Ramco-Gershenson Properties Trust's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Ramco-Gershenson Properties Trust (RPT)

Q1 2012 Earnings Conference Call

April 25, 2012 09:00 ET

Executives

Dawn Hendershot – Director, Investor Relations

Dennis Gershenson – President and Chief Executive Officer

Gregory Andrews – Chief Financial Officer

Analysts

Todd Thomas – KeyBanc Capital Markets

Nathan Isbee – Stifel Nicolaus

Vincent Chao – Deutsche Bank

Ben Yang – Keefe Bruyette & Woods

Rich Moore – RBC Capital Markets

Michael Mueller – JPMorgan Chase

Presentation

Operator

Greetings and welcome to Ramco-Gershenson Properties Trust First Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Dawn Hendershot, Director of Investor Relations for Ramco-Gershenson. Thank you. Ms. Hendershot, you may begin.

Dawn Hendershot – Director, Investor Relations

Good morning and thank you for joining us for Ramco-Gershenson's first quarter conference call. Joining me today are Dennis Gershenson, President and Chief Executive Officer and Gregory Andrews, Chief Financial Officer.

At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Additionally, statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made. Although we believe that the expectations reflected in any forward-looking statements are based on reasonable assumptions, factors and risks that could cause actual results to differ from expectations are detailed in the quarterly press release.

I would now like to turn the call over to Dennis for his opening remarks.

Dennis Gershenson – President and Chief Executive Officer

Thank you, Dawn. Good morning ladies and gentlemen. It's with real pleasure that I report our company's first quarter solid achievements in growing income, improving shopping center fundamentals, and advancing our capital recycling program while simultaneously promoting a sound capital structure. These results provide concrete evidence of significant advances in the repositioning of our portfolio and the achievement of a much stronger balance sheet.

Our efforts to chart a course that supports growth in long-term shareholder value were evident in our fourth quarter 2011 numbers and are even more impactful in the statistics we are reporting today. As it relates to our shopping center performance, we believe that the momentum we have created over the last 12 months, which was reflected in this quarter's same center net operating income growth of 3.3% and a core asset occupancy consistently above 93%. We'll continue to build throughout 2012 and beyond.

Supporting this conclusion in the first quarter, we achieved meaningful positive leasing spreads across the board. We also continue to improve our shop leased occupancy, a critical factor in driving income growth by 50 basis points. One reason for our success in achieving smaller tenant occupancy gains is the number of multi-store agreements we are signing in the soft goods category of 3,000 to 5,000 square feet with national retailers including Carters, Rue 21, Dots and (indiscernible) as these users position themselves among our new anchor tenancies.

In addition, tenant retention at growing rental rates remained strong at over 85%. Subsequent to quarter end, we have signed a new anchor lease with Ross Dress for Less to replace a large portion of the Sweetbay grocery, which closed in the first quarter at our Village Lake Center in Florida.

Supporting our goal of generating consistent, sustainable income growth, management has the responsibility to assess, anticipate, and respond to an ever changing retail environment. Thus, we have been actively engaged in a conscious effort to reduce our exposure to certain retail categories and to proactively work with those retailers, we anticipate closing stores who are downsizing their footprint. By way of example, over the last 18 months, we have worked with our three office supply retailers to replace their tenancy, where sales fell short of their expectations and where we could constructively achieve a reduction and our exposure to that sector. Since initiating this program, we have decreased the number of office supply stores in our portfolio from 30 to 24. We have also been in active negotiations with certain mid-box tenants who were (designers) of downsizing. These store size reductions have created the opportunity to lease space to a growing list of national in between size retail users occupying 8,000 to 11,000 square feet including ULTA, Five Below, and Shoe Carnival. Historically, community shopping centers consisted of large format anchors and small ancillary retailers.

Thus, the downsizing of the mid-boxes has created the opportunity to accommodate these exciting retail concepts. An additional benefit designing these in between retailers like ULTA is that their tenant fee generates interest from other complementary operations. Also in the category of large format retailers who are working to redefine their identity. Best Buy has recently announced a series of store closings and they have revised their prototypical footprint, which is now smaller than many of their existing stores. We applied Best Buys in the portfolio. None of our stores are on the closing list and the majority of our locations call within the range of their new prototype. That said we are positioning ourselves to mitigate the risk to our portfolio if there was a change in Best Buy's current strategy. Each of the five shopping centers, where Best Buy is located is part of a major metro market. Each is an infill location and each is the object of additional national mid-box tenant interest if space should become available.

Read the rest of this transcript for free on seekingalpha.com