General Growth Properties, Inc's (GGP) CEO Sandeep Mathrani on Q2 2014 Results - Earnings Call Transcript

Jul.29.14 | About: General Growth (GGP)

General Growth Properties, Inc (NYSE:GGP)

Q2 2014 Earnings Call

July 29, 2014 10:00 am ET

Executives

Kevin Berry - Vice President of Investor Relations

Sandeep Lakhmi Mathrani - Chief Executive Officer and Director

Michael B. Berman - Chief Financial Officer and Executive Vice President

Analysts

Samir Khanal - ISI Group Inc., Research Division

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

Christy McElroy - Citigroup Inc, Research Division

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Vincent Chao - Deutsche Bank AG, Research Division

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Paul E. Adornato - BMO Capital Markets U.S.

Benjamin Yang - Evercore Partners Inc., Research Division

Steve Sakwa - ISI Group Inc., Research Division

Michael Bilerman - Citigroup Inc, Research Division

Michael W. Mueller - JP Morgan Chase & Co, Research Division

Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division

Daniel Mark Oppenheim - Crédit Suisse AG, Research Division

Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division

Operator

Good day, ladies and gentlemen, and welcome to General Growth Properties Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, today's meeting is being recorded.

I would now like to introduce your host for today's meeting, Mr. Kevin Berry. Mr. Berry, please begin.

Kevin Berry

Good morning, everyone, and welcome to General Growth Properties Second Quarter 2014 Earnings Call hosted by Sandeep Mathrani, our Chief Executive Officer; and Michael Berman, our Chief Financial Officer.

Certain statements made during this call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties and other factors. Please reference our earnings press release and SEC filings for more detailed discussion.

Statements made during this call may include time-sensitive information, accurate only as of today, July 29, 2014. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed in Form 8-K with the SEC and available on our website.

It's my pleasure to now turn the call over to Sandeep.

Sandeep Lakhmi Mathrani

Thank you, Kevin. Good morning, everyone. Thank you for joining our call this morning. I'd briefly highlight our financial and operational metrics and discuss our recent investment activities. Michael will cover our financial results and guidance in more detail, and then we'll open it up for your questions.

Highlights on the financial results. For the second quarter, FFO per share increased almost 18% to $0.31 from $0.27 in the same quarter last year. Same-store NOI and EBITDA each increased 5% for the second quarter last year. Year-to-date FFO per share increased almost 20% to $0.62 from $0.52 in the same period last year. Same-store NOI increased 5.4% and EBITDA increased 4.5% over the first 6 months of last year.

Earnings growth continues to be driven primarily from property operations and keeping our property management overhead costs in control. Michael will explain.

Operational results. The mall portfolio was almost 97% leased and 95% occupied. Permanent occupancy increased to 91% from 89% a year ago. The strong operating metrics are evidence of our continued and focused efforts.

I would like to highlight, there have number of retailers and restaurant closures announced over the past few months, including but not limited to, Coldwater Creek, Love Culture, Sbarro and Juicy Couture. Within the GGP portfolio, these companies occupy almost 740,000 square feet. To date, we re-leased approximately 1/2 of that space and are working to re-lease the remainder. With the unexpected loss of occupancy, we will still achieve our year-end permanent occupancy target of 93%. Leasing spreads on the same suite basis continues to be strong for 2014, over 14% and ahead of our original expectations.

Now on to sales. There has been a lot of discussions concerning sales per square foot and its relevance to a mall's overall quality. For GGP, this metric measures the change in sales of tenants occupying approximately 55% of the permanent occupancy.

As reported, sales for the rolling 12 months on a comparable basis for tenants occupying less than 10,000 square feet increased 60 basis points to $563 per square foot. For the same-store mall portfolio, sales increased 90 basis points.

As expected, certain teen apparel retailers continue to post decline, which have a negative effect on sales. We feel there are a number of reasons causing the decline, including: sameness in product; high price points; competition, primarily from fast fashion retailers; and the target consumers' unemployment rate is high and they are burdened by the high-cost of their mobile phone plans.

For illustration. If the 3 As, that is Abercrombie, Aéropostale and American Eagle were excluded, sales of the same-store mall portfolio would be up 1.6%.

Specific to just the second quarter. Sales for tenants under 10,000 square feet increased 2.5% when compared to the second quarter of last year. Sales for all tenants, excluding department store, increased a healthy 6.4% for the same comparison.

For perspective. Sales today are 22% higher than the last peak in 2007, and 39% higher than the low in 2009. Impressive growth, given the overall economy grew, approximately 9% since 2009.

Our business for the past several years has seen a demand from certain retailers for larger stores over 10,000 square feet. Common users include UNIQLO, H&M, Zara, not to mention the increased store sizes by successful retailers, such as Apple and Victoria's Secret.

To provide you with a more complete gauge of the portfolio's productivity, we now disclose total sales, which includes all tenants that report sales to us except for the anchors on a comparable mall basis. We believe this a better measure of the portfolio's market share of retail sales, whether the share is growing, contracting or remaining level. This metric measures the change in sales of tenants occupying approximately 83% of the permanent occupancy. As reported, tenant sales, excluding anchors, increased 3.1% to approximately $20 billion.

Turning to our development activity. We remain on track in terms of anticipated timing and expected returns. The total projected share cost is approximately $2.2 billion and expected return on investments, which we define as the first stabilized cash on cost return, is between 9% and 11%.

To date, we've opened $326 million of projects, including the renovation of Glendale Galleria and the new Macy's Men's store fashion show. $1.1 billion is under construction and the pipeline includes $720 million of projects.

Our strategy regarding development is to focus primarily on our A malls and malls that we believe we can invest capital to improve overall quality to an A or high B. We're confident there are opportunities within the portfolio for additional projects and plan to share them with you once they have been thoroughly vetted.

Just a quick update on the largest development projects. Ala Moana Center. Expansion and renovation accounts for nearly 1/3 of our development capital. Bloomingdale and Nordstrom will anchor the 650,000-square-foot expansion. Approximately, 75% of the total expansion space is leased, a level of progress ahead of our expectations, and expected to generate NOI above original pro forma. We expect to complete the first phase of redevelopment in late 2015, at a total projected cost of $573 million.

The second phase of the redevelopment, the repositioning of 200,000 square feet Nordstrom box, is expected to cost $85 million. We have recently re-leased almost half the space to an international fast fashion retailer.

Baybrook Mall, located south of Houston, is undergoing a major expansion. We recently acquired an adjacent land parcel and commenced construction on an outdoor lifestyle shopping and entertainment comprising of almost 550,000 square feet. The expansion is driven by the higher level of demand from retailers and restaurants attracted to Baybrook, given its Class A quality status and location within a very strong and growing market. Approximately 54% of the expansion has been leased. Total projected share of cost for the development is $76 million, with an anticipated completion in late 2015.

Woodlands Mall, located north of Houston within one of the more successful master plan communities in the United States, is nearing completion of it's a $45 million redevelopment. The redevelopment began when we acquired the Sears box in early 2012, and obtained Nordstrom's commitment to open a new 140,000-square-feet store. In the process, we added over 20,000 square feet of in-line space, which is 100% leased.

Lastly, Southwest Plaza, located near Denver, is undergoing a complete redevelopment we expect to complete in late 2015. The mall is located in a market with excellent demographics. This project is somewhat unique in that we are transforming a B mall that had some vacancy to what we expect to be substantially upgraded upon completion. The total projected cost for this is $73 million.

Turning to recent investment activity. I'd like first to provide an overview of the sources of growth for GGP. For the past several years, we've been very consistent in communicating that GGP's growth is internally driven from occupancy gains, positive releasing spreads and income from our various development activities. We expect average annual EBITDA growth between 4% and 5% through 2017 based on these internal sources.

As we focus on achieving these goals, we've also strengthened our balance sheet. We believe we have the financial capacity to look at external growth opportunities. We believe external growth opportunities will help us continue to grow EBITDA between 4% and 5% beyond 2017.

One way to grow externally is to acquire more of what you already own, and we have been active on this front for the past few years. We've acquired 24 anchor boxes, comprising 3.6 million square feet for redevelopment or retenanting, including the Sears store at Ala Moana Center, allowing us to commence the redevelopment activities I highlighted before.

The Bloomingdale's Home Store at Oakbrook Center in Chicago, now occupied by PIRCH, The Container Store, lululemon, Aritzia, HUGO BOSS and Tommy Bahama, far improving the tenant mix of the mall; and also, recently the lower level of Neiman Marcus, where we've opened 2 new restaurants. The former Rob-May store at Fashion Show Mall, now occupied by Macy's Men's.

We've acquired interests held by joint venture partners in several of our malls, including the Village of Merrick Park, a Class A mall located in an affluent area near Miami. And we've been buying back our stock, we've invested approximately $2.3 billion in our portfolio at an average price of $16.75 per share.

Our job, our focus, is to allocate capital in an accretive manner to generate earnings and dividend growth over the long term, thereby creating value for our shareholders.

Flagship street retail assets offer very compelling opportunities to create shareholder value. The types of assets of interest to us are located within select markets, such as Manhattan, San Francisco Chicago, Miami, Boston, Washington D.C. to name a few.

Each of these markets is in high demand from the world's leading retailers. The locations provide a rare opportunity for retailers to have a valuable flagship location, a location that is top of mind for the CEOs of the retailers. The markets are dense, urban areas with virtually no new supply of retail space. In addition, given their flagship status and high productivity, these locations actually boost e-commerce sales, given the high visibility afforded the retailer from occupying these sites.

We are focused on Street retail assets that have a twist to them. These include opportunities to mark an existing lease to market, lease of vacant space, or convert non-retail space to retail.

Pulling [ph] yields are generally 3% to 4%. Through our efforts, we expect yields to double within 36 months and have mid-double digit IRRs. Contractual rent increases approximately 3% annually, and minimal operational and management resources are required.

Last year, we acquired several Street retail assets, and I'd like to provide an update on each. I originally reviewed the growth strategy for each asset during our third quarter 2013 earnings call. At that time, I said we expect our shares of the NOI to grow from $13 million to approximately $24 million. We've accomplished that. We've accomplished what we said we would do.

200 Lafayette was a building in the heart of SoHo's retail district and includes 115,000 square feet of retail and office space. We acquired the asset last October for $147 million at a little over a 5% cap, based on JCPenney occupying the entire asset, which provided the twist. At closing, we came to an agreement with JCPenney for them to vacate several of the lower floors, freeing up the most valuable space for retail. The NOI then dropped to about $4 million, or about a 3% cap on the acquisition going in. We recently leased these floors to PIRCH, a retailer specializing in higher-end kitchen and bath fixtures, and the store is expected to open in late 2015, early 2016. PIRCH has also locations with us at Glendale Galleria and Oakbrook Center.

In addition, we leased the entire top floor as office space. With the entire asset now leased, we expect the NOI to increase to over $10 million, generating above a 6% yield. Now that the office space is fully leased, we may sell just the office portion of the asset. If we sell the office portion at a 5% cap, our resulting return on the retail would be over 8%, that's an unlevered yield number.

830 north Michigan Avenue is located across from Water Tower Place, along The Magnificent Mile in Chicago. We acquired the asset last October for about $168 million, about a 3% cap. Approximately 60,000 square feet of the asset had been vacant. That was the twist in this deal. We reviewed this vacancy as an attractive offer to retailers for their flagship locations. We've leased the vacancy to UNIQLO, and expect the NOI to increase to over $8 million, generating above a 5% yield.

The 2 Union Square properties that we bought in San Francisco in the high-end retail district, we acquired a 50% interest last September for $82 million at about a 4% cap. The twist here was recapturing the space occupied by Apple and re-leasing at higher rents. We have been successful in re-leasing the space to T-Mobile, and we expect our share of the NOI on both assets to increase to almost $5 million, generating a 6% yield.

So if you add those numbers up, it comes to pretty close to $23.5 million, from what we said was about $13 million going in. Based upon what we've accomplished with the assets acquired last year, we began looking for additional opportunities.

As disclosed in our earnings release, we recently acquired a 50% interest in 685 Fifth Avenue in New York City. The property is comprised of 25,000 square feet of retail and 115,000 square feet of office. The location is irreplaceable, on the southeast corner of Fifth Avenue in 54th Street, the center of one of the most valuable retail corridors in the world, the Plaza District. The twist with 685 Fifth was the Diesel lease, which is significantly below market; and the Gucci lease for the office space, which had an 18-month termination clause allowing the space to become available. At closing, Diesel agreed to terminate their lease and will vacate early next year.

We're under contract to acquire the retail space at 530 Fifth Avenue. The property is comprised of 58,000 square feet of retail space standing a full-city block, between 44th and 45th Street. 530 Fifth Avenue is not only an excellent location along the southern expanding retail corridor of Fifth Avenue, but is very valuable given its large scale. The twist with 530 was twofold. The expiring lease covering the highly designed corner retail space, and the fact that 50% of the retail is vacant.

We are also under contract to acquire 218 West 57th Street, comprising between 35,000 to 40,000 square feet of retail, along the expanding retail corridor of 57th Street, west of Sixth Avenue.

In addition, the asset is located directly across from the site of the future Nordstrom Department Store, Manhattan's first. The twist here is that we close in 2016, after the Nordstrom opens. Rental rates should be significantly higher than they are today, but we bought it underwriting at today's markets rents.

In sum, we believe these assets provide GGP with a unique source of growth and further distinguish GGP as a pure player of owner of high-quality retail properties.

In closing, I'd like to reiterate that our company's consistent earnings growth is a product of our disciplined focus on our business plan and staying true to our mission of owning high-quality retail properties. We have executed this plan and would continue to do so, never losing focus on the drivers of our long-term earnings growth. Once again; increase permanent occupancy, realizing positive rental rate spreads, generating income from our development and expansion activities and opportunistically acquiring high-quality retail assets.

Michael will now review our financial results in more detail and guidance for the remainder of the year.

Michael B. Berman

Thank you, Sandeep, and good morning, everyone. I will start off by making some comments on our second quarter results, followed by some details on our second half plan and third quarter guidance and a quick update on our full-year guidance. Finally, I'll provide an update on our balance sheet activities before we open it up for questions. As always, please remember my guidance numbers are intended to be points on a range.

In the second quarter, same-store permanent revenues were $646 million or almost 5% growth compared to last year. Total same-store mall revenues came in at $729 million, up approximately 4.7% to last year. Please remember that in the first quarter, permanent revenues were up 3.7% and total revenues were up 3.9%.

Our operating business is strong. Same-store mall expenses increased approximately 3.8% in the quarter, driven primarily by real estate tax expense. Same-store mall NOI came in at $537 million or 5% to last year. Company NOI for the quarter came in at $549 million, $22 million better than 2013, or 4.2% growth.

Net G&A for the quarter was a minus $42 million, slightly lower than last year, resulting in EBITDA of $507 million for the quarter, up $24 million from last year, or 5%. Financing costs for the quarter were $213 million, down from $222 million last year. Overall, company FFO came in at $298 million or $0.31 per share, an increase of almost 18% on a per-share basis.

For the first half of the year, we've achieved same-store permanent revenue growth of 4.3%, same-store NOI growth of 5.4% and EBITDA growth of 4.5%. During the second half, we expect the permanent revenue growth to continue at a strong pace just above 4%, as our permanent occupancy ramps up to our year-end goal of 93%.

We do expect our same-store NOI growth to moderate during the second half to be more in the 3% to 3.5% range, due primarily to a large one-time positive nonrecurring item that occurred in the second half of 2013. Without the one-time item, second half NOI growth would be approximately 5%. Also, our guidance includes the impact Sandeep mentioned earlier of tenant bankruptcies of approximately 75% basis -- 75 basis points of NOI growth. We are starting to see positive contributions from our acquisitions and we are also benefiting from cost savings in our G&A, leading to EBITDA growth in the second half, comparable for the first half growth of 4.5%.

Moving on to the third quarter specifically, within our same-store portfolio. We anticipate permanent revenue growth of approximately 4%, but total revenue growth closer to 2.5%. On the expense side, we expect to be relatively flat for last year, yielding same-store NOI for the third quarter of approximately $540 million or around 3.5% growth. The impact of the previously noted nonrecurring item is approximately 75 basis points of same-store NOI growth in the third quarter, and will have an even greater impact on our fourth quarter numbers.

We expect our acquisition NOI for the quarter to double to over $5 million. Further cost savings in G&A lead us to expect EBITDA of about $510 million, representing approximately 4.5% growth. Financing costs should be approximately $215 million, compared to $214 million in the third quarter of 2013. We therefore expect FFO in the range of $290 million to $300 million, or FFO per share in the range of $0.30 to $0.32. This represents growth of approximately 10% per share at the midpoint.

For the full year of 2014, we continue to expect same-store NOI of 4% to 4.5%, EBITDA growth of 4.5% and FFO per share in the range of $1.30 to $1.32, or increase of approximately 13% over 2013.

Moving on to our balance sheet. On our April call, we laid out plans for approximately $750 million in net financing proceeds during the year, in addition to our plans to close on construction financing for Ala Moana. Excluding acquisition financings to date for the year, we've closed on 8 transactions, refinancing $736 million at share and generating over $500 million of net proceeds to date. The weighted average rate on these loans have gone from 4.8% to 3.5%. Of the 8 transactions, 4 were floating and 4 were fixed.

We also had 2 deals in documentation, refinancing a $160 million at share and generating proceeds of approximately $190 million. For the rest of the year, we have 3 deals to close, refinancing $350 million at share and generating approximately $90 million in net proceeds.

In sum, by the time we're done, we expect to generate over $780 million in net proceeds, a little bit better than our plan of $750 million. On the acquisition financings, we closed on 685 Fifth and we expect to close on 530 Fifth later this quarter, for net proceeds of approximately $270 million at share.

Finally, we closed on construction financing for Ala Moana, securing a $450 million facility with 4 years at LIBOR plus 190, it drops down for LIBOR plus 150 at stabilization. We also have about 1/3 recourse, which drops down to 0 at stabilization. Our revolver is down -- has been paid down to 0.

And with that, let's open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question is from Samir Khanal of ISI Growth ( sic ) [ Group ].

Samir Khanal - ISI Group Inc., Research Division

From ISI Group. It looks like occupancy cost ticked up a little bit in the quarter. Was that primarily a function of slower sales? And what's the historical average been for kind of occupancy cost? Just trying to get sense of how further you can push rents here, in light of slowing sales.

Michael B. Berman

Over the last, I'd say, half dozen months, the occupancy cost has ranged -- has been around 13%, 13.2%, one quarter; 12.9%, another. I don't think there's anything special trend going on right now with respect to the occupancy cost.

Sandeep Lakhmi Mathrani

And if I'd add, Samir, that basically in A malls, you can push occupancy well above 16% to 17%; in B+ malls, it will be 14%, 15%. So there's plenty of headroom, and you have to appreciate that releasing spreads are based upon sales that were established and the rents were established 5 years ago. And as I've just mentioned, over the last 5 years, sales have gone up dramatically. And so you're actually -- will continue to see a healthy spreads in my opinion through 2015. As we've seen, we've leased or approved almost 2.5 million square feet for 2015 and the spreads have been pretty healthy.

Samir Khanal - ISI Group Inc., Research Division

Great. And Sandeep, but just in terms of Street retail, what would -- and along the lines of occupancy cost, I mean what is the occupancy cost for that type of assets?

Sandeep Lakhmi Mathrani

So Street retail occupancy costs have generally been between 20% and 25%. And so you get a flavor of what occupancy cost would be in A++ mall, if you will, quite similar.

Operator

Our next questioner is Andrew Rosivach of -- with Goldman Sachs.

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

This is actually Caitlin Burrows. On the topic of tenant sales, so your total mall sales were up 3.1% over the last 12 months, so 250 basis points better than the under 10,000-square-foot sales. What did the total sales and outlook look like a year ago when the under 10,000-square-foot tenants were doing much stronger? And has the spread changed, in other words, is the trend changing for both of those metrics?

Michael B. Berman

I think -- and I'll correct myself by calling you later if I'm wrong. The number has improved in terms of the total sales because we've been adding more of the larger tenants that are doing large volumes in sales. So that's why you're seeing a more of a spread between the total and the less than 10,000. And there's more of that now than there was last year.

Caitlin Burrows - Goldman Sachs Group Inc., Research Division

Okay. And then, also, on the topic of the urban properties and acquiring them, you mentioned that one opportunity is to maybe convert non-retail space into retail. Do you think any of the office space at the property you acquired at 685 Fifth Ave. could be converted into additional retail space going forward?

Sandeep Lakhmi Mathrani

I think there is some history on the Street. If you look at Abercrombie, it's a 5-level retail space. If you look at Armani, it's a 5-level retail space. So I think there is potential to take the retail up to 5 levels at 685 Fifth.

Operator

And the next questioner is Christy McElroy with Citi.

Christy McElroy - Citigroup Inc, Research Division

Sandeep, just following up on Fifth Avenue. From an investor perspective, as you are -- as you look for opportunities to buy Street retail and sort of that 42nd to 49th Street strip versus the 50th to 57th Street strip, can you talk a little bit about the landscape of competitions for deals and going in cap rate sort of south of 58th versus north, if there's any difference? And if there's been a difference in rent trends? It seems like north of 58th has always historically been more desirable, but there's been a lot of changes south of 50th. If you could provide your thoughts on that.

Sandeep Lakhmi Mathrani

So let me just give you a little bit of feedback, right? So if you look at 42nd to 49th Street or 42nd to 50th Street and you exclude Saks Fifth Avenue, at grade, you've got about 300,000 square feet of retail, at grade. If you look at 51st Street to 57th Street, and you eliminate a couple of the churches and a private club, you've got about 2,000 linear feet of retail, which equates to about 200,000 square feet of retail at grade. I just want everyone to have a perspective. You've got 500,000 square feet between 42nd and 57th Street, and put that in perspective, the in-line GLA at Ala Moana currently is 950,000 square feet. We're adding another 300,000 square feet, you're going to have a 1,250 million. So the entire world who wants to be represented in New York City on Fifth Avenue has to fight for 500,000 square feet of store [ph] space. I think you can't underestimate the value of this retail. The going in cap rates are strong. And you know, again, we've elected to participate in deals where there is a level of twist in it that we can realize these returns in a 36-month period. Cap rates, whether they are north of St. Patrick's Cathedral or south of St. Patrick's Cathedral, seem to be the same going in. The question arises, is how quickly can you capitalize on the upside? And our discipline has been to be able to capitalize on that in a 24-month period, so that we can achieve the results in 36 months. The types of tenants, that are South of St. Patrick's Cathedral have been much more fast fashion, bigger format stores, with H&M almost having 2 stores in that area. They've opened their largest one, about 60,000 square feet. Topshop is opening soon. You've got -- the Anthropologie is in the market. So you've got a lot of the bigger format stores going in there. And once again, there's a high level of demand of tenants seeking space. Even 530 Fifth Avenue, which we acquired and we -- actually bought only the retail, it's amazing to us that we are getting inbound calls over how we could expand the retail and take another level of office, which of course we don't own, it's owned by RXR. So the demand for bigger format stores seems to be going towards the south of St. Patrick's Cathedral, and the demand for luxury seems to be on the north Side of St. Patrick's Cathedral. As a matter-of-fact, many retailers have been bullish on their earnings calls, to actually say they want flagship locations on Fifth Avenue. That's a very bold statement, understanding the cost of real estate, and also speaks to the high amount of demand that's available for space.

Christy McElroy - Citigroup Inc, Research Division

And then, at 830 North Michigan, can you remind me, was there any additional lease roll opportunity beyond the space you re-leased to UNIQLO?

Sandeep Lakhmi Mathrani

There was no more square footage available. Although, there is over 200,000 square feet of FAR, which we're not using. Which again, someday, has value. But again, what I -- I remember my days when I first started doing Street retail, the quote we always had in our office was, the day we lease the space, we got an offer for higher rent. And it was inevitable. And that happened through the great recession. And 830 North Michigan, since you've raised it, was very similar. We signed a lease with UNIQLO and we had 2 inbound offers at almost 1/3 higher rent than the rent we signed, and we thought that was a good number. So again, it speaks to the demand for Street retail, by retailers looking for representation in major gateway cities.

Operator

And our next question is from Alexander Goldfarb with Sandler O'Neill.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Just continuing along that line, just wanted -- just confirm what you're saying. So basically, when you guys make these investments, you're looking for a 2 to 3x return in sort of a 3-year timeframe, is that correct?

Sandeep Lakhmi Mathrani

Yes. That's correct, on income.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Right. Right. Right. So the point is where we see some of the other Street retail players buy out -- buy locations where the lease doesn't expire for, let's say, 8 years. We're not going to see -- if we see you guys involved in something, we should take comfort that the ability for you to get at that space is something within the next 3 years. Is that what you're saying essentially?

Sandeep Lakhmi Mathrani

That's been our play, and that's the twist we look for in each of the deals. The 3 we did last year, we have actually made a comment on the earnings call and we told you where it would head. We've accomplished that and we're moving forward. You got to little bit understand where GGP comes from. Our philosophy has been acquire, demonstrate, prove the theory, acquire again. We did that with our small business. We acquired 24 boxes, as I said earlier. We leased up to now 21 up to 24. The remaining 3 are in negotiations. We will have no new boxes. So now are we searching for new boxes? Yes. Similarly with Street retail. We bought 3, we proved out our theory and we bought 3 more, looking for twist in them. Okay? So we are very incremental in our process and very opportunistic.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Okay. And then, switching. You mentioned Miami. Obviously, you guys have Bayside down there. There was an article that I guess a third-party may do some residential, but given you've got 3 moderate-to-upscale projects going on just adjacent, whether it's the Design District or the Taubman site or the Bell Harbor folks, can you just give a sense for where you see Bayside -- the evolution of that property? And how you take a market like Miami, where the Street retail is changing dramatically? How you figure out where you want to buy that -- you're paying good money for a site not that there could be, in a few years, too many retail locations, as hard as that may seem given all the money that's down there?

Sandeep Lakhmi Mathrani

Let's just talk about Bayside. Actually, the article I think was slightly incorrect and you're right, it did talk about residential. What we have done is we've done a lease with a tenant to provide an entertainment news with just a -- it's a, I don't know, a 300-foot high spindle lighting with an entertainment news on top. So it's not really a residential project, so it sticks with our theory of Bayside being much more entertainment focused. The type of leasing at Bayside is again very different than anything else, it's a completely -- if you've been there, it's a very entertainment-focused project, almost like Samuel Hall was, if you will. So it has made different competitive point than Miami Design District, which is predominantly luxury. So the answer of me stating Miami, it is a gateway city. We don't currently have a plan. But the answer is if there should be opportunities that arise, we would be opportunistically looking to invest.

Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division

Okay. And just the final question is, going -- if we look at your stats, like the releasing spreads, those traditionally focus on -- under 10,000 square foot given the growing importance of the larger -- the over 10,000 square foot especially among the fast fashion. Can you just give a sense for what the releasing or the leasing spreads are in some of these bigger boxes, are they commensurate here? Presumably, they're going to grow quickly as box use changes, but then presumably that starts to slow down over time or maybe not necessarily?

Sandeep Lakhmi Mathrani

Just double checking, but -- I believe, we can get back to you on this if I'm incorrect. But I believe, and I'm almost 100% certain, the releasing spreads are for all tenants, excluding anchors. It includes the tenants that are greater than 10,000 feet. Which is why I think, early in the year I talked about 8% to 10% growth and my logic was that we're doing deals with bigger tenants, which would actually bring down the spreads. And if I'm incorrect, we will issue a note. But I think I'm correct.

Michael B. Berman

The governor is the sweet element. It's not the size.

Sandeep Lakhmi Mathrani

It's not the size. So Michael will double check.

Michael B. Berman

Okay. I'll follow-up with Kevin after.

Operator

And the next questioner is Craig Schmidt with Bank of America Merrill Lynch.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

I was wondering if you could give us a little detail on the planned redevelopment at Staten Island. It seems to be your biggest project outside of Ala Moana. And I just wondered if you're touching anchors as well as specialty shops in terms of the expansion.

Sandeep Lakhmi Mathrani

Craig, so the answer is we are expanding -- we look to expand one of the existing anchors in the mall, and we're adding a clip-on in the front of the mall, which will be basically the relocation of a food court, and we've already signed a new number of tenants that'll occupy that frontage. And as a matter of fact, we're even adding a supermarket at the rear of the property. So, for all of you who know Staten Island -- Staten Island Mall is a highly captive mall. It's got 550,000 people. It's an A mall. And we have -- on a -- in the approval process right now to get the project approved by the city authorities. But it's fairly far along that we would expect.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

And then, you already are the best asset on Staten Island. Is this expansion and redevelopment effort to keep people from either shopping in New York City or New Jersey and keep them out at Staten Island?

Sandeep Lakhmi Mathrani

No, Craig. It's just the demand for retailers looking for space that can sell 550,000 people with high a demographic is high. It's the only mall on Staten Island. So effectively, it is just to serve the demand of people on the island. The mall is over -- a $600 a square foot mall.

Operator

And the next questioner is Vincent Chao with Deutsche Bank.

Vincent Chao - Deutsche Bank AG, Research Division

Just wanted to -- I know you made a lot of comments about sort of how GGP looks at Street retail. Just curious if you could comment on the overall market appetite, particularly in New York. We're hearing a lot about -- a lot of players entering that and a lot of people kicking the tires and I guess agreements [ph] talking about being surprised at how many people are really looking at some of these deals. Just curious what you're seeing, and also if there's a dwindling opportunity, time wise, to make these deals happen, given the competition.

Sandeep Lakhmi Mathrani

You know, Vincent, there's always going to be competition. Again, we bought 3 assets as we've announced this press release. This is -- I did it in Q3 of 2013. I'm going to go ahead and tell you that the current NOI of all 3 assets, let's call it, $25-ish million, but we expected to grow to $60 million. If I took that $35 million increase and, you could do any cap rate you want, 4.5%, 4%, or 5%, it's a creation of $700 million, $800 million, $900 million of value. That's like buying a few malls. And so you don't have to buy a lot in this business to allow us to move our needle, and we're looking for growth opportunities that will continue that 4% to 5% EBITDA growth in 2018 onwards. There's always going to be competition. And again, we're very disciplined, and if we can opportunistically grow our business in Street retail, we will. It's the most complementary business to the A mall business, as we've maintained. And we look at every asset that comes onto the market, whether they be malls -- we looked at Pacific Place in Seattle, which is an urban mall, it traded at low 4 caps. And so we are focused on -- it's our job to look at all the opportunities that come and find those that have a twist in them, and be able to react quickly.

Vincent Chao - Deutsche Bank AG, Research Division

Okay. And in terms of your success in locking down some of these deals, I mean, obviously, if you can double the income in a short period of time, that's quite attractive to yourselves as well as anyone else out there. I guess, what do you think it is -- that's about GGP, that's allowing you to win these deals?

Sandeep Lakhmi Mathrani

I don't think it's about one firm or the other. I think the market is competitive, you have to compete. And as always, let the best man win. And so I don't view there could be one advantage over the other. There are several very good firms that compete for these spaces in the -- on the various Streets. And there's always a winner and there's always a loser.

Vincent Chao - Deutsche Bank AG, Research Division

I guess what I'm trying to get at -- do you think it's more your projections for growth are differing from others? Or your IRR hurdle is different? Or -- just trying to understand what the differentiating factor might be. If you could highlight that.

Sandeep Lakhmi Mathrani

Vincent, I can't answer the question. I don't really look at other people's underwriting versus mine. I can't answer the question of why one wins and one loses.

Operator

And the next question is from Jeff Donnelly with Wells Fargo.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

Actually maybe, Sandeep, to build on that, I guess, maybe put differently is, when you chose to enter the street retail business, how did you think about what your competitive advantage would be to enter that space?

Sandeep Lakhmi Mathrani

Again, I think several firms have a competitive advantage. I don't think one firm has a competitive advantage versus the other. I know the business pretty well. I was fortunate enough to learn the business in my days at Vornado, and I'm respectful of that. I am able to underwrite the transactions and react quite quickly. We have a very good relationship with tenants, we are able to use that to our advantage to understand what the market is. And I won't say that's a differentiator, but I would say it is a core expertise.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

And just a few follow-up questions. Can you -- maybe you mentioned it earlier and I missed it, but can you tell us who is going to be managing the properties you bought and just whether or not they're going to be, from a presentation standpoint, consolidated or unconsolidated? And just maybe the last one, I am surprised to see a 50% interest transact. Usually, I see a lot of people transact slightly less than that to avoid any kind of owners' taxes. Is there a reason for that?

Michael B. Berman

Yes, can you repeat the first part of your question? I didn't hear it.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

I was just curious who was managing the assets and from a presentation standpoint whether or not they would be consolidated or unconsolidated in your financials?

Sandeep Lakhmi Mathrani

So I'll answer the first part of the question, which is who is going to manage it. Again, our job, as you've seen, is to recycle capital, we've been selling assets and buying assets. So the existing manpower that we have is fully capable of leasing, managing, developing these assets. And more so, these assets require very little operational management because they are, obviously, Street retail don't have much common area to speak of. So I'll let Michael answer the presentation of consolidation versus non-consolidation.

Michael B. Berman

So that's going to be an accounting question depending on the facts and circumstances surrounding each agreement. So whether we're consolidated or not consolidated, to us, the most important presentation is our pro rata presentation. And also, the detail around which we give you on these earnings calls about how we're doing with the assets. So we treat it as if it's all our money and all our responsibility, but that doesn't necessarily mean -- that's how the accounting works. But we tried to provide flow-through to the pro rata results, so that whether or not we consolidate it or don't consolidate it, you can see exactly what we are thinking.

Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division

I understood. And actually, Sandeep, can you talk a little bit about maybe how deep your pipeline is for these types of transactions today? And is it as broad outside of New York as it is within it?

Sandeep Lakhmi Mathrani

To the answer, you're really talking about depth, again, this is opportunistic. You're not sitting with a pipeline, these deals come quickly, people react quickly and they close quickly. So you're not sitting here underwriting 20 deals and having a pipeline to select from, you have to react as and when they come to the market. To answer your second question, yes, the nice thing about GGP is we're a national company. We can look at markets. As I've mentioned on previous calls, we do have the best street presence on Seattle. We have the best street presence in Portland, Oregon. We've obviously acquired in San Francisco. We've acquired in Michigan Avenue and Chicago. We've acquired in New York City. So the answer is, for us, we could be in a couple of other gateway cities: Boston, Washington D.C. So we're not focused only on the New York market. We could be national in our expansion or external growth opportunities, again, which can be beyond just street retail. If an A mall came up for sale, we would be active to try to pursue it.

Operator

Our next questioner is Paul Adornato with BMO Capital Markets.

Paul E. Adornato - BMO Capital Markets U.S.

Just a quick follow-up. On the street retail, you described a kind of a twist, which often involves converting the use of the space to retail. Does that involve zoning or entitlement changes as well? And is that a significant hurdle?

Sandeep Lakhmi Mathrani

None of the assets we've bought is there a zoning or entitlement issue.

Paul E. Adornato - BMO Capital Markets U.S.

Okay. Perhaps more generally, what are some of the pitfalls that you might encounter in some of these transactions?

Sandeep Lakhmi Mathrani

Hard to answer. When you say some of the pitfalls, my experience, even in a deep recession, was there was always a demand for the space, I actually never saw in the deep recession, rents go backwards in the space. And so if you ask me what the pitfall was, it's hard to see how rent can keep escalating, however, they always seem to.

Operator

And the next question is from Ben Yang with Evercore.

Benjamin Yang - Evercore Partners Inc., Research Division

You guys have done a good job shifting the focus away from tenant sale per-square-foot growth for the reasons you mentioned, so it seems like occupancy cost, at least the way it's reported, is also somewhat irrelevant. So I'm just curious, again, do you have any thoughts on what a better metric might be to try to figure out what the embedded rent worth is in your portfolio? I mean, is total occupancy cost over total comp sales, is that better? And do you happen to have that number handy? And maybe what that has been historically for you guys?

Michael B. Berman

We don't have that number handy, Ben. I would say, if you take a step back, we generally expect to get rent bumps of 2%, 3%, given the spreads and the turnover, that's another 1% to 1.5% of expected rent growth. So you're talking about 3% to 4% order of magnitude of revenue growth embedded in the business, again, depending on the year and how much occupancy might otherwise get. So trying to glean on a year-to-year basis, compared to an expiration schedule versus the rents that you're signing, I have found to be not always the best measure, I tend to focus on, tell me how much my contractual bumps are going to be, tell me what you think the spreads are going to be, add them up, how am I going to do when my overage rent and my temporary -- where do I think I'm going to be in the baseline revenue number. So there might be some other statistics that we can think about with respect to -- an occupancy cost number. But we haven't really spent a lot of time on that, yet.

Benjamin Yang - Evercore Partners Inc., Research Division

Okay. I appreciate that comment. And then, maybe switching gears, going back to the outdoor lifestyle expansion at existing malls. I think you mentioned a supermarket at Staten Island, I didn't catch the other retailers, but it does seem like growth in the traditional lifestyle tenant isn't exactly robust and I know you guys have mentioned it in the past that you don't intend on building outlets, but is there any consideration maybe doing an outlet style wing at an existing mall, given obviously the growing demand in that particular segment? I mean does that type of expansion work or do you think that's maybe a little more far-fetched?

Sandeep Lakhmi Mathrani

No, I think, Ben, that's a very good point. I think when you start to go to secondary markets and you have A malls, and in those secondary markets, maybe there is a potential to add clip-on outlets. We've thought about it. We've studied a few malls. So it wouldn't surprise me if, as in the last iteration, where we saw the growth of lifestyle centers and mall owners add clip-on lifestyle centers to their malls as a way to compete. It wouldn't surprise me in secondary markets, it won't happen in primary markets, but in secondary markets, that you may have a clip-on outlet center component. It wouldn't surprise me.

Benjamin Yang - Evercore Partners Inc., Research Division

Okay. And then, so based on your quarterly discussions, it sounds like maybe the outlet -- the traditional outlet retailers would be open to that idea?

Sandeep Lakhmi Mathrani

Yes, I mean through our discussions with them says that they're not going to put a full-priced store because the market's demographics doesn't support full-price store, they don't see harm in putting an outlet-branded store in that market, and that's a good way for them to increase. On the contrary, it's a better way for them to increase their growth almost because they're not cannibalizing their own full-priced stores, which has been the situation in several malls. And I will point out a little bit of statistics. We have 120 malls, out of 120 malls, 60 malls have an outlet within 20 miles of it. So we do know that malls and outlets can coexist, and the tenants that get hurt are the ones that are cannibalizing themselves.

Operator

Our next questioner is Steve Sakwa with ISI group.

Steve Sakwa - ISI Group Inc., Research Division

Sandeep, I just wanted to clarify, I guess, when you talked about the NOI on the Street retail going from, I think, you said $25 million to $50 million, I presume that was across all 6 of the assets. Is that correct?

Sandeep Lakhmi Mathrani

Steve, no, that $25 million to $50 million was a 100% -- at 100%, but just with the 3 new assets. 685 Fifth, 530 Fifth and 218 West 57th Street.

Steve Sakwa - ISI Group Inc., Research Division

Okay. I guess I don't have the numbers quite in front of me in terms of the total purchase price, but what kind of incremental capital, typically -- and I guess maybe every deal is different, but what kind of incremental capital above that initial purchase price do you envision putting into these assets?

Sandeep Lakhmi Mathrani

So I'd like to say, at our cost basis, those 3 assets, 100%. Again, we only own 1/2, is call it, $900 million. So we would say you got to spend another $50 million to $100 million. So you'll get that $60 million, 6-0 million of NOI on a basis of, call it, $1 billion.

Operator

The next questioner is Christy McElroy with Citi.

Michael Bilerman - Citigroup Inc, Research Division

Actually, Michael Bilerman. Sandeep, it was helpful for you to go over the total sales numbers at the beginning and splitting out between comp, under 10,000, over 10,000. I just wanted a couple of clarifications. When you talked about the 55% number referencing the 563 of sales, if you look at your mall and freestanding GLA, call it about 54 million square feet. Are you effectively -- and I think you're just over 90% occupied, so you're effectively saying the 563 is relating to about 20 million -- 29 million square feet of which 26.5 million is leased. Is that the way we should think about it? And then, from -- is that what you're talking about?

Sandeep Lakhmi Mathrani

Correct.

Michael Bilerman - Citigroup Inc, Research Division

And then, I guess, the 83% includes all retailers above 10,000 square feet?

Sandeep Lakhmi Mathrani

It includes all retailers, excluding the anchors.

Michael B. Berman

Excluding the anchors.

Michael Bilerman - Citigroup Inc, Research Division

And then, the balance, that 17%, which is about 8 million square feet, is that underleased space? Is that space that has only been leased over the last year? What does that represent?

Sandeep Lakhmi Mathrani

No, those are the tenants that haven't -- they're not in that -- this 83% is also for comparable that has to be open and operating for 13 months. So the remainder, call it, that 7%, the delta between 90% and 83% just to pick at those 2 numbers, is -- we haven't seen 12 months go by, so there's no comparability.

Michael B. Berman

Or there could be some people that just don't report to us.

Sandeep Lakhmi Mathrani

Yes.

Michael B. Berman

Or no report.

Michael Bilerman - Citigroup Inc, Research Division

Right. And then -- but in -- the percentages you're quoting are of a percentage of permanent occupancy or a percentage of the total? Because you just mentioned 7%, but the balance is 17% of space.

Sandeep Lakhmi Mathrani

It's percentage of occupied.

Michael Bilerman - Citigroup Inc, Research Division

Percentage of occupied. So it's really 17% of occupied space is non-comp?

Sandeep Lakhmi Mathrani

Correct.

Michael B. Berman

Right.

Michael Bilerman - Citigroup Inc, Research Division

And that space has predominantly been leased over the last year?

Sandeep Lakhmi Mathrani

Well, some of it is not leased. As you can see, there's some vacancy. You take 100%, if you're 95% permanently occupied you take out 5%, if you've got 5% temp occupied, you're down to 90%. Just to pick those numbers. So we're only talking about 7%.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And the productivity of those spaces in terms of sales, you have the sense of how those are doing? Will those be accretive to the average or dilutive to the average?

Michael B. Berman

Well, given that there's a larger footprint, they're likely to be...

Sandeep Lakhmi Mathrani

I would actually sit back and say, I'm not sure it's dilutive to the 563 or accretive. It's 100% accretive to market share.

Michael B. Berman

Right.

Sandeep Lakhmi Mathrani

Right? So what's your focused on, well, not your focus -- what we're focused on is, is the mall total sales going up or down? If the mall's total sales are going up, which means actually, the malls have tremendous relevance. So if you add any square footage and they produce any sales, it's going to be accretive. So which means the market share is actually going to be higher than that percentage that we demonstrate.

Michael Bilerman - Citigroup Inc, Research Division

And you talked in your opening comments about the bankruptcies that have happened and the fact that you still will be able to get to your 93% permanent occupancy. What are the offsets to those bankruptcies? Where are you gaining share? Talk a little bit about the operating business. I know we spent a lot time about talking about street retail, which is exciting, and a lot of dollars, but can we spend a little time on the core business?

Sandeep Lakhmi Mathrani

Yes. So the answer is, as Michael said in his comments, and we wanted to make a special point of that, that our operating business is doing incredibly well. Our revenues -- our top line revenues even in the second quarter were higher than the first quarter. And if you actually look at our top line revenues in the third and the fourth quarter, they continue to be very positive. So our operating business is -- our leasing activity is very, very strong. As I mentioned, we had 740,000 square feet, I would sit back and say, the best way to understand demand is to really have a situation where you get space back unanticipated. And that happened to us here a few times, and we actually went -- in many situations, we actually went back and recaptured the space even in the bankruptcy courts because there was a demand for space. And as I mentioned, we've already leased half of that. So had we not had the 740,000 square feet, had we not leased half of that, our occupancy would be over 93.5%. So no better way to talk about demand for high-quality space than being able to replace space that was unanticipatedly given back to us.

Michael B. Berman

Stock [indiscernible] in the sense of business.

Michael Bilerman - Citigroup Inc, Research Division

And just lastly, can you just remind me on the Urban lawsuit, which I assume was the old Rouse that you inherited from when they did Rodamco. What exactly changed hands and what cash went out the door?

Michael B. Berman

I think we've put it on the press release, Michael. And we are under a nondisclosure agreement, we can't really talk outside what's in the press release. So I'm not really sure what else I can tell you quite honestly. We were very focused on making sure everybody understood what happened, and we tried to put it into the press release. If there's a specific question about the language that's in there, I'm happy to answer it, but we are somewhat limited due to a nondisclosure agreement on what we could say.

Michael Bilerman - Citigroup Inc, Research Division

Right. I know there's an $18 million loss. I've assume that's an accounting loss rather than cash and I just didn't know -- what cash went out the door from GGP, was it reserved for or already...

Michael B. Berman

Fair enough. In the press release, we indicate that we've sent $60 million into Urban, and got back some preferred equity interests. And so, the $60 million went out the door, the $18 million is the net accounting loss, that's true. But $60 million left the company.

Michael Bilerman - Citigroup Inc, Research Division

And the return on those -- on that $60 million will be what?

Michael B. Berman

We got back some preferred instruments that have coupons on them that are below market, which is essentially, for practical purposes, the essence of the loss that we booked.

Operator

The next question is from Michael Mueller with JPMorgan.

Michael W. Mueller - JP Morgan Chase & Co, Research Division

I was just wondering are you evaluating any other ground-up opportunities in addition to moving forward to Norwalk?

Sandeep Lakhmi Mathrani

So the answer is we always look at new ground-up opportunities in markets that we believe have -- there's an ability to open malls, and I think if you -- in my previous calls, I did mention there are markets such as the Houston market and the Dallas Fort Worth market and there are several like those that have in our opinion, holes. And we do look at them. But again, our nature would be to do Norwalk. Will we do one more? Maybe. And then, our nature would be to stop, get them built and then look at them again. Our nature is not to be accumulators for future growth. We might do one more, but that will be it.

Operator

And our next question is from Ki Bin Kim with SunTrust Robinson.

Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division

A couple of quick follow-ups. On the Street retail portion for the 3 new assets that you're about to buy. So I would just like to understand the value creation potential. What is the -- if you grow this NOI going into the 5, 6 cap eventually, what is the, on a clean basis, the kind of stabilized yield they can sell this asset in the market, overall?

Sandeep Lakhmi Mathrani

So the question is, what's the yield you could sell a stabilized asset in the market?

Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division

Yes, so like what are the market cap rates...

Sandeep Lakhmi Mathrani

I think it's been proven that the cap rates -- if you look at stabilized assets selling in New York City are in the low 3s. I think actually maybe even below. The Apple and SoHo, I think sold at the top 3.

Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And second question, I'm looking at Page 18 on your supplemental for your lease spread on disclosures, and at $55.72 for your total 2014/'15 expiring rent, it seems like that number is being used as both the cash rent and the averaged rent, because if I look at the spread calculations, it seems like the $63.97 over the $55.72 is the 14.8%, and the $70.67 average rent for new versus the expiring $55.72 is also the average rent, is 27% spread. It seems like it's being used as both the average and the cash rent, is that correct?

Michael B. Berman

Yes, it's the ending point for both statistics.

Operator

The next questioner is Dan Oppenheim with Crédit Suisse.

Daniel Mark Oppenheim - Crédit Suisse AG, Research Division

I'm wondering just on the other side of it, well you started with some of the Class B assets there. So you -- as you think about selling those, would you think about waiting until so that twists that are occurring here you're getting the step-up in cash flow for 36 months out. Obviously, you've done a great job on the financing side, so there's not the need for that, but just wanted your thoughts there overall.

Sandeep Lakhmi Mathrani

And let me just understand the question, again. Are you just talking about us selling the Street retail, 36 months...

Daniel Mark Oppenheim - Crédit Suisse AG, Research Division

No, no, no. Just -- sorry, I'm more thinking about the Class B, sort of just I think there is a match in terms of when...

Sandeep Lakhmi Mathrani

Again, we -- as we mentioned, we have 120 malls. We are quite happy with our portfolio. It's our job to analyze each mall from a growth perspective. And our job is to basically feel that if we can recycle capital more productively, we would sell assets and buy assets. And we've actually shown you that over the last 3.5 years, we've sold almost 80 assets and recycled that capital back into buying boxes, buying back shares and A malls, buying back our shares and investing opportunistically in other retail opportunities. So the answer is we're always and are constantly looking to recycle capital from low growth assets, generally -- or assets where you feel that you've maximized your value creation. So it's part of our job.

Operator

Our next question is from Nathan Isbee with Stifel.

Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division

Just focusing on the core portfolio. Demand is clearly very strong for space. But as you look into your crystal ball over the next few years, I guess, two questions, would you expect the closure activity that you discussed, even if you were able to quickly resell it, to pick up? And then, do you think retailers are starting to rethink the amount -- total amount of stores they would -- they need to attain full penetration of the retail landscape here in the U.S.?

Sandeep Lakhmi Mathrani

I'll do the second question first, Nate. The answer is that for -- to penetrate the market, I think retailers have said they need between 500 and 700 stores. And that's why I keep going back, that if you own the top 600 malls in the country, you sit in a pretty good position. Again, GGP owns 20% of the top 500 malls in the country. So I think the penetration will be anywhere between 500 to 750 stores, or 700 stores in the country. And I know that would make 500, 550, 600 stores and malls and a couple of hundred stores on the various streets. So that's how I see a new retailer coming in to penetrate the United States. And similarly, I would actually feel that existing retailers are looking at their portfolios to making sure how much cannibalization is there and how should they redo their -- the number of stores that they have and the distribution of stores. And I think you'll see that even the best retailers will say you need 750 stores to penetrate the United States.

Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division

But you don't see any change taking place there in terms of the penetration numbers?

Sandeep Lakhmi Mathrani

I mean they -- call it over 1,000 malls today in the country and there are 900 JCPenney's or more. So that will be the change, right? So you're going from 1,000, 1,100 stores, a lot of these chains have down to 750, 800 stores, so that will be a reduction. And that's really coming from obsolescence, by the way, more than anything else. I've always said the -- it's competition to Street, it's competition to lifestyle centers, it's competition to outlet centers, it's competition to big box, speciality users and that's where there has been obsolescence in the business. So -- and to answer your first question, which is do I see an acceleration of closures or bankruptcies? Look, we do know that in several retailers that have consistently been on a negative trend, and it will be naïve of us not to expect there to be more closures with those retailers that have shown double-digit negative trends for quarter-over-quarter.

Nathan Isbee - Stifel, Nicolaus & Company, Incorporated, Research Division

Okay. And then, just going back to that second question. I mean, you talked about 900 to 1,000 malls and Penny’s, I mean most small shop resellers never had that full penetration. So I'm asking more on the small shop side, where typical full penetration had been probably 600 to 700.

Sandeep Lakhmi Mathrani

Well, I would only say that if you look at Limited Brands and you look at the Gap, they had 900-plus stores, at their peak. And -- but if you look at -- that's why I sort of sat back and said if you look at new retailers coming in, I would still see -- and if your analysis, which may be absolutely correct, which is maximum penetration for the in-line stores with 600 to 700 retailers, then it remains about the same.

Operator

I would now like to turn the call back to management for any final comments.

Sandeep Lakhmi Mathrani

Thank you for joining our call this morning. Once again, please contact Michael or Kevin if you have any questions. Have a great day.

Operator

Ladies and gentlemen, thank you for participating in today's meeting. This does conclude the program, and you may all disconnect. Everyone, have a good day.

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