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Edited Transcript of WRI earnings conference call or presentation 30-Apr-19 3:00pm GMT

Q1 2019 Weingarten Realty Investors Earnings Call

Houston May 3, 2019 (Thomson StreetEvents) -- Edited Transcript of Weingarten Realty Investors earnings conference call or presentation Tuesday, April 30, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew M. Alexander

Weingarten Realty Investors - Chairman, President & CEO

* Joe D. Shafer

Weingarten Realty Investors - Senior VP, CAO & Secretary

* Johnny L. Hendrix

Weingarten Realty Investors - Executive VP & COO

* Michelle Wiggs

Weingarten Realty Investors - VP of IR

* Stephen C. Richter

Weingarten Realty Investors - Executive VP & CFO

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Conference Call Participants

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* Christine Mary McElroy Tulloch

Citigroup Inc, Research Division - Director

* Christopher Ronald Lucas

Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst

* Craig Richard Schmidt

BofA Merrill Lynch, Research Division - Director

* Greg Michael McGinniss

Scotiabank Global Banking and Markets, Research Division - Analyst

* Hong Liang Zhang

JP Morgan Chase & Co, Research Division - 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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Good morning, and welcome to the Weingarten Realty Inc. First Quarter 2019 Earnings Call. My name is Brandon, and I'll be your operator for today (Operator Instructions) Please note, this conference is being recorded.

And I will now turn it over to Michelle Wiggs. Michelle, you may begin.

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Michelle Wiggs, Weingarten Realty Investors - VP of IR [2]

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Good morning and welcome to our First Quarter 2019 Conference Call. Joining me today is Drew Alexander, Johnny Hendrix, Steve Richter; Joe Shafer.

As a reminder, certain statements made during the course of this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results could differ materially from those projected in such forward-looking statements due to a variety of factors. More information about these factors is contained in the company's SEC filings.

Also, during this call, management may make reference to certain non-GAAP financial measures such as funds from operations, or FFO, both core and NAREIT, which we believe help analysts and investors to better understand Weingarten's operating results. Reconciliation to these non-GAAP financial measures is available in our supplemental information package located under the Investor Relations tab of our website.

I will now turn the call over to Drew Alexander.

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [3]

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Thank you, Michelle, and thanks to all of you for joining us. I am pleased to announce another good quarter, a great start to what we feel will be a very good year. Same-property NOI growth of 3.2% once again exhibits the significant transformation of our portfolio. While the retail environment continues to have its challenges, the diversification of our tenant base, the quality of our real estate and the much improved overall strength of our merchant lineup enables us to post solid metrics.

Coupled with the best-in-class balance sheet, WRI is well positioned for future growth. Acquisition activity has picked up somewhat as we closed on a grocery-anchored center in Phoenix and have a couple of others in pipeline. We're encouraged by the product we've seen lately and are cautiously optimistic that we will be able to add some quality properties to our portfolio during the balance of the year.

As to dispositions, we've sold $67 million of property in 2019. We'll continue to sell noncore properties albeit at a slower rate. With respect to our new development activities at both West Alex and Centro Arlington in D.C., we're scheduled to begin residential preleasing activities in the latter half of the year and expect to have a modest amount of revenue online before year-end. At Centro Arlington, we expect Harris Teeter to open around year-end of 2019. Both of these projects have many moving pieces which continue to impact the timing of the construction, expected stabilization dates and estimated final investment. As has been widely noted, mixed-use projects have their challenges but the D.C. area locations will be successful, valuable real estate projects. They benefit from a strong supermarket anchor, they're in close proximity to Amazon HQ2 and the strong Northern Virginia market.

The Driskill at River Oaks is progressing nicely, construction is currently ahead of plan and we should have some residential units available in mid-2020. Recall, this 30-story luxury high-rise at our prominent 320,000 square-foot River Oaks Shopping Center here in Houston will include over 300 residential units with around 10,000 square feet of ground floor retail, and the total project cost is approximately $150 million. We've many other redevelopment projects in the pipeline that would provide excellent returns on the invested capital, and we continue to work on those with great focus. A solid quarter.

Steve, the financials?

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Stephen C. Richter, Weingarten Realty Investors - Executive VP & CFO [4]

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Thanks, Drew. Good morning, everyone. Before I get into the specifics of our quarter, I wanted to point out that effective this quarter, we adopted the new GAAP leasing standard, which has several effects. As we previously discussed, the most significant change is the expensing of indirect legal and leasing costs, which resulted in over $2 million of additional overhead in the first quarter being expensed SG&A that was capitalized last year. Second, we are now required to exclude from revenues and expenses real estate taxes paid directly by tenants to the taxing authorities. Third, we are the lastly, under 13 ground leases. Operating ground leases are now recorded on the balance sheet and amortized accordingly to rent expense and the net impact on FFO was minimal. Finally, there are new rules for determining and presenting what used to be called bad debt expense and the allowance for doubtful accounts. For WRI, this has not resulted in an additional expense in the first quarter nor any adjustment to retained earnings as we believe we have adequately adjusted for all AR where we don't think it is probable that it will be collected. The details to some of these reclassifications by account are included on Page 44 of the supplemental.

Now on to the first quarter. Core FFO for the quarter ended March 31, 2019, was $0.52 per share compared to $0.57 per share for the same quarter of the prior year. The decrease is primarily due to disposition activities, which cost us $0.03 per share for the quarter, and $2.3 million of indirect leasing cost we expensed in 2019 but not in 2018.

Additionally, 2018 included a gain on debt extinguishment of $0.03 per share. These decreases were offset by the strong increase in same-property NOI driven -- primarily driven by increased base minimum rents and incremental income from our developments and redevelopments. We also recognized increased compensation expense for restricted share awards offset by other G&A expenses as noted in the press release, a reconciliation of net income to core FFO is included in our press release. Our balance sheet remains amongst the strongest in our sector. At quarter-end, net debt-to-EBITDA was a strong 5.3x, and debt-to-total market capitalization was 31.9% supported by a well-laddered maturity schedule that has no significant maturities until 2022.

Our great liquidity and strong credit metrics provide significant long-term stability and flexibility to pursue opportunities that arise. As to earnings guidance, we're affirming all amounts presented in our prior quarter. All of the details of our guidance are included on Page 10 of our supplemental. Johnny?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [5]

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Thanks, Steve. We're very pleased with our operating results this quarter. Occupancy remains strong at 94.3%. The impact of bankruptcies has remained minimal. Fallout was a record low. Leasing remains strong with 210 new leases and renewals signed for $18 million in annual rent. Our redevelopment program continues to produce strong risk-adjusted returns. And finally, our same-property NOI with redevelopment was a very strong 3.2%.

Just a brief update on the bankruptcies. We have 2 Kmarts, 1 is closed, and we expect it to be rejected soon. We received April rent for the closed store and may still get May rent as well. We expect the remaining Kmart will be affirmed. We're working on leasing the 8 remaining Payless stores we have. We expect those to be closed over the next several months as they liquidate. Leasing has been going nicely for those shop spaces. The company has leased 3 of the 4 toy spaces, and we're negotiating a lease for the fourth one now. I would expect those spaces to be back online paying rent by the end of 2019.

We have 4 Mattress1One stores representing $370,000 in annual rent. These are generally good locations. And we should re-lease any we get back quickly. Our guidance has a cap for each of these bankruptcies. Overall, fallout, during the quarter, was 15% lower than a year ago. This is a direct result of our transformed portfolio and the high-quality tenants we've been leasing to in recent years.

Normally, the first quarter has the highest fallout of the year. So we're cautiously optimistic this lower fallout will continue through 2019. As of the end of the quarter, our average supermarket sales are $678 per square foot. This is incredibly strong and compares to average supermarket in the U.S. with sales around $400 per square foot. We continue to lease mostly to service tenants, medical usage, discount clothing, fitness facilities and restaurants.

Occupancy remains strong at 94.3%. Importantly, we have a 200 basis point spread between signed and commenced. We expect to commence 271,000 square feet or about $7 million in annual rents over the next 6 months, which will fuel nice gains in same-property NOI the rest of 2019.

You'll see we've added an additional disclosure on Page 30 of the supplemental. Same-property NOI grew a very strong 3.2% during the quarter. Most of the increase was driven by a minimum rent, which was up 2.8%. In addition to the lower-than-expected fallout, we commenced rent for a couple of larger tenants earlier than we expected. The one operating metric that appears low was rent growth at 3.7%. It's the result of a few box renewals that were originally signed in 2008, prior to the financial crisis.

During the quarter, rent for new leases grew at 11.5%. Shop space renewals grew at almost 7%, while box renewals were a negative 3.3%. We have some visibility as for the box renewals for the balance of 2019, and we expect those to increase in the mid-single-digit range. As part of these renewals, we were able to extract some noneconomic benefits like reducing or eliminating options, longer lead time for option notice, easing of restrictions and more flexibility in adding buildings in the future which will supplement our redevelopment efforts.

Our redevelopment program remains strong as we have 10 shopping centers, excluding River Oaks, under redevelopment with an expected investment of $82 million, and estimated returns of around 10%. This quarter, we added 2 outparcel buildings with 20,000 square feet to the program. These are located in Fiesta Trail Shopping Center in San Antonio, fronting Interstate 10 close to the HEB, which anchors our shopping center and is a dominant supermarket in Texas.

During the first quarter, we purchased Madison Village Shopping Center in Arizona. This is a 90,000 square-foot shopping center, which has high volume Safeway with below-market rent. The center also has 40,000 square feet of shop space, we feel we can improve the tenancy on over the next couple of years. We expect the compound annual net operating income growth over 4%. We have a few other properties in the pipeline that we like. We still have a lot of diligence to complete so there is no guarantee those properties close. Drew?

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [6]

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Thanks, Johnny. This has been a good start to 2019. Great acquisition of the grocery-anchored center. Great same-property NOI growth, low tenant fallout, nice leasing velocity and a great balance sheet. We feel that our extensive transformation efforts have positioned the company to maximize the long-term value for our shareholders. With our accelerated disposition program largely behind us, we're well positioned for future growth.

Great people, great properties and a great platform equals great results. I thank all of you for joining the call today and for your continued interest in Weingarten.

Operator, we'd now be happy to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And from Citi, we have Christine McElroy.

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Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [2]

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Johnny, I'm wondering if you could provide some additional color on the box renewal spread anomaly in Q1? How many stores were involved? Was this related to the reduction in rent per square foot on your Dick's exposure? And was this a renegotiation on an option renewal? Just looking for more color on that.

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [3]

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Hey, Christy, this is Johnny. Good morning. Yes, these were renegotiation of boxes that we actually did the original leases on early in 2008. So they've been in place for about 10 years. I just want to make sure a couple of things. Number one, that I communicated clearly that we expect box renewals will be in the mid-single digits through the rest of the year. And a little bit of perspective. The box renewals for 2018 averaged 5.5%. We don't have a lot of visibility on the overall increases for the rest of the year. But again, we would expect that to be closer to the double digits. I do see this as a bit of an anomaly. The company's average base rent is very strong. We reported this quarter for the boxes $13.63, and that's an increase from $13.56 last quarter. And overall, $19.45 for the company, up from $19.35 from again, last quarter. Again, these were renegotiations. This was a bit of an anomaly and at this particular situation, the tenants did have some leverage that they exerted.

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Christine Mary McElroy Tulloch, Citigroup Inc, Research Division - Director [4]

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And so is this retailer doing this sort of programmatically across their stores, sort of aggressively trying to get rent floors such that you may not have any more exposure to them this year, but perhaps in 2020 as we sort of go down the line that you'll continue to maybe see this come through your rent roll, and should we be concerned about this happening with any of your other box tenants?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [5]

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Christy, I would tell you that every retailer is exerting as much pressure as they possibly can. We are getting request for reductions all over. For the most part, we have a very strong portfolio. And we're able to negotiate from strength in those situations. So I wouldn't think this is going to be an ongoing situation. I don't see this as an issue that I would be overly concerned about going forward.

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Operator [6]

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From Scotiabank, we have Greg McGinniss.

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Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [7]

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Steve, you came in above same-store NOI guidance range for the quarter but still firm. Is that just due to give Kmart and Payless headwinds? Or are there other items assumed in there as well? And then I'd also like to get a sense for how you expect the metric to trend to the year? And what are items that could take you to the top or bottom of the range?

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Stephen C. Richter, Weingarten Realty Investors - Executive VP & CFO [8]

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Good morning. The quarter was a good first quarter. There's lots of moving pieces. As Johnny mentioned, the -- what could move the -- to the high to the low end, it's still probably the biggest issue is fallout. We have -- in our guidance, we still are conservative. Again, fallout in Q1 was extremely low. If that continues through the balance of the year, it will bode well for 2019 or '18 -- '19 overall. So I think that it's tough to really other than the fallout, to go to guess what could cause things to go really well. Accelerating commencement of leases, obviously, helped on the positive side, and as I mentioned on the downside fallout of rents, quicker leasing up, et cetera. So it's really difficult to this early in the year to predict where we'll wind up for the balance of the year.

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [9]

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Hey, Greg, this is Johnny. I just want to mention that Kmart is not a lot of rent. That's the Placerville store. And as you remember, the rent is really low. I think it's about $30,000 a month. So that's not a huge number. And the big thing that we have out there, obviously, is the bankruptcies. The one that is kind of a looming is Pier 1 that everybody has talked about. Our exposure to them is relatively low about $1 million in annual rent. So -- and even if they file bankruptcy today, we probably wouldn't have that much loss rent for 2019. For the rest of it, if they are already in big bankruptcies that we're not currently aware of, then that would definitely hurt.

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Greg Michael McGinniss, Scotiabank Global Banking and Markets, Research Division - Analyst [10]

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Okay. And then kind of shifting gears and think about development a bit. I recognize there are still a lot of pipeline left to deliver, contribute, stabilize over the next few years, but how are you thinking about additional ground up development or multifamily investment over the next few years? And considering Amazon coming to town to D.C., how are you thinking about the multifamily portion on those Virginia assets? Still planning on selling those stabilization, more long-term investments there? Any color would be appreciated.

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [11]

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Hey, good morning, Greg, it's Drew. So we're very comfortable with the 2 D.C. developments as I think we've articulated the original thought was to sell them not just after they're stabilized but after we really have a good understanding of how the project works. All the mix fused, how everything interrelates. So it's sometime off and I hope something we've always been flexible about that our view on that may change. So as you mentioned, with the Amazon coming on, and those jobs really don't create, don't take place until '21 or so, it is something that we will certainly evaluate as we get closer and we might hold those longer, might joint venture or if somebody offers us really attractive price, we'd be opportunistic about it. As we've mentioned before, I don't think we're really going to add any multifamily exposure on our balance sheet till we digest more of the big 3 projects that we have. The projects are doing nicely, and we're very comfortable with it. But we do appreciate. It's not our core expertise. And as we've said before, not looking to add other multifamily until we digest the 3 we have. That said, we are looking at some new development opportunities. We would structure them more like we did The Whittaker, where if they were mixed use, we would not have the resi on our balance sheet. Seeing some things, working on some things. But I don't think there'll be a tremendous amount of new development added to the pipeline. We're just not seeing the demand, and the tenants willing to pay the rents. On the other hand, as Johnny alluded in his remarks, we are seeing a tremendous number of redevelopment opportunities to go into our existing portfolio and add product. We're also starting to see some acquisition opportunities that make sense to us. So I think a lot more of our capital will go to redevelopment and acquisitions and not really likely that we'll do a lot of new development that we are looking at a few small things.

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Operator [12]

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From Bank of America, we have Craig Schmidt.

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Craig Richard Schmidt, BofA Merrill Lynch, Research Division - Director [13]

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My questions have been asked.

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Operator [14]

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From Green Street Advisors, we have Vince Tibone.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [15]

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The weighted average lease term for new leases continue to trend lower this quarter. Just wondering if this is a mix issue or tenants actively negotiating shorter leases than in the past?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [16]

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Hey, Vince, this is Johnny. Good morning. Yes, this is clearly a mix issue. We just didn't have as many boxes new leases signed this quarter as we would normally have. I would say there's really no change in that area relative to the tenants we're negotiating with. We actually may even be renegotiating some longer leases, particularly for some of the other boxes. So I would see that trend going back to normal or even increasing the lease term over time.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [17]

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Interesting. So how much -- is the lease structure changing in terms of more options? Or just longer, absolutely...

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [18]

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No. Just -- Vince, it's just longer term. As we're spending a little more capital on getting some of these tenants in there, we are negotiating for longer terms. And in some cases we are able to get it.

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Vince Tibone, Green Street Advisors, Inc. - Analyst of Retail [19]

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Got it. That makes sense. And then one more, just quick one for me, you mentioned Safeway at Madison Village is below market. How much term is left on that space including option that before you can really get to it and market to market?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [20]

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It's a lot of term. It will be a long time.

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Operator [21]

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From SunTrust, we have Ki Bin Kim.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [22]

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Steve, can we talk a little bit more about your developing projects? And can you remind us where the underwriting was for multifamily rent versus where the market is today?

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Stephen C. Richter, Weingarten Realty Investors - Executive VP & CFO [23]

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Good morning, Ki Bin. We haven't gotten into those kind of specific disclosures. But generally speaking, on all 3 projects, we're between about $2.50 and $3 a square foot. It's something that we're generally comfortable with. We look mostly at untrended rents, it's called the very modest trending. So generally speaking, very comfortable with things. But these are also luxury properties you want to. And we've had lots of discussions with the operators you want to be very sensitive to the credit quality of the people you're leasing to. These are all renters by choice. There is some free rent in both markets or all 3 submarkets. So you have to work through that depending upon your timing and getting the right people and you have to be sensitive, generally looking at 12, 13-month leases. So it's good that you get another bite at the apple quickly. But some of these people are pretty prone to move so you also have to be careful you don't have people leaving the back doors, it's called too soon before you fill things up. So very comfortable with the projects long term. The Amazon jobs will be coming on, but that will be a little bit after we start leasing the project. So a lot left to be done. But we're cautiously optimistic and pleased with all 3 projects at this point.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [24]

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And Centro Arlington is about 1 year away from the stabilization. When should we start to see some kind of leasing momentum in that project?

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [25]

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Towards the end of the year Harris Teeter is opening. And as mentioned in both projects, we'll start some residential leasing towards the end of this year. How much expense we have versus revenue is a little dicey exactly where the calendar falls and how the construction goes and how things develop. But Centro Arlington is progressing nicely and Harris Teeter is supposed to open the end of this year. So a little bit of revenue this year and substantially more next year. So we're encouraged. We've been working on and talking about these projects for a long time. Mixed-use projects have a lot of complexity, as I said, a lot of moving part, but we're getting towards the payoff on them and are very pleased. I think they'll be very good long-term projects.

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Ki Bin Kim, SunTrust Robinson Humphrey, Inc., Research Division - MD [26]

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Okay. And last question on the same topic. Your redevelopment at Sunset Point 19 and you have Bed Bath & Beyond as one of the key tenants for that redevelopment project, so how do you think about that tenant and how healthy they are in the future? And how you balance merchandise and mix versus basically getting the rent?

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [27]

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Maybe I'll take the start, and Johnny can chime in since it's really more leasing decision. But I think a lot of it they were there in the project. They wanted to move. It was a good store. We're also given of a nice new box in a good spot with new term. So...

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [28]

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Yes, the other thing is when you're looking at merchandising property, you're looking at it space-by-space, center-by-center decision. This is a very strong store for Bed Bath & Beyond. We've recently got all of their sales, and this is the strongest store we have with them. They really don't have very many other stores in the area, which I think is going to be a key to their success going forward. They obviously, have a place in the retail distribution chain and they have some issues that they're working on. I am sure they have a very good balance sheet. They will be able to improve over time. But they'll probably close some stores to. And that will be an issue that we'll deal with when we get there and we've got a great relationship with them. We'll be talking with them at ICSC again this year and going overall of -- all of our stores.

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Operator [29]

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From JPMorgan, we have Hong Zhang.

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Hong Liang Zhang, JP Morgan Chase & Co, Research Division - Analyst [30]

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I guess a question on acquisitions and dispositions. I guess how many -- how much do you have under contract on either side as of today?

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Stephen C. Richter, Weingarten Realty Investors - Executive VP & CFO [31]

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Well, Hong, it's true as to dispositions, we feel comfortable with our guidance. As mentioned before, we're going to be very opportunistic about what we sell. Looking to sell the bottom of the portfolio at NAV, we think it's good. When the stocks at a discount to NAV. We're seeing some acquisitions, which is helpful. But I really don't want to get into what's under contract. We're not going to close everything that's under contract in all probability. We're going to work on a lot more than we expect to close. So we'll position ourselves very well to be opportunistic. And -- but we don't expect to close everything that we're working on. Acquisition likewise, Johnny can chime in. We're seeing some more things and we're encouraged, but it's -- it'll be a little early to start publishing pipelines and starting to count on specific things. Johnny?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [32]

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Yes. I think the market has had a little more product and we've been excited to be able to work on a few things. We've got a couple of things that we're negotiating letters of intent or under contract on. Again, we feel good about the guidance of -- midpoint around $100 million. So that's where we think we'll end up.

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Hong Liang Zhang, JP Morgan Chase & Co, Research Division - Analyst [33]

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Got you. And then I guess on the Kmart, Toys, Payless back filling, what sort of tenants are -- have you found to take those spaces?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [34]

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I would say that the discount ready to wear is dominating. We have Burlington, Ross, another couple of Ross'. So that's really where we are. I think we have a furniture store on the other one. So -- but discount ready to wear is absolutely where the business is today.

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Operator [35]

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(Operator Instructions) From Capital One, we have Chris Lucas.

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Christopher Ronald Lucas, Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst [36]

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Johnny, on the tenants that have indicated that they are looking at closing stores or shrinking their real estate footprint over the next couple of years. When you're talking to them, is it more likely that they're just going to wait till the end of the term of their lease? Or are they looking to get out in advance? And if they are getting out in advance, what's your view as to taking sort of a lease term fee or keeping them on the hook until you are backfilling?

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Johnny L. Hendrix, Weingarten Realty Investors - Executive VP & COO [37]

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Good morning, Chris, most of the time they are looking to close the store earlier than the end of the term. And I think the Office Depots are really good example of that. I think you published a piece that they're closing 2 stores that we have with them. Both of those stores expire in either mid-to late 2020. And that really helps us. We actually are negotiating a committee-approved lease on one today. We should be ready to start construction the day that they terminate. We may terminate them early, we may not, depending on how our negotiations go and the entitlements go. The other store we have several people who are very interested, that one is late 2020. We should be in good shape to either terminate them early or wait until they -- until their lease expires. That's kind of normal. In most cases, we're talking to tenants a year or so in advance, and we have a really good idea of what they're doing. One of the advantages that we talked about earlier in some of these leases that we've been negotiating is that if I can take away the options or if I can get longer period of notice on the options, it puts me in a lot better negotiation position the next time where I have the ability to look at some different tenants and different options and that's always very, very helpful for us.

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Christopher Ronald Lucas, Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst [38]

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Okay. And then moving over to Centro. It's been a number of press accounts describing a deal you guys have signed with WhyHotel for a good number of the units. Can you just sort of describe how that works? And how that will impact the '19 numbers.

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [39]

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Good morning, Chris, it's Drew. Yes, I don't think it will be that significant in '19. It was something that was brought to us by our partner who is the expert there. That whole genre seems to be very much catching on. And talking to some of my other friends and peers in the apartment world, a lot of this started out as a way to jump start the preleasing and get a lot of units done. But it's worked out operationally very well, in a lot of cases has become a permanent part of the projects that there seems to be a nice niche where it's a longer stay than a traditional hotel. It's people who are looking at more routine business. They do a good job in terms of the screening that you don't end up with any bachelor or bachelorette parties or anything like that, that's disruptive. So it's nice book of business. So as we learn more about mixed-use projects. It's something that started out as a try. It could be short. But it may end up being longer. It may be something that happens in other projects. But again, in talking to some of the different, both private and public companies, it seems to be quite a niche. And obviously, people are trying new things. Marriott's recent example -- recent announcement is just one example. So we think it's good. We'll try it. But it won't be that much in '19.

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Christopher Ronald Lucas, Capital One Securities, Inc., Research Division - Senior VP & Lead Equity Research Analyst [40]

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And that structure is sort of a master lease structure. I mean, you're not involved in how active the units are actually rented correct? I mean, it's a master lease structure?

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [41]

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You're correct. That is absolutely correct. We have some understanding of the standards and their policy to prevent the bachelor parties. But no, we're not -- I'm not at the front desk handing in the room key, no. You're exactly right.

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Joe D. Shafer, Weingarten Realty Investors - Senior VP, CAO & Secretary [42]

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And Chris, Joe Shafer here. On -- the cash we're going to bring in the door on the WhyHotel, that's going to be a contra asset, so we're not going to be recognizing revenue.

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Operator [43]

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All right. No further questions at the moment. Drew, we'll turn it back to you for closing remarks.

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Andrew M. Alexander, Weingarten Realty Investors - Chairman, President & CEO [44]

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Well, thank you, Brandon. We appreciate everybody's interest in the call. We're around if there are other questions. We'll see many of you at RECon and/or NAREIT. We very much look forward to that. Again, thanks so much for your interest in Weingarten. Have a good day.

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Operator [45]

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And again, ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.