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Cedar Realty Trust, Inc. (NYSE:CDR)

Q4 2011 Earnings Call

March 6, 2012 5:00 PM ET

Executives

Brad Cohen – Investor Relations, ICR

Bruce Schanzer – President and CEO

Philip Mays – CFO

Brenda Walker – COO

Nancy Mozzachio – Head, Leasing

Mike Winters – Head, Acquisitions

Tom Richey – Head, Development

Stuart Widowski – General Counsel.

Analysts

Craig Schmidt – Bank of America

Rj Milligan – Raymond James

Paul Adornato – BMO

Todd Thomas – Keybanc

Operator

Greetings. And welcome to the Cedar Realty Trust Fourth Quarter 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cohen, Investor Relations for ICR. Thank you, Mr. Cohen. You may begin.

Brad Cohen

Thank you very much, operator. Good afternoon. At this time, management like me to inform you that certain statements made during the call, which are not historical facts, may be deemed forward-looking statements within the meaning of Section 27A of the Securities and Exchange Commission of 1933 and Section 21E of the Securities and Exchange Act of 1934 as amended by the Private Securities Litigation Reform Act of 1995.

Although the company believes that expectations reflecting any forward-looking statements are based upon reasonable assumptions, they are subject to various risks and uncertainties. The company can provide no assurance that expectations will be achieved and that actual results may or will differ.

Many other factors and risks that could cause actual results to differ materially from expectations are detailed in the company’s press releases, which was put out this afternoon and from time-to-time in the company’s filings with the Securities and Exchange Commission.

In the end, the company undertakes no obligations to revise or update any forward-looking statements reflected in any circumstances after the date of the company’s release.

It is now my pleasure to turn the call over to Mr. Bruce Schanzer, Chief Executive Officer and President. Bruce?

Bruce Schanzer

Thanks Brad. And welcome to the fourth quarter 2011 earnings call of Cedar Realty Trust. On this call, in addition to reviewing our fourth quarter 2011 and full year 2011 results, we will provide an update on the strategic plan we first described last November, we will describe some of the important steps we have taken in renewing our focus on leasing, as well as measures we have taken to start creating value through intensive asset management. Lastly, we will provide guidance for 2012.

On this call I’m joined by the senior management team of Cedar, specifically, Philip Mays, our CFO; Brenda Walker, our COO; Nancy Mozzachio, our Head of Leasing; Mike Winters, our Head of Acquisitions; Tom Richey, our Head of Development; and Stuart Widowski, our General Counsel.

Just about all team Cedar is dialed into this call as well. I would like to take a moment to acknowledge their many contributions. Although you will hear three people doing most of the talking on this call, there are over a 100 members of team Cedar and each of them is critical to us achieving our objectives.

Since beginning at Cedar in June of 2011 with Phil, the reconstituted management team had endeavored to bring strategic and financial rigor to Cedar’s decision making and business planning. As we enter 2012, we are starting to see our efforts begin to produce results, though there was much work ahead of us and it will take time before we can say that Cedar has become what we intend for it, a strong performing shopping center REIT that delivers compelling results on a consistent basis.

Over the past eight months there has been one major focus at Cedar in furtherance of this objective, namely, developing and then executing our near-term strategic plan, which includes three primary elements, divesting non-core assets, using the proceeds to reduce leverage and focusing our energies on our core portfolio of 92 primarily grocery-anchored shopping centers straddling the Washington, DC to Boston corridor.

In the course of developing and implementing this plan, we have transformed Cedar into a more analytical and disciplined organization that is keenly focused on growing net asset value through intensive asset management and thoughtful capital allocation.

In terms of our near-term strategic plan we have made solid progress on our disposition program. Of the approximately 50 assets we are divesting, we have already closed on 15 sales generating roughly $40 million for debt reduction.

In addition, we have 24 assets either under contract or teed-up to be return to a lender that should generate an additional $65 million for debt reduction. Thus, at this juncture, we are roughly 70% completed with our near-term strategic plan since we have approximately $105 million of the $150 million either closed under contract or to be return to a lender.

The 15 sales closed to date include 11 of our Ohio assets, our two net leased CVS assets at Kinderhook and Kingston, as well as our two unanchored strip centers in Virginia, Virginia Center Commons and Salem Run. I will not get into extensive detail on each asset under contract.

In summary, eight net leased assets, the seven Homburg joint venture assets, our one Michigan Center Stadium Plaza and four land parcels are all under contract. Four assets, most notably our Roosevelt II asset are being return to the lender.

Remaining to be divested are our three in close mall assets, two unanchored centers in Pennsylvania and a number of land parcels. Although, some of these divestitures will take time, we’ll remain committed to this process and we’ll continue to drive hard to effect these dispositions while maintaining some pricing discipline when appropriate.

As Nancy and Phil will discuss in greater detail, our attracted core portfolio of primary grocery-anchored shopping centers straddling the Washington DC to Boston corridor remain resilient and defensive with solid leasing results, steady rent growth and strong performance. In addition, as I will briefly touch on, we continue to create value within our portfolio through discipline capital allocations coupled with intensive asset management.

On the leasing front we had a solid fourth quarter with total leasing volume of meaningfully in every category over the fourth quarter of 2010. Notably, on the small shop front leasing velocity continue to strengthen throughout the year with volumes up one-third in the second half of the year over the first two quarters. As Nancy will discuss in her remarks, we’ve implemented programs that are specifically focused on our small shop spaces in order to maintain and grow occupancy in this tenant category.

Focusing on renewals for a moment, we have continued our remarkable street of positive renewals spreads. We now have posted positive spreads in 32 of the last 33 quarters. The leasing group has done a traffic job of anchor leasing with a special focus on the six dark anchors sprinkled around our portfolio.

We are currently negotiating leases or letters of intent at four of the six centers. All of these transactions have a similar characteristic and that we are exclusively trading a higher per square foot rent from a weaker tenant who is not operating its store for a lower rent per square foot from a higher credit tenant who will operate their store.

We feel this is a good long-term trade-off since by restoring an active anchor. We improve the centers vitality, resolve co-tenancies in certain instances and improve the overall credit profile of our tenant roster.

Generally, we expect to start seeing the impact of this improve leasing activity on the bottom line whether of the small shop or larger anchor variety towards the end of 2012 and during 2013. Although, we have scaled back our development and redevelopment business, so it is more appropriately size to our overall capital base and provide a suitable spread to our cost of capital, our redevelopment projects at both Trexlertown and Brickyard, which are now underway are examples of projects where we have invested significant capital back into our centers, while asset managing them in a manner that generate attractive risk adjusted returns.

At Trexlertown Plaza in December we delivered to Giant a new 74,000-square foot store that just about the tripled the rent we have been receiving from them in our neighboring Trexler Mall. We have back filled one-half of the 54,000-square foot space vacated by Giant in moving to its new location with a Marshalls at per square foot rents close to double what we had been receiving from Giant. We are highly optimistic of filling the balance of the vacated Giant space and our advance discussions with a number of perspective tenants.

The incremental NOI from the redevelopment and re-tenanting of these neighboring properties will be approximately $1.9 million, which represents a yield on incremental capital investment of between 11% and 12%.

At our Brickyard property, we have undertaken a redevelopment to replace 110,000-square foot Sam's Club that vacated a center with two or three new tenants. We executed a lease in December with Kohl’s for a 58,000-square foot store that is now under construction.

Kohl’s expects to open in October of 2012. We are speaking with a number of perspective tenants for the balance of the vacant space. We anticipate generating an NOI yield on our incremental investment of at least 11% at this property as well.

Going forward, you should expect that we will target these sorts of yields in deciding to pursue a redevelopment project. We recognize it is imperative that there be a sufficient spread over our cost of capital to account for the execution risks inherent in such undertaking.

More generally as we contemplate completing our near-term strategic objective, we will increase our focus on maximizing the value of our resilient and defensive portfolio of primary grocery-anchored shopping centers that straddle the Washington, DC to Boston corridor, and further intensifying that footprint through selective acquisitions.

A central element of this long-term strategy will include taking a much more disciplined approach to our capital allocation decisions, which will hopefully translate into appropriate risk adjusted return and ultimately value creation opportunities for the benefit of our shareholders.

With that, I give you Nancy Mozzachio, our Head of Leasing.

Nancy Mozzachio

Thank you, Bruce. Well economic recovery remain choppy, our leasing results evidence the defensiveness and resiliency of our centers, as well as the lure of high growth in supermarket to tenants large and small. As Bruce discussed, we solve sizable leasing velocity improvement in 2011 versus 2010 in every category, anchor, dark anchor, mid-sized anchor, small shop and temporarily leasing.

New leases commencing in the fourth quarter totaled 146,000-square feet, up 23% over the same period in 2010. Total volume for 2011 was up approximately 34% over 2010 with a sizable increase in small shop activity in the last half of the year and overall absorption rate increasing 60% over 2010.

Let’s break it down by category. Anchor volume was up 50% in 2011 over 2010. In 2011 we completed transactions with Giant, Kohl’s, Carmike Cinemas, as well as expansion of two of our well-established supermarket in Central Pennsylvania.

Activity levels on darks but paying grocer locations are up substantially year-over-year. In Connecticut we are in advanced negotiation to replace a dark Shaw's box concurrently discussion concerning replacement in some cases replacement and expansion of three other dark boxes meaningfully progress.

We see credit worthy replacement anchor tenants capable of producing strong sales for the asset. In doing so rent may not always meet dark box contractual rent. However, the trade-off is often value creation through ancillary tenant lease up, lease rollover rate and cap rate associated with the property.

Mid-sized anchor transactions in 2011 were up meaningfully over 2010. We lease and delivered a T.J. Maxx at The Commons in Dubois, Pennsylvania and A.C. Moore at Upland Square in Pottstown, Pennsylvania.

We signed leases with Michael's at Coliseum Marketplace in Hamptom, Virginia and with Marshalls at Trexler Mall in Trexlertown, Pennsylvania. Both Michael’s and Marshalls expect to open at their respective location by the end of the third quarter of this year. It’s worth noting looking at today’s numbers, first quarter 2012 lease and LOI negotiations with mid-sized anchors already exceed volume achieved in all of 2011.

Exceed drivers in anchor and mid-sized anchor velocity is started last year with two folds. First, the lack of new construction is forcing retailers to see mid-sized centers that have strong sales volume characteristic. And second, high operating costs associated within closed malls are driving some retailers out as they seek improvement in profitability. Centers such as ours straddling the Washington, DC to Boston corridor are in demand and our centers are becoming beneficiaries of this emerging trend.

Small shop leasing increased as well this is one of our core focuses. Quarter four 2011 small shop volume is more than doubled that of 2010. The trend continues into 2012. In fact, when we look at small shop leases already executed in 2012 but not yet delivered we see volumes approaching 200% over the same period in 2011. Last year we found small shop success with franchise concept, dollar stores and quick service restaurants, as well as the continued integration of health related and medical uses in our centers.

Specifically in 2011 we began an excitingly small shop program as per leasing activity in five of our assets with concentration of long standing small shop vacancies. The hallmark of the program set base rent for severance vacancies at rent slightly inside prevailing market rate for the subject trade area and requires no landlord capital.

One activity -- once activity at a select center is generated and momentum begin rent are gradually increased through other remaining vacancies. The success of the program to date is best summed up by the dramatic improvement to one center in New Jersey.

We began the program last fall the center requesting was 86% occupied and contained nine vacancies. In a little less than four months five vacancies were leased to three separate tenants, one tenant opened in December and two tenants are under construction, leased occupancy jumped 6.6% and new activity levels are at rate not seen in several years.

We completed 82,000-square feet of renewals in the quarter and 708,000-square feet for the year, renewal spreads remained consistent and positive, a key is achieved for many quarters. Volumes for the fourth quarter and full year 2011 were consistent with cyclical nature of lease exploration and retention rates were up from 2010, although historically speaking our rent retention rates are quite in the 85% range.

Despite challenges to the economy in 2011, more tenants committed to our properties than the previous year probably leasing volumes in all size categories. Although, leases were executed in 2011 it is important to note that we expect rent commence for these tenants to occur over each quarterly period in 2012 with a largest new tenants commencing in the fourth quarter of this year. Slight improvement in consumer spending thus far keeps us cautiously optimistic about leasing volumes for this year, where we hope to achieve positive results in our core property.

With that, I’ll hand the call over to Phil.

Philip Mays

Thank Nancy. Good afternoon, everyone. I will briefly highlight our financial and property operating results, provide an update on our balance sheet and discuss our initial FFO guidance for 2012 before giving the call back to Bruce for a closing comment.

Beginning with the operating results, this is a third quarter in a row we are reporting recurring FFO of $0.12 per diluted share. This is a decrease of $0.02 per share versus 4Q of 2010. We are also reporting $0.49 of FFO per diluted share for the full year 2012. This is a decrease of $0.10 per diluted share versus the prior year.

In both cases and consistent with our last call, these decreases are driven by lower acquisition fees from our RioCan JV and lost rent from the IRS vacating two properties in Philadelphia that are in the process of being return to the lender. The progress we are making on dispositions will have a further impact on this current rate of $0.12 per quarter and I’ll discuss that in a minute.

Now looking at same-center results, same-center NOI excluding redevelopment increased 2.9% for the quarter and just over 1% for the full year. The strong quarter results were generated by occupancy gains along with the decrease in bad debt expense.

Including redevelopment same-center NOI increased 3.9% and 2.3% for the quarter and year, respectively. The positive spread over same-center excluding redevelopment results from lease up at Townfair Center over the year and than the new Giant coming on lease or coming online at Trexlertown Plaza in 4Q 2011.

With respect to occupancy, we finished the year with total occupancy at 91.6% and same-center occupancy at 93.3%, a 110 and 30 basis point increase respectively over last year.

Now occupancy may temporarily decrease if we make progress filling our dark rent paying anchors due to the down time between the new anchors opening and the exist of the current dark anchors. However, if progress is made replacing these dark anchors it will obviously result in long-term value creation.

Focusing on the balance sheet, as we reported in the January press release, we closed on the new $300 million secured credit facility that combined and replaced our existing $185 million stabilized facility and $150 million development facility.

The new consist of three-year $225 million revolver and a full year $75 million term loan that both have one year extension options and bare interest at LIBOR plus a spread ranging from 200 to 300 basis points determined by our leverage ratio. The spread is 275 basis points based on the current leverage. This new facility along with our disposition strategy will contribute to a lower cost of capital and more financial flexibility.

Before turning to guidance I do want to note that along with our 10-K and supplement filed earlier today, we are also filing an S3 and 2SAs. The S3 is to reestablish an active shelf with the terms -- with consistent terms of our prior shelf that expired 1SA related to the prior shareholder approval of an increase in the number of shares available for stock incentive plan and the other SA relates to certain [LP] units.

Finally, I would like to walk through recurring FFO guidance. We are setting our initial 2012 guidance at $0.40 to $0.45 per diluted share. This takes into account a progress are making on the dispositions. Remember on the third quarter call, we noted our dispositions would be $2 million to $3 million or $0.03 to $0.04 per diluted share on an annual basis. Subtracting this $0.03 to $0.04 per share from our current run rate of $0.12 per quarter or $0.48 per year you have the high-end of our range.

The low-end of our range takes into account the timing of these dispositions. We are already closed on the majority of our Ohio assets in late 2011 and early 2012, and these are the most dilutive dispositions of the various categories we have discussed.

Further, taking into account the timing in which the remaining dispositions are lining up it is possible that a significant portion of our diluted dispositions will occur, first, followed by the dispositions that are flat or accretive to FFO such as our land, mall sales and completing the buy sale of the Homburg JV. Accordingly, we provided a low-end to our range that takes into account this possibility. Our guidance also includes same-center and occupancy growth of flat to 1% positive.

And with that, I’ll turn the call back to Bruce.

Bruce Schanzer

Thanks, Phil, and thank you everyone for joining us on this call. 2011 represented an important year for Cedar in that we effected a fundamental management transition which resulted in a cultural change and strategic shift that we expect will lead to significant improvements in Cedar’s performance over the coming years.

2012 will be a year of evolution as we implement our strategic plan and start to see the seeds we planted towards the end of 2011 and in early 2012 begin to take root and hopefully start to bear fruit during the second half of the year and into 2013.

With that, we will open the call to any questions you might have.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from line of Craig Schmidt with Bank of America. Please go ahead.

Craig Schmidt – Bank of America

Thank you. Looking at the second piece of your asset sales, that’s the 24 properties of $65 million. How soon will those be close that under contract and is there any work to be done on those that are been return to the lender?

Bruce Schanzer

Okay. So let me answer those questions in the order which you asked them. In terms of the timing, we are driving them pretty hard. I think that I would surprised if they blend much past the end of the third quarter that sort of how we are thinking about internally. It’s hard to control the space some of these require landlord, I mean, I’m sorry, lender approvals that we can’t perfectly control and so again, our -- in terms of how we are thinking about it, we think about these things at the offset closing by the end of the year and we are hoping that they close by the end of the third quarter.

In terms of the assets being return to the lender, our corporate objective in my direction to Brenda Walker who is being heading that is to try and spend as little money as we possibly can, some of these loans have non-recourse carve outs we obviously don’t want to attribute those, but with the specific exception we’re avoiding, triggering the non-recourse progress, we are trying to spend as little money as possible on those assets.

Craig Schmidt – Bank of America

Okay. And then sort of on the third tranche or third piece rather the $45 million loan assets. Are you getting much response from those assets or is little slower going then the initial first two pieces?

Bruce Schanzer

I would say, I would really divide that up into a couple of categories. Some of those assets are currently being marketed and I alluded the pricing discipline, we are, some of these assets we received offers on and we are working those deals, some of them we are currently marketing and waiting to get deals, some of those assets we haven’t yet brought to market, because we’re looking for the lease up and so they really, there is not one answer to how to characterize all those assets.

One thing I would say that only five of the 11 are improved assets, right. So the rest or balance are land assets and they are between close malls and two non-mall improved retail assets, since I would characterize those differently in the sense that most of the value that we are talking about remaining is in those five improved assets and much less that is in the land.

Craig Schmidt – Bank of America

Okay. Thanks. Very much.

Bruce Schanzer

You got it, Craig.

Operator

Thank you. Our next question is from the line of Rj Milligan with Raymond James. Please go ahead.

Rj Milligan – Raymond James

Hey. Good afternoon, guys. Pretty good progress on disposition so far. I’m just curious who is on the other side of these transactions, who are the -- who been the buyers?

Bruce Schanzer

It really varies, it really varies, I wouldn’t characterize then with any kind of single characterization may vary from very sophisticated institutional buyers to local developers and local small time investors. It really just -- it varies by the asset, [by the result].

Rj Milligan – Raymond James

Okay. And so, I’m curious if what’s the same-store NOI guidance or can you provide same-store NOI guidance for 2012, what this core portfolios going to do?

Philip Mays

Yeah. So in our guidance it provide for same-store growth between flat and 1% excluding redevelopment. For ’11 we did 1% excluding redevelopment 2% with redevelopment. We’d hope to get there again, we disappointed if we didn’t, but if we keep in mind the strong, defensive and stable nature of our assets, should economy improve, that will moderate, the same characteristics will moderate the growth the little but in the guidance flat to 1%.

Rj Milligan – Raymond James

So would that be backend loaded into third and fourth quarters with the leasing that you guys have done in Q4 of 2011?

Philip Mays

Yeah.

Rj Milligan – Raymond James

Okay. Great. Thanks guys.

Operator

Thank you. Our next question is from the line of Paul Adornato with BMO. Please go ahead.

Paul Adornato – BMO

Thanks. Good afternoon. I’m trying to understand the leasing activity and the effect on cash flow? And so, I was wondering if you could tell us what the difference or the gap between signed leases and rent paying leases is, and if you could exclude the noise surrounding the re-anchoring of the dark spaces?

Philip Mays

Yeah. We’ll – this is Phil, Paul. With most of the leases that Nancy talked about are all coming online such as Kohl’s very, very late in the year. So I don’t think that will be backend loaded the same with the same-store growth towards the end of the year.

Paul Adornato – BMO

Okay. And what’s the, could you quantify the impact of re-anchoring the dark spaces?

Philip Mays

Extremely we’re to do that, would be lost rent, we hopefully, we would push our term fee too, that would probably wash out, so there is a lot of moving parts there as we work through them. If we do achieve one of those Paul and if that significant we’d update our guidance at that point in time.

Bruce Schanzer

Paul, this is Bruce. The only thing that I would add is that dramatically the description that I gave is pretty much how we are thinking about it which is lot of these dark anchors pay pretty stable rents, and the pure cash flow oriented manager might say, we are just going to keep milking these things until they run out, but just thinking about this portfolio from a long-term perspective and again, managing it to try to maximize the value of the asset in the aggregate, we’ve decided -- we made a decision that we are going to compromise and we are going to take best rent in difficult from a replacement tenant.

But generally speaking we are speaking with tenants who are better credit quality tenants than the tenants who currently occupy the dark anchors and so again they will definitely be a reduction in the rent per square foot at least in the ones that we’re talking about right now, as Phil mentioned, hopefully we get a term fee that might mitigate some of that lost, but at least based on the numbers that we are working through right now what we think in terms of the appreciation in value overwhelms and offsets that rent reduction, that sort of the calculus that we are making as we think about filling our dark anchors.

Paul Adornato – BMO

Okay. That certainly makes sense of the strategy. With respect to the new rents on the anchor spaces would you characterize them as add market or slightly below market in order to get that better credit quality?

Bruce Schanzer

Those are add market, I mean, with, Nancy was describing before where were pricing spaces slightly inside of market are really very, very limited type of strategies that are only applied to small shop spaces where there is several vacancies. But in the case of dark anchor we are really getting the rent, we are patiently making deals with new anchors, but we are certainly not going to take it below market rent, where we are already taking a haircut over the rent that we are receiving.

Paul Adornato – BMO

Okay. Thank you.

Operator

(Operator Instructions) Our next question is from the line of Todd Thomas with Keybanc. Please go ahead.

Todd Thomas – Keybanc

Hi. Good afternoon. With regard to the asset sale plans overall in the past you’d discussed that $7 million to $8 million of NOI that you would loose associated with the full 50 properties that you plan to sell? And based on your comments should we assume that the bulk of that NOI is already accounted for in the completed asset sells and what’d under contract?

Bruce Schanzer

You know, Todd, I’m looking at Phil here. I think, the basically the way to think about it is that about half of it was in our Ohio dispositions and half of it in everything, also with our Ohio deals done, we are just about half way through the NOI loss.

Todd Thomas – Keybanc

Okay. Because, it’s sounded like some of the land sales, some of the property sales later on will be accretive, so I was…

Bruce Schanzer

Yeah.

Todd Thomas – Keybanc

… wondering if.

Bruce Schanzer

Of that.

Todd Thomas – Keybanc

So do the first and second tranche of property sales account for more than $7 million to $8 million of lost NOI?

Bruce Schanzer

No. Well, this is distinguished between when you’re talking about tranches there is what we have closed and there is what we have under contract, and then there is what we have remaining to sell. What we have closed on is essentially our Ohio assets with handful of other assets.

The Ohio assets represented about half of dilutive impact from an NOI perspective of all the dispositions we are making the balance of the assets that we sold, may be throwing the other million bucks or so. So basically what we sold so far again runs about half of the lost NOI, it’s actually mean by the first tranche and that’s -- I would say the answer is yeah.

Todd Thomas – Keybanc

Right. Okay. That’s helpful. And then just a question on guidance for Phil kind of technical, but is there any change in the non-cash rental income on the income statement the amortization of intangible lease liabilities, I know it’s non-cash, but in the past that’s been a fact there in estimating rental income and FFO? So just wondering if there is any change in that line item that we should think about for models for 2012?

Philip Mays

Yeah. The company does have what you are talking about kind of the significant amount of the low market leases that are getting amortized to income because that timing when those assets were bought and the average leases on those that is them bleeding off between $11 and $10 decrease about $1 million. I mean, it’s likely to decrease maybe another $0.5 million over ’12.

Todd Thomas – Keybanc

Okay. All right. That’s helpful. And then, I was just wondering if you could comment Food Lion, maybe just give us an update on the seven stores that you have and then whether you had conversations with them about their strategy going forward for your centers?

Nancy Mozzachio

Hey. I think our position in our conversation with Food Lion that those stores we have are strong stores, many of the changes that were announced or converting bottom dollars toward back to Food Lion, all of our Food Lion are in fact all full line Food Lion stores generating healthy sales. So we’ve heard nothing that reports to closures or any closures and anything in our portfolio.

Todd Thomas – Keybanc

Okay. And then just lastly with regard to RioCan, they’ve been vocal about their desire to continue sourcing deals in the U.S. and establishing U.S. management platform. I was just wondering if you have any thoughts about where your relationship with RioCan might be headed during the course of the year?

Bruce Schanzer

Well, let me answer that question, I guess, you sort of have two-part there, I can help you with one part and you’d have to speak with the folks at RioCan about the other part. In terms of sourcing deals, we continue to work with them to have them source deals and we are helping them look at deals now.

So I could tell you that that definitely inactive and dynamic, and constructive relationship that we have with them. As we’ve mentioned before we are not currently putting out capital and so this is strictly done as part of the RioCan relationship. We do get a financial benefit and as much as we get fees from these transactions but this is also just part of the overall very good strong personal relationship that we have with the folks at RioCan.

In terms of their objectives, I’ve read the same thing you’ve read, and I don’t make decisions for RioCan, you have to speak to the RioCan folks about what their intentions are as it relates to their growth plans beyond the deals that we are doing with them in United States.

Todd Thomas – Keybanc

Okay. Would you be interested in taking a large role in managing assets for them?

Bruce Schanzer

Well, to be clear we are managing the assets that we are acquiring for them in the Northeast and we are happy to do it.

Todd Thomas – Keybanc

Okay. Thank you.

Bruce Schanzer

Got it.

Operator

Thank you. There are no further questions in queue at this time. I’d like to turn the floor back over to Mr. Schanzer for closing remarks.

Bruce Schanzer

Thank you everyone for joining us. Have a good evening.

Operator

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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