it.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [48]

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Yes, sure. I mean...

Start with any size, I'll finish up.

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [49]

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Yes, we're -- let me think of a good way to start this off. We -- of course, cost of capital bounces around, right? And it's bounced around for years. And our view when we're investing capital is not so much to look at the spot price of our cost of capital, but to look at the longer-term weighted average cost of capital and make our decisions, investment decisions that way. So a bump up or down in the stock price or in the interest rate or a bump up or down in the cap rate really doesn't have a material impact on our view of how we should invest our money, because, again, we are in the game for the long term, and when we're making investments, we think about the long term, right. We are always in the market looking to buy, but we're only in the market looking to buy great locations that we're pretty comfortable we can add value to over time. Those deals, as Don mentioned earlier, are difficult to find. And in this market they continue to be difficult to find. But we're out there looking and we always have a number of things that we're working on. And from time to time, we'll get those done and as we did with Jordan Downs, right.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [50]

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I would -- the only thing I would say to that is that those opportunities are more likely to have redevelopment components to them as the way to create value, than just blowing up rents on an existing shopping center.

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [51]

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Yes, absolutely. Absolutely. The days of buying an old center and giving it a little lipstick and rouge and rolling rents up, I'd love to find those, but they are not around like they were 10, 15 years ago, right. In terms of cap rates, where cap rates are going, really, really tough to say right now. I think on prior calls and you probably hear this from other management teams as well, that the really good stuff is still trading at really aggressive cap rates. I think maybe what's changed over the last 9, 12 months, is if that bull's-eye was a size of a quarter a year ago, maybe that bull's-eye is the size of a nickel now, right. Fewer deals are viewed as -- fewer properties are viewed as really, really good properties. And when you start to move out on the target away from the bull's-eye, then it's kind of anybody guess as to where the cap rates might be in the secondary and tertiary markets. It's just very difficult market right now, a few buyers showing up to bid.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of REIT [52]

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That's very helpful color. Just one more from me and maybe switching gears a bit. Looks like shop occupancy was down about 50 basis points on a year-over-year basis. Within that segment, can you just discuss kind of where you're experiencing the move-outs, whether merchandise categories, specific retailers. Just curious if -- get a little bit more color on kind of why that ticked down some?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [53]

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Yes, that's not me. Someone else is going to have to take that question. Who wants it? Or we'll look at it and get back to you. What do you think?

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Daniel Guglielmone, Federal Realty Investment Trust - Executive VP, CFO & Treasurer [54]

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I think -- let us kind of focus on that. It wasn't something that popped out to us. We can follow back up with you, Vince, on that one.

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Operator [55]

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Our next question comes from George Hoglund with Jefferies.

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George Andrew Hoglund, Jefferies LLC, Research Division - Equity Research Analyst [56]

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I was wondering if you can just give any kind of update on your view of the grocery exposure? And how you think grocer environment may change over time? And then your exposure to grocery there? And also how it relates to kind of ethnic grocers? And what kind of performance difference you're seeing there versus kind of traditional grocers?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [57]

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Yes. I am not sure. With respect to the latter first, I have to get that out of the way. I'm not sure I have a macro comment in terms of that difference, George. I will tell you, this is such a local-based business, man. And so what we've really tried to do hard over the last year, 1.5 years, in particular, is meet with grocery management teams, try to understand where they are going. A real interesting one is Harris Teeter, which we have along with Kroger, so now the same company at Barracks Road, they have 2 grocers in the same shopping center in a market that does have competition in terms of that. I can tell you, they like others are trying lots of different things to figure out their next steps. They're also doing a pretty darn good job -- a far better job than ever before on prepared foods, on those things that bring somebody into the shopping center or to the grocery store. Are we at the point where we can say the middle to -- all the middle of the aisles of the grocery store macro-wise are going to go away and all you're going to need is 15,000 square foot grocers with prepared foods and flowers and other things that are experiential? No, we're not at that stage. In fact, what we see is a lot of grocers in the markets that we're doing business in doing very well. Are they -- are sales going up the way they did a decade ago? Absolutely not. And there is clearly pressures. They are clearly trying to figure that out. But their cost ratios and their ability to be 4 walls profitable or in fact, effectively increase that profitability, looks very promising. So it's so hard for me and maybe it's just because our company is not that big. But to make macro statements with respect to grocers in the U.S., I can make micro statements with respect to the markets that we're in and rightsizing and sometimes that's big and sometimes that's smaller in each location that we are in, is something that -- every grocer we talk to is actively interested in the conversations. And that's says to me, "Yes, they are absolutely looking for ways to improve profitability in a more aggressive way than they have before." But beyond that, I don't have much to say in terms of the Primestor portfolio and the food that we have there. Those are strong performing grocers, as they are in our markets. And in terms of where they go, I just -- I don't have anything unless you do, Jeff, to add to that.

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Jeffrey S. Berkes, Federal Realty Investment Trust - Executive VP & President of West Coast [58]

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No, I don't think we have a deep enough pool to really answer that question broadly.

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Operator [59]

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Our next question comes from Haendel St. Juste with Mizuho.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [60]

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So the Brookstone bankruptcy filing this morning reminds us that while the retail backdrop is improving, there still some challenges out there. So can you talk a bit about your tenant watch list and on tenant credit underwriting today? How are you thinking about tenant credit quality? Have you made changes in your underwriting of new tenants this late in the cycle? Are you raising standards, requiring more deposits? And then on Splunk specifically, they've become one of your bigger tenants and may become bigger as they grow. So I'm curious how you're thinking about exposure to a tenant like that. And what it means to your credit risk profile?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [61]

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In terms of the second one, by the way, I really don't want to comment on that. I didn't tell you who the tenant was in the building that we were -- is 700 Santana Row, so I don't want to comment on that any further at this point. I hope you understand that. And they'll -- with respect to overall tenant credit and underwriting, look, man, we -- not -- no different, no different in terms of what this company has consistently done. And every investment we make in a space, if we've got to put money into a space and all deals we need to that for, I get, we are absolutely running through a vigorous credit process to underwrite whether we are probable or more likely than not to get through that lease and if not, what protections that we have. We negotiate termination rights extremely aggressively. We negotiate go-dark rights extremely aggressively. We have a pretty good track record of -- to controlling the space and controlling the shopping center to the extent we can, and obviously, relative to other deals that are out there, that is a really important thing. In terms of the -- if there's not money going into the space, we're a loser on the ability to try something out with the tenant -- with different types of tenants along the way there. But none of that has changed. You are still taking your most aggressive shot at control and obviously rent. So no, man. I don't see a big difference and obviously then that, I don't have to say it, but I'm going to say it for the record, we have no Brookstones.

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Haendel Emmanuel St. Juste, Mizuho Securities USA LLC, Research Division - MD of Americas Research & Senior Equity Research Analyst [62]

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And then one more follow-up, on the departures of Chris and Don. Look, I don't know if I missed this, but is there going to be any G&A impact in either 4Q or early '19? And then more broadly, curious on any implications there to your read on spend going forward? You talked about not starting any big projects right now, cost exceeding rents. So I'm curious if we should be thinking about a deceleration in spend on re-dev in the coming years? Or perhaps am I reading too much into that?

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [63]

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You are. You shouldn't be. I mean, there was another question about the next phase of Pike & Rose. We'd like to get going with that. Whether we can or not, that's got nothing to do with the departures; that's got everything to do with our underwriting. Assembly Row, we are getting close on the next thing to talk about at Assembly Row. That will not be changed one way or the other. With respect to West Coast, we are making real progress on Santana West. Whether that gets announced shortly or not, certainly isn't impacted by the departures. So no, you should not see a reduction in that. And by the way, if we did buy the next big piece of land for a mixed-use property, you would see no benefit of that for 5 to 7 to 9 years, right, just to put that stuff in context. Remember, we got Assembly; we acquired it in '05. We acquired Pike & Rose; we got control of Pike & Rose in '09. Stuff takes time, no question about it. So please don't think there'll be a diminution in development activity or redevelopment activity because of the departures. If there is, it's because of economics. And we are not going to -- we're not going to put money to work in a dilutive way. So that is to be seen. But so far nothing that I would say would cause that diminution.

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Daniel Guglielmone, Federal Realty Investment Trust - Executive VP, CFO & Treasurer [64]

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And with regards to the G&A question. The first part of your question, there may be a modest pickup, but it won't be material and wouldn't change kind of how we are thing about G&A or G&A forecast for the balance of the year in a material way.

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Operator [65]

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Our final question comes from Michael Mueller with JPMorgan.

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Donald C. Wood, Federal Realty Investment Trust - President, CEO & Director [66]

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Mike, you there?

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Operator [67]

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(Operator Instructions) It looks like he's not on the line anymore. So I'll go ahead and turn the call back over to Leah for closing remarks.

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Leah Andress Brady, Federal Realty Investment Trust - IR Associate [68]

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Thanks everyone for joining us today. Hope you all enjoy the rest of the summer. And we look forward to seeing you this fall.

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Operator [69]

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Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for your participation. You may all disconnect. Have a wonderful day.