Wheeler Real Estate Investment Trust's (WHLR) CEO Jon Wheeler on Q2 2016 Results - Earnings Call Transcript

| About: Wheeler Real (WHLR)

Wheeler Real Estate Investment Trust (NASDAQ:WHLR)

Q2 2016 Earnings Conference Call

August 4, 2016 10:00 AM ET

Executives

Laura Nguyen - Director of Capital Markets

Jon Wheeler - Chief Executive Officer

Wilkes Graham - Chief Financial Officer

Analysts

Steve Shaw - Compass Point

Mitch Germain - JMP Securities

Operator

Greetings, and welcome to Wheeler Real Estate Investment Trust 2016 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would like to turn the conference over to Ms. Laura Nguyen, Director of Capital Markets. Thank you, Ms. Nguyen. You may begin.

Laura Nguyen

Good morning, everyone, and thank you for joining us. On the call today will be Jon Wheeler, Chairman and CEO of Wheeler Real Estate Investment Trust; and Wilkes Graham, Chief Financial Officer. Following Management’s discussion, there will be a question-and-answer session, which is open to all participants on the call.

On today’s call, management’s prepared remarks and answers to questions may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from those discussed today. For a more detailed discussion related to these risks and uncertainties, we encourage listeners to review the company’s most recent filings with the SEC.

As a reminder, forward-looking statements represent management’s view only as of the date of this call. Wheeler Real Estate Investment Trust assumes no obligations to update any forward-looking information statements in the future. Definitions and reconciliations of non-GAAP measures are included in the company’s quarterly supplemental package, which is available through the company’s Website.

With that, I’d now like to turn the call over to Jon Wheeler, Chief Executive Officer and Chairman of Wheeler Real Estate Investment Trust. Please go ahead, Jon.

Jon Wheeler

Thank you, Laura. Good morning, everyone. Welcome to the 2016 second quarter earnings call for Wheeler Real Estate Investment Trust. I’ll start the call this morning by reviewing our second quarter results and provide an update on the recent progress and the initiatives we set forth earlier in the year, and then turn the call over to Wilkes to review our financial results and provide guidance for the third quarter.

We remain focused on increasing AFFO per share and also continuing the further execution of both delevering and cost containment initiatives needed to reach dividend coverage. Wilkes will comment on our third quarter guidance. But I can tell you that after substantial progress during – both during and after the second quarter of 2016, our goal of dividend coverage by year end 2016 is within our sights.

We have made significant strides. We’re reducing the company’s cash, general, and administrate expenses and also lowering our overall cost of capital through debt refinancing and the recent issuance of our Series B on an ATM. I will discuss both of these further later on. But I believe, our shareholders will agree that we have been extremely conscious [ph]of both objectives and are executing on them successfully.

Furthermore, during the second quarter, we continue to leverage the strength and expertise for lease and property management teams, monetize non-core assets and further align our management team, as we increase the economies of scale and continued our growth.

On April 12, we completed the acquisitions of AC portfolio, our largest acquisition to-date, which was perfectly aligned with our acquisition strategy of acquiring accretive necessity-based retail focused properties in the secondary and tertiary markets. These 14 grocery-anchored retail shopping centers are located in South Carolina and Georgia and are in total consist of 605,218 gross leasable square feet.

The portfolio was off-market opportunity for us just by an existing relationship that we’ve cultivated throughout the years, and after several attempts, we’re able to successfully acquire the properties at an 8.85% cap rate in line with our business objectives.

We acquired the AC portfolio below replacement cost in our markets for $71 million, or $117.72 per leasable square foot. The acquisitions for the quarter were funded through a combination of $12 million in cash Operating Partnership Units at a premium to the stock price at the time and debt, which will put us on later in the call.

At a combined occupancy rate of 92%, the AC portfolio provides an opportunity to create value for the company, whether to strategically repositioning of retailers at the centers to increase traffic and maximize sales, or with the lease up of new tenants and renewals in more favorable terms.

In addition to increasing rental revenues achieved since the acquisitions of these properties, we have targeted new opportunities to generate ancillary income in additional NOI with a Phase II development project that will increase the total GLA of the portfolio by 6,200 square feet. We’re able to do this, this time and time again and we’ll continue to realize these values to our shareholders as the opportunities present themselves.

Upon the successful acquisition of AC portfolio on June 29, we completed the sale of another freestanding retail property. The sale of the Starbucks/Verizon leasehold interest was a part of the company’s regional disposition strategy announced in late 2015 to monetize non-core assets and use proceeds to reinvest in our specialized markets at higher cap rates to increase cash flow to the Trust.

We first acquired Starbucks/Verizon leasehold interest in October of 2013 for $1.4 million at a weighted average capitalization rate of 7,25%. In less than three years, we sold this asset for a premium at an acquisition value of approximately $2.1 million at a weighted average capitalization rate of 6.1% based upon net operating income for the trailing 12 months, which resulted in gains for trust of approximately $688,000. This was a 1031 exchange transaction and we’re able to use part of the proceeds to retire $550,000 of debt from Revere, which again early in the quarter for AC and we’ll be identifying potential acquisitions for the proceeds later this month.

To-date, we have sold four of the eight assets identifying our plan, all of them less than three years prior to sale for an average 7.14% cap rate versus the purchase average cap rate of 7.68%. We have another 200 contract for sale at an average of 5.28% cap rate versus the purchase cap rate of 9.23%.

While our realized a single tenant net REIT market is highly sought after, we believe this cap rate comparison can exist on the shopping center assets as well. Our assets have proven to be resilient to e-commerce and rely solely on what we consider a necessity-based retail. Frankly, you cannot get your nails to NOI. Dividend coverage remains the storefront and we also recognize the importance – deleveraging our debt and strategically raising accretive capital as soon as possible.

Before I dig deeper into both, I would like to note the positive momentum in our stock price. We began the second quarter with WHLR trading at $1.24 per share, and as of June 30, closing at $1.54 per share. This momentum has continued into the third quarter and as of market closed yesterday, WHLR was trading at $1.75 – $1.74 per share and our volume has recently been well over our normal average.

While I’m pleased with the markets response for the period, we continue to view, our stock is undervalued and are committed as we have repeatedly stated do not raising common equity at the current price. As an alternative, we expect to continue maximizing profits at our existing centers, targeting opportunities to increase NOI, to refinance our centers to take advantage of the current low interest rate environment, to dispose our remaining non-core assets and continue to streamline operations and reduce G&A cost.

Subsequent to second quarter, we put in place a $15 million after-market offering of our 9% Series B preferred led by JonesTrading. This program provides another source of cost effective capital. As we have always done, we’ll continue to evaluate all sources of capital, including this newest tool to ATM program and determine how to best fund our growth and deleverage debt.

As of August 2, the company had sold 721,761 shares of Series B preferred stock for approximately $15.3 million in gross proceeds and net proceeds of $14.8 million. ATM to-date has just raised over $15 million, mainly from the sponsorship of two large institutional REIT investors at a lower cost of capital compared to our Series C offering just over a year ago.

We view the early success of the ATM is important now, because it allowed us to narrow our delevering GAAP to covenants by 85%, but also because we believe it has sent a signal to the marketplace that the accretive capital is available to us.

Last quarter, we got into a second-half of 2016 cash G&A run rate of less than $4.5 million, or 10% of total revenues. We took great strides during the second quarter in this area to streamline efficiencies and reduce overall expenses highlighted by a 11% reduction on compensation and benefit costs as compared to the first quarter, while excluding employee separation costs.

Further, inclusive of the elimination of the Chief Financial Officer position at July 31, as well as streamlining a national attrition and absorbing those responsibilities within the company, we currently expect third quarter compensation of benefits to run approximately 25% lower than the second quarter. As such I’m happy toreport that we’re on track to hit our internal target of 10% of gross revenues starting in the third quarter and still feel, we have a scalable and manageable platform to absorb new acquisitions.

Turning to portfolio operations. Same-store NOI increased 5.9% and 3%, respectively, on a GAAP and cash basis. Overall, occupancy in the portfolio declined 10 basis points to 93.8% at June 30, 2016 from 93.9% as of March 31, 2016, but only due to on boarding of the 91.9% lease to AC portfolio, which totaled 605,000 square feet. Including the 3.15 million square feet that we owned during both the first and second quarter of 2016, occupancy increased by 28 basis points to 94.2% from 93.9%.

Further, recall that in the third quarter of 2015, we acquired 934,000 square feet that were similar to the AC portfolio also 91.9% lease to the time of acquisition. We’re pleased to announce that after just three quarters under Wheeler operations oxy [ph] across the asset stands at 92.6%, up 68 basis points since the time of the acquisition, while rents per square foot are up 1.5%.

Leasing activity remained solid, and during the quarter, our leasing team executed 16 renewals, a total of over 76,761 square feet at a weighted-average increase of $0.36 per square foot, almost a of 3.6% increase over prior year rates.

This – these renewals – this renew 74% of the total GLA expiring as of December 31, 2016. We signed nine new leases during three months ended June 30, 2016, totaling approximately 25,700 square feet at a weighted-average of $21.76 per square foot. I’m extremely proud of our leasing team as we strategically position retailers in our centers, take into consideration co-tenancy and cross-shopping trends, and the overall traffic flow to drive sales and profitability for our tenants.

I’ll now turn the call over to Wilkes Graham, our Chief Financial Officer for a review of our financials for the second quarter. Wilkes?

Wilkes Graham

Thank you, Jon, and good morning, everyone. I’ll begin by reviewing our financial results for the second quarter, followed by our balance sheet update and the summary of our AFFO guidance for the third quarter of 2016. Jon covered our portfolio operations and G&A, so I’ll skip the usual recap of our earnings release and go straight to the bottom line.

FFO available to common shareholders and common unitholders for the second quarter of 2016 was $1.3 million, or $0.02 per share, or $0.07 on an annualized basis, which compares to a loss of $0.07 per share or a loss of $0.26 per share in the second quarter of 2015.

Adjusted funds from operations available to common shareholders and common unitholders or AFFO for the second quarter of 2016 were $2.7 million, or $0.04 per share – per common share and common unit, which equates to $0.15 on an annualized basis, which compares to a loss of $1.5 million or a loss of $0.07 per share for the second quarter of 2015, which equates to a loss of $0.28 per share on an annualized basis.

Second quarter of 2016 results also compared to our guidance for the quarter of $0.15 to $0.16 of annualized AFFO, which excludes the third-party fees that were reliant on third-party capital.

I’ll now move to the company’s balance sheet as of June 30, 2016. The company’s net investment assets, including assets held for sale, totaled $295 million, with cash and cash equivalents of $2.7 million. Total assets were approximately $366 million for the first quarter – for the second quarter of 2016, as compared to $309 million at December 31, 2015.

Total outstanding debt at June 30, 2016, including debt related to assets held for sale, was $256 million compared to $191 million at December 31, 2015, with substantially all of the difference coming from the funding of the AC portfolio. The weighted-average interest rate on our fixed rate debt at June 30, 2016 was 5%, with a weighted-average term of approximately 5.8 years.

The second quarter was a busy quarter for us from a balance sheet perspective. As previously disclosed, we financed the $71 million purchase of the AC portfolio on April 12 via accommodation of debt, cash and the issuance of 888,000, 889,000 Operating Partnership Unit.

We’ve borrowed 85% of the value of the AC portfolio, or $60.35 million on a separate KeyBank facility of LIBOR plus 500, which was in addition to the $7 million already outstanding NOI as of March 31.

Additionally, we secured an $8 million line of credit with Revere at 8% plus a $240,000 exit fee [ph] in part to replace the $9 million, or 9% senior notes that we paid off over the previous year. Of the remaining $3 million or 9% senior notes that were outstanding as of March 31, $1.6 million was converted during the second quarter into 1.4 million shares, leaving a current balance of $1.4 million.

Following these transactions, our debt to gross asset value, which is the governing leverage metric for our KeyBank facility increased to 68.2% at June 30, from 61.6% at March 31. We call it as part of the AC financing, KeyBank agreed to increase our debt to gross asset value maximum covenant limit to 70% from 65% until March of 2017.

Our agreement with KeyBank also stipulated that once we pay down our KeyBank facility, which stood at $67 million at June 30, 2016, the $46.15 million, or 65% of the LTV and the AC portfolio, the interest rate on the remaining balance will decline by 250 basis points to LIBOR plus 250.

We stated on our last earnings call in May that due to this structure, we were incentivized to seek out delevering capital that would allow for an accretive pay down of the facility to the necessary leverage level. We’ve made significant progress on this front since the end of the second quarter and indeed over the last couple of weeks.

First, on July 11, we executed a promissory note for $4.6 million to refinance the Chesapeake Square collateralized portion of the KeyBank Credit Agreement totaling $3.9 million. The new loan matures on August 1, 2026, with principal due at maturity and bears interest at 4.7%.

Further, since we launched the at-the-market offering or ATM on our 9% Series B convertible preferred last week, we have raised gross proceeds of $15.3 million and net proceeds of $14.8 million via the issuance of 721,000 shares at a weighted-average net price per share of $20.57 against par value of $25, which equates to all-in costs to us of 10.9%. We note that this cost of capital is approximately 6% cheaper than our last capital raise, which was the $93 million, we’ve raised about 18 months ago.

Later today, we will make an $11 million to $12 million payment to KeyBank, leaving a remaining obligation of just $2 million to $3 million required to lower our interest rate on the line back to LIBOR plus 250. While we cannot speculate on when or what caused this remaining capital will be raised, we are encouraged by demand we’ve seen to-date on our Series B ATM and we are committed to paying off the remaining balance in the most cost-efficient manner possible.

I’ll also note that as of today’s payment, our debt to gross asset value will stand at approximately 64%. Separately on July 29, 2016, we executed a promissory note for $4.5 million to refinance the perimeter square promissory note totaling $4.1 million. The new loan matures on August 6, 2026, with a – with principal due at maturity and bears interest at 4.06%, down from 6.38%. This refinancing not only stays at the $165,000 in annual interest payments alone, but also shows investors that we can lock-in lower interest rates in the current environment for the benefit of our investors.

I’ll now turn to our guidance. We are guiding to $0.16 to $0.17 of annualized pro forma AFFO per share for the third quarter of 2016. This guidance assumes approximately 90% renewal percentage on lease expirations with 3% leasing spreads and minimal new leasing, no new additional acquisitions and no additional capital raises others than the remaining $2 million to $3 million we owe to KeyBank.

This guidance gives a full quarters timing effect to the reduction of the KeyBank facility interest rate that would occur, should we make the additional $2 million to $3 million payment on the facility, in order to line up on an apples-to-apples basis with the additional full quarterly dividends owed to the newly issued Series B shares, the proceeds of which are funding facility payments.

We stated on our last call that we contemplated generating a material amount of development and leasing fees from a development in Hilton Head, South Carolina, and we continue to pursue this effort. As we’ve stated in the past, we will not comment on any guidance metrics outside of the next quarter, that was Jon stated, our goal is to reach dividend coverage with AFFO by year-end and we look forward to updating you on our progress on the next earnings call.

With that, I’ll now turn the call back over to Jon for final comments. Jon?

Jon Wheeler

Thank you, Wilkes. I’ll now close the call with some brief remarks. At the end of 2015, we initiated cost containment strategic plan one that was somewhat difficult for me personally. This plan has proved to service well and will remain committed to keeping in line with that initiative.

We have made significant improvements to reduce expenses and delevers the company at an accretive benefit to our shareholders. We expect this to continue in the second-half of 2016, as we continue to path the dividend coverage. We understand markets cycles, economic trends, and navigate them very well, and this leads us to remain optimistic in our plan to grow the company accretively.

We intend to strategically take advantage of the current low interest environment and we’ll evaluate the tools and resources, [our exposure] [ph] to raise accretive capital. Furthermore, from a capital perspective, we are focused on the monetization of our non-core assets and debt refinancings that will lower our cost of capital and support additional growth.

Our focus remains on driving total return for all of our shareholders in the properties we have purchased along with the cost containment initiatives leave us well position to accomplish this goal.

In closing, we believe that our experience was also continued to be recognized by the market over time and appreciate everyone’s ongoing support.

With that, I would like to thank you all for your time. And,operator, I’d like to turn it over to you for questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question and answer session. [Operator Instructions] Our first question is from Steve Shaw of Compass Point. Please go ahead.

Steve Shaw

Hey, guys. Can you walk us through what nonrecurring expenses might be falling off in the third quarter?

Wilkes Graham

Sure. First of all, I think it was about $30,000. And the first three quarters of each year, it’s just vacation approval, which is just – this is the way we account publication, it doesn’t really matter. But the substantial amount of the nonrecurring expenses in the quarter about 185,000 was employee separation costs, mostly associated with the elimination of the CEO overall. So you won’t see that going forward.

So we would expect that, given the amount of progress we’ve made in the second quarter on G&A, which again, as Jon said, we’ll start to see all that progress show up in the third quarter, whereas competition benefits going down by 25%. We approved all of the separation costs in the second quarter, and so you shouldn’t see those going forward.

Steve Shaw

And what about acquisition costs?

Wilkes Graham

All of the acquisition costs that we reported in the first and second quarter were tied to the AC portfolio. So other than, perhaps, the 1031 Exchange of the Starbucks/Verizon, where we’re going to identify an asset later this month, but I believe we have till December to close that asset. We don’t contemplate any additional acquisitions.

Steve Shaw

Okay. And then what about the capital costs?

Wilkes Graham

The capital costs that we’ve reported particularly in the second quarter were related to the stock filings we’ve done, the loss in our ATM. So there may be minimal costs there, but again based on our current balance sheet, we don’t anticipate significant expenses there.

Steve Shaw

Okay. And then getting over to the development fees, I think the previous number that you guys spoke about was possibly up to $1 million with nothing to-date, just want to gauge the probability of recording development fees in the second-half, and if that up to $1 million number has changed at all?

Jon Wheeler

Steve, this is Jon. That most likely both development fees and leasing commissions and with Pineland Station down on Hilton Head Island, South Carolina has off-balance sheet. It would be difficult to project up to $1 million, but we do have some numbers and I know that we could achieve as it relates to benefits for the trust, but that’s hard to identify right now.

Steve Shaw

Okay. And then, Wilkes, I think you said there was – was there $1.4 million rent on that $8 million loan?

Wilkes Graham

No, so there’s $1.4 million left in the senior notes at 9%. On the $8 million loan, I think, you’re referring to the Revere loan?

Steve Shaw

Yes.

Wilkes Graham

That you’re referring. Yes, we paid down some proceeds on that with the sale of Starbucks/Verizon, which was collateralized as part of the collateral for Revere. So the current balance on the Revere loan is $7.45 million.

Steve Shaw

Okay. Thanks.

Wilkes Graham

Thank you.

Jon Wheeler

Thank you, Steve.

Operator

Thank you. [Operator Instructions] The next question is from Mitch Germain of JMP Securities. Please go ahead.

Mitch Germain

Good morning, everyone. Jon, any kind of credit issues, I’m sure you’re analyzing everything going on in the portfolio. Anything come up that’s of any real concern?

Jon Wheeler

No. I guess, from the outside perspective, from the investor and from the analyst, when you see Ahold and Delhaize is coming together on their M&A that could be an initial pause. But we stood there actually as positive for stronger balance sheet and with the assets we have specifically related to them through the line of bio[ph]. We actually see them stronger and the locations that we have had good strong profitable and upward trend in sales. So we don’t see any earnings there in short-term now.

Mitch Germain

Great. And then what about leasing momentum on the AC portfolio, I mean, is that a portfolio that could effectively grow through the 95%-ish level that you’ve got in the entire company?

Jon Wheeler

Yes. So as we reported here in this narrative, almost ideal as to our past experiences when you acquire 92% or 92% lease in our occupied portfolio, AC is just like that where it’s 92% moving over there, just year-to-date maintenance leases, we’d like to call it, with your 1,200, 1,500s and your 2,000 plus tenants. Over six, nine-month, 12-month period, we will get that to our historical averages of 94%, 95%, 96% and again utilizing the necessity and service provider type tenants and/or retailers that are not currently represented in that market or in that particular shopping center.

And, for example, if you look at Harris Teeter on Folly Road, we have the ability to build out a 6,200 square feet ground up. And we’re in the process on the entitlements to that at very strong rates that are actually north of the current rates that are in line adjacent to the shopping center right now at Harris Teeter. And, as we mentioned before, that’s a great candidate to either refinance or sell the much lower cap rate as you saw in our narrative. We are north of the mid-8.5 caps on acquisition and Harris Teeter’s with good lease terms and good strong upward trading sales still a much lower cap rate.

So there will be a great indication of the outlook for the freestanding programs that were referenced on the debt positions, but also for a potential shopping center to have the cap rate compression as well.

So when you look at our portfolio, since day one of being public, it’s consistently been at 94%, 95%, 96% leased and occupied and the A3 portfolio will prove to just the same.

Mitch Germain

And then I know you mentioned two assets for sale, Maybe if you could help just quantify, you also talked about some other non-core monetization. So maybe if you can just quantify for us what – how much of the portfolio or value that you consider potential so comments?

Jon Wheeler

I look forward to depict the value or establish the value. But if you look at Pure Point in Morgantown, West Virginia, that was over a non-cap acquisition, and both Ruby Tuesday and Outback are on the contract for a below six count. So that’s a good indication right there. And actually as the business philosophy going forward, what we like to do is to be able to carve out any outparcels, because that’s a such a hot business right now for 1031 buyers or the bond type investors that having responsibility for Ruby structure.

So every time we can’t whether it’s an outparcel that could have a build-to-suit or with an existing operator like Ruby and Outback will carve those disposition. And as you may know, a lot of capital is acquired, three of our grocery stores early in the year for their freestanding triple-net program, and there’s a lot more people doing that. Again, the 1031’s California investors and as with large institutional that are buying those type of assets.

Mitch Germain

And what about some of the land positions? Okay, go ahead, folks.

Wilkes Graham

Yes, I’m sorry., Mitch. Let me just add, we’re going to file our 10-Q later today, and I’ll just make you aware, when you look at the assets held for sale, it’s kind of look a little funny. I think it’s going to show that the assets held for sale are $300,000-some and the liability is $1.35 million. The only thing left held for sale are Ruby Tuesday and the Outback that we went under a contract a year ago to be sold in February 2017, it’s a little over $2.2 million.

When the bank sort of allocated assets, the asset values of those assets, they really – they’re accounting for a very small amount of the assets. So sort of just regard to that cost base, the assets, it’s going to be a $2.2 million sale relative to that $1.35 million liabilities against it.

Mitch Germain

Great. And what about some of the land positions, guys? Is that something that you’re looking to monetize over time?

Jon Wheeler

Absolutely. And whether it would be build-to-suite or just flat at disposition to a third-party? Yes.

Mitch Germain

Great. That’s it for me.

Jon Wheeler

Thanks, Mitch.

Wilkes Graham

Thank you.

Operator

Thank you. The next question is from Steve Shaw of Compass Point. Please go ahead.

Steve Shaw

He, guys. One more I think I may have missed this. But the rent number on new leases was pretty solid, what was driving that?

Wilkes Graham

Well, those are actually smaller leases, small shop leases, and traditionally obviously you have a higher per square foot, and again, a lot of those were more restaurant oriented. And again, the restaurant industry can be a higher percentage in rent versus potential gross sales, and again, those are more likely 1,200 to 1,500 – 1,800 per square foot tenants.

And you’re correct, those are high numbers for us, where traditionally if you look at our average rent on the portfolio, including anchors and senior anchors just more closer to 950. But what I like about that Steve is, it shows the strength in the secondary and tertiary markets and the prevailing rate but we can demand by doing what we do.

Steve Shaw

Thanks, Jon.

Jon Wheeler

Thanks, Steve.

Operator

Thank you. [Operator Instructions] Okay, it appears we have no further questions. I would like to turn the conference – oh, actually we do might have a question, let me see. Thank you. Yes, we do have another question that comes from the line of Kevin Cook, a Private Investor. Please go ahead.

Unidentified Analyst

Yes, thanks, Mr. Wheeler for taking my call. [As again in the south side of] [ph] China, obviously, in Florida, not too far from the [Jones Creek Property], [ph] but I’m also familiar with a few of the other properties like other Hawkinsville, Georgia. And again, I’m just a small investor. I’ll leave all the technical stuff to the experts and the analysts.

My question would be, what would you say to a smalltime investors or just individual investor what to invest in the company?

And my second question would be the Jones Creek Property down here, as you know, Jacksonville is between the $12 to $15 fastest-growing city in the country. Do you look to expand more down in this area also, and I’ll close and shake your answer?

Jon Wheeler

Yes, sir, and thank you very much. I’m always encouraged when we have the prototypical individual private investor, Colin, asked questions, because it’s very encouraging and thank you sir. I’m glad you following the company and I’m – I appreciate your investment.

So as to you first comment, I believe that you are referring to mandatory crossing, down in the mandarin section of Jacksonville. That’s a Wheeler legacy asset or private asset, there’s not part of the trust. So you may have seen Wheeler Real Estate company as the leasing and property management company owned asset and that’s what we refer to as low as next towards a shadow anchor. So that’s not part of the trust.

But going back to Hawkinsville, Georgia and very interestingly you come across that property that was the acquisition back in 2003 that was the Wheeler legacy asset that has been a part of the trust. Since 2013, we brought that in December of 2013. And that’s a great example of the secondary and tertiary markets, where that was formulated a Food Lion, and then Food Lion by its Harvey’s and they changed the banner to Harvey’s.

And Harvey’s is very dominant in middle Georgia, and that’s a perfect example, where we have a shadow anchor that’s not part of the collateral, part of the asset-based hardware. But the balance of the shopping center in Orangeville, Georgia is filled with service and accessory retail.

And matter of fact, they are on the corner of that building at the very corner of the main drive shopping center [indiscernible] movie gallery and then we backed it with Anytime Fitness in the spot there. And it’s just a perfect example, when the video store industry had failure. We’re able to backfill it quickly and with much higher rates on an average condition.

And that’s a perfect example where you have the Chinese restaurant, the Male Salon, the Colliers, the fitness, the drug store and grocery store. And right it is the drug store there and just a comparison to say, their in line rents are – total occupancy rents between $8 and $9 per square foot. And we most likely would not have relocation risk, because if they did build a freestanding store, they would be in a $30 occupancy cost, and that’s a good conversation where the prevailing market sales would not support such a high rent.

But they do and they help ratio that we call it for them at the $8 to $9 is providing a Q where they need to be. And as it relates to investing more in Florida, yes, we’re up and down in East Coast, and we’re 11 states from Sicklerville, New Jersey to all the way up and down from the Middle Atlantic and the Southeast. And Florida is a government state for us as is Georgia and South Carolina, most recently here with A-C acquisition.

So stepping to cap rates and stepping to other part of debt maturities, we would like to continue to stay active down in the Florida market. And specifically Jacksonville, Jacksonville is very similar to our home office here in Virginia Beach with similar demographics in the military and so forth.

Unidentified Analyst

Thank you very much for your answer.

Jon Wheeler

Thank you, sir.

Operator

Thank you. And at this time, we have no further questions. I would like to turn the conference back over to management for closing remarks.

Jon Wheeler

Thank you, operator. On behalf of the team here at Wheeler, I would like to thank all of those who dialed in for the call, and we look forward to talking with you again in November, when we report our third quarter results. Have a great day. Thank you.

Operator

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your line at this time, and thank you for your participation.

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