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SITE Centers Corp. (NYSE:SITC)
Q4 2019 Earnings Call
Feb 13, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning and welcome to the SITE Centers reports fourth-quarter 2019 operating results conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brandon Day with Investor Relations. Please go ahead.

Brandon Day -- Investor Relations

Good morning and thank you for joining us. On today's call, you will hear from Chief Executive Officer David Lukes; Chief Operating Officer Michael Makinen; and Chief Financial Officer Conor Fennerty. Please be aware that certain of our statements today may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially from our forward-looking statements.

Additional information about these risks and uncertainties may be found in our earnings press release issued today and in the documents that we file with the SEC, including our most recent reports on Form 10-K and 10-Q. In addition, we will be discussing non-GAAP financial measures on today's call including the FFO, operating FFO, and same-store net operating income. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release. This release, our quarterly financial supplement, the accompanying slides maybe found on our Investor Relations section of our website at www.sitecenters.com.

At this time, it is my pleasure to introduce our chief executive officer, David Lukes.

David Lukes -- Chief Executive Officer

Good morning and thank you for joining our fourth-quarter earnings call. Our 2019 performance is a great start to the five year business plan we laid out at our Investor Day a little over a year ago and I am enthusiastic about our teams focus on execution. Fourth-quarter results capped an excellent full year for SITE Centers with same-store NOI growth and OFFO significantly ahead of our expectations. Key drivers for the quarter were better than expected property NOI and Lower G&A, which were consistent themes throughout the year as our operations team have delivered on revenue and proactively managed expenses.

The fourth quarter also included a number of transactions, including the announcement of expected JV from our Teachers sale and $195 million equity offering, along with a significant repayment of our Blackstone preferred investment and three new acquisitions. Each of these actions are accretive to the company's long-term growth profile and position us well for 2020 and the years ahead. I'd like to put my comments on our fourth-quarter and full-year 2019 results into context with the three components of our five year business plan; leasing, acquisitions, and redevelopment. It's these three activities that underpin our 2020 guidance assumptions and the steady growth within the portfolio.

First, we are a leasing story. Our biggest opportunity for growth is to fill our valuable real estate with some strong tenants. At the top of the list are the 60 anchor opportunities we've been highlighting over the past year. We've now executed leases or LOIs on 43 of those spaces at a blended 38% leasing spread.

Our success over the past year was the primary driver of same-store NOI growth, the largest component of our business plan, which was 5.1% for the fourth quarter of 2019. The acceleration from the third quarter was boosted by early anchor openings and outperformance versus our budget driven by a number of positive variances. Full-year growth of 3.6% was also well ahead of the five-year average that we laid out at our Investor Day, supporting the most important part of this plan. As anchors and shops recently signed start to open and pay rent they'll provide a steady tailwind of growth for the next several years and are a key driver behind 2020 same-store NOI guidance of 2.5% and the midpoint of our range, including redevelopment and 1.5% excluding redevelopment.

I'm particularly pleased with the outlook considering the difficult comparisons in 2019 and several announced bankruptcies in the first weeks of the year. The second component of our business plan is acquisitions. As a reminder our five year plan calls for $75 million of annual investments funded via capital recycling, a goal we have achieved in 2019 through the acquisition of three properties in the fourth quarter. I discussed our vintage plaza deal in Austin, Texas last quarter and I'm now excited to announce two other investments in Tampa and Portland.

Both are consistent with vintage, where we expect vacancy and below market leases to produce NOI and cash flow growth well in excess of our portfolio average. Additionally, despite different formats, both properties benefit from adjacent natural traffic drivers. Southtown Center in Tampa, Florida, is a collection of service oriented shops surrounded by some of our top performing Sprouts and Publix grocery anchors in an affluent submarket. The blocks in Portland, Oregon is a bit more unique as is collection of urban retail condos at the base of 10 different apartment buildings in the Pearl district.

This submarket at the footsteps of Downtown Portland has seen significant population growth, with 5,800 apartments constructed since 2011 alone. The majority of the leases in our properties, which are occupied by a mix of restaurants, banks, and fitness users, were signed prior to the population growth I described providing a significant opportunity to increase cash flow upon lease expiration. Retail properties with true rent growth are challenging to identify. But our ability to use customer data gives us a clearer picture of the economic demand for space, and it allows us to be less concerned with the retail format and more focused on retail traffic.

Both of these recent investments have very high customer traffic and a proven roll up in market rents. With the scarcity of competition and a measurable mark-to-market on renewals, we are confident that economics on these acquisitions deliver a return that's high enough to warrant our use of capital. We remain optimistic that we'll be able to source additional investments over the course of 2020, all of which will highlight our bottom up format agnostic approach while all at the same time be mindful of our cost of capital. Finally, we're continuing to make progress on the third component of our business plan, redevelopment.

We started the second phase at the West Bay Plaza during the fourth quarter and are seeing very strong demand for the remaining space which will complete the transformation of our center. Tenants are also set to open over the course of 2020 at Venice at the collection of Brandon Boulevard wrapping up those projects. Finally, work continues on our pipeline of large scale entitlement projects, and we remain focused on realizing value on these sites, whether it means capturing profits early through a sale, mitigating risk through a joint venture, or executing on our own. In summary, SITE ended the year with a very much stronger portfolio of assets, a better balance sheet, and significant embedded cash flow growth, all of which supports our five year plan.

I expect 2020 to be another successful year as we continue to benefit from an occupancy uplift driven by strong tenant demand and flexibility to really invest opportunistically. Lastly, we were very fortunate to appoint Conor Fennerty as our new chief financial officer during the fourth quarter, and on behalf of all of our staff and the board of directors, I want to welcome him to the executive team. Conor has a proven track record as an investor and has earned tremendous respect through our organization over the past three years with his leadership of our finance and FP&A departments. I also want to thank Matt Ostrower for his incredible contributions to this company and his friendship over the past five years.

We wish him well at his next adventure and are sure he will make an impact like he did here at SITE Centers. And with that, I'll hand the call over to Mike Makinen to discuss our operating results.

Mike Makinen

Thank you, David. I'm extremely pleased with our operational results for the fourth-quarter and full-year 2019. Quarterly NOI was ahead of plan due to bad debt, bankruptcy settlement claims, higher overage, and percentage rent and earlier rent commencements. Anchor and shop leasing volumes remain robust and we are encouraged about the prospects to backfill spaces occupied by tenants that have recently filed for bankruptcy.

Since the RVI spin, we have repeatedly demonstrated that when we get space back from tenants, we can release at a healthy mark to market to a diverse group of tenants. We have opened four consolidated anchors in the fourth quarter, the majority of them earlier than expected, and now have 25 of the 60 anchor spaces identified at our Investor Day open and rent paying. Another 13 are signed but not yet open and five are in advanced lease negotiation. And as David mentioned, we expect these openings along with the backfill of 2019 and 2020 small shop bankruptcies to provide a multi-year tailwind.

New lease spreads and net effective rents for the quarter were right in line with our trailing 12 month averages since the spin. Renewal spreads were softer though due in part to several grocery anchors that exercised flat options as well as two short-term renewals of anchor tenants at redevelopment properties which were also included in our renewal spreads. As I've mentioned a number of times previously, our smaller denominator will create some volatility in our operating metrics. The lease rate for the portfolio was down 40 basis points this quarter, largely due to the dress barn closures.

Strong leasing activity partially mitigated these move outs with our operations team completing the highest quarterly shop volume in two years. Demand for shop space is deep and I feel very good about the momentum. So finally, our commenced rate was effectively unchanged and the 290 basis point leased occupied GAAP provides confidence in our ability to achieve our five year 2.75% same-store NOI growth target with a 1.5% annual average NOI reserve for tenant bankruptcies. With that, I'll hand the call over to Conor.

Conor Fennerty -- Chief Financial Officer

Thanks, Mike. I'll comment first on our balance sheet, discuss fourth-quarter and full-year earnings, and then close with thoughts on 2020 guidance. First on the balance sheet, our position remains very strong with pro rata debt to EBITDA in the quarter at 5.5 times compared to 6.5 times in the third quarter of 2018, despite the mid-quarter closings of the Tampa and Portland acquisitions. Our maturities remain in good shape with the weighted average term of 5.2 years.

We have significant liquidity as of year-end with almost full availability on our $950 million line of credit and just three of our 70 consolidated properties encumbered as of today. Additionally, we have three other sources of future capital. First is the $170 million of gross proceeds we expect to receive from the closing of the Teachers joint venture in the coming weeks. The second is the $113 million remaining preferred investment in our Blackstone joint venture.

We received almost $47 million of the preferred in the fourth quarter with the sale of ESUM Center as our joint ventures continue to unwind. The third source is the capital we eventually expect to receive through the ultimate liquidation of RVI. We received the second half of the original 34 million receivable in the fourth quarter and have the $190 million preferred remaining. All of these sources, proceeds from Teachers, the Blackstone preferred, and the RVI preferred along with growing EBITDA positioned the company to remain well below our stated long-term average maximum of six times net to EBITDA while strategically deploying capital where we find attractive opportunities.

That said, as David mentioned, we are mindful of our cost of capital and don't expect to close anything in the near term. Turning to fourth-quarter and full-year 2019 results. For the fourth quarter as previously mentioned, we benefited from a number of positive variances versus our budget. First, operations were ahead of plan due to the factors outlined by Mike, which were fairly broad based.

Second, bankruptcies had a much smaller impact than anticipated and we recognized $650,000 of revenues from Dress Barn and Forever 21, which we did not expect to occur. Lastly, G&A includes a $1.8 million onetime benefit that positively impacted results by a penny. The significant outperformance in the fourth quarter pushed our full-year results to $1.27 per share compared to the top end of our guidance range of $1.22. Importantly, results demonstrated measurable OFFO growth from 2018 after adjusting for the impact of spend, highlighting this company's ability to execute and drive cash flow per share.

I'll turn now to our 2020 guidance. We're introducing OFFO guidance of $1.10 to $1.14 per share driven by same-store NOI excluding redevelopment of 1% to 2% and including redevelopment of 2% to 3%. The same-store NOI increases driven in part by the anchor rent commencements David and Mike discussed, partially offset by a 60 basis point headwind from $1.8 million of bankruptcy claims settlement proceeds received in 2019 and bad debt favorability due to the adoption of a new lease accounting standard. Guidance for 2020 JV fees of 16 million to 20 million is unchanged with the sale of our stake in the Teacher's joint venture, the largest driver of the year-over-year decline.

I would expect roughly a third of JV fees to be recognized in the first quarter, with the remaining quarters equally balanced. In terms of RVI fees based on sales completed to date, RVI fees will be outmost $19 million in 2020 assuming no other assets are sold. That said, we expect the company to continue to execute on its business plan to realize value so our guidance reflects additional asset sales. Interest income will also be lower in 2020 due to a lower average balance of our Blackstone preferred and the mezzanine loan repayment in the fourth quarter.

Lastly, there are a number of moving pieces from fourth-quarter 2019 to the first quarter of 2020. First, weighted average shares will be higher at roughly 195 million due to the fourth-quarter impacts on the equity offering. Second, G&A will be higher as we won't have the onetime benefit recorded this quarter. Third, ancillary and other income is expected to be lower by $1.5 million due to non-recurring revenue received in the fourth quarter.

And fourth, in addition to some seasonality that leads to lower NOI in the first quarter we also will not have revenue from Dress Barn, Bar Louie, and Village Inn that's totaling $650,000. And as Mike mentioned, we are excited about the backflow prospects, but there will likely be limited revenue from these spaces in 2020. With that, I will hand the call back to David for some closing comments.

David Lukes -- Chief Executive Officer

Thank you, Conor. In conclusion, our first full-year post spin provides evidence of this organization's ability to grow, take the size of actions, and execute on transactions. We remain ahead of schedule and executing on the operational redevelopment, opportunistic investing goals that underlie our plans to produce compelling growth over the next five years and we expect another successful year in 2020. Now operator we are ready to take questions.

Questions & Answers:


Operator

Thank you. [Operator instructions] And the first question will come from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi, thanks. Good morning. First question, so 2019 was clearly a less impactful year from closures and bankruptcies and I think last quarter you commented that in your view it was more timing related and that you anticipate more transition. So, to start the year, we've seen some announcements, perhaps there's more to come but what's your updated view on the health of the retailer environment in general? Are conditions improving at the margin, or are they getting worse, what's your sense around the level of retail disruption that you're seeing?

David Lukes -- Chief Executive Officer

Hey, Todd, good morning. It's David. I would say that our opinion of the changes occurring in the retail landscape really haven't changed. What has changed is that the ones that we thought were risky last year turned out to be less so.

And some of the ones that we did not think were risky turned out to be more so. So if you take the surprises to the positive and these surprises to the negative, I think we feel like our stance on the continued changing of a tenant roster continues.

Mike Makinen

The one thing I'd add to that Todd is remember at our Investor Day we included a 150 basis points of annual reserve. So we're anticipating more of closures or we can absorb more closures over the course of a five year budget. And the exciting part is you'll see years like 2019 where we have very limited closures and you can see some outperformance. But in our years, where there are more closures, we can absorb that and our least occupied GAAP helps us for the year on the front.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Got it. And then with regards to that 150 basis points, how should we think about this year if you could maybe help break out a little bit of detail around sort of your budget for the year in terms of the property level budgeting that you've done relative to some additional cushion that might be embedded in the guidance?

David Lukes -- Chief Executive Officer

Sure, Todd, I will let Conor speak specifically to the budget. But I would -- I kind of referenced you back to our Investor Day conference which was just over a year ago. And what we said at that point in time was that the disruption in retail is going to give this company opportunities. But we should assume some churn and the churn that we have been witnessing allowed us to give sort of a five-year plan that included 150 basis points, which was the sum of credit loss and bankruptcy reserve.

But that was a blended average over five years. If I were to kind of tilt you toward a thinking process, and I think it's fair to assume that on average 150 basis points a year is going to be our budget.

Conor Fennerty -- Chief Financial Officer

And just to add on that Todd, so for 2020 as David mentioned we're using assumptions consistent with the five year plan. So it's 150 basis points of combined bad debt and bankruptcy reserves.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK, and you recaptured, I guess, on a few of the restaurants. I think you mentioned Bar Louie specifically. Is that tenant specific or are you seeing any concerns or challenges at all in restaurant?

Mike Makinen

This is Mike. Those two were somewhat surprising, Village Inn and Bar Louie. In aggregate across the portfolio, the restaurant business tends to be quite healthy.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

OK. Got it. And just a quick last one, the bills that's listed in the supplement, the last tenant on your top 50. Is that -- Bealls a separate entity from the Bealls that is owned by State Stores or is that [Inaudible]

Mike Makinen

The Bealls that you're referencing is separate and unrelated to Stage Stores.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Got it. All right. Thank you.

Operator

The next question will be from Christy McElroy with Citigroup. Please go ahead.

Christy McElroy -- Citi -- Analyst

Hey. Good morning, everyone. Just to follow up on Todd's question in regard to the buffer in guidance, I think we're all in tune with some of the sort of meter drivers there, including the management and RVI fee income, and interest income, and there's also the G&A impact. I just -- in terms of sort of reconciling and bridging the gap from that $0.33 in fourth quarter into what's a much lower $0.20 quarterly run rate next year, just wanted to try to gauge the level of conservatism here in that 150 basis points? And Mike, you mentioned that operations were ahead of plan.

Are you being extra conservative here or more realistic? I guess we're just -- I'm just trying to figure out of that $0.33 how much of that is sort of operations and vacancy, which I mean, it seems like your same-store NOI growth pace seems pretty good, so just trying to reconcile those two?

David Lukes -- Chief Executive Officer

Hey, Christy. It's David. One of the benefits of only having 70 wholly owned assets is that it's easy for us to do bottom up budgeting on every single suite with a lot of frequency. So I would say that anytime we come out with a budget on a portfolio of this size, you can assume that it's based on individual suites and therefore it's a realistic budget.

If you look at last year, a couple of things happened, number one, the construction team at the company were able to get a number of anchor tenants opened a little bit earlier than we had expected and a lot of that comes down to permitting and asking the tenant to open in their blackout period. So I think we pulled forward some revenue that was a little bit unexpected. But from a budgeting standpoint, it really is a realistic budget for 2020.

Conor Fennerty -- Chief Financial Officer

The only thing I'd add, Christy, to your point on the moving pieces, the three biggest pieces for next year attributing or contributing to the decline are JV fees, RVI fees, and interest income. And those three pieces alone are about $0.14 of headwinds. So that's really the biggest driver of the year-over-year change. To your point, it's February 13th where we have a balance up budget.

We feel very comfortable with the budget today. But to David's point, there are a number of other factors or assumptions that could change our timing and estimates over the course of the year.

Christy McElroy -- Citi -- Analyst

And, Conor, you mentioned G&A next year but I'm wondering if you could give a range of what's embedded in FFO, especially in regard to the how the RVI fee income is changing in sort of your expectations around being able to lower G&A with RVI coming off?

Conor Fennerty -- Chief Financial Officer

Sure. So we talked about '19 as kind of the trough year for G&A. And so we stopped providing disclosure on that because if you think about the last three years, we are a company in transition. There are a lot of moving pieces and we're trying to provide the investment community with as much clarity as we could provide.

For next year, we're not a company in transition anymore -- excuse me, for this year. I would expect, call it, $58 million to $50 million -- $59 million of G&A for the year. And again, we've kind of completed the hand-off of RVI fees and lower G&A. And so I'd expect there'd be that those kind of breakdown or the correlation to lower G&A and lower RVI fees to end in 2020.

Christy McElroy -- Citi -- Analyst

OK. And just lastly, I think you mentioned here, Mike, that you do expect more dispositions this year. What -- how are you thinking about sort of the JV asset sales that will continue versus assets that you would sell in the wholly owned site?

Mike Makinen

Yeah, in the wholly owned site, Christy, we don't have anything budgeted to be selling.

Christy McElroy -- Citi -- Analyst

OK.

Mike Makinen

It doesn't mean that opportunistically we might decide to recycle a property, but we aren't budgeting for wholly owned dispositions. On the JV side,it's a little bit out of our hands. The Blackstone joint venture continues to sell assets but really, it's under their guidance and direction. And any of the other joint ventures that have dispositions, it really has more to do with the partner than it does us.

Christy McElroy -- Citi -- Analyst

Right. OK. Thank you.

Operator

The next question will be from Rich Hill with Morgan Stanley. Please go ahead.

Richard Hill -- Morgan Stanley -- Analyst

Hey. Good morning, guys. First of all, thank you for the transparency on same-store NOI guide within -- without redevelopment. But I wanted to go back to maybe the 2.75% same-store NOI growth that you -- for your five year plan that you disclosed at your Investor Day.

I think that excluded redevelopment, and obviously redevelopment is a big part of your story. So would you be willing to think about your five year plan for NOI growth, including redevelopment in light of the additional disclosure this morning?

David Lukes -- Chief Executive Officer

Rich, that's a very good comment. You are indeed correct. The Investor Day presentation that presented at 2.75% average same-store NOI growth was excluding redevelopment. The reason that we have not talked about a five-year plan for including redevelopment is a lot of it depends on whether we're going to invest in the redevelopment assets once we achieve entitlements or whether we're going to dispose of that land and air rights and use it to invest in other properties.

So far to date, when we have entitled mixed use or multifamily property we have selected to sell the property, sell an out parcel or ground lease it. And so both have different effects that are pretty dramatic on same store. And so that's why I don't think it's all that wise for us to look ahead over the next couple of years. Having said that, on an annual basis when we come out with guidance I do think it's appropriate that we give you as much clarity as we can.

Richard Hill -- Morgan Stanley -- Analyst

Got it. But just to clarify that and add to that, one way or another, total NOI growth should be going up though because you're either going to be redeveloping it, which should be a positive or you wouldn't do it or you're going to be having proceeds and you will be able to reinvest those proceeds in other properties or pay down debt or something else. Is that sort of the fair way to think about it? What I'm trying to quantify is their upside.

David Lukes -- Chief Executive Officer

Yes. I mean, I think of it as if we're entitled to a piece of property that has real value, if we ground lease it, that's going to show up in same store. If we redevelop it, it'll take capex and it'll show up in the redevelopment inclusive of same store. And if we sell the land and reinvest it in a new property, it's not going to show up in same store because it's not in the pool.

Mike Makinen

Ye.. The only thing I would add, Rich, on that last comment from David, remember the 2.75% was the static portfolio that we owned at the Investor Day. So, one of the things David talked about the three assets we bought this quarter, we're really excited about. And one of the reasons we're excited about it is if we think it's additive to our growth rate.

So it will take time for those assets come into the pool, etc., but that's another factor to consider as you think through same-store NOI and NOI growth for the whole portfolio.

Richard Hill -- Morgan Stanley -- Analyst

Got it. And, David, going back to some of the prepared remarks and the significant amount of cash that you're coming -- that you've got coming in, can you just talk through how you might allocate that cash right now and how you're thinking about it versus paying down debt, buying new properties or maybe other sources of use of cash?

David Lukes -- Chief Executive Officer

Yes, I'd love to. We do have an exciting tilt here where I expect us to have some capital. If you look at the last year we paid down debt, we paid down press, and we bought assets, and we bought back stock. And I think depending on what we see in the open market, depending on our debt maturity schedule, depending on where the stock is trading I think we will make some prudent decisions.

The reality is we've tried very hard to be good stewards of shareholder capital and the amount of shareholder capital that's coming back to this company could be this significant which means we need to think very carefully about the acquisitions and where we put money.

Richard Hill -- Morgan Stanley -- Analyst

Got it. OK, guys. That's it for me. Thanks.

David Lukes -- Chief Executive Officer

Thanks, Rich.

Operator

The next question comes from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb -- Piper Sandler -- Analyst

Hey, good morning. Good morning. So just a few questions here. First, just going into the guidance and the $150 million of cushion that's for BKs and closings. Is Pier 1 on top of that or is Pier 1 in that $150 million?

Conor Fennerty -- Chief Financial Officer

So, Alex, Pier 1 nothing's been announced today, but here was a publicly disclosed list where we had four wholly owned properties but as of today they're paying rent and we have leases with them. And so it's kind of a status quo for Pier 1 today.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK, but presumably, Conor, I mean, you guys have budgeted something in your numbers. I'm assuming that those foreclosed just to be on the safe side correct?

Conor Fennerty -- Chief Financial Officer

Presumably we're aware of all the announcements to your point, Alex, and we've done this before and we're anticipating the worst or we can anticipate the worst.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. Great. And then on the RVI it seems like the U.S. is fine on the liquidation side.

Just curious the update on Puerto Rico, it sounds like it's still a really tough retail disposition market, but maybe as you guys look at RVI dispositions for this year you don't need to sell anything from there to continue at a healthy pace liquidation, so maybe you can give us some of the framework around peso liquidation and how much of that depends on being able to target the Puerto Rican market for asset sales?

David Lukes -- Chief Executive Officer

Hey, Alex. This is David, good morning. I really don't feel comfortable commenting on RVI's business strategy or execution. It has a separate board, as you know.

They do press release, and the press releases I think you can look at the pace of asset sales and whether they've been Puerto Rico or U.S. And I think you can make a reasonable judgment about the pace of dispositions in 2020, which is what we do when we look at our internal budgeting.

Alexander Goldfarb -- Piper Sandler -- Analyst

OK. And then just finally, I appreciate your comments on that you're not really looking for any wholly owned asset sales, continue to focus on JVs, but you've been acquiring assets to have either all small tenant or predominately small tenant to help NOI growth. So David as you look at what you're thinking about targeting for acquisition, whether it's this year or next year how do you think about these smaller tenant assets as improving the overall NOI growth profile of the company, and do you expect that through these acquisitions you grow 20 or 50 basis points of extra NOI that you'll be able to get in the run rate or how should we be thinking about that and what you're looking at?

David Lukes -- Chief Executive Officer

Yes, Alex, that's a really good question. As you imagine with the amount of capital we might have to invest we've spent a lot of time thinking about how we want to deploy capital. And I've mentioned several times the fact that these retail landlords have a lot more data than we all used to have even two years ago. And if I look at the markets today I see low construction deliveries, high development cost, high occupancy levels, and scarcity of good space in wealthy submarkets.

As this company SITE Centers starts to get through our occupancy build in the next two years, as you can imagine we're going to become a renewal story. And when you're buying properties and in high-income submarkets that are highly occupied, the renewal is really what you're -- and depending on for NOI and rent growth. And that's why we're using a lot of customer data to really look carefully at what each tenant is paying, compare that to other tenants that are similar in the market, and figure out where we can build an NOI growth that's arguably a lot higher than our internal core. We're not specifically avoiding anchor spaces.

It's just that as we look to the market and say where can we get real growth, the rent growth is really coming from smaller shops in wealthy submarkets.

Conor Fennerty -- Chief Financial Officer

And the one thing I will just highlight Alex as David mentioned in his prepared remarks, we are format agnostic, right. You'll see us buy a wide range of properties. So, you see, you're absolutely right. This past quarter, we bought three assets that were majority shops but you're likely to see us buy kind of across the retail spectrum in terms of format, and we are bottoms up format agnostic.

Alexander Goldfarb -- Piper Sandler -- Analyst

Thank you.

Operator

And the next question will be from Ki Bin Kim with SunTrust. Please go ahead.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Thanks. Just to go back to you same-store NOI guidance, you guys mentioned in your opening remarks that Village and Bar Louie accounted $650,000 in rent, is that in your budget and the 150 basis points is on top of that? [Inaudible]

Conor Fennerty -- Chief Financial Officer

I missed the first part of your question, you said the $650,000?

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Yeah. Is that on top of the 150 basis points reserve or would that be a [Inaudible] that reserve?

Conor Fennerty -- Chief Financial Officer

No. So the Bar Louie, the Dress Barn, and the Village Inn that's income we are no longer receiving. That's in our budget. That's not part of the reserve.

The reserve are for future bank pursuits that haven't been announced to date. And so again, to repeat the point, Bar Louie, Dress Barn, and Village Inn are in our budget, in our 1% to 2% same store and are not part of our future reserve.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Got it and can you just comment on any kind of capex trends you're seeing as it comes to tenant negotiations and if there's anything noticeable?

David Lukes -- Chief Executive Officer

Ki, I think a portfolio of this size, it's hard to make any broad comparisons but I'll let Mike answer that.

Mike Makinen

Yes, I mean, as you can see by our reported net effective rents, I mean, the capex has remained fairly consistent. The anchor tenants are still expecting similar packages that they were expecting over the last several years. And on our shop capex, that remains relatively modest.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK, but when I looked at that -- the capex, at least the tenant allowance part as a percent of the new rent value, it does seem like it's creeping higher, I know it's just one quarter but --

Mike Makinen

Yes, I think you just -- the answer to it is just one quarter and I think you're going to see a little bit of bumpiness quarter to quarter with the portfolio of this size. But aggregately speaking, we're not seeing any substantial trends or changes.

David Lukes -- Chief Executive Officer

I mean, Ki, one of the things that we always we always like to remind people is that as long as we're in a lease-up scenario, especially a lease-up of larger spaces, capex is going to maintain a fairly elevated state. Once that starts to wear thin and the lease to occupy gap closes, the company becomes more of a renewal story. And on renewals in high-income areas, I think you can imagine, you're renewing with very little TI, which is why our assumption is that our NOI growth is also going to flow through to AFFO growth.

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

OK. Thank you.

Operator

The next question comes from Vince Tibone with Green Street Advisors. Please go ahead.

Vince Tibone -- Green Street Advisors -- Analyst

Hey, good morning. Could you discuss how the Pier 1 closures are being negotiated? Are you expecting any lease term fees from this or are they using maybe similar to Dress Bran, the threat of bankruptcy to get out of its leases early without paying anything to landlords?

David Lukes -- Chief Executive Officer

Vince, I would love to speculate and good morning, but I think I'll withhold simply because we're not under any knowledge that would help shed any light on it.

Vince Tibone -- Green Street Advisors -- Analyst

Fair enough. And then maybe just shifting gears, are you able to share the cap rates on the acquisitions or can you just talk to me a little bit more broadly as well about what you're seeing in the private transaction market today?

Mike Makinen

Yes, sure. Well, as a reminder the investments that we made last year were made possible by recycling capital when we did a joint venture with a Chinese institution about a year ago. The proceeds from that transaction were used to pay down debt, buyback stock, and make some of our acquisitions so that the blended return of all those activities was far in excess of what we think the return is on our stock. Having said that, the acquisitions on their own blended to the six cap rate.

Vince Tibone -- Green Street Advisors -- Analyst

OK. Great. And then just broader, are you seeing any big shifts in the private transaction market, changes in debt availability or capital interest or pretty similar to the last let's say six months or so?

Mike Makinen

And I certainly in the last six months, I haven't seen anything that's been noteworthy that the ability to secure debt seems readily available, and we've sold a lot of properties out of joint ventures. And so I think we've got a pretty good window on the disposition outlook. On the acquisition side, it seems like the larger properties are pretty actively pursued by larger institutions. In the smaller properties, it's a little bit more of a mixed crowd with some private and some public but the demand for acquisitions is still pretty steep.

Vince Tibone -- Green Street Advisors -- Analyst

OK, interesting. And one last one for me, could you just share a little bit more additional detail on the redevelopment projects? They are expected to contribute this 100 basis points to same store this year? And just to clarify I want to make sure I understand all the major redevelopments are excluded from same store still, is that correct?

Conor Fennerty -- Chief Financial Officer

So, Vince, the major redevelopment will be included in the same store with redevelopment.

Vince Tibone -- Green Street Advisors -- Analyst

Got it. OK.

Conor Fennerty -- Chief Financial Officer

And so the assets contributing this year are the collection of Brandon, Van Ness, and then the first phase of West Bay.

Vince Tibone -- Green Street Advisors -- Analyst

Got it. OK. I just wanted to clarify that. Thank you.

Conor Fennerty -- Chief Financial Officer

Absolutely.

Operator

The next question is from Wes Golladay with RBC Capital Markets.

Wes Golladay -- RBC Capital Markets -- Analyst

Yes. Good morning, guys. Looking at the reserve on the preferred equity investment, is that driven by a cap rate assumption change or NOI at the property?

Conor Fennerty -- Chief Financial Officer

So, Wes, as you know, each quarter we mark to market that valuation reserve -- the preferred balance and we go property by property working with our transactions and our funds team. I can't recall specifically what drove the $3 million change this quarter. If you recall, last quarter we mentioned it was really just an anchor not renewing. Just given the size of that portfolio and the size of our preferred, it's really sensitive to input.

So it's a long way of saying I can't recall what drove that this quarter but it's usually a one or two items that moved it. To David's point, we -- it's really not a cap rate question. We haven't seen cap rates move. It's typically an operation change.

Wes Golladay -- RBC Capital Markets -- Analyst

OK. That makes sense. And then looking at the 17 acres of the 60 that you're still working on, are you actively marketing all that space? And then since the Investor Day, have you gotten any more anchorage back?

Mike Makinen

That is a good question. The answer to are we marketing all of that space, the answer is no. If you look at page 17 of our supplement you'll see some of our major redevelopments have a TBD next to them. In those cases we're sitting on boxes and we're holding them from being leased but they're part of that 60 that we mentioned at Investor Day because we're working on the entitlements.

Conor Fennerty -- Chief Financial Officer

And in terms of have we got anchors back, absolutely Wes and there's a normal amount that comes back every single year. It's a point that's not lost on us and those are -- the highlights the relevance of the 60 anchors. And we're excited about the tailwind for next couple of years but they're diminishing in terms of importance and there's other kind of more material anchors that we have that are either in lease up or vacant today. So it's a long way of saying that's absolutely yes to other anchors that have come back to us in the last 18 months since our Investor Day.

And that's kind of part of our normal course of business.

Wes Golladay -- RBC Capital Markets -- Analyst

And I guess, a follow up to that would be for those anchors I expect you would continue to get some back. So, is the new rent lease going to be comparable to be -- and what you are doing with the 60?

Conor Fennerty -- Chief Financial Officer

Yes, it will be part of our same-store pool in comp pool for our spreads. And you have seen our new lease spreads kind of hover in that low double-digit area and so they would be included in that pool, Wes.

Wes Golladay -- RBC Capital Markets -- Analyst

Not included but the comparable level like you get from the 60, you highlighted the big pop?

Conor Fennerty -- Chief Financial Officer

Yes, we have a certain number of boxes come back every single year.

Wes Golladay -- RBC Capital Markets -- Analyst

OK. Thanks.

Operator

The next question comes from Hon Sang with JP Morgan. Please go ahead.

Hon Sang -- J.P. Morgan -- Analyst

Yes. Hi, guys, just a quick question for me. Just looking at your footnote -- the notes you gave -- same-store excluding lost rent related to lease terminations, is that basically like the same-store excluding bankruptcy number?

Conor Fennerty -- Chief Financial Officer

So, Hon, the reference there is starting the third quarter of '19, we provided same-store NOI with and without the impact of loss rent from termination fees. Starting in 2020 to be comparable to our peer group, we are excluding any impact from termination fees, whether that's loss rent over the term fee itself. And so that footnote was simply a call out to let the investment community know that starting in 2020, again, we will have no impact from term fees as well as loss rent or the term fee itself going forward. If you look in 2019, the impact of the loss rent from term fees was fairly immaterial.

I think it was about 15 basis points but again just to improve our comparability to the peer group, we exclude all lease term impact for 2020 and onwards.

Hon Sang -- J.P. Morgan -- Analyst

Yes. Cool. Thank you.

Conor Fennerty -- Chief Financial Officer

You're welcome.

Operator

The next question will be from Floris van Dijkum with Compass Point. Please go ahead.

Floris van Dijkum -- Compass Point -- Analyst

Great. Thanks guys for taking my question. Just a question on the 150 basis points of reserve that you have, have you guys now -- what's the breakdown between rents -- these lost rents as well as cam reconciliations and how does that compared to historic levels?

Conor Fennerty -- Chief Financial Officer

Floris, we haven't provided that level of detail. What I would just say is we focus on loss revenue. So whether that's base rent, whether that's percentage rent, overage rent, cam it's all the same to us, it's loss revenue. The other piece that Dave and I both mentioned is there's a bad debt component.

So we saw bad debt. We have a separate bad debt assumptions related to income or revenue, excuse me, which is cam plus base rent as well. And so again, we're not going to provide that level of detail, what I would just tell you is we focus on loss revenue which includes all the factors you identified.

Floris van Dijkum -- Compass Point -- Analyst

OK. Thanks. That's it.

Operator

Next up is Linda Tsai with Jefferies. Please go ahead.

Linda Tsai -- Jefferies -- Analyst

Hi. What are your occupancy goals for 2020? And it seems like the lease to occupy narrowed this quarter versus third quarter, would you expect this trend to continue?

David Lukes -- Chief Executive Officer

Linda, it's David. We are very happy with the amount of leasing production out of the team. We had a fantastic year last year. I will say that our goals have more to do with leasing space to the right tenants and we don't have occupancy goals for the leasing team or for the company, which is why we really don't mention occupancy goals in the guidance.

Linda Tsai -- Jefferies -- Analyst

Thanks. And then on the renewal spreads, understanding there were a couple onetime items and you're more focused on leasing up right now, what level would you expect to generate for renewables overall in 2020, understanding it's pretty volatile?

David Lukes -- Chief Executive Officer

I would expect the overall renewal rate to be similar to what we've seen in the past several quarters. We did have some onetime events this quarter that tended to soften it a little bit.

Conor Fennerty -- Chief Financial Officer

And, Linda, if you remember from our Investor Day, we talked about a blended spread of 7.5% and the range of 5% to 10%. So we're kind of consistent with our range on a trailing 12-month basis.Linda TsaiThanks for that. And then just one final one, sorry if this is an obvious question but for your separate bad debt assumption does that include spaces where you don't expect a tenant to renew and it might be hard to fill that space right away?

No, so bad debt is really just about revenue recognition, right? So that's tenants that are in place today that either, to Floris' point, don't pay cam or don't pay base rent. So it's really a function of existing tenants just sit on the income statement for rent paying tenants. The bankruptcy reserve is a function of tenants that go bankrupt and just stop paying rent.

Linda Tsai -- Jefferies -- Analyst

OK.

Conor Fennerty -- Chief Financial Officer

I'm happy to -- if you want, I'm happy to talk about that offline as well.

Linda Tsai -- Jefferies -- Analyst

OK. Great. Thanks.

Operator

The next question will come from Chris Lucas with Capital One Securities.

Chris Lucas -- Capital One Securities -- Analyst

Hey. Good morning, guys. Maybe a little color on -- so you've got 25 of the anchors that have begun paying rent. What's your expectation for this year in terms of openings and the cadence of those anchor openings for 2020?

Conor Fennerty -- Chief Financial Officer

Chris, typically, as you know, anchors like to open around the holidays. So you'll see those back-half weighted or back-end weighted, I should say, in the fourth quarter. That's consistent with the trends we saw in '19 and '18. Absolutely you could have some folks open mid-year but the majority will be kind of a back half or fourth-quarter weighting.

Chris Lucas -- Capital One Securities -- Analyst

Any sense as to the number of anchors that will open this year?

Conor Fennerty -- Chief Financial Officer

No. I mean, if we have a lease signed, typically you'd open up in the same year but there's always folks that have larger build outs, more complicated build outs, or permitting issues that could push you to 21. So the other thing I'd say is we're providing the anchors by count. Within that count there is a wide range of brands, right.

So you could have anchors that pay much higher rents in a higher income area. That could be more material than one that pays lower income or lower rent excuse me. And so again I think you just see the impact likely in the fourth quarter but you could see other ones slip as well but count is not what's going to drive growth.

Chris Lucas -- Capital One Securities -- Analyst

OK. And then, David, I don't know if I heard the answer. Did you provide the cap rate for the two assets you described in the investor presentation?

David Lukes -- Chief Executive Officer

I did but I had a long soliloquy before I mentioned it. But yes, the acquisitions last year all in aggregate blended to a six cap.

Chris Lucas -- Capital One Securities -- Analyst

OK. And then the investment thesis behind the two assets, can you describe here? Is it mostly below market rent related or is it remerchandising opportunity, what's sort of the driver there?

David Lukes -- Chief Executive Officer

Yes. For these two in particular, the opportunity is renewal spreads.

Chris Lucas -- Capital One Securities -- Analyst

OK. And then last question for me, just last time you guys bought stock back was I think stock was around 11.75. How do you think about the relative value today given the portfolio significantly derisked the balance sheets to much better shape, etc., etc.?

David Lukes -- Chief Executive Officer

Well, I agree the balance sheet is in better shape and I think the company's been de-risked. I do think we do have some complexity still. When Conor goes through the sources of capital this year, there's a number of them. And that complexity, I think, can sometimes show up in the discount.

And so I think, we'll see what happens over the course of the next couple of quarters but we feel pretty good about the business plan.

Chris Lucas -- Capital One Securities -- Analyst

Thank you. That's all I had.

Conor Fennerty -- Chief Financial Officer

Thanks, Chris.

Operator

Your next question is from Samir Khanal with Evercore.

Samir Khanal -- Evercore ISI -- Analyst

Hey, Conor, good morning. I'm sorry if I missed this, but I know there's a lot of focus on the same-store NOI growth. But when I look at your FFO, I mean I know there's a lot of variability with fee income, RVI fees, I'm just trying to figure out at what point can we start to see a bottom from an FFO standpoint. So, any color on that would be helpful

Conor Fennerty -- Chief Financial Officer

Sure. So let me walk you through some of the big moving pieces for 2020 versus 2019. And I think they have applied some color on the kind of future growth rate of the company. So as I mentioned too, I think as Christy JV fees, RVI fees and interest income are about 13% of these headwinds.

On top of that we've got the G&A or higher G&A and a higher share count, which are roughly two to three pennies as well. And then lower other income in terms fees year over year is another call, two pennies. That takes you from a $1.27 to call it $1.09 round numbers. And then from there we have NOI growth.

What you're seeing in 2020 -- I guess, is this is something we've tried to highlight over the last couple of years since our Investor Day Samir is the kind of handoff from lower RVI fees to the reinvestment of capital that both David and I have talked about. So it's really going to be a function of when and how we reinvest that capital in the back half of this year and into 2021 Samir. And what I would just tell you is we feel really good about our five year business plan and the 5% OFFO growth that we outlined. As you see us reinvest that capital of course in 2020 I think you'll start to see more visibility on 2021 and future growth.

Samir Khanal -- Evercore ISI -- Analyst

So it's fair to assume that this sort of 2020 is the bottom and then that's sort of you will start to see the inflection at this point?

Conor Fennerty -- Chief Financial Officer

I think you'll start to see that growth profile develop over the course of the year, Samir, correct.

Samir Khanal -- Evercore ISI -- Analyst

OK. All right. Thanks.

Conor Fennerty -- Chief Financial Officer

You're welcome.

Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to David Lukes for any closing remarks.

David Lukes -- Chief Executive Officer

Thank you all for joining our call and we will see you either next quarter or at the conference.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Brandon Day -- Investor Relations

David Lukes -- Chief Executive Officer

Mike Makinen

Conor Fennerty -- Chief Financial Officer

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Christy McElroy -- Citi -- Analyst

Richard Hill -- Morgan Stanley -- Analyst

Alexander Goldfarb -- Piper Sandler -- Analyst

Ki Bin Kim -- SunTrust Robinson Humphrey -- Analyst

Vince Tibone -- Green Street Advisors -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Hon Sang -- J.P. Morgan -- Analyst

Floris van Dijkum -- Compass Point -- Analyst

Linda Tsai -- Jefferies -- Analyst

Chris Lucas -- Capital One Securities -- Analyst

Samir Khanal -- Evercore ISI -- Analyst

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