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Federal Realty Investment Trust (NYSE:FRT)

Q1 2012 Earnings Call

May 08, 2012 11:00 am ET

Executives

Kristina Lennox -

Donald C. Wood - Chief Executive Officer, President, Trustee and Chairman of Executive Investment Committee

Andrew P. Blocher - Chief Financial Officer, Senior Vice President and Treasurer

Chris Weilminster - Senior Vice President of Leasing

Jeffrey S. Berkes - Former President of Federal Realty West Coast

Analysts

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Christy McElroy - UBS Investment Bank, Research Division

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

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

Cedric Lachance

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

Michael Bilerman - Citigroup Inc, Research Division

Stephen Bakke - Morgan Stanley, Research Division

Operator

Good morning, and welcome to the Federal Realty Investment Trust First Quarter 2012 Earnings Conference Call. [Operator Instructions] This conference is being recorded. [Operator Instructions] I would now like to introduce the conference leader, Ms. Kristina Lennox. Ma'am, you may begin.

Kristina Lennox

Good morning. I'd like to thank everyone for joining us today for Federal Realty's First Quarter 2012 Earnings Conference Call. Joining me on the call are Don Wood, Dawn Becker, Andy Blocher, Jeff Berkes and Chris Weilminster. These and other members of our management team are available to take your questions at the conclusion of our prepared remarks.

Our first quarter 2012 supplemental disclosure package provides a significant amount of valuable information with respect to the trust's operating and financial performance. This document is currently available on our website.

Certain matters discussed on this call may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any annualized or projected information, as well as statements referring to expected or anticipated events or results. Although Federal Realty believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, Federal Realty's future operations and its actual performance may differ materially from the information contained in our forward-looking statements, and we could give no assurance that these expectations will be attained.

Risks inherent in these assumptions include, but are not limited to, future economic conditions including interest rates, real estate conditions and the risks and costs of construction. The earnings release and supplemental reporting package that we issued yesterday, our annual report filed on Form 10-K and our other financial disclosure documents provide a more in-depth discussion of risk factors that may affect our financial condition and results of operations.

Before I turn the call over to Don Wood, I'd like to remind you that next week on May 16 to 17, we will be sponsoring an Investor Analyst Day in San Jose. If you would like additional information, please contact me directly. And now, Don will begin our discussion of our first quarter 2012 results. Don?

Donald C. Wood

Thanks, Kristina, and good morning, everyone. A great quarter for us in so many ways from the record quarterly earnings of $1.04, to the credit upgrade from Fitch to A- and a positive outlook designation from both S&P and Moody's, to the strong double-digit lease rollover growth, to the construction starts and assembly in Santana Row, to the seamless integration of Plaza El Segundo and Montrose Crossing into the portfolio, everything came together this quarter for us quite nicely. And then the second quarter started out the same way, and so as Andy will talk about in a little bit, we're going to raise earnings guidance for the full year.

What I'd like to do is talk how the quarter starts around the productivity of our core leasing, because it provides the best window we have into the expectations for future cash flows. The first quarter was pretty extraordinary, 22 leases for 461,000 feet of comparable space completed at an average rent of $31.66, 17% higher than the $27.15 it replaces. Just to put that in perspective, we've only leased 461,000 feet of space in the 3-month period 3 times in the last 60 quarters, that's since 1997. So it'd be very helpful in 2012 and 2013 cash flows.

An important contributor to the quarterly leasing result was a very significant re-merchandising of Huntington's Shopping Center in Long Island, where we replaced Barnes & Noble and Toys R Us with new and very accretive deals with Nordstrom Rack, Alto [ph] and Chili's. While we certainly deployed capital to reconfigure, the deals make a ton of sense both financially and with the objective of improving merchandise for the benefit of the entire shopping center. Huntington is a great example of a very well-located real estate where demand does exceed supply and where we can drive economics. It sits adjacent to an assignment [ph] who's very successful, Walt Whitman Mall.

Geographically, the economy in Northern California continues to gain ground with job creation in the tech sector really benefiting our residential rents at Santana along with increasing tenant sales. Washington and Boston also continue to feel very good, while Philadelphia has flattened out in the past couple of quarters, more small-shop tenant failures relative to the other regions in Philly. You might recall from my past comments that Philly held up remarkably well during the depths of the recession, but it seems to be acting weaker now; stable, just not growing all that much. It is so important to have a diversified portfolio, not just by tenant concentration, but by regional concentration and retail property type too. The portfolio remains 93.8% leased, flat with last year but up from the fourth quarter. You should also expect physical occupancy to decline for the year as the recently executed deals begin to be delivered.

On the operating side of our business, all is clicking along very well for the time being. On the acquisition side of our business, nothing new that's imminent, though we're doing a lot of looking. But I will say that the integration of our last -- of the 2 large year-end purchases have gone very well, with meetings with both current and prospective tenants confirming our due diligence and validating our optimism about creating value at both Montrose Crossing and at Plaza El Segundo. At PES specifically, we're getting closer and more optimistic that we do, in fact, have a development that will work financially. Preliminary costs, retailer demand and rents seem to make sense on that hard corner of Rosecrans and Sepulveda. More on that in future quarters.

On the development side, construction on 2 major projects is underway with a third scheduled for a summer start. The first of that is Santana Row, where we've broken ground on our large $70 million-plus 212-unit residential building, professionally called Building 8B at the moment, and we expect it to be done in 20 months with 2014 being the first stabilized year with a 7% plus on levered yields. By the way, the 108-unit building that we completed late last year, called Levare, is already 100% leased. It took just 5 months to get there. Rents exceeded estimates and will earn an unlevered 9% return on that $34 million investment.

Looking forward at Santana, planning is aggressively underway for additional retail, office and residential investments, somewhere around -- totaling somewhere around $225 million on the Santana Row site. We hope to be underway on all of those pieces, leading to a full build-out over the next handful of years. There's a lot of value still to be created at Santana.

Second, and across the country just outside of Boston, Assembly Row is now under construction. AvalonBay is driving pilings on the first of their residential buildings. We'd begun construction on the large building that will house, among other things, a parking garage and theater, and track work has begun in preparation of the new T-stop. Expect a 2014 opening on this first phase with the opening of the new T-stop trailing by 6 to 12 months. Retail leasing interest is very strong, both from outlet tenants and restaurants and we'll start to report on and name tenants as we move through negotiations, the letters of intent, the signed deals. We're very excited to be underway at Assembly.

And thirdly over the summer, I expect to be able to report a construction start at Mid-Pike Plaza, where the first phase of our new mixed-use development called Pike & Rose will kick off. No changes to budget or timing on this one either, $250 million for the first phase with the expectation of a late 2014 opening.

As you can see, a lot's going on for Federal over the next few years: a $0.5 billion of development dollars for the initial phases of existing retail destinations that we've controlled for years; an operating platform firing on all cylinders; new acquisitions with leasing and redevelopment opportunities to exploit; and an open aggressive eye for more. We're proud of our performance in what's still a very uneven recovery.

We're really looking forward to the ICSC convention in Las Vegas later this month. We've got a lot of product to promote, what with leasing at Assembly Row and Pike & Rose in full swing, and a very proactive approach to expand our relationships and showcase opportunities throughout the portfolio, Vegas should be particularly productive this year. If you're out there, make sure you stop by and say hello. So we sure hope to see many of you at Santana Row the week before, which is just next week, as we host our first West Coast investor tour in a decade. Hope you'll come, it will be worth it.

That's it for my prepared remarks today. Great quarter, shaping up to be a great year in a modestly improving economy. Now let's hear from Andy Blocher.

Andrew P. Blocher

Thanks, Don. Good morning, everybody. The $1.04 of FFO per share in the first quarter was a record quarterly result driven by continued strong operating performance, 5.5% same-center property operating income growth excluding redevelopments and 5.9% including redevelopments, which included a continuation of low levels of bad debt, a lack of snow in the mid-Atlantic and Northeast, higher percentage rents and somewhat higher-than-normal lease term fees. The results came with no associated occupancy improvement.

Let me provide some of the details of the quarter that we can discuss the balance sheet before going through the assumptions behind our increased guidance. Minimum rent increased $7.8 million over the first quarter 2011. $1.2 million of that minimum rent increase came from the redevelopment pipeline as both Levare, the 108-unit residential building, which opened at Santana in October, is now fully leased; and 300 Santana Row, the retail office building contributed significantly to that result. The redevelopment of Escondido Promenade in Southern California where we replaced a vacant Mervyn's with a new Dick's and Ross also continued to contribute to our redevelopment performance. Minimum rent increases were net of the impact of activities that hurt current period performance, but will positively impact future performance, including taking a portion of Shoppers World out of service to make way for the redevelopment there and Mid-Pike where demolition will take place as we begin construction of Pike & Rose in the next few months. And the Huntington Shopping Center, as new vacancy was created as we execute the significant re-tenanting that Don discussed.

While not in the same-center pool, minimum rent increases also include the benefit from owning Plaza El Segundo and Montrose Crossing for the entirety of the first quarter. Net of financing, these acquisitions contributed about $0.01 to first quarter FFO per share.

Recoveries declined $1.9 million despite the addition of the acquisition properties due to lower snow removal costs in the first quarter of '12 compared to 2011. The impact of lower snow was approximately $0.01 to FFO per share when you net the lower recoveries against the lower rental expenses. We also saw an increase in percentage rent, as a number of our tenants have seen significant year-over-year sales increases particularly at Santana Row and Bethesda Row, which contributed to our 4.6% increase in rental income.

Other property income increased $2.3 million, largely from an increase in lease term fees off of historical -- historically low levels we saw in 2011. In providing our 2012 earnings guidance assumptions in November, I had indicated that we expected to see an increase in lease term fees throughout the year, and this quarter we did. On the expense side, we saw a 5.9% decrease in rental expenses despite the addition of the acquisition properties, with the bulk of it coming from the lower snow that I already discussed, as well as the continuation of our decreased levels of bad debt that we've seen from the past several quarters. The strong performance of our core portfolio, as measured by our same-center growth, is predictably noteworthy, considering the positive same-center growth that we produced on an annual basis throughout the economic downturn. There are no easy comps here.

As we anticipated, interest expense increased $3.7 million as the loans related to Plaza El Segundo and Montrose Crossing's acquisitions came online late in '11, and with the full quarter's expense from the $275 million term loan we executed in November. In total, funds from operations increased 8.8% to $66.7 million and 5.5% on a first-year basis to a record $1.04 result.

Moving on to the balance sheet for a moment, we had limited capital markets activity in the quarter, as we raised $21 million through the ATM at an average price of $96.58 in the first quarter. At the end of the quarter, we maintained approximately $50 million of excess cash on the balance sheet, we have full availability on our $400 million revolving credit facility and have great access to both debt and equity capital alternatives. With only $192 million of debt coming due in 2012 and another $197 million coming due in 2013, we remain in a great position to finance our upcoming debt maturities and fund our large pipeline in development, while maintaining our flexibility to fund additional acquisitions without negatively impacting our high-quality balance sheet.

Our diligence in managing the balance sheet was recognized by Moody's in January, when they placed our Baa1 corporate credit rating on positive outlook, followed by S&P, putting our BBB+ credit rating on positive outlook in April, and Fitch upgrading our unsecured debt rating to A- just a few days later. All of these ratings actions contemplated the quality of our real estate, the consistency of our portfolio results, but despite the economic downturn and our approach to managing both operating and financial risk over the long term. The upgrade to A- places Federal Realty in rarefied air. There's only 2 other U.S. REITs that have achieved this rating. The impact of these ratings' actions only increases the financial flexibility we have as we address our future financing.

Finally, we increased our 2012 FFO per share guidance to a range of $4.24 to $4.29. The assumption changes to the new range include a 75 to 100 basis-point increase in overall occupancy in 2012 versus a previous assumption of 50 to 75 basis points. These occupancy increases are expected as we execute the redevelopment of the Shoppers World, the re-tenanting in Huntington. And as we deliver the Border backfills about Santana Row and Friendship Center. Cash basis lease rollovers for '12 in the 10 -- or we're expecting in the 10% to 15% range, which would be the strongest rollovers we've seen since 2008. Same-center property operating income growth in the 3% to 4% range, the top end of an increase of 50 basis points from the guidance we provided last quarter and increased common shares outstanding reflecting the $21 million of shares issued through the ATM in the first quarter of '12.

We're certainly very pleased with quarter results and our prospects for the future. And with that, operator, we'll now take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Craig Schmidt with Bank of America.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

It sounds like there's a lot of activity surrounding your Pike & Rose site. I wonder if you could describe some of that development activity in that general area and all the things that are going on.

Donald C. Wood

Sure, Craig. The White Flint district, which encompasses -- which starts down by Lerner's mall and then comes up a hill and peaks right at the top where our property is at the corner of Old Georgetown and Rockville Pike is all under -- will be under development at some point over the next few years, because it's all part of the overall sector plan. And so there -- this will be identification, if you will, of an entire area. There are -- there's more residential list programs. Some of those other companies I'll be doing that include -- at JBG will be in there. The Lerners themselves will be in there as part of that and there are a number of other developers who are part of that project, part of the overall district. So you'll see more residential. There will be more office, and certainly more retail. And one of the things that we are doing as part of this is we've been very, very involved in this process all the way through. In fact, Evan Goldman and Don Briggs, our 2 guys who really have marshaled this thing beautifully, frankly, all the way through, have a great relationship with all the other partners. So I think if you look at this area, Craig, 10 years from now, you won't believe the transformation. But we certainly will be in the ground first in terms of new stuff as part of the district, and so we'll be delivering in 2014 ahead of most others.

Craig R. Schmidt - BofA Merrill Lynch, Research Division

Great. And then just -- I'm just wondering if you're at a place with Assembly Row that you have a sense of the mix of restaurants, outlet tenants and other? I mean, what would the breakout be by those sort of 3 categories?

Donald C. Wood

Yes, in total, we're putting in another 325,000 square feet there, and most of it is going to be outlet. And so you'll see roughly a -- not sure I have the breakout exactly right here, 150 on outlet and then you'll see service and you'll see the theater, which takes a big piece of it. The theater itself, takes 62,000 of that away, and the rest will be service and restaurants.

Operator

Your next question comes from the line of Christy McElroy with UBS.

Christy McElroy - UBS Investment Bank, Research Division

Andy, I just wanted to follow up on the maturity schedule. With regard to the $175 million of notes you have coming due this summer, is that something you would look to refi in the public bond market or maybe with a bank unsecured term loan? And can you talk about sort of the potential cost of these options, if you've had preliminary discussions at all?

Andrew P. Blocher

Yes, Christy. We have the ability through the accordion feature on the term loan. That market is drying up, to some extent, on the 7-year basis. And at this point, I think it make sense for us to go as long as we possibly can based on where the market is currently. We're in a very good position where we're currently contemplating long-term debt, equity financing or a combination of both. From a near-term FFO perspective, the impact between long-term debt and equity has really minimal impact on FFO. And one of the things that we haven't seen yet is any real trading in our bonds since Fitch upgraded us to A-, and that's something that I want to get a better handle on, but indicative pricing currently on the 2 -- on the new 10-year note would probably be in the sub-4% range. And if we were to go really long and go out to, call it 30 years, we can go out and do something in the 5 1/4% range. So we're thinking through that right now. We're blessed with having a lot of options. It all comes down to the quality of the balance sheet, but we haven't affirmatively made a decision yet.

Christy McElroy - UBS Investment Bank, Research Division

Given some of the low rates that we've seen on some of the REIT preferred deals lately, is that an option that you'd consider?

Andrew P. Blocher

Certainly, we consider everything. The issue with respect to the preferreds is, I feel like I get kind of a REIT market price with respect to the preferreds, which doesn't fully contemplate all the qualities that we have, which are reflected in things like senior unsecured notes and certainly with respect to our equity.

Christy McElroy - UBS Investment Bank, Research Division

Okay. And then just on the lease term fees, can you attribute this quarter's volume to any specific tenants or movements within the portfolio? And I think last quarter, you gave a range of $2 million to $3 million for the year. Is that -- does that still hold?

Andrew P. Blocher

I think that the range that we're talking about is probably going to be in the $3 million to $4 million range. There were -- there was one lease term fee in particular, for a tenant down at Third Street that was the biggest part of it. It was about $1.8 million of the $2.4 million total.

Christy McElroy - UBS Investment Bank, Research Division

And then just lastly, at what point did the H&M take occupancy at Santana Row?

Donald C. Wood

H&M will be taking occupancy early this summer when we're done with our work. And they should -- we anticipate that they'll be opening in the fall of this year before the holidays.

Operator

Your next question comes from the line of Alexander Goldfarb with Sandler O'Neill.

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

Just following up on the upgrade to the A-, you had mentioned that this enhances your financial flexibility. But just sort of curious with the higher metrics that you need for the A-, are you guys well within those, so that if you pursue your development and redevelopment, it's really a nonissue? Or does the upgrade mean that you have to rejigger some things to stay within the new parameters?

Andrew P. Blocher

Yes, Alex, great question. One of the things that I'm most proud of with respect to our upgrade is when we sat down and met with all 3 rating agencies, we were very upfront about the development pipeline, we provided conservative guidance as to how it could potentially be funded. And the fact of the matter is, if you read through all 3 of the 2 positive outlooks and the upgrade from Fitch, it notes that we need to maintain metrics that we've effectively been maintaining for 3 to 5 years. So it's not a matter of we ran our business in order to get to this upgrade. The upgrade is a logical conclusion from the way that we've been running our business. So there are no material changes in the way that we're thinking about the balance sheet, and no changes in the way that we're running things like those development projects, which is, it's the best way that we can get there. It's just the logical outcome from the way that we're running our business.

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

Okay. And then on the re-leasing schedule on Page 19, maybe this is from the Huntington activity, but new leases were up pretty big, renewals were sort of flattish, but TIs for both were up big from the prior quarters. Is this just Huntington or were there some other things going on in the quarter?

Donald C. Wood

Three big things, Alex, that impacted that. Huntington, for sure, had some good-sized numbers there. Also Shoppers World, where we're in the middle of that redevelopment. So technically, we got a little bit of double counting going on there, because it's in the TI number, but it's also considered on the redevelopment schedule on the capital there. But that's just kind of how it shows. Those 2 were big. And then on the renewals, the big number on the renewal was the renewal that we did decide to do for Gucci, a 10-year deal out at Santana. We did agree to a deal that did include a lot of capital, and we did that to lock them in for 10 years at the property to be able to lease off of them as sales of the rest of property continue to rise. So those 3 things were significant capital contributors. You take them out, we still have double-digit rent growth.

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

Okay. And then just final question is when we speak to Washington, D.C. office brokers, they're pretty bearish and actually surprisingly bearish even given all the headlines. Are you seeing anything in your retail portfolio that's commensurate with the bearish activity that the office guys are talking about? Or is retail in the D.C. Metro market neighborhoods just sort of a different parallel universe and not really affected by the slowdown that's going on?

Donald C. Wood

Alex, I think that's right. I can tell you I heard the same thing, and so I've been particularly wary and trying to look for signs within the retail portfolio of softening or some of the same things that the office guys are seeing. I do not see them. And kind of the results, quarter after quarter, seem to suggest that. I will tell you that the one thing that has become crystal clear is that at least on the retail side, there's not -- the quality of the location is more important than ever, that the retailers are stepping up for the best locations. They are not stepping up nearly as much though for the secondary locations, including not even -- not taking it, because they're not taking the part -- or grabbing the lesser rent at the secondary locations. They're just ignoring the secondary locations more and more and only choosing the primary. So we haven't seen it in our portfolio, but I think if you talk to others with portfolios, you may get a different answer.

Operator

Your next question comes from the line of Jeffrey Donnell with Wells Fargo.

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

If I can just -- just maybe build off Alex's question a little bit. I think, Andy, you touched on this. First, congratulations on the upgrade in the quarter. I just -- I guess, I'm curious how much of that shift was driven by just the timing of having Pike & Rose and a Sunday square materialize around the same point in time? Maybe it's important to be taking down your leverage as you have those 2 large projects going on?

Andrew P. Blocher

Yes, Jeff, I don't really see it that way. I see -- the way that we presented it to the rating agencies was very much just a balanced approach. I think that we've demonstrated that over the long term, even prior to having the ATM. I think in the previous 8 years, we have raised equity 6 times in those previous 8 years. We've been very much focused on the unsecured debt markets and not so much on the secured debt markets. I just -- I don't think that, that -- I really saw that as a possible impediment that they got very, very comfortable with, not the size and scope of the development and how those projects were coming online. So I don't necessarily view that as a positive or a negative.

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

And maybe just a broader question about your leverage philosophy. I mean, I know you guys just got the rating upgrades. I'm not asking you to depart from it. But for a platform that doesn't take a lot of ground-up construction risk, generally speaking, you're not an ongoing developer, traditionally, and historically, you have one of the lowest levels of variability in your core earnings. I guess I'm wondering, do you think an A- rating is sort of overkill, if you will, for the platform and maybe BBB+ is sort of more optimal for the REIT? I'm just curious of how you guys think about it.

Andrew P. Blocher

Yes, I don't necessarily know that. It depends on the REIT. I think that for us, I mean, we are a consistent performer. And like I said, the way that we think about how it is that we run the company, which leads to a strong valuation, includes things like the consistency of our earnings, the level of the same-center pool where -- the solid base for which we have eliminated exposure to development and maintaining very well leverage. So I don't know that you can look at any one of those pieces in isolation. You have to look at the entire package.

Donald C. Wood

Maybe, Jeff, just what I'd add to that is that -- and the question kind of assumes that we were looking for an A- rating and that's really not the case. I mean, the driver for us is running the business such that we can get investors comfortable with the best chance for an increasing stream of cash flows. The fact that we've done it for a long time and, of course, we're always in front of rating agencies and, of course, we always want the highest possible rating that they will give us, but it's not like the business plan changes in order to achieve a particular rating, and that's kind of what I'm trying to say. So while we're out in front of them, and we always are, by the way, not just these last few months, but regularly, obviously over the years, I think it has much more to do with their comfort in the company's conservative philosophies for a long time. And so surely, A- beats BBB+ from a cost perspective. And if we were doing things that were significantly different in the business plan to achieve that A-, I think your question has a lot more validity and it's really right on point. But we haven't changed our conservative philosophy nor we do we expect it.

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

That's fair. Actually, Don, just maybe 2 more questions on ICSC. Is there anything specific you hope to depart from ICSC with, I guess, a specific goal that maybe you can share with us? And then I don't know if Berkes or Briggs is on to comment, but I'm also just curious for their sense, or maybe you can chime in on their behalf. I'm...

Donald C. Wood

Yes. Well, I won't give you -- it's not a square footage of lease that's signed or a square footage of leases to LOI or particular things like that. It is to significantly advance them all in the leasing of Assembly Row and Pike & Rose. That is the overall objective that is incremental to our normal overall objectives with respect to the rest of the portfolio, which obviously still applies. But the way ICSC is falling this year -- the way our projects are falling, if you will, in terms of construction starts, et cetera, relative to ICSC in Vegas, this should be -- it's a perfect time for us to be able to showcase what it is that we're doing and to take conversations further into the LOI phase and LOI conversations further into the lease signed phase.

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

And do you have a sense -- another part was I'm sure ICSC is sort of feeling better than last year and the year prior. But do you have a sense how, or a way of measuring how maybe this upcoming ISCS year maybe compares to the years prior to 2008 and '09?

Donald C. Wood

Not a clue, and let me -- not a clue. It seems like every manager has asked that every single year, every leasing person has asked that. And I can honestly tell you other than attendance numbers that I get through ICSC and how qualitatively the place feels, those are really the only measurements. It is so hard to be able to -- and you may read in the paper quotes from guys that say, "Wow, this was the greatest ICSC in the history of ICSC," or "It felt a little softer." So they're such subjective comments that the proof really is in the ensuing 6 to 9 months of lease productivity that includes ICSC as well as a whole lot of other factors. So real hard to get a gauge on what you're trying to ask.

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

And just last question on Assembly Square. Is there a final, final date, if you will, when IKEA has to move ahead on their project? And I guess if they don't, is it fair to say that you guys are the logical buyer? I guess, I'm wondering, is there a reason why you wouldn't want to buy that land?

Donald C. Wood

You just took it a little further than I'm willing to say right now. But yes, listen, the decision by IKEA from what I understand is, if imminent is too strong, it's not too far off. It's within a few months off. I've heard rumblings that they're not going to go forward. I've heard other rumblings that they're not finished yet with their decision-making process, and it's going to be what it's going to be. I can tell you there are a number of things. With the team starting and with the response that we've gotten thus far with our leasing. It's not nearly as important as it used to be. If they don't go forward, certainly we'll want it. We certainly have an interest in what happens on that piece of real estate from a standpoint of investing on it. But I suspect we won't be alone. There'll be others that would be all over that too.

Operator

Your next question comes from the line of Cedric Lachance with Green Street Advisory.

Cedric Lachance

About 1 year ago, you hired Michael Khouri to go after mall tenants, specifically. So looking back over the last year, can you give us a sense of the progress you've made in terms of attracting mall tenants to your properties?

Donald C. Wood

I sure can. In fact, I'm going to start and then I'm going to ask Chris to finish that. You may or may not know that Khouri was wooed over to Vornado 4 or 5 weeks ago, Cedric. I don't know if you knew that and they were able to give them a bigger job. And at least up until Steve's letter, potentially more of a future. I don't know, we'll have to see. But Khouri did a great job for us. And it wasn't only in the matter of getting mall tenants effectively to sign leases with us. But it was more that he got a lot of mall tenants to compete for spaces with existing tenants that we had. So that helped in -- I'm guessing this number, I probably should do this even a little bit better, somewhere between 25 and 30 leases where there was more competition, effectively more demand for space. Because what Khouri was bringing in to compete with are existing leasing agents for the existing tenant in the space. So even if that mall tenant didn't come in, and in a number of cases they did, the economics that we wound up being able to get from the existing tenants was significantly better, because that's what competition does. Chris, anything you want to just add?

Chris Weilminster

I would just add in that he was very productive in producing some new deals for us with smaller-unit retailers. He really helped with our North Face deal in Bethesda Row. He helped us get Chili's teed up for the deal that I mentioned at Huntington, as well as 1 or 2 more that you may hear about in the future, as well as exposure to Crazy 8s, which is a retailer that we've got in some other centers. So we -- I think Michael was very productive and it was a great program that we're following.

Cedric Lachance

Okay. And in terms of looking forward, will you be replacing him and will you continue that initiative as actively as you have over the past year?

Donald C. Wood

Cedric, it's a great question, I tried to get there before you even asked it. And we've talked about that ad nauseam here. We'd love to replace that role. Replacing that role is not easy. Finding the right person for that particular spot is not easy, and Michael fit it like a glove. So we can't just bring in, if you will, a mall guy. That kind of won't fit in over here and only takes -- only creates disharmony, if you will, on the team. So it's got to be the right guy. But we will actively look to replace that role, whether it's put together the same way we had with Michael or whether it's incorporated in a different -- within a different function with leasing, I'm not sure. But it was a very valuable role and we'll need it to keep going forward.

Cedric Lachance

Okay. And I think, Don, it looks over the past year, you've been, I think, conservative and guiding people in terms of expectations for longer-term re-leasing spreads and longer-term NOI growth. But when I look at the environment, it seems to be consistently improving. If you look back versus 1 year ago, would you say that your expectations for longer-term same-store NOI have increased? And if so, by how much do you think you've increased?

Donald C. Wood

Cedric, if you go back and you read my conference call comments starting from the third quarter of 2011, you'll see that I clearly became more bullish and more optimistic as I saw some results and some things I knew that were in the pipeline coming forward. That did improve those expectations, and that was consistent in terms of what I said in the last third quarter call, fourth quarter call and that's certainly again in this call. So clearly, I am feeling more bullish. What I'm not willing to say yet is whether I believe that over the next 5 years, over the next 7 years, that retail leasing, if you will, is out of the woods, because I don't know that yet. I want to see some more time pass. I still believe that the -- and I very much believe that the country is over retailed. I still believe that, that is the consistent and will continue to be. And so what that does is just make me and our whole team a lot more picky, if you will, about what deals we're doing, what -- from an acquisition side, from a leasing side, from a development side. Because you better be in a place where demand exceeds supply like Huntington. And there's just not -- there's a lot more places where supply exceeds demand. I wish I could tell you, move up your long-term NOI growth numbers from 2% to 2.7%, but I'm not in that frame of mind yet, I'm sorry.

Operator

Your next question comes from the line of Michael Mueller with JPMorgan.

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

First of all, Andy, on the balance sheet, is there anything in earnings guidance for additional equity for the balance of the year?

Andrew P. Blocher

Yes. Mike, I tried to make it clear. Apparently, I didn't when I was answering Alex's question. From -- it's the reason why I made the comment earlier from an FFO perspective. The yield on the debt and the yield on the equity are somewhat comparable. Just from an FFO perspective, I'm not going to say that it's the same long-term cost. So both of those alternatives are contemplated within the range. Obviously, like I said earlier, we haven't seen trading in the bonds to reflect the A- rating from Fitch. I want to see that before we make a determination as to which path we're going to proceed under.

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

Okay. And just thinking about equity over the next few years with the development pipeline, I mean, should we think of it such that you got an ATM and that's a nice way to help fund the development over time as the capital requirements come up? And maybe if there's something a little bit larger on the acquisition side, that's how you would think more about traditional equity offering to help fund that?

Andrew P. Blocher

Yes. I mean, the couple of things that would drive us from utilizing the ATM to kind of a standard way overnight type of deal would be the amount of equity that we wanted to get and the timing under which we wanted to get it. So if there is a determination that we need to get a bunch of it very, very quickly, that would be an indication of a regular way offering. The ATM has really just been a supplement to our capital-raising activities so we found useful in doing some matching and hitting the market in order to fund certain capital needs.

Donald C. Wood

The other thing I'd like to add to that, Mike, is what's your big picture, what you ought to be thinking of is that upon delivery, as those developments are put into service, we certainly expect our balance sheet to look similar to the way it looks today. And so certainly, there may be a couple of bumps along the way in terms of a bigger equity slug or a bigger debt slug depending upon the marketplace. We're going to end up where we want to end up in a very similar position than we are today, coming 3 and 4 years ago, as we -- 3 and 4 years from now.

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

Got it. And going back to a prior question where you're talking about CapEx, but you also touched on the leasing spreads. If we look at the new leasing spreads that I think were up about 30% or so on a cash basis, was there something, 1 or 2 tenants that was driving that as we've seen in the past? Or was it a little bit more broad based this quarter?

Donald C. Wood

No. It was -- in addition to the things I talked about before in Huntington, where we had some great leasing spreads, they are the same way at Shoppers, but we put in capital to get them. If you kind of took all that stuff out, and you look at the balance, it was definitely more broadly based. And so -- and that has been a continuation of a trend. As I say, other than Philadelphia, Philly has been flatter over the last 3 quarters, 3 and 4 quarters basically than it was earlier. So other than Philadelphia, which was pretty flat, the balance was broad based and stronger.

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

Okay, okay. I wasn't sure if your comments were more specific to TIs or if you were incorporating spreads on that as well. And then last question, Andy, on the same-store NOI numbers, if you would isolate the impact of snow, I mean, how significant or how much of a change would there have been to the year-over-year comps?

Andrew P. Blocher

I mean, snow would be, call it, 50 to 75 basis points.

Donald C. Wood

[indiscernible]

Andrew P. Blocher

What Don was saying is basically $0.01 a share, but 50 to 75 basis points on the same-store growth number.

Operator

Your next question comes from the line of Quentin Velleley with Citi.

Michael Bilerman - Citigroup Inc, Research Division

It's actually Michael Bilerman, Quentin's here as well. Just thinking about the disbursements of capital for the development, how do you sort of see that evolving over the next sort of 2 years in terms of when the big capital outlays will come? And I'm asking that just in a sense of how we should think about the pre-funding on the equity basis, which we've sort of danced around a little bit on the call?

Donald C. Wood

It's -- I'll tell you, Mike, it is very -- it's pretty even spread when you start with the fourth quarter or so of this year. But it really gets going into the four quarters of 2013 and then the first 2 quarters or so of 2014, '13 and '14. It is pretty evenly spread, and you'll see it going out both at Assembly and you'll see it at Mid-Pike. Mid-Pike will be the bigger driver, because it is -- we're doing all of our capital, $250 million. At the same time, you'll see the residential outflow in the earlier part at Santana Row. So when you balance all this together, there won't be the need for a big chunk of capital to be funded in any particular corner. At least that's how we certainly plan it.

Michael Bilerman - Citigroup Inc, Research Division

Right. So you think about $460 million of new capital, because you've already spent $88 million over the course of 7 quarters or 6 quarters?

Donald C. Wood

Yes. Use 8 quarters, because there will be a lag.

Michael Bilerman - Citigroup Inc, Research Division

Right. And so you have a little bit of free cash flow that you're generating, call it $50 million a year for that. That certainly helps on an equity side. I think, Andy, you have about $140 million left on the ATM?

Andrew P. Blocher

Yes, actually, we -- either we have or we will have, as part of our new shelf registration of recharge the ATM back to $300 million.

Donald C. Wood

But we will keep using the ATM, Mike.

Andrew P. Blocher

Yes.

Michael Bilerman - Citigroup Inc, Research Division

Right. Okay, so it sounds like, yes, things could go either way in terms of doing an offering and pay down existing debt and no FFO impact, just given where the stock trades. Or potentially just wait and just do ATM as you fund your development and use your free cash flow that way?

Andrew P. Blocher

Right. All -- those are basically the alternatives, correct.

Michael Bilerman - Citigroup Inc, Research Division

And when -- the $13 million that's maturing this year, when did those maturities occur?

Andrew P. Blocher

By July. July.

Michael Bilerman - Citigroup Inc, Research Division

In July. So it sounds like everything is going to come to a head pretty soon in terms of making decisions?

Andrew P. Blocher

That's correct. And Michael, remember, we have $50 million of excess cash on the balance sheet and an undrawn $400 million revolver. So that provides flexibility as well to the extent that marketing conditions change.

Michael Bilerman - Citigroup Inc, Research Division

And where sort of -- in terms of the metrics that the agencies have put forth towards you in terms of debt to EBITDA, debt to a sort of gross asset value. Where is sort of their comfort range relative to the current ratings?

Andrew P. Blocher

Comfort range, I mean, I guess, Fitch most importantly, because they're the ones at A-. Kind of a 5.5 range for debt to EBITDA, fixed charge in the 3x type of range and absolute leverage about where we have it now. As I said in my earlier comments, if you go back and look historically, which I think they referenced in their release that they put out for this, you'll see that's really where we've been over the period of time, and the only time that we really got out of that is, as an example, fourth quarter of last year when we took on all of the debt with no associated EBITDA with PES and Montrose Crossing. So we are running our business the way that we would typically run our business. We just get the benefit associated with the better rating.

Michael Bilerman - Citigroup Inc, Research Division

Okay. And then Don, just in terms of next week, you sound pretty excited for the Investor Day. And going into the West Coast, you said first time in a decade to do a big tour out there for the company. What's the goal for next week? I mean, what do you want people to come back with after they've been out there and seeing the assets and heard you speak?

Donald C. Wood

Yes, I want them to see how much future potential there is at Santana Row and I want them to see how much future potential there is at West Gate and what is -- I want them to meet the West Coast team. Because I think that, look, a lot of investors are New York-based and when you do get out to California, you get out to L.A., you get out to San Francisco. And so a lot of investors still think of Santana Row as that big development project that Federal Realty did. But the bottom line is, this has been a stable operating asset now for 10 years. And showing how that has matured and when you look at how that has matured, plus now is the time to build out the balance of it over the next 5 years or something like that, I think you'll be -- I think investors will be very excited about that. I know I get very excited every time I go out there. So the ability to get a big group, I think we've got 60 or so of Federal Realty investors and some of them are our largest, most influential investors coming to that. So to be able to make that real and not just 0.5 hours in a wheat pack [ph] suite or something at NAREIT is a whole lot different. We're really excited about it.

Operator

[Operator Instructions] Your next question comes from the line of Paul Morgan with Morgan Stanley.

Stephen Bakke - Morgan Stanley, Research Division

This is Stephen here with Paul. I had a quick question about the cash rollovers. You talked about expectations of 10% to 15% in 2012. How much of a driver will junior anchor re-leasing upside be?

Andrew P. Blocher

Yes. I mean, we don't have that breakdown specifically on a go-forward basis, Stephen. I'm happy to pull it and we can...

Donald C. Wood

I can tell you, Stephen, it's always a driver. It's always going to be an important part of the lease rollover. And whenever -- basically when you look, it's pretty regularly 2/3 of what it is that we do is in renewals and 1/3 is in new leases. And that varies a little bit, but that's basically what happens throughout the company. When you look at those new leases, which is where we do expect to see some good increases in some of the deals that we're doing, they will move the numbers. They also tend to move the numbers for the small shop tenants around them. So you see -- this all hangs together in this business, particularly at Federal shopping centers, because they're not power centers. They'll have 2-year anchors with a lot of small shops around them, restaurants, other types of uses. So you'll see it all together. But clearly, junior anchors will play a big part of it.

Stephen Bakke - Morgan Stanley, Research Division

Great, that's helpful. Have you seen -- have you kind of been involved in any discussions about downsizing that some of the other strips and other landlords are focused on?

Donald C. Wood

No -- certainly, every conservation we have with every retailer is all around where you guys are going, what you're trying to do. We're trying to obviously match their needs with our haves, if you will. And not surprisingly, that those conversations largely start with a location. And the better the location, the more flexibility of how much, how far off prototype they'll go, whether -- how creative they're willing to be. Can we do 2 floors stuff. All that kind of stuff goes with it. But I can tell you, we're extremely involved with every retailer that we deal with in terms of understanding where it is that their next prototype is going. And certainly, it's why one of the big reasons I believe that the country's over retailed. I absolutely believe that smaller GLA is in the DNA for a lot of retailers.

Stephen Bakke - Morgan Stanley, Research Division

Great. And then my last question is could you provide an update on the acquisitions pipeline?

Donald C. Wood

Yes. As I said, I think nothing imminent right now, but lots of stuff happened out there. Is Jeff Berkes on the call from California?

Jeffrey S. Berkes

Yes, Don, I'm on. Hey, Paul. Hey, Stephen. It's like we talked about last quarter, it's slim pickings and skinny returns right now, and that really hasn't changed. And given that we had a big year last year, particularly given that we closed 2 big deals right at the end of the year, which we're very happy with, we're looking hard but don't see or haven't yet seen a real reason to stretch and pay the prices that others are paying for some of these assets, that don't have a good go-forward growth profile in our view, so we'll continue to be patient. We'll continue to use a couple of arrows in our quivers that others don't have, which is a great structuring capability and a balance sheet that allows us to take on some secured debt if we need to, and pull the trigger when we find something that we really like.

Donald C. Wood

I'd give you one real-life example. There's a -- we're not naming the property, there's a property in our backyard here in Rockville that is on the Pike, on Rockville Pike, that is being marketed that we are -- we didn't feel the same way as we felt about Montrose Crossing, which was a dominant, big piece of land, great corner, et cetera, which we would stretch for to get it done. This one is much smaller. It's much less important, frankly, to the job of leasing on the Pike. And we were in there up to a number that seemed to make sense for us and we got blown out of the water is what we hear. And so we're -- we were out it and there's a lot of other people chasing it and they're going to pay a big number. But we're pickier, it's just not dominant enough. So if we're buying it, it -- we have to be confident that demand will exceed supply, so it's got to be a dominant shopping center.

Jeffrey S. Berkes

Yes, I mean, just to put a sightly finer point on it, if we don't see a prospect of growing NOI going forward, let's forget about cap rate for a minute, because yields on everything are low right now. But if there's not a good go-forward growth story with the asset, we're not going to buy it. And we just haven't seen anything in the last few months other than the stuff we closed last year that we really liked from that perspective.

Operator

At this time, Ms. Lennox, there are no further questions. You may continue.

Kristina Lennox

Thanks and thank you, everyone, for today. We're looking forward to seeing you next week.

Operator

Thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a wonderful day.

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