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Edited Transcript of WPG earnings conference call or presentation 24-Oct-19 3:00pm GMT

Q3 2019 Washington Prime Group Inc Earnings Call

Bethesda Apr 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Washington Prime Group Inc earnings conference call or presentation Thursday, October 24, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joshua P. Lindimore

Washington Prime Group Inc. - Executive VP & Head of Leasing

* Louis G. Conforti

Washington Prime Group Inc. - CEO & Director

* Mark E. Yale

Washington Prime Group Inc. - Executive VP & CFO

* Melissa A. Indest

Washington Prime Group Inc. - Executive VP of Finance & CAO

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Conference Call Participants

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* Caitlin Burrows

Goldman Sachs Group Inc., Research Division - Research Analyst

* Ki Bin Kim

SunTrust Robinson Humphrey, Inc., Research Division - MD

* Vince Tibone

Green Street Advisors, Inc. - Analyst of Retail

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2019 Washington Prime Group earnings conference call. (Operator Instructions.] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Lisa Indest, Executive Vice President and Chief Accounting Officer. Please go ahead.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [2]

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Good morning and welcome to WPG's third quarter 2019 earnings call. During today's call, we will make certain forward-looking statements as defined by the federal security laws. These statements relate to expectations, beliefs, projections, plans and other matters that are not historical and are subject to the risks and uncertainties that might affect future events or results. For a detailed description of these risks, please refer to our earnings release and various SEC filings.

Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our press release, supplemental information packet and SEC filings, which are available on the Investor Relations section of our website.

Members of management with us today are Lou Conforti, CEO; Mark Yale, CFO; Josh Lindimore, Head of Leasing; and Dan Scott, SVP of Development.

Now I'll turn the call over to Lou.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [3]

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Thanks, Lisa, and hey, everybody. Good afternoon. A couple bullet points and then I'll hop right in.

We're reaffirming both 2019 FFO as adjusted and divi guidance in $1.20 and $1.00 per diluted share, respectively. We maintain our 2020 comp NOI growth forecast of at least 2% for combined Tier 1 and Open Air. And kudos to Josh and Dan and everybody else. We leased 3.2 million square feet year-to-date. All right.

The Merriam-Webster dictionary defines alternative music as produced by performers who are outside the musical mainstream, typically regarded as more eclectic or original than popular music. There exists a distinct analogy between this musical genre and us. In fact, we strive to transform our assets from their previous 1979 esthetic via creativity and originality. Instead of walking around numb, akin to a zombie, my colleagues have laced up their pumped-up kicks, decided to tighten up and deal with the challenges facing our sector. It hasn't been easy, and we have the scar tissue to prove it.

All right now, everybody phone in immediately with the names of the artists who -- no.

Starting with the department store update, we have now resolved 17 of the 23, which equates to 74% of the vacancies within the company's portfolio. Let me repeat that: 17 divided by 23 is 74%. And we expect to announce several others within short order.

While pundits were expecting a more bitter than sweet symphony, we were able to provide solutions ahead of schedule and attract a wide array of tenants which markedly diversified current rosters. I'll let you decide what's better for our assets: Fieldhouse USA, HomeGoods, PetSmart, Round 1, ALDI, Room Place, TJ Maxx, just to name a few, or lackluster Sears or the Bon Ton. Unless you're the Mayor of Simpletown, it's a pretty easy decision. Combine these names with some local and regional flavor, some common area activations, and you've got a party.

Let's now turn to leasing which, as you ought to know, is our most important and epic task. Our leasing professionals continue to perform with the fortitude of a 7-nation army, and as a result, they exhibited a robust 13% year-over-year increase -- again, totaling 3.2 million square feet -- and the number of lease transactions for the same period increased 9%. Of this aforementioned 3.2 million, 56% of new leasing volume is attributable to lifestyle tenancy -- food, beverage, entertainment, home furnishings, fitness, professional services. I can't resist. Our guests have plenty of reasons to come out and play as well as eat, drink and buy a loveseat or two.

In addition, we continue to incent our leasing and property management professionals, which I just believe is very important because it focuses -- it provides specific focus upon, whether it be an asset or product type category that we want, and we've done 143 leases that qualify under various incentive programs during the first 9 months of 2019.

Listen, we'll always love our tenants with stores that smell like Teen Spirit, and we certainly don't want to start a teenage riot, but isn't it about time we catered to a more diverse demographic constituency? Mark and I love to rock the latest crop-tops as much as anybody's teenage daughter. However, when we're meeting with an institutional investor, an exposed midriff is just plain disrespectful.

All of this talk about baring one's midsection makes me think about Forever 21. We currently have 6 locations within our portfolio, and as of now, it looks like we're going to lose 2, maybe 3, and 1 was slated to be relocated anyway as a result of a major mixed-use redevelopment.

And turning to Motherhood Maternity, I just thought I'd mention that they only account for 20 basis points -- again, 20 basis points -- of annualized rent. And Josh was quick to inform me that 50% of this exposure is situated within Polaris, Town Center, and Scottsdale Quarter.

Let's continue with a few other operating metrics. Tier 1 sales per square foot increased 4.6% to $413 during the trailing 12. Occupancy costs, which you guys know is the litmus test of tenant profitability and of which we rank among the best within our sector, decreased 90 basis points to 11.2%. Leasing spreads for new Tier 1 and Open Air transactions increased 160 basis points during the same trailing 12 months. And while combined Tier 1 and Open Air occupancy decreased 110 basis points to 92.9%, every single square foot of it was attributable to the bankruptcies of Charlotte Russe, Gymboree and Payless.

I'd be uncomfortable as a blister in the sun save for the fact we're filling this space with, plain and simple, better tenants with more interest in goods and services. In fact, we estimate Tier 1 occupancy will improve sequentially by 150 to 200 basis points by year-end.

Let's discuss comp NOI. Tier 1 decreased 8.8% and Open Air increased 2.6%, which resulted in a combined decrease of 550 basis points, equating to $6.4 million. Before you reach for your lithium, it's important to deconstruct this data point in order to better understand its various components. Take it from the Strokes, one of my all-time favorite bands, it's not hard to explain. The entire decrease can be described as follows: $4.3 million negative impact as a result of co-tenancy and commensurate rental income loss from 2018 anchor bankruptcies -- Bon Ton, Sears, Toys -- and the remaining $2.1 million attributable to 2019 -- again, Charlotte Russe, Gymboree and Payless.

So backing out the aforementioned co-tenancy and rental income would have resulted in flat comp NOI. Think about it. If we didn't have visibility as it relates to resolving co-tenancy and rental income, we sure as heck wouldn't be forecasting positive 2020 comp NOI growth of at least 2% and (inaudible) point as well as an increase in occupancy by year-end. The bottom line is we're working our (expletive) off to lease both in-line and department store space, and we have satisfied the vast majority of this detrimental impact. I can repeat this for a couple of the pundits out there, but read the transcript.

In other words, our leasing volume proves Michael Stipes is sadly mistaken if he believes it's the end of the world. Just remember, you get what you get, and my colleagues -- and there's my shout-out to you guys -- you guys have given it your all.

I'm going to end my commentary with an interesting scenario analysis, which provides yet another illustration of the silliness of our current share price. Remember last quarter when we provided a financial analysis which in effect solved for the applicable cap rate of Tier 1 assets by setting all other factors constant, given this current share price? The result was at the then current price, Tier 1 assets traded at a 29% cap rate.

All right, this time we're going to take a look at retail and mixed-use redevelopment potential and its incremental impact upon NAV. Mark will provide more detail, but I'm going to provide a framework or a summary, as illustrated below. But actually, I was told by Legal I couldn't illustrate it below, so I've just got to talk about it. 3 representative assets -- sorry, Rob Demchak -- 3 representative assets were selected: WestShore, Westminster and Clay Terrace, all of which are scheduled to undergo redevelopment in short order.

Drawing from the financial analysis of the previous quarter, current valuation was ascribed to each asset by applying actual NOI and an implied cap rate of 25%. That was roughly $4.50, whatever current share price, but 25% cap rate actual NOI. Note that these redevelopment projects include retail, office, residential and lodging. And in every instance, the obligation to deliver fully entitled land parcels to the developers of the products other than retail was the responsibility of us. Capital spend for the delivery of these fully entitled land parcels was included as a deduct. And at fair market valuation, what are these things worth afterwards was calculated via third-party research. And we tend to be very rote and methodical in our quantitative analytics, and so nothing cute.

All right. These 3 assets, super-duper conservative assumption set, resulted in $2.00 or more of value creation per share -- just these 3 assets. Now extrapolate with varying degrees and apply this methodology to Pearlridge, Southern Park, Grand Central, Polaris, Southgate, Johnson City, and the list goes on and on and on. And you see where I'm going. I'd love for any of the analytical community out there to really think about this.

And one other thing -- and I'm probably going off script, which I tend to do anyway -- how many acres do we have, guys, at Westminster, for instance, that we own?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [4]

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Just under 50 acres.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [5]

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Under 50 acres, okay. Orange County, literally you can wave to the traffic on the 405, probably one of the great development sites in America.

What do you think unentitled or even entitled land is?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [6]

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$3 million to $3.5 million.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [7]

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Okay. So $3 million to $3.5 million per acre. Do the math.

Okay, in closing, I'd like to thank all of my colleagues. Again, you guys just blow me away, and I love all you guys, and just -- you're working your behinds off, and you've all become my heroes. Your collective efforts make me feel like I'm Mr. Brightside.

I'll now turn it over to Mark, who will discuss financial results and activities for the quarter. Thanks, all.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [8]

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Thanks, Lou, and good morning to everyone. With the September closing of the $117 million of refinancing of our four Open Air properties, generating net proceeds of nearly $70 million, we finished the quarter with enhanced available liquidity of approximately $490 million when including cash on hand and capacity on our credit facility.

When considering the $42 million of net proceeds received earlier this month from the previously discussed ground lease transaction, along with $50 million of expected proceeds from the remaining Four Corners out-parcel sales, we continue to feel comfortable with our current available liquidity. Accordingly, we have now addressed the upcoming April 2020 maturity of our $250 million bonds which, by the way, is our only unsecured debt maturity through the end of 2022, when our credit facility and related term loans mature, and secondly, remain in a strong position to continue to fully commit to our redevelopment pipeline.

In terms of upcoming secure debt maturities, we did transition back to the servicer on July 1 our Towne West Square Mall along with the $45 million of related mortgage debt. We also expect by the end of the year to transition back our West Ridge Mall and Plaza properties together with the $50 million of secured mortgage debt there. Each of these encumbered noncore assets had or do have single-digit debt yields, thereby providing us with a very efficient way to delever.

Beyond these mortgages, we only have $105 million of secured debt maturities through the end of 2020, comprising of loans secured by 3 of our Tier 1 properties. We're currently expecting, through a combination of traditional refinancing and loan extensions, to be able to address these maturities with minimal required pay-downs. We would expect to have further details on all this by year-end.

Finally, in terms of our proactive liability management, we were able to retire during the third quarter approximately $30 million of our 2024 notes at a roughly 6% discount to par. Thus we continue to raise important capital today while reducing future maturity risks and extending out the debt maturity profile of the company. Further, these efforts demonstrate that we are continuously exploring opportunities to enhance our balance sheet and liquidity position.

As Lou mentioned, we're making solid progress with respect to addressing the 29 department store boxes in our Tier 1 and Open Air portfolios, which we believe will need to be repositioned over time. Of those 29 boxes, 6 are currently occupied by open and operating Sears stores when excluding announced fourth quarter closings. So when considering the 17 locations addressed via signed leases or negotiated LOIs, this represents nearly 75% of these vacant boxes. Once again, this demonstrates the strong demand for space within our portfolio while allowing us to continue to diversify the experience for our guests.

We also remain confident in our originally projected estimate of around $350 million of additional capital spend over the next 3 to 5 years, necessary to transition all 29 locations. Remember the full pipeline excludes the 13 boxes owned by non-retailers, including Seritage.

Now let me turn to our quarterly financial results. When adjusting for the gain on extinguishment of debt, FFO for the third quarter was $0.28 per diluted share, landing at the upper end of our guidance range going into the period, primarily driven by larger-than-expected out-parcel gains and lower corporate overhead expense.

In terms of comp NOI, it was generally in line with forecast, and expectedly challenged, primarily by last year's anchor bankruptcies and this year's in-line tenant liquidations. In fact, when neutralizing for the impact from Sears, Bon Ton and Toys 'R' Us and the first quarter in-line bankruptcies, we would have seen essentially flat comp NOI performance for the quarter from our Tier 1 and Open Air portfolio versus the negative 5.5% that we reported.

We did experience improvement in comp NOI performance from the second quarter, which we knew would be the low point for the year. Now in looking at the fourth quarter, we're expecting to see even further improvement, with performance forecasted to be essentially flat to modestly positive. Remember, the fourth quarter last year was already burdened by a full period of lost anchor rents and over $1 million of co-tenancy reserves.

In terms of our outlook, we did reaffirm our 2019 adjusted FFO guidance within the range of $1.16 to $1.24 per diluted share. Additionally, as Lou mentioned, we did reaffirm our dividend guidance for the remainder of this year. While operating results have been pressured over the last several years, we do continue to see a tangible roadmap for meaningful growth next year, especially when factoring in the state of progress being made on the department store repositioning front.

As we look to 2020 and beyond, we remain confident in our ability to not only replace the lost rent and address related co-tenancy from these closings, but to actually make our properties better by bringing to the table the uses that our guests are looking for. While we are in the process of pulling together our detailed 2020 property budgets, we're still tracking to the over $10 million of estimated additional NOI next year from our redevelopment of vacant department store space along with other major leasing activity that we discussed during the second quarter earnings call. Accordingly, and when also assuming some stabilization of tenant bankruptcies and minimal further department store disruption, we continue to anticipate generating meaningful comp NOI growth in 2020 of at least 2% from our combined Tier 1 and Open Air portfolios.

So with that, I will now open the call for any questions. Thank you.

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Questions and Answers

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Operator [1]

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[Operator Instructions.] Our first question comes from the line of Ki Bin Kim from SunTrust.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [2]

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So if I look at your implied guidance for the fourth quarter, it seems like you're basically estimating flat same-store NOI growth at the low end of guidance. In the 3Q, same-store NOI was down 5.5%, about $6.4 million. So I was wondering if you can provide a bridge to get us from the minus $6.4 million to something closer to flat by 4Q.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [3]

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Well, Ki Bin, it's Mark. Good question, and I tried to touch upon that in the prepared remarks. It's really a combination of the fact that we did start recognizing co-tenancy in the fourth quarter of last year, so we won't necessarily see that same type of negative headwinds that we saw in the first 3 quarters. And probably the bigger piece is just the fact that we had anchor rents that finally burned off in the fourth quarter last year. So all the Toys 'R' Us, all the Bon Tons, most of the Sears were closed. So just in that itself, it really allows us to bridge a significant portion of that gap. Then you layer in the fact that we do have some of these redevelopments coming online -- Lincolnwood, for example. We have some activity at Dayton and Fairfield Commons, so we should start seeing a lift from the redevelopment and the repositioning of the department stores.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [4]

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And increased stock as well as increased in-line occupancy, which obviously means additional rent.

So in summary, I'm going to do this for everybody. In summary, guys, it's the combination of redevelopment coming online. Let's just call it diminishing co-tenancy impact and increased in-line occupancy.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [5]

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Okay, and to get to the 2% NOI growth for 2020, I know comp's going to be easier. But any way you can kind of break it down in a little more detail to give more support to investors on the different levers that it takes for you guys to get to 2% growth? And I think also, I think you mentioned it in your opening remarks that you're assuming a stable bankruptcy environment or minimal bankruptcies, and just wondering if that's a realistic assumption at this point.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [6]

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Well, stable, if we've said the word stable, I would say from a historical precedent standpoint, we're not overly optimistic, nor are we overly draconian in what we think and what we are anticipating. And Lisa, Mark, et al. could speak to our tenant watch list, which I believe we've mentioned, as we mentioned in the last couple of quarters, continues to improve.

But listen, man, we're not delusional in any way, shape or form, and we've delivered what we said we were going to deliver. And there's no -- I think Yiddish is the term -- there's no ferkakta assumptions in what we're doing. We pick up 150 to 200 basis points of occupancy by year-end, that manifests itself into incremental rental income. Burn-off of co-tenancy is just being incrementalist in our approach.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [7]

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And just a little bit more behind that. I talked about the $10 million of incremental NOI from developments coming online, major leasing activity. That obviously gives us a very good starting point when you look at that compared to our base. And then what you really need to see is stability around outside of that. And we have our Open Air portfolio, which is trending positive. We think we'll see growth from that part of the portfolio. We understand the challenges in Tier 1, but we certainly think we're going to see better performance.

And I just want to put in perspective when we talk about the bankruptcies, when we experienced well over a $6 million negative impact in 2019 from the in-line bankruptcies -- the Charlotte Russes, the Payless, the Gymborees, the Things Remembered -- we just don't have those types of exposures within our tenant watch list today. So I think that's what Lou is referring to. We still are assuming there will be bankruptcies.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [8]

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Of course, we have contingencies, at least taken the contingencies. I thought your opening salvo would be, "Congratulations, Dan Scott and Josh Lindimore, for leasing 3.2 million square feet and fulfilling 17, or resolving 17 out of the 23 department store vacancies." Maybe that was my delusional alternative universe I was in just now. I'm sorry. I love you, Ki Bin.

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

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I think I put it in the note. I put it in the note, though.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [10]

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Okay.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [11]

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And just from the bad debt perspective, what's your kind of current thinking as you look into next year? And if you can remind us, like, what was the general reserve that you started off with at the beginning of this year?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [12]

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Yes, we are assuming probably in the neighborhood of that 1% of our total rental income, so trending back more to historical. We'll probably put a little bit of a cushion on top of that based upon what we're looking at as we go into 2020.

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Operator [13]

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Our next question comes from the line of Caitlin Burrows from Goldman Sachs.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [14]

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Maybe just continuing with the 2019 guidance, I guess, just thinking about the fact that it was revised lower this quarter from last quarter, just wondering, like, what's so different about your view now on the second half of '19 versus before? I know you mentioned the Sears, Toys and Bon Ton impacts, but it doesn't seem like any of that's new. And then just kind of how does an unchanged view on 2020 growth, granted off a lower base, kind of match up with a lower second half '19?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [15]

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Mark is champing at the bit, and I've just got to say, so Caitlin, it was at the margin, I think, a 25- to 50-basis-point delta. But no, you're right. Since we trade with the acuity of -- I don't know, what are we trading, at a 17, 18 multiple? Oh no, I'm sorry, we don't. So as we transform an industry. But no, that's a good question. Mark, go on.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [16]

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Yes, just put in perspective, we're talking about not even a $2 million change in terms of our views. And specifically, what changed, full liquidation of Charming Charlies. I think at the point that we provided guidance, we thought they would merge. I think we also got hit, and even though we don't believe it's going to carry over and be a significant issue, we lost a month's worth of rents for Forever 21. We reserved against that, so that was a burden. And we had a couple of our redevelopments delayed. They're going to happen, and actually, that helps as it relates to growth in 2020. So that's where we are. We're going to try to be as transparent as possible; we always will be. And we updated our view based upon those factors.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [17]

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Okay. And then I think you mentioned in the prepared remarks, expecting something like flat same-store growth in 4Q. It seems like that would get you closer to the low end of the '19 guidance, so I guess I'm just wondering, is the midpoint or high end of down tree possible, or do you think it's...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [18]

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It's the same question, Caitlin. It's the same question. You're right, we shouldn't be as blunt-edged in our approach. Next, what's...

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [19]

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Okay, moving on, okay. So I guess in terms of the 2019 dividend, I think you've made it clear for a little while now that wasn't going to be changed, especially due to the lender transition. So as we think about 2020, can you give us some of your latest thoughts on what the 2020 dividend policy will be based on and when those decisions will be made?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [20]

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We, as most other companies, don't speak to dividend policy. Our 2019 dividend policy remains in effect and subject to the Board and management. Speaking, our dividend policy remains unchanged.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [21]

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Okay, I guess anything else you can say in terms of whether it's based on, like, cash flow expectations or generating liquidity, taxable income expectations?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [22]

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No, it's combinatorial. We think about it as what's allowable via return on versus return of. Obviously, cash flow is the primary when you coefficient weight surplus. Cash flow, that's -- it's a combination of lots of different things. Over the last 2 years, people spoke to us to suspend, they're cutting dividend, and our dividend policy remains unchanged. Thanks.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [23]

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Okay, and I guess going forward, if it were to remain unchanged, or we'll see what happens. But I guess does that mean that leverage kind of has to go up? And if so, what does that mean here?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [24]

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No, that means that -- yes, it's a combination there of them or, heaven forbid, rental or FFO goes up. There's two sides to this. And I've been of the opinion, and I said this, I'm of the opinion that if there was a moderate trend, our share price goes up. That's now how we operate. We work in conjunction with our Board, and we -- I guess to your point, it's a combination of lots of different factors: what we could and what we should and everything in between. But we've acted with the best fiduciary thus far, and we'll continue to do as such.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [25]

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Okay, and then when we think about the covenant that's the total indebtedness to total assets, it's come up over the past year, and we're getting closer, just, I guess, algebraically, to when it -- so I guess, what gives you guys confidence that going forward, you'll not violate that covenant requirement?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [26]

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Caitlyn, we're projecting basically to see the leverage stay where you're seeing it at the end of the third quarter. We're comfortable with the cushion that that provides. And obviously, if we're talking about growth in 2020, you're going to see an improvement in that covenant. So it's been a tough couple of years, but we truly believe that the trajectory of the cash flows or EBITDA and our leverage will start moving in the right direction.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [27]

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And during that last, those tough years, we've materially improved our assets and we continue to do as such. We've improved the tenancy profile. We have exhibited minimal variance in the grand scheme with respect to operating and financial metrics. And we -- when our focus is on being the dominant town center in our secondary or whatever, our trade areas, it's becoming increasingly apparent that we are the folks to do it. And by the way -- oh, I thought you said -- I'm sorry. I thought you said that, "Congratulations on incremental increases in sales per square foot and occupancy costs," which means a tenant can be profitable at 11.2%. I must have missed that. All right, another question?

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [28]

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Sure, we've got more.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [29]

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Bring it on.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [30]

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I guess in the sense of the taxable income topic, on the West Ridge transition, I'm just wondering, is there any likelihood that that gets delayed to 2020? And if so, how would that impact 2020 taxable income?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [31]

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Caitlin, our assumption right now, based on what we know, is it's going to be transitioned back here in the fourth quarter.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [32]

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Okay. And then during the quarter you guys had a like $30 million impairment. Was that related to lender transitions or something else?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [33]

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No, it was not. It's just going through accounting on assets and looking at where the book value is non-cash charge, and you'll see that from time to time on Tier 2 assets.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [34]

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Tier 2, we've been unencumbered, accretive of cash, but we've made it perfectly clear what we're doing with Tier 2, which was 28% 3 years ago -- 27%, 28%, 29% -- 3 years ago. What are we at? 7%? 8%? 7%?

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [35]

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7%.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [36]

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7% now. So it doesn't mean that there's not a marginal return on those assets, but we don't putz around when there's -- we segregated those assets. We've reduced those assets that come through Tier 2, and some are playing out according to schedule, as evidenced by an impairment. And quite frankly, some are going the opposite way, where all of a sudden, Josh and Dan and everyone else are leasing space on these. So there's no way to reevaluate it. This is a kinetic process, so impairment on a Tier 2 asset -- non-cash.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [37]

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Got it. And just in terms of recognizing that now, does that suggest that you're going through some process of potentially selling whatever property or properties that was, or not necessarily?

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [38]

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No, not necessarily. There was no change in our decision on the asset. It was really just a technical accounting change, and we go through that evaluation by asset every quarter, Caitlin.

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Operator [39]

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[Operator Instructions.] Our next question comes from the line of Vince Tibone from Green Street Advisors.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [40]

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What was the rationale for the seller financing on the ground lease transaction? I'm curious if that was always part of the original plan, or did the buyer's financing potentially fall through since that deal was announced?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [41]

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You've been very prescient. The buyer is a fund, and quite frankly, they didn't raise the entire amount of dough in time. And I should have better explained that there was going to be, so the onus of burden rests upon my shoulders. There should have been a range, but as opposed to putzing away, going back and forth with respect to waiting to close -- who's saying, "Take the money and run?" We took the money and ran, and quite frankly, and it is funny because, and I think you get it, you get it.

The lack of understanding of this relatively simple transaction befuddles me. And I think you get it, just by virtue of your question. Plain and simple, we gave them the opportunity to come up with the other $45 million. And by the way, we made a few shekels along the way, the interest income of 4%. And as it relates to the instrument itself, the initial interest rate, and how we get from 7.5% to 4%, to me, locking in 30-year money with in effect a call option -- let me think about this way to put, or no, as we call -- if they can't refinance, is really, really smart. That's way too much hubris, so I'll only do one really -- really smart.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [42]

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But I'm just curious. Like doesn't the seller financing, though, make it effectively, to your point, this 30-year bonded -- well, our 30-year commitment -- more expensive? Because you're effectively paying a small percent rate for 5 years.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [43]

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No, no, no, no, no, no, no! So let's do a draconian scenario, which would be the best scenario. They can't refinance. We get the property, we get the land back, and guess what -- we get to keep the $45 million -- is it $45 million or $50 million? --

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [44]

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$45 million.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [45]

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$45 million.

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

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No, I'm just talking about just the seller financing piece, where that basically makes the interest rate...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [47]

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We're getting paid. We're getting paid during that interim, while they...

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [48]

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But a net, on a net basis. Because you go from paying -- you went from paying effectively a 7.5% rate on $100 million to paying a 12% rate on $42 million -- or sorry, on the net. But yes, the effective interest rate, netting out what you're getting paid and what you're paying, went up to 12% for the first 5 years. That's my only point there. I was just curious how you thought about that.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [49]

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No, you're going the wrong way! No! I'm leaving. Goodbye, everybody -- no. Mark, handle it.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [50]

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Maybe we can take this offline now.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [51]

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We love you. We should have done a better job explaining.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [52]

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Bottom line is we're going to get 4% interest rate. We were going to use those proceeds to pay down our line. Our line is less than 4% at this point. So in the short term, we're actually a bit more accretive. And we're going to get that loan paid off. And I think what people need to focus on, these are smart investors who put $45 million on the table. They fully expect to take that bridge financing out.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [53]

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Think of the risk if they don't. Think of the risk -- it's binary. Whoops. They lose that $45 million.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [54]

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Right. No, that makes sense. Thanks.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [55]

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No, I should have done a better job of explaining it. But no, I think you'll get a -- it's -- can I say 2 reallys? It's a really, really smart deal. All right, what else we got?

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [56]

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No, I'm just curious if you think selling Tier 1 malls could be a viable source of capital for either deleveraging or funding future redevelopment plans. I'd love to get your thoughts just on the broader mall private market today and where you're seeing malls being negotiated in the market and how the debt market or mortgage financing availability is today, maybe, versus 6 months ago.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [57]

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I'll start and whoever -- listen, there's still very little evidencing of price discovery. But what is happening is -- I'll do 3 reallys -- really, really, really smart institutional and private equity investors are beginning to call us and saying, "You guys have built a hell of an operating infrastructure. Is there an aggregation thesis?" And I think we're hearing that. So the reason I bring that up is because albeit there's still very little price discovery, people are getting interested in what we're doing. And our focus was to be the best in our business. And there's no hubris; we work our behinds off 24/7. But we built an infrastructure that's, quite frankly, as formidable as -- more formidable than anybody in our, I guess, our subsector.

So really not a lot of sales data out there, but I don't want to disclose any more. But it's getting more interesting, which will obviously inure to the benefit of our multiple, because everybody, again, it's binary. You're either e-commerce or physical retail. You're either primary versus secondary. You're either us versus somebody else. And there's just been no nuancing whatsoever. It's been a blunt-edged instrument. Does that help?

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [58]

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No, it does. I'm just curious, just to clarify, so it doesn't sound like you're in the market now looking to sell any malls today. Is that a fair statement or do you...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [59]

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We're in the market at all times, and I've made that perfectly clear, whether it's corporate, whether it's asset specific. Here -- from how many assets was Mark smart enough to get rid of, which have proved out, thank goodness, and what now what we have is robust. Come visit our assets, people. So we got rid of 17, Mark? I don't know, 17? So we got rid of them, but those were drags. Now it's time, and what we've done is evidenced by increasing sales per square foot, the activations that we're doing, people are coming, people are coming via their leasing, our fulfilling big boxes. That will inure to the benefit of us, the multiple expansion, and that will inure -- as a result, we'll get, if there's an asset sale out there, trust me. If someone offers a good price, we'll circle it.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [60]

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Fair enough. One last one for me. I'm just wondering if you could quantify how much tenant sales growth was impacted by the fallout of underperforming tenants. Like are you able to share tenant sales growth on a same-tenant basis?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [61]

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Yes, we don't have the exact number, but I would say that it certainly is part of it. And maybe, certainly we had organic growth. We had comp growth.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [62]

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We did have comp growth.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [63]

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So if you factor that in, it maybe is 50/50, probably between just improving base, getting rid of the underperformers. But we absolutely had organic comp growth that drove that increase as well.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [64]

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So I'm actually, Vince, I'm actually asking the question along with you. So how much was organic?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [65]

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Like for like...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [66]

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Like for like.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [67]

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Versus addition by subtraction, reducing the...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [68]

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So it was roughly 50/50? Yes. That's actually interesting. I didn't think about it like that, and that makes me feel even better. So if you think about it from a ratio standpoint, 50% of our tenancy exhibited like-for-like. All right. Again, which shows that there's been a modulating or an adjusting process going on, and not everybody is going to heck in a hand basket, and we've replaced those that have. I admittedly didn't think about it in just kind of an aggregate like that. What else you got?

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [69]

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No, that's all I have. That's really helpful color. Thank you.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [70]

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You're not going to say, "Boy, oh boy, 3 assets? You think there's $2.00 of NAV." You guys are right down the street. Wait a minute. So --

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [71]

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I know. We can talk about Westminster. So yes, what's the plan there? That's the one where...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [72]

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We own 50 acres, and what we own, 50 acres, and is it $5 million? Is it $3.5 million to $5 million?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [73]

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Yes, it's $5 million when you get the entitle.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [74]

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When you get the entitlement, so let's do this. 50 times 5 -- hmm. So some real value. What about Pearlridge? What about...

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [75]

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Just on Westminster really quick, like where are you in the entitlement process? Because that's the challenge in California, right? The dirt is expensive, but it's impossible to get anything done.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [76]

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Yes, it is. Yes, it is.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [77]

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So like, are you, is this something that could be broken ground in 3 years, or is this still a longer-term horizon?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [78]

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Oh, it will be broken ground before 3 years, my brother. And again, we're not going to do, we're not going to be office, hotel, multi, for sale. We're going to be selling that -- yes, and we are in the process. Trust me, it's always difficult anywhere, albeit when you have a very cooperative city which would love the incremental tax revenue and the incremental derivative GDP impact of what something like Westminster would do, it's going to be good stuff. But you can do this with kind of 70 of our assets. And again, I think I mentioned in varying degrees. So $2.00 for those 3, hmm, okay. And we just had folks down the road kind of, I saw you telephonically nodding your head yes. All right, anything else?

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Operator [79]

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Our next question is a follow-up from the line of Ki Bin Kim from SunTrust.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [80]

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So I will say congratulations on...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [81]

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Thank you. Oh, my god, thank you. Announcer, can you call the meeting to an end? We're done. Don't really do it, don't really do it, announcer -- moderator.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [82]

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On your ability to find some interesting liquidity forces. So as I think about this next year, I know you've tried to address a lot of the debt maturities. But should we expect any other liquidity events from WPG, whether it being selling more out-parcel sales in addition to what you've announced or some other kind of secured lending or borrowing, secured borrowing?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [83]

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I think we're always looking for sources of capital, ways to enhance the liquidity. But I think what we would be focused on is deleveraging, not necessarily looking at debt transactions per se. But we're always looking for ways to bring strategic capital into the company, and I think Lou, as you mentioned, there's folks coming to us who believe in the space and believe in this company.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [84]

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Well, and they believe in this, and I sound like I'm -- you guys know me. The type of folks that have been reaching out is a pretty impressive list. And from a creative capital source, there's always a Faustian deal that we can do.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [85]

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Okay, and I've got a couple more follow-ups here. Scottsdale quarter, I feel like I've been looking at that project and your supplemental, so back in the Glimcher days. It's going to be finished this year. You still have about $10 million you have left -- $10 million-plus -- capital that you have left to spend to finish it. Just curious, with 1 quarter left, what's the reasons why that hasn't been spent? And I know it's mixed use, or is retail, office and maybe residential. Any sense of leasing progress in those different elements?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [86]

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Yes, I'll let Josh talk about specifically what's on the table, but most of that money is probably earmarked towards final construction completion as well as tenant allowance, which typically gets back loaded. But we're about ready to come online, and I would expect that project to come off the supplemental. And maybe, Josh, you could talk about where we are with the final phase.

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [87]

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Yes, with the final phase, Ki Bin, we've got, I think it's -- I'm going to use rough numbers -- it's about 40-plus, 42,000 square feet. Don't hold me tight to this, but I'm going to say we literally have maybe 4,000 feet left, 4,500. And obviously, there are some people that -- tenants are iffy, right? They don't like making announcements. But I think here in the next quarter to quarter and a half, you'll be pleasantly surprised with the mix that we've...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [88]

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Come on, give him a little preview, baby. Come on.

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [89]

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I can't, no.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [90]

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Come on, come one.

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [91]

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No.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [92]

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Starts with a...

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [93]

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Ki Bin, just go visit Scottsdale in like February, right? That's when everybody wants to go, anyway.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [94]

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And just to remind you, Ki Bin, what's happening is it's 40,000 square feet of first-level retail entertainment space that we own and we've condo-ed. But then somebody's going vertical and adding, I think, 300...

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [95]

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350 units.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [96]

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Yes, 350 residential units to Scottsdale Quarter that are online.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [97]

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And so...

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [98]

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We're not involved with that financially.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [99]

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And you still feel comfortable at the midpoint of the 7% to 8% yield?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [100]

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Yes.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [101]

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Okay, and just last question, are you contemplating moving any assets from like the Tier 1 bucket to Tier 2 or Tier 2 to noncore next year?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [102]

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We have, again, speaking, I'll use the phrase really methodical. I'm not going to say we don't contemplate, but we have a quantitative process that's multivariant, and it's really a good first check. It's a good question. That's a good question. And the question is, "Can grass," or the comment was, "Can grass." No. We have a process at the end of the year of which Lisa directs, and we have 6 variables, and I wrote it way back when, and these guys, let's just say, refined it and made it workable. But -- and then we talk about it. But it's primarily driven pursuant to the output of the model.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [103]

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Correct, yes. And we will...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [104]

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And that's probably how you'd want us to be.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [105]

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We'll do that in the fourth quarter, Ki Bin, so we'll do that analysis in conjunction with our year-end report. We'll tell you if we changed any classification.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [106]

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Okay, and I asked that question just to see if the same sort of NOI guidance could be impacted by those decisions.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [107]

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No.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [108]

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I'm sorry. Yes, no, I think Josh did a great job. It looks like we're only going to lose 2 or 3 Forever 21 -- oh, I'm sorry, you didn't ask that question. I apologize.

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Operator [109]

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Our next question is a follow-up from the line of Caitlin Burrows from Goldman Sachs.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [110]

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So maybe just one quick follow-up on the Scottsdale piece. So if we look at the expected spend of, call it like roughly $65 million at the midpoint and, say, 7.5% yield. That would be like roughly $5 million of extra NOI. So I guess I'm just wondering, of that roughly $5 million, are you recognizing most, all, none of it today? Any details there?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [111]

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Big goose egg. Josh was giving me the big goose egg, so nothing as of today. And I don't -- I'm not going to opine whether it's $5 million or not, but right around there, and nothing is being recognized, I'd say.

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [112]

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But that's the full phase. It's not just that one block, I believe.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [113]

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If it involves more blocks. The only one that's not online is the middle one. So we...

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [114]

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The 40-plus thousand square feet, Caitlin, is not online. It comes in, I think the first tenant -- again, don't hold me to it -- but I think the first tenant comes online here in a month, less than a month -- November.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [115]

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Right, so the, call it $60 million or so, $65 million of spend -- is that related to just that 1 block, or is that for a larger piece and so it actually is online?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [116]

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It either relates to the entire, what we at one point called Phase 3. So there are 3 blocks, so it includes the residential block we already have, where we've condo'ed about 30,000 square feet of retail as well as Block M, which has an office building and first-level retail. So it incorporates all that. So when you factor that in, certainly a chunk of that is already online. So really, what you're talking about is taking 40,000 square feet you can put a rent per square foot on. But there will be incremental income, but it's not to the tune of the $5 million that you talked about.

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [117]

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Yes, we can follow up with you, Caitlin, but it might be somewhere in the neighborhood of half that's not online at all yet. But I can look at the numbers and certainly get you that information.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [118]

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Okay, got it. Then maybe when we think about the out-parcel sales that you guys are doing, do those create taxable income or not?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [119]

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They do, but you can relatively manage through that in terms of just kind of the bite size that's involved. But yes, they do generate, in most cases, taxable income.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [120]

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Okay, and then just thinking about future liquidity sources as was touched on before, when you think about the amount of out-parcel sales you guys have already announced, how much deeper do you think your opportunity is there, and do you think that could continue beyond what we already know today?

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [121]

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You're right, because we have those April 2020 bonds -- oh, I'm sorry, we've handled those already.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [122]

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My next question's on those.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [123]

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And then we have 6 -- how much do we have in capacity right now on the line?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [124]

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We're looking at basically, when you factor in the ground lease proceeds, I think we're in good shape. We'll have, roughly, almost $550 million of liquidity at year-end is what we've projected.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [125]

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So is there more out-parcel stuff? Maybe. Yes, maybe. But it's just -- for us, we regard it as an arbitrage. You're a seller at X, and obviously, we know what our weighted average cost of capital is, and there's the delta is good. And there's the buyer is somebody that has -- a credit tenant or a net leased REIT. It has just a different borrow cost and objective than we do. So yes, there might be more, but we've been, again, pretty methodical in doing it, and you guys are the first to know.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [126]

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Got it, okay. And then just in terms of the expected gains for 2019, I think you're guiding now to $21 million to $24 million. But it seems like you've already essentially recognized all or most of that. So I guess I'm just wondering, wouldn't it be reasonable to assume that those gains continue into 4Q of this year?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [127]

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You do need to back out from what you see on the income statement. About $4 million is the number that relates to actually selling depreciable real estate. So still got the proceeds; it's just not included in FFO for the NAREIT definition, only unappreciable property.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [128]

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Okay. I guess that it seems like over the course of this year, that has continued to rise, and it makes it seem like it would continue to. Do you agree with that, that line of the guidance?

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Melissa A. Indest, Washington Prime Group Inc. - Executive VP of Finance & CAO [129]

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Basically, that's the range that we expect to have close this year. We did update it from last quarter.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [130]

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Yes, okay. And then yes, Lou, like you were talking about, I know you guys have generated the liquidity to address the April maturity next year, so that's great. It seems like these proceeds are getting used kind of along the way, though, for other uses, since the line of credit is where it is. So I guess I was just wondering, as we go into 2020 and you actually do address that maturity, should we expect the line of credit to go up further when that's actually paid off?

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Mark E. Yale, Washington Prime Group Inc. - Executive VP & CFO [131]

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Yes, we've built capacity on the credit facility, and it's our expectation that we will use the credit facility. But just remember from where we were at the end of the third quarter, we do have the proceeds from the ground lease transaction, and we're expecting within the next 9 to 12 months another $50 million of proceeds from the Four Corner out-parcel sales.

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [132]

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As well as increased FFO.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [133]

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Okay, and then on...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [134]

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While we have transformed our assets, I beg you guys, the ubiquitous you guys, go look at what we've done and things out -- other than the Scottsdales and the Austins. We are -- they're vibrant. And those that aren't, we have -- we are addressing on a real-time basis. And I'm not just talking it. Look at the leasing. Look at the leasing. And if it doesn't perform to kind of that stair-step, linear kind of -- dare I say Wall Street definition of increment -- kind of step-by-step -- we are changing tenants and diversifying tenants, and our guests love it. And guess what, they're spending more dough. They're spending more dough. But you've got to come and look. You've got to come and look.

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Caitlin Burrows, Goldman Sachs Group Inc., Research Division - Research Analyst [135]

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Okay, and then last one on the Forever 21. So you did mention that you're only expecting 2 or 3 closures there. And versus Forever 21's bankruptcy filing, that is less. So I guess I'm just wondering was that original list just irrelevant? Are the others expected to have rent adjustments, or what is your outlook for Forever 21, and how much is known versus unknown at this point?

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [136]

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As it pertains to them, look, they're going to put out a list of what they want to do. They're going to go back and negotiate with all of the landlords. I will tell you, our portfolio in general from an occupancy standpoint is -- I don't want to say probably -- is the lowest as it pertains to way more to cross the board. So...

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Louis G. Conforti, Washington Prime Group Inc. - CEO & Director [137]

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Hence, i.e., profitability.

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Joshua P. Lindimore, Washington Prime Group Inc. - Executive VP & Head of Leasing [138]

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Right. So we'll -- I'm sure we'll take a haircut on a couple of things, but I don't anticipate any major degradation.

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Operator [139]

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Thank you. And this does include the question-and-answer session of today's program as well as today's conference. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.