Whitestone REIT's (WSR) CEO James Mastandrea on Q3 2017 Results - Earnings Call Transcript
Whitestone REIT (NYSE:WSR) Q3 2017 Earnings Conference Call November 2, 2017 11:00 AM ET
James Mastandrea - Chairman, CEO and President
Kevin Reed - Director of IR
David Holeman - CFO
Craig Kucera - FBR Capital Markets
Mitchell Germain - JMP Securities LLC
Carol Kemple - Hilliard Lyons
John Massocca - Ladenburg Thalmann & Co.
Good day, everyone, and welcome to today's Whitestone REIT Third Quarter 2017 Earnings Conference. Just a reminder that today's call is being recorded. And at this time, it's my pleasure to turn the conference over to Kevin Reed, Director of Investor Relations at Whitestone REIT. Please go ahead, sir.
Thank you, Lori. Good morning, and thank you for joining Whitestone REIT's third quarter 2017 Earnings Conference Call. Joining me on today's call will be Jim Mastandrea, our Chairman and Chief Executive Officer; and Dave Holeman, Chief Financial Officer. Please note that some statements made during this call are not historical and may be deemed forward-looking statements. Actual results may differ materially from those forward-looking statements due to a number of risks, uncertainties and other factors. Please refer to the company's filings with the SEC, including Whitestone's Form 10-Q and Form 10-K, for detailed discussion of these factors. Acknowledging the fact that this call may be webcast for a period of time, it is also important to note that today's call includes time-sensitive information that may be accurate only as of today's date, November 2, 2017.
Whitestone's third quarter earnings press release and supplemental operating and financial data package have been filed with the SEC. Our Form 10-Q will be filed shortly. All will be available on our website, whitestonereit.com, in the Investor Relations section.
During this presentation, we may reference certain non-GAAP financial measures, which we believe allow investors to better understand the financial position and performance of the company. Included in the supplemental data package are the reconciliations of non-GAAP measure to GAAP financial measures.
Before I turn the call over to Jim, I would like to say that Whitestone was independently acknowledged by EY's prestigious entrepreneurial Award recognizing Jim as their choice for the 2017 EY Entrepreneur of the Year, Transformational CEO for the Gulf Coast Area from over 600 individuals that were nominated. Jim humbly accepted the award for our entire Whitestone team and will be among those considered at the national level later this month.
With that, let me pass the call on to Jim.
Thank you, Kevin, and thank you all for joining us on our call today. Today, I will provide an overview of our continued strong performance with most of my remarks directed towards the underlying fundamentals driving our achievements. This includes our weaving together as mutually dependent, the consumer, the tenant and the real estate through our infrastructure.
The disruption caused by e-commerce in the retail industry is forcing the transformation of real estate to be less dependent on traditional retail products and more dependent on community services. This created an opportunity, which Whitestone has capitalized upon. At the core of our e-commerce-resistant strategy is understanding the consumer, their needs and wants; targeting tenants to craft a homogeneous tenant mix; acquiring and developing real estate properties to accommodate smaller-space users; and designing a simplify -- and simplifying a complex infrastructure to be nimble and to be scalable.
Now let me comment on our focus on the consumer. We do extensive consumer research to find what is missing in a particular market and then create an optimal mix for each community property. While some believe the impact of e-commerce on physical real estate is overstated, few disagree that e-commerce has changed consumer behavior and it has had a much greater impact on bricks-and-mortar of retail real estate than anyone would have predicted. This disruption is creating a consumer need in the service retail space, and we capture and fill this void.
Whitestone's track record since our IPO shows the financial strength of our e-commerce-resistant, service-based model, topping 90% occupancy this quarter with approximately 1,650 tenants. Our deep understanding of the consumer and in-depth research around the boomer and millennial generations is revealing. In general, our findings show that boomers and millennials are relying on duel-income households, make household purchases online, entertain outside the home, sharing space and living in smaller space, enjoying a lifestyle that resolves around mobility and flexibility, connecting more through walkability needing greater urban footprints and consuming more through e-commerce.
Our community center properties are the first porches, the living rooms, the entertainment centers and the workspaces of the communities. What comes to the forefront is that our retail properties represent an extensive distribution system of the delivery of services to local communities within our community-centered properties.
Next, let me comment on our tenants. Tenants that are present in our everyday life are often mistakenly called mom-and-pops. At Whitestone, we prefer to call them entrepreneurs. These entrepreneurs are highly motivated to be successful. And most importantly, their businesses are their livelihood. They take calculated risk, build their balance sheet and they pay their rent.
What makes our tenant e-commerce resistant is they are service oriented and compete in their local neighborhoods and communities for customers. We proactively search for these types of tenants and rigorously vet them to ensure they have 3 distinctive characteristics, the ability to cocreate value, tenants that have complementary business that will establish traffic to our properties on an 18-hour basis. An example of this tenant mix that drive traffic is our positioning of a dance school for children, a pilates studio, a modern sports bar and a restaurant in one of our properties. This resulted in a one-stop family shop, moms dropped their daughter off at the dance studio, run to pilates; dads stops in with son at a modern sports bar; all meet up for an evening family dinner at the restaurant. This example has seen great success, often resulting in people showing up at our center in family groups of 2, 4, 6, 8 and becoming a multi-generational meeting spot.
Next is the entrepreneurial spirit. Tenants want to succeed, and to do so invest in their space, take business risk and work beyond the normal 8-hour day that you might find of a manager of a typical national big-box retailer. When they succeed, we succeed. And social identity, tenants can identify, service and become integral part of the everyday social interactions of their communities and neighborhood.
Third, let me comment on our real estate. Whitestone's real estate platform of handpicked properties brings together the tenant with the consumer. The types of properties we acquire and how we position our real estate must meet 3 important characteristics. They must be located in high-household income neighborhoods with household incomes among the best in the public REIT industry sector. They are in communities with highly educated workforces and positive growth potentials. Next, the ability to attract entrepreneurial clients, where they believe their businesses will be successful. Our marketing and leasing teams proactively search for tenants that understand the local consumer, and our property managers properly service our tenants by becoming fully knowledgeable of our tenants' businesses and goals. And then providing an expanding platform through our business model with properties that we can add value above our purchase price or replacement costs. The value-add component of our properties we acquire is captured when we expand the physical space for both the existing and new tenants.
Last, I would like to comment on the development of our unique infrastructure. Our infrastructure is designed to simplify complexity, be nimble, scalable and to be able to efficiently handle a greater volume of property management activities and leasing transactions. Our tenant leases are typically structured with shorter 3- to 5-year durations, market-based rents, triple net structures, 3% annual increases, percent rent participations, no restrictive cotenant clauses, and they provide Whitestone the flexibility to vertically manage the real estate in all stages of the economic cycle. To put this in perspective, we currently have approximately 1,650 tenants that provide us with a stable and predictable cash flow with minimal disruption when replacing a tenant.
Our team, technology, systems and processes are designed to scale our business while attending to our tenant needs. Together, this comprehensive approach has enabled us to achieve extraordinary results by understanding the consumer, selecting the right tenant, acquiring targeted real estates specific to our business models and developing our infrastructure to derive shareholder value, property-by-property.
Our contrarian approach to our real estate was ahead of the curve. And while our efforts have yet to be fully appreciated in the investment community, we believe that over time, as we continue to execute, we will achieve share price multiples similar or better than our peers.
Whitestone's total shareholder return has been impressive as well. According to SNL through October 31, we ranked #1 of 17 public shopping center REITs over a 1-year time period, #4 of 17 public shopping center REITs over a 3-year time period, and #4 of 14 public shopping center REITs over a 5-year time period.
Before I turn the call over to Dave, I'd like to make some additional comments. Hurricane Harvey. While Hurricane Harvey inflicted serious damage in the our city of Houston, Whitestone REIT was extremely fortunate, incurring only minimal damage to our 29 properties.
Industry recognition. We were pleased to have been added to the S&P SmallCap 600 Index, and I would also like to congratulate and show my gratitude to our team members. It was their hard work and dedication that took Whitestone from a turnaround story that it was 10 years ago and transformed it into a successful growth company it is today.
Independent trustees. We added 2 new independent trustees to our board, Mr. Nandita Barry and Mr. Najeeb Khan, significantly enhancing the board's diversity and independence. These additions expand the board to 7 members. But more importantly, add cognitive and gender diversity as well as a greater level of independence. At Whitestone, diversity has long been a key component of our success, and our board members fit well into our diverse culture and operations. Our associates include native speakers of 28 different languages, and our properties serve numerous multicultural groups.
Property dispositions. As an update, our previously announced disposition efforts are on track, expecting to close approximately $50 million of dispositions by year-end. And finally our scalability. As we look ahead, we are well positioned to make additional accretive acquisitions from a dynamic pipeline of over $500 million of similar types of properties with the ability to leverage our current infrastructure and our operating partnership structure. We have used this operating partnership structure in the past for 3 of our acquisition, and we priced our OP units at $19 per share.
With that, I would like to now turn the call over to Dave to provide a more detailed review of our exceptional third quarter financial and operating results. I will provide some closing remarks following conclusion of our Q&A. Dave, please?
Thanks, Jim. I will now provide further detail on the quarter's transactional activity and our financial performance. The third quarter was a very good quarter, highlighted by continued strong same-store net operating income growth in Whitestone's wholly owned portfolio of 4.7%, 19% year-over-year growth in NAREIT funds from operations per share, 20.3% year-over-year growth in our annualized base rent per leased square foot in our wholly owned portfolio, and a 250 basis point increase in our wholly owned operating portfolio occupancy to 90.1%.
For the quarter, our leasing team signed 92 new and renewal leases totaling 276,000 square feet, with a total lease value of $19.2 million representing future rental revenue income. Our leasing spreads for the trailing 12 months were a blended 7.6% on new and renewal leases. We ended the quarter with a total operating occupancy at 90.1%, up 250 basis points from a year ago and 30 basis points from the second quarter. As this positive trend continues, we expect net operating income to increase. Our annualized base rent on a year-over-year GAAP basis expanded 20% to $18.84 per square foot at the end of the third quarter.
We have a diverse tenant base, which minimizes our individual tenant credit risk, with our largest tenant representing less than 3% of our annualized rental revenues. At the quarter end, our tenant count was up 6% from a year ago. And as our tenants' businesses expand, our leases position us well to participate in their success.
For the third quarter, total revenues increased 32% over the same period last year to $33.7 million. This $8.1 million improvement in revenue was derived from same-store growth in our wholly owned portfolio of $1.6 million or 7.3%, and new acquisition of $6.5 million.
Property net operating income grew 30% over last year to $22.4 million. This $5.2 million increase was attributable to 4.7% same-store net operating income growth of $700,000, new acquisitions that contributed $4.7 million, and was slightly offset by a decrease of $200,000 in our consolidated partnership non-retail legacy properties. While our consolidated partnership legacy properties experienced a 1% reduction in occupancy, we plan to dispose of these properties and expect positive results in doing so.
NAREIT funds from operations for the quarter increased 60% or $3.8 million versus the prior year quarter. On a per-share basis, NAREIT FFO increased 19% to $0.25 per share. Funds from operations core for the quarter increased 33% or $3.3 million versus the prior year quarter. On a per-share basis, funds from operations core was $0.33 for both periods.
We continue to scale our general and administrative expenses over a larger base of assets and revenue. As a percentage of total revenues, general and administrative expenses, excluding acquisition and disposition transaction costs and the amortization of noncash performance-based share compensation was 7.8% of total revenues for the quarter. This compares favorably to 9.1% in the second quarter; 10.8% in Q3, 2016; and 11.1% for the full year of 2016.
Now let me spend a few minutes on our balance sheet. We have total real estate assets on a gross book basis of $1.1 billion, an increase of over $225 million or 25% from a year ago. Our assets have an annual in-place net operating income of approximately $90 million for an unlevered cash-on-cash return on investment of approximately 8%.
Our capital structure remains quite simple with one class of stock and operating partnership unit and a combination of property and corporate-level debt. Further, our underlying debt structure comprises a mix of secured and unsecured debt and well-laddered maturities. Our capital structure provides us with the financial flexibility to support growth opportunities. At the end of the quarter, approximately 2/3 of our debt was fixed, with a weighted average interest rate of 3.9% and a weighted average remaining term of 5.4 years. We had $73 million of availability under our credit facility at the end of the quarter, with additional availability of up to $200 million from the exercise of the facility's accordion feature.
As previously communicated, we expect our debt leverage to improve over time due to increased net operating income generated from rising occupancy and rental rates and from future acquisitions and additional asset dispositions. In line with our expectations, our debt-to-EBITDA ratio improved in Q3 to 8.27x, an improvement from 8.35x in the second quarter and 8.53x a year ago. We've continued to maintain a largely unsecured debt structure with 48 unencumbered properties out of 58 at an underappreciated cost basis of $733 million. We are reaffirming our previously announced 2017 funds from operations core guidance range of $1.29 to $1.34 per share. Please refer to the supplemental financial information that's posted on our website for additional details on our financial guidance.
This concludes my remarks. And Jim and I will now be happy to take your questions.
[Operator Instructions]. And we'll go first to Craig Kucera at B. Riley, FBR.
You had a pretty healthy drop in your cash G&A and overall G&A, and I know you spoke to it. But how should we think about that going forward? Is that trend going to continue? Or should we continue to see even larger increases going forward or sort of a -- is this a good run rate?
Yes. Thanks, Craig. Yes, as we've communicated, one of the things we feel very strongly about is the scalability of the infrastructure we've built. And as we've continued to grow the company, we've continued to see that G&A as a percent of revenue decline. We expect that to continue. This quarter was a very good quarter. Obviously, quarter-to-quarter, there's some different things. Had a little less professional fees this quarter. But we absolutely expect our G&A to scale over our assets and revenue and decline as a percent of revenue as we go forward.
Got it. I know you have I think about 21% of your space rolling through 2018. And clearly, the portfolio has smaller tenants than some of your peers. But can you tell us how retention is trending? And are you aware of any large move outs relative to your tenant base in 2018?
Yes, Craig, this is Jim. Our lease renewals is just a -- been an important part of our business model. And tenants, we knew when their businesses are successful. What we try to do is we help them to be successful with our intention that we place in our properties and our businesses. And then we have the infrastructure to follow-through on that. So we target about 80% renewals annually intentionally. And we don't have any large spaces that are moving out this year or next year.
We're getting a little closer to the annualization, I think, of the Pillarstone announcement. But has there been any movement or any additional thought on kind of how things are going to move forward with Pillarstone?
Yes, sure. Obviously, a lot of movement. I think we've previously communicated that it's our intent to have Pillarstone in a position, not to be consolidated on Whitestone's financial results next year. I think we still remain on path to do that. The Whitestone portfolio continues to perform very well, as we said it would. And I think we are on target with our plan to have Pillarstone deconsolidated by the end of '18.
We'll go next to Mitch Germain at JMP Securities .
So Jim, one of the comments you made in your prepared remarks about extensive research about what's missing in a market. Can you elaborate on specifically what you guys are doing there?
Yes, there are a number of things we do, Mitch. It includes looking at, say, the psychographics of the community. We look for neighborhoods that have high household incomes and then usually family neighborhoods. And then we look at -- we get into the neighborhoods, we -- our research takes us into the HOAs, into the meetings, into their minutes, into the data. And then we look for the drivers to find out what specifically is missing in a community. And we do that community by community. And we have a group of 3 or 4 people in the team, but that's all they do all day long. So what it does, it enables us to do two things, one is that we can respond with the right tenant, and we have a proactive tenant approach.
As opposed to say, putting a for leasing sign on the window and then seeing who calls, we go out and look for the type of tenants, and then show them the data that can help them see how their business can be successful. And that's one of the approaches we take to it. The second approach to it is that we then work with some of the other tenants that we have in place to find out what complements their businesses. And then we work with them to help them be in business. We're kind of thought -- we're thought of into our tenants as the entrepreneur of entrepreneurs, so we help them expand their businesses.
Got you. That's helpful. Back in the day, you guys used to reference a small tenant premium relative to the larger tenants in your portfolio with regards to -- from -- with regards to rent per square foot. Is that something that's still pretty relevant? Or the fact that you really just sort of kind of cycled out some of many of the larger tenants is not as relevant as it used to be?
It's very relevant. In fact we -- it's really the core of our model and that smaller is better. And we think it is. It creates a much more stable and predictable cash flow. So we evolve from just simply the small tenant to the small tenant, e-commerce resistant. And as we got more traction, we then focused on how we could exercise that and even get better at it than what we did. But what's interesting is that the 4 pieces that I mentioned in my remarks tie together. We want to understand consumer. When we understand the consumer, we want to make sure that we have the tenant that can meet that consumer's needs and wants.
And then specifically -- and you've looked at lot of our real estate, we target properties that fit the community, the tenant and the consumer. So we don't go out. We don't buy a mall and try to make them all work. We look for and find the properties within the community. And then we layer in our infrastructure that weaves that all altogether, so that our leasing team is trained accordingly. We have training all the time. We have a number of people who meet tenants. We look at properties all the time. So those 4 things woven together has really been the foundation of our success.
Great. And last from me. Obviously, Eldorado, BLVD, both had redevelopment opportunities. Listen, you've only owned them for a quarter or at least 1 full quarter. But just curious as to where both of that -- both of those stand right now.
Currently, we have plans to do anywhere from 140,000 to about 180,000 square feet of new space at BLVD. That will be about 2 stories of additional retail and then 4 stories of service office type of tenants. We have 1 LOI out right now. We're negotiating for approximately 40,000 of square feet of the spaces that hasn't been built yet, and we have about another 50,000 in negotiation. Currently, the property's about 100% lease, maybe 99% leased. Dave, you want to address Eldorado?
Sure, I'll just give a little color on the 2 acquisitions last quarter, which were great acquisitions for us, the Eldorado and BLVD, as you mentioned. I would say 1 quarter in, both properties are doing probably better than we expected with our underwriting, so we were extremely pleased with the 2 acquisitions we made last quarter, as Jim said, that the tenants are doing great. And the development opportunities there are looking very well, good as well. As Jim said, we're doing significantly pre-leasing kind of efforts on the sort of development potential at both BLVD and Eldorado. Eldorado's a little smaller opportunity with a 20,000 square foot pad with the potential of moving a tenant from in line to a drive-through location in that pad. So I think both of those are on track. We see those as big opportunities for Whitestone.
[Operator Instructions]. And we'll go next to Carol Kemple at Hilliard Lyons.
On the disposition that you expect to close in the fourth quarter, could you give us any guidance for modeling purposes about how many square feet that is? And what your net effective rent would have been this quarter if those properties were taken out?
Good question. I'm trying to kind of add up the square footage in my head. It's not a small amount, not a large amount of square footage. There are 3 properties we're currently marketing. One is about 200,000 square feet, one is about 100,000 square feet, and then the other one's about 100,000 square feet. So about 400,000 square feet of real estate, which is 7% or so of our GLA. They are lower base rent properties than our overall portfolio so they will have an impact on our ABR for the portfolio will improve with the disposition. And then they're just -- as we've talked about in the past, part of this is just recycling capital. They're properties that we feel like we've extracted as much value as we can, and we'd like to take that money in and put it into to either paying down our debt or to accretive acquisitions that we feel fit our business model better.
What kind of rent do you think they're doing on a square foot basis, like $10, $8? What should we kind of use for modeling?
Sure, and I can say it. Obviously, there is uncertainty in starting in selling properties. And potentially, we close on these, potentially we close on some. But I'll give you some of the numbers. The 200,000 square foot property is roughly, on a rent basis, it's about $16 a square foot. The 100,000 square foot property is roughly $8.75 per square foot. And then the 100% -- I'm sorry, 100,000 square foot property is about $8.50 per square foot. So our overall rate for the portfolio is a little under $19. Two of these properties are in the $8 range, and the one is $16.
And Carol, all three have a very nice profit built into them as well, from lower cost basis and also from what we've done to improve the property.
[Operator Instructions]. And we'll go next to John Massocca at Ladenburg Thalmann.
So looking at your same-store NOI growth, other revenues ticked up pretty dramatically. I know some of that's probably reimbursement of higher property operating expenses, but doesn't cover it all. Was there something else in that number? And is it going to continue to be that high going forward?
Yes. So the largest piece, as you said, was -- if you noticed our operating expenses, the property taxes were a pretty significant increase. I think as we've communicated previously, we worked hard to get our property tax valuation lowered. So we, on a quarterly basis, we do our best estimates of those. So we saw an increased in our property tax expense, and that was largely passed through to the tenants in the other income line. So that's the largest driver. Other drivers are just in some of our new acquisitions. For instance, BLVD, for instance, we get pretty a healthy amount of parking revenue. We also get some revenues from services outside of it. And then just the increase in the occupancy across the portfolio, obviously, as our occupancy increases, we get a greater coverage of our CAM. We've also -- as a company, one of the things we focused on is really, as we renew leases, making sure if we have any gross leases in our portfolio, we convert those to triple net leases. So we're very focused on trying to maximize the revenue coverage of our expenses and share that with our tenants.
We've just actually underwritten two leases, one was a new one, and one was a renewal. And these are wealth managers of large recognizable banks, both with gross terms. We took them to net terms. We have 3% annual increases. We have -- pass through the triple nets. In one case, we pass them through $11 of square foot triple net. And as that comes down, that'll change for the tenant. But they're paying their rent plus the triple nets plus the 3% increase. We also keep the terms down to 5 years, and then we can renew them in 5 years if they exercise an option with the -- at the market rents.
So that causes a little bit of just movement on the income statement, right, a little coming out of the base rent line and going into the other income line for reimbursement when we go from a gross to a net lease.
Sure, sure. So the sound of it, given these lease changes, obviously, not with same store. It was the actual income statement with BLVD, which has more kind of other revenue sources. But that -- this number probably is, relatively speaking, a good run rate going forward.
Yes, I always obviously look at, as you do probably when you model, look at a longer period of time when you do run rate. But I think there was -- that this quarter is very representative a little higher taxes. But nothing unusual in our other income, nothing that we know of in our other income this quarter. So it would be a good run rate.
Makes sense. And then as you guys look forward to maybe growing the portfolio, there's a lot of not necessarily new, but it seems there's kind of worse and worse every quarter, headline risk from e-commerce. Has that been affecting cap rates you're seeing out there with potential transactions, may be making some acquisitions look more attractive than they were, say a quarter or 2 ago?
I think you obviously just hit right on our business model, right? We've been focused on the piece of the real estate that we feel very good about, which is the smaller spaces, the service tenants. Sure, our cap rates on your malls and big boxes are, obviously, you're seeing a lot of impact there. That's not the type of real estate we focus on. We continue to see opportunities. One of the things we do, as Jim talked about the research is, a lot of it is boots on the ground, being very much involved in the local communities we operate in. And so we're continuing to see opportunities. We bought properties, obviously, over the last 5 years at good going-in rates, and we've been able to increase that cash flow. So we're not seeing anything drastic on the cap rates for the types of assets we're looking at. We continue to compete a little bit against more private capital, like we've always said we do. Because of the assets we look at are a little different than some of the other bigger public REITs.
So it sounds like, private capital, maybe a little at the margin but isn't getting skittish in these asset classes. So that the cap rates are kind of staying relatively the same.
Yes, we closed on two acquisitions last quarter. Hopefully, haven't closed anything. Cap rates are -- you really only know cap rates when you close or sell acquisitions or when you close or sell properties. And so we've continued to see, with our focus and with our staying out of auctions, being focused, looking for principals, really working a little harder maybe than some of the other folks, so we've continued to see attractive cap rates on the acquisition side. And then on the disposition side, we continue to see those as well.
John, we also think that if the tax changes, that we're reading about on the news every day, take effect that they'll have a very positive impact on us with folks who want to exchange out of real estate into OP units. And they'll look at the broad base of our structure. We're already in some discussions on that. And they look at the broad base of our business operations, states we're in, properties we own and the stability of our income to start talking about exchanging into our REIT for their properties.
And gentlemen, we have no additional questions. Mr. Mastandrea, I'll turn things back over to for you any additional or concluding remarks, sir.
Good. Thank you. Let me just thank you all for joining us on the call today. We really do appreciate your interest and your continued confidence in Whitestone, particularly those on the call who are overseas. We make a trip once a year there, and we've had a number of institutional investors who own our stock that -- we're pleased to see them, and they're pleased to see us and hear about our growth stories. And we thank you, if you're on the call today.
We're continuing to make progress on our strategic initiatives that support our business model, which we believe is quite innovative, building upon our well-positioned portfolios, specific types of properties with an optimal mix of e-commerce-resistant tenant. We're going to continue to grow our profitability and add shareholder value. For the remainder of 2017, we're going to continue to focus on increasing property occupancies and selling properties where the value has been maximized. We plan to use the proceeds from property sales to reduce debt and for selective, accretive redevelopment and acquisitions. We remain confident that our business model and team will continue to produce results that will be rewarded in the marketplace.
In closing, I'd like to say that the foundation of our success has been our ability to, once again, I say, weave together the depth and knowledge of the consumer, the selection and blending of our entrepreneurial tenants, the acquisition of specific types of community center properties as a distribution platform for service-based retail and the development and simplification of a complex infrastructure, including our highly skilled and experienced team. Together, we've been able to produce stable and predictable cash flows while increasing occupancy. We'd like to thank you, and we look forward to updating you in our progress as we move through the balance of 2017. Thank you all.
And ladies and gentlemen, once again, that does conclude today's conference. Again, I'd like to thank everyone for joining us today.
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