GGP
#So the As are generally about 10% of NOI and the Bs are generally 13% to 14% of NOI.
CapEx.
All kinds of CapEx and the allowance of CapEx, that's in that math.
Well, the ---+ we've chosen to be prudent here.
We've chosen to seek.
Out institutional investors to come in and be our partner.
The institutional investor base is eager to acquire more A centers.
There are no A centers in the market for sale.
They've elected to be part of a ground-up development, such as Norwalk.
And in discussions with them, because there are so few of these, the question is should we increase the size of the project from about 200,000 square feet to 300,000 square feet.
We're evaluating that.
The leasing activity, as I mentioned, if this project was 300,000 square feet, is preleased to about 50% today.
The mix, so far, has been a combination of entertainment, fitness, restaurants, apparel, electronics, home furnishing.
I will likely venture to say, of that 50%, a larger percentage has been nonapparel.
Yes.
We've said it's an 8% to 10% return.
The rents we're getting today would demonstrate that the retailers feel that the sales productivity of the center will be in the high $700s.
So they're sort of are not-anchor deals, and they're not in-line deals.
They take about 60,000 square feet.
They do terms.
I think that's a 20-year term.
And we get ---+ I would sort of sit back and say, a return of at least 6%, if not slightly higher.
I think businesses as usual.
We don't start unless it's preleased.
We've actually maintained that our Seritage venture produces closer to 7%.
The non-Seritage is between 8% and 10%.
So I think we've maintained exactly in that sort of wheelhouse.
The tenant demand is there.
Again, these are the better-quality assets, which is where most of the redevelopment is occurring and there is a demand for space as evidenced by ---+ even a trailing 12-month leasing spread actually inched up a little bit.
Even though I've continued to maintain guidance of spreads of 8% to 10%, they have inched up.
So it's sort of speaks to a flight to quality to good real estate.
Yes.
So we tried to lay those out on Page 4.
But effectively, on the G&A front, we had the Seritage gain last year, which is included in mining that G&A number, and we had that onetime bonus pool impact.
So you had a $20 million swing from 1 year to the next.
It looks like this year was much higher than last year, but the reality is you really need to adjust for the run rate.
Except the bonus pool.
We're thinking of joint venturing it as is as well.
It's pretty comparable.
So with respect to the net debt number, that's effectively as we've been saying for a long time, the growth in EBITDA.
Some of it is the amortization of debt that occurs.
But generally, it's the growth in EBITDA.
That is the driver of that statistic.
With respect to the line, we just had a timing issue on cash.
We expect that to be 0 by the end of the year.
We had ---+ we paid a special dividend in the first quarter.
We paid the regular dividend in the first quarter.
We paid the bonus pool in the first quarter.
The first quarter has a large chunk of cash.
So we feel pretty good about our liquidity position.
We don't really have anything going on in the marketplace right now in terms of loans.
So ---+ and as far as the floating rate exposure, it's generally ---+ and we've maintained this for a while.
Since we are a one-loan, one-property philosophy, if we have an asset that's not ready for fixed financing, it's going to be floating rate.
That's just the definition.
We also have ---+ about half of the floating rate is in a term loan with the banks that has a fairly good maturity on it.
I don't have that broken out.
We were really just trying to focus people on the cash flow and the downtime, though it does take time to get these people back in.
But I don't have a specific occupancy target for the second quarter.
; So, <UNK>, we have 12 Seritage JVs; 4 are under construction.
And I've said, I think in my previous call, the various other ones have dates and timelines, and 9 out of the 12, so far, are preleased.
So we could ---+ we hope to see start in construction on another 5, hopefully in the next 12 months.
As it relates to the other acquisitions, as you know, both in the case of Tysons and actually Stonestown Galleria in San Francisco, we recaptured the Macy's boxes.
So they sort of have a fair leaseback for 3 years, I believe.
We're making headwinds.
Stonestown is virtually 100% now leased.
We hope to recapture it a year ahead of schedule, again showing the demand for A-quality assets.
And in the case of Tysons, again, we have very good leasing progress.
Again, I fully expect by year-end, we'll be 100% lease of the Tysons box.
<UNK>, as I mentioned, I don't want to be repetitive but there's no sacred cow.
We will look at all alternatives, okay.
We've done the math and we look at our top 80 assets and we refine that after a while.
We're all in the real estate business.
There's a demand for space, and we know that the math of just ---+ of the value of the A assets is so much in excess of what we create today.
It will be na.
ve for us not to look at all options available to us to create shareholder value.
And I think we've said this in numerous investor meetings.
As a matter fact, at the Citi conference, we said it at almost every meeting.
But I think it takes a sense of urgency when devaluation is not being appropriately met in the marketplace.
So we're ---+ we will evaluate one of all multiple paths to go on, and we will make some decisions in the near term.
It will always involve the board because any decision over $100 million requires board consent, okay.
So it'll be management's recommendation, and the board will review and approve our path forward.
Brookfield, like any other investor, cares about shareholder value creation.
And we will evaluate what's the best way to bridge the gap between the value as we see as a company, okay, and where it creates today.
I think it's a little bit of both.
I think if it's quality real estate and the retailer wants to maintain their position in the shopping center, they would have to pay the appropriate rent and maybe, in the short term, a slight hedge up in occupancy cost.
It may be.
We've seen that with retailers, I mean, who have actually turned around, and Talbots is a great example.
Talbots continue to pay rent while they were in a turnaround.
They've done a fantastic job turning around their business.
It was important for them to maintain their position of real estate and decided to take the difficult pain while they were in the turnaround process.
I'm only giving you a success story.
J.
Jill, very similar.
Again, I'm very proud to say that these are power retailers who had turned their business around and moved forward.
I would also sit back and tell you that there are retailers who are eager to expand ---+ power retailers eager to expand as they've seen the carnage, okay, of the tenants that went bankrupt who have been in a weak positioned for long periods of time, such as Limited, such as Wet Seal.
And so we are actually seeing other retailers, who have performed, stepping up and increasing their size and scale in the shopping centers so that they can actually take ad<UNK>tage of the lost apparel sales from the bank of retailers.
I think the better assets will continue to perform.
And I think what we see is ---+ what we don't break out is between the A assets and the B assets, that the carnage is more felt in the lower-quality assets than the higher-quality assets.
And as I demonstrated, that the big delta in NOI weighted in sales is $705 to non-NOI-weighted, it's $591.
So you can just sort of appreciate that, that sort of applies even for apparel in the higher-quality assets versus the lower-quality assets, and we're not NOI weighting at 1.8%.
Given you've started monitoring traffic, could you provide some details around what you saw in the quarter.
So traffic has been steadily building through the year.
The traffic is likely up in the ---+ in our shopping centers.
Only a handful of them have sort of calendared, if you will, so you could year-over-year comped.
But we will tell you that we see ---+ if I were to just look at the amount of traffic from the first quarter, the first quarter had ---+ January had 30% of the traffic, February had 30% of the traffic, March had 40% of the traffic and April is building ahead of March.
So we're actually seeing traffic build.
Again, the best function of ---+ are showing you that the centers are performing well and actually sales have picked up.
And then in terms of store closures, is it evenly distributed across the As and the non-As.
Or did you see a higher percentage of square footage close in the non-A malls, which I know you pointed out as 20% of NOI.
So the ones that obviously liquidated, like Wet Seal and Limited, there's no ---+ it's across-the-board.
But for the ones that have not, I'll give you a little example.
Payless Shoe allows bankruptcy.
Thus far, we only have 2 closures of the 80-odd Paylesses that we have.
rue21 announced a list of 400 closures.
Thus far, we only have 14.
And so they tend to be in the lower-quality assets.
And then just one final one for <UNK>.
Given the comments around depressed occupancy in 2Q, what would be reasonable same-store growth expectation for that quarter.
Well, it'll probably be the worst of the year.
The bankruptcies will hit it.
Probably $10 million of that $25 million will probably hit the second quarter, so less than the first quarter.
Well, if you take out the $25 million, that's a big chunk of it.
And then there were some odds and ends around the same-store that kind of offset in net G&A.
But I think if you look at what we said in the comments, you can pretty much get there.
ARROW is basically out of everything other than FFO.
We ---+ it's tax-affected.
It's all down in the FFO.
There is a line item in our supplement called ---+ I think it's net investment income, which is where the pretax income of ARROW goes and then we have a tax provision.
So it's out of the EBITDA.
It's out of the company NOI.
It's out of the same-store NOI.
Yes.
At this moment in time, it's been and we've maintained it.
That's been 7%, and the [odd] reason for that is obviously half the space is being leased back to Sears.
All I'm going to say is that it doesn't ---+ NOI weighting highlights the quality of the portfolio.
Spinning assets doesn't mean that one of the ---+ that could not be one of the options, that we were the first people to spin Rouse.
So you could say in this cycle, we invented the spin.
And so the answer is you just lose whatever x hundreds of millions of dollar of cash flow.
It really doesn't change your portfolio.
If the investor base needs to see a higher-quality asset without appreciating that NOI weighting does the same thing, it's ---+ we hear you.
And from our perspective, like I said, the way to value the asset pool is to figure out how we demonstrate that the ---+ sum of the parts is greater than the whole.
Because at the end of the day, we're in the retail real estate business.
And the disconnect that exist between the private and the public markets is expensive.
I actually gave you that on the A assets, the market price is in the mid-3s to the low 4s.
If you take my 80% of my NOI and do the math, you'll see that we're in the real estate business.
And at some stage, the market will appreciate the value of the real estate, and it may be that we need to demonstrate how we show them that.
And again, it's our job to create shareholder value, and we're focused on it.
Well, we've already identified for '18 and '19, all right.
So right, now we've identified ---+ we control the real estate.
We are in the redevelopment process.
So to get that sort of 30-ish million dollars in '18 and the same 30-ish million dollars in '19 of incremental NOI is already in our authority and development, all right.
So to effectuate that in '18, you have to be well under construction today.
So over the last 6 years, we believe in good corporate governance and there's been a rotations of our Board of Directors.
As you may remember or may not, in 2010, 2011, we had John Schreiber, Cyrus Madon, Sheli Rosenberg as part of the board, and they rotated out in the last couple of years.
So we actually feel that it's good corporate governance to rotate our directors.
And we are actually very happy to have Janice Fukakusa, who was the CFO of RBC; and Tina Lofgren, who was Head of Real Estate of TJX Companies, to be new board members after our Annual Shareholder Meeting.
<UNK>, I think it's up to us to sort of think a path just for the sake of discussion.
If you sold an asset and you dividend out the cash to your investor base and they believe they can invest their money, it's ---+ all it does is it takes it off the top.
If you buy back your stock, it's a whole different animal.
So I could take a very extreme situation and say, let me sell 80 A malls and dividend out $25 in dividends, or some math better than that, and then I have 50 assets producing $0.5 billion of cash flow with a 0 stock price or say a $0.25 stock price.
I don't know the answer.
All I'm trying to demonstrate is that if a market doesn't value the real estate, it's our job to make sure that the investors get their appreciation, either in the form of dividend or some form of demonstration that we are in the real estate business and the real estate needs to be valued appropriately.
So I don't really have an answer.
All I do realize is the disconnect has gotten so wide, it is up to us to demonstrate to the market that there's a real estate value at stake here.
It's just the management and the board.
<UNK>, we have just started the process of evaluating the path that we want to take.
The disconnect has widened, as you can all appreciate, in the last 30 days.
So when we went out for ---+ to put the project of Norwalk to find institutional investors, each 1 of the 4 institutional investors that presented a proposal to us for Norwalk inquired for asset sales or JV partnership in the built, stabilized assets, and they did tell us in discussions how they view the market pricing to be.
As a matter of fact, if you speak to most of the institutional investors and ask them which is the best-performing asset class within their portfolios, it usually is superregional malls that have produced, over the last 20 years, the best return.
And we continue to see that today.
If I actually just look at the As and the higher-quality As, it actually ---+ as the quality increases, that growth rate goes from 4% to 5%, even in this environment.
Thank you for joining the call.
Please contact <UNK> or <UNK> with any questions you might have.
We look forward to seeing many of you over the next couple of months at ICSC and NAREIT.
Have a great day.
