Mike Mas - SVP of Capital Markets Hap Stein - Chairman and CEO Lisa Palmer - CFO Brian Smith - President and COO Chris Leavitt - SVP and Treasurer.

Christy McElroy - CitiBank Jay Carlington - Green Street Adviser Jim Sullivan - Cowen Group Craig Schmidt - Bank of America Rich Moore - RBC Capital Markets Michael Mueller - JP Morgan Chris Lucas - Capital One Securities.

Greetings and welcome to Regency Centers Corporation Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Mike Mas, Senior Vice President of Capital Markets..

Good morning, and welcome to Regency’s third quarter 2015 earnings conference call. Joining me today are Hap Stein, our Chairman and CEO; Brian Smith, our President and COO; Lisa Palmer, our Chief Financial Officer; and Chris Leavitt, Senior Vice President and Treasurer.

Before we begin, I would like to address forward-looking statements that may be discussed on the call. Forward-looking statements involve risks and uncertainties, actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements.

Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Forms 10-K and 10-Q which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

We also request that callers observe a two question limit during the Q&A portion of our call in order to give everyone a chance to participate. If you have additional questions, please rejoin the queue. I will now turn the call over to Hap..

Thank you, Mike. Good morning, everyone, and thank you for joining us. Our results continue to be extremely gratifying. We’re achieving Regency’s key strategic goals and objectives. First we’re sustaining a long term same property NOI growth in excess of our goal. As evidenced by excellent visibility into a fourth straight year of 4% growth.

Second our development team continues to source high quality shopping centers for development and redevelopment allowing us to deliver an average of $200 million of great projects annually.

Third, we are strengthening an already conservative balance sheet to disciplined match funding of investments and efficient accessing of multiple sources of capital. At the same time we’re enhancing the intrinsic quality of our portfolio which is by all relevant measures one of the best in the sector.

Ultimately the combined results of these strategies are consistently compounding core funds from operations and net asset value by 5% to 7% annually. As important Regency is well positioned to continue to consistently deliver on these key objectives in the future. Lisa..

Thank you Hap and good morning everyone. We’re pleased with our results this quarter with core FFO per share of $0.76 representing a 7% increase over the third quarter of 2014.

Year-to-date same property NOI growth excluding termination fees was 4.5% with base rate continuing to be the largest contributing factor as move-outs remain as historically low levels and we experienced gains in commenced occupancy.

Through the first three quarters NOI growth has exceeded our expectations, although it is projected to moderate slightly during the fourth quarter as we face higher comps especially in the other income line item. We’ve raised our guidance accordingly and we now expect full year same property NOI growth to be in the range to 4% to 4.3%.

Moving now to capital markets activity, I would like to spend just a few minutes updating you on the status of our forward equity offering. As a reminder we completed the offering in January on a forward sale basis. This allowed us to best match the proceeds with the intended use.

As discussed at the time of the offering and on subsequent earnings calls, we identified three uses for the proceeds. First, the acquisition of University Commons in Boca Raton, Florida. Second, repaying $100 million of near term debt maturities to further enhance our balance sheet.

And finally, prefunding a portion of our ongoing development and redevelopment pipelines. We closed on University Commons in September and yesterday we notified the holders of our bonds maturing in the summer of 2017 that we will be redeeming a $100 million or 25% of that issuance at the end of November.

Given the certainty of timing we’re now planning to fully settle the forward at that time. As a result of this early repayment, we’ll incur make-all premium of approximately $8 million in the fourth quarter. This will be added back for purposes of [indiscernible] in core FFO.

Driving for well laded maturity profile and managing interest rate risks, our both key balance objectives, it will provide us with more financial agility. Today’s capital markets backdrop and elevated maturities in 2017 support the partial retention as the most cost effective debt repayment alternative at this time.

And further, we expect our estimated net debt to EBITDA to improve to 5.3 following the settlement.

In summary these capital markets activities combined with the continued strong results of the same property portfolio as well as some straight line rate increases driven by the exceptional leasing of our development properties resulted an increase to the midpoint of our guidance range for core FFO per share of $0.04 to a new range of $3 to $3.03.

Brian?.

Thank you Lisa and good morning everyone. 2015 is shaping up to be another successful year by all key measures. On our same property basis the operating portfolio planned a 96% lease to quarter end. The largest growth continues to be in small shops which rose to 91.5%.

Demand for quality space remains high well shop space move-outs as a percent of leased space continues to surpass historic lows. Despite the trend in move-outs translated into retention rate that exceed historical averages which is another measured portfolio health.

Retention rate was very strong in 80% for the operating portfolio year-to-date again well above our long term average.

The momentum from the strong leasing trends gives me confidence from our portfolios ability to achieve additional occupancy gains as we continue to benefit from robust demand from retailers of the restaurants which – by low levels of new supply.

The favorable leasing environment affords us to leveraged execute leases with higher starting rents and embedded rent steps. Rent growth by new leases signed during the quarter was nearly 19% while we continue to attain an average of nearly 2.5% annual growth embedded in the vast majority of our deals.

Our consistent occupancy gains and pricing power produce same property NOI growth in excess of 4% for five consecutive quarters and lease explained have enabled us to raise our earnings guidance for the current year. This positive trends also give us confidence in our ability to sustain long term NOI growth of 3% or higher.

Turning now to acquisitions, we continue to be able to find exceptional shopping centers with superior growth prospects. At least to mention as many of you are already aware, we closed on our most recent acquisition University Commons last month.

University Commons is a 180,000 square foot center located on the major east-west quarter in an densely populated market of Boca Raton. It also benefits from a significant day time population from the nearby Florida Atlantic University.

The center features a top performing foods as well as best in [indiscernible] for national retailers including [indiscernible]. With current rents at 25% below market there is a sizeable opportunity for this property to add to our long term NOI growth profile.

Focusing now at our ground-up development this quarter we completed our Persimmon Place project in the Bay Area. This 150,000 square foot center took only 20 months from the start of construction to completion and had 99% leased incremented.

We’ve already received overwhelming positive feedback from our line up a fresh tenant to share, they’re performing well beyond their expectations. The exceptional quality and performance of this project demonstrate the accurate, best in class development team and has already led the new development opportunities.

After the close of the quarter we purchased three acres of land adjacent to our end processes line market in Dallas for second phase of this already successful alters into project. CityLine phase 2 which is 100% leased even before breaking ground will have an 22,000 square feet to the 80,000 square foot center already under construction.

We’re projecting a return of 8.6% on invested capital for the second phase. Looking briefly on dispositions during the quarter we sold Glen Gate in Mariano’s anchored shopping center in Chicago for $50 million for a cap rate of 5.1%.

Consistent with our match funding strategy Glen Gate was identified as a potential disposition for the funding of the acquisitions given it’s lower than average growth profile well also enabling us to reduce our exposure to Roundys.

As evidenced by the increased guide range for acquisitions, we do have a good visibility into compelling acquisition opportunity in the north east at a comparable cap rate to Glen Gate sale. Lastly I would like to touch on [Hagen] in light of their recent announcements.

The six locations represent a minimum amount of base rent in our portfolio and with restock and gross debts our potential exposure is less than 13 base points. The good news is we’re confident in the desirability of our real estate and our ability to enhance the quality of earnings accounts.

With average base rents in the single digit there is potential to unlike substantial growth and redevelopment opportunities. In addition the leases are guaranteed by [indiscernible]. Thanks for listening, we’ll now turn the call over to the operator for questions..

[Operation Instructions] Our first question comes from Christy McElroy with CitiBank, please proceed with your question..

Hi, good morning guys.

Lisa to follow up on your comment, in November do you expect to settle this form out of the equity offering and then did the sale of Glen Gate to help fund the Boca deal impact to your decision to go via the settlements?.

Yes. As you know that cash is fundable, we did complete our bond offering in the middle of August and where we closed on University Commons in September. And the Glen Gate sale did happen, but even with that said we still intend to fully settle the full amount at the end of November.

And the Glen Gate proceeds have been earmarked for the increased acquisitions in the guidance that we gave..

Okay.

And then Brian, just looking at your acquisition guidance beyond the Boca deal, sorry if I missed this, is there another deal that you are close to that maybe you have under contract at this point I notice that it’s now up to $80 million to $90 million, I didn't know if there was an $18 million deal you are working on?.

We do. We have got – we have a couple of properties under contract in the North East. We are in the process of due diligence right now and we would – we haven't determined yet if they are going to close because the due diligence that we do have a couple under contract..

And one is a little more certain than the other which is the one that we have included in the upper end of the guidance..

Where in the North East?.

That's on the long island. And the other one is in the Boston area. .

Great, thank you. .

Thanks Christine..

Our next question is from Jay Carlington with Green Street Adviser. Please proceed with your question. .

Thank you.

Lisa or maybe Brian, I am just kind of wondering how difficult is it to forecast the redevelopment contribution at the beginning of the year?.

What we do is that basically the answer – right at this time now we are looking at all of our potential redevelopments that may begin over the next 12 months. In many cases you are going to need something else to happen though. We usually have pretty good visibility a year in advance. So, we have a pretty good understanding of what’s going to happen.

However, there could always be delays. It could be that you are negotiating with an anchor that's already in there right maybe for an expense, tear down, rebuild, and that is – there is always some uncertainty to that timing. But roughly we have pretty good visibility into the next 12 months. .

This is just the start to and when the anchor decides we want to open and sometimes that changes. We got the permitting but then we also have approval that are also required by the other anchored and that can take a longest amount of time..

Okay and maybe a quick follow-up to that I guess, how does your year-to-date redevelopment contribution compared to kind of what you are thinking at the beginning of the year?.

I think we are pretty much right on target..

And Brian, did put a question here, kind of want to get your thoughts on, if you think the markets observing the recent wave of bankruptcy that we’re seeing in and the store closures and maybe some of the mergers that are coming down the pipe that may result in other store closures?.

I haven’t seen much concern about the store closures impacting us, we don’t have that many big boxes and the kind of assets that we’ve got, we’ve got – I think of our vacant big boxes half of them we’ve activity on.

The bigger issue in terms of the bankruptcies and the mergers so forth is, what it means for developments going forward it means, right now all the activity and developments coming from the grocers and largely from the specialty grocers, but they have all got their 16 pipelines full, they’ve got their 17 pipelines full and then you got all the [Hagens] on the west coast where people were wondering what’s going to happen there and still have – down in Chicago, you got the AMPs that are out there, you still have some recommends.

So, it’s more, can we get any development going, I’d say the flip side of that the good side of that is the grocers are only taking the top deals given those pipelines are full and given the excess inventory out there. So, if you got one, then it’s really, really good projects..

Jay, I want to go back to your first question, I think something that’s really interesting about the contribution of redevelopments. The ones that are already in process, we’ve really good systems in place to understand what that contribution is going to be.

It’s those that we haven’t started yet that we may or may not start in the current year that we’re trying to project and could be – property is not considered a redevelopment until we put it in the supplemental in our disclosure as a redevelopment and a great example of that is the center that we have in South Florida near the Adventure Mall that we have been allowing tenants leases to expire so it’s not very well occupied because we’re getting right into a full scale redevelopment there and that is right in our same property pool.

It is not considered a redevelopment even though I believe the asset is 70 some percent brand. So that one is most difficult..

Got it that’s very helpful, thank you guys..

Thanks Jay..

Our next question is from Jim Sullivan with Cowen Group, please proceed with your question..

Just kind of a big picture question Hap, the internal growth here has been exceptionally strong and with cap rates in the acquisition market being as low as there, I guess when we think about the value creation margin with your both ground-up developments as well as redevelopment set back grant that margin is probably as high as do you ever seen it.

I’m curious and this sort of goes on – follows what Lisa just said, but the redevelopment opportunities in the portfolio were seen to be very value accretive, and I wonder if you think about those as a source of growth on the one hand as opposed to what I’ll value add acquisitions.

Do you see scope for more growth and either both of those given how profitable they’re – value accretive they are given the margins?.

Well, there is no barriers of our capital then a redevelopment of the existing portfolio because what we are doing is we are enhancing typically and already good center making a great center, we are getting an attractive return on capital and we are going to increase our growth profile on a go forward basis. So that's – that is priority one.

Priority two would be we still believe that ground up development in the exceptional cases that Brian indicated still make sense and we can do that hit margins. Well not as good as they were coming out of the downturn.

We are not as good today but they are still very compelling and we are building great shopping centers that are going to be great addition to our portfolio in the long term basis. And then thirdly, from an acquisition standpoint, what we are doing there is we are incrementally increasing our growth rate.

We don't consider that to be an immediate value creation but we are selling like in the case of Glen Gate a low growth asset in addition to that we are reducing our exposure to round these and reinvestment that capital at roughly comparable cap rates into the shopping centers that's going to generate much more growth longer term..

And I am curious in terms of, as you think about that acquisition market cap rates of course have come down and stayed low for some time now. And there seems to be a significant number of potential buyers out there who want to stable project, well located with long term leases and place.

Just how competitive is the acquisition market for the value added acquisitions something where there is some hear on or some issues that maybe that long term stable coupon type buyers now really looking at it or looking for maybe as a scale set to redevelop?.

I think Brian can add color to this. I think market is still is very competitive. But from an acquisition standpoint an acquisition with upside potential would be our top priority. And one of the properties that we are working on in the North East has that both –.

We basically have two and one that we are trying to get contract. So we have got three of those we are working on its competitive. I mean all the acquisitions are competitive.

We are seeing in the a), grocery market is what we thought our cap rates from Florida four and three quarters we had to compete [indiscernible] going in the low four and whereas I thought the IRRs were then around six and we are seeing 6 to 6 in the quarter we are not seeing couple of properties grow a remiss by a wide margin where pension funds are sold per 5.5 to 5.3 quarters on leverage side.

It's competitive in the As and it's competitive in the value add. .

Okay, great, thank you. .

Thank you Jim. .

Our next question is from Craig Schmidt with Bank of America. Please proceed with your question..

Thank you.

Brian given the six locations from [Hagen] would there still be grocer and if they are what are some of the names you like to replace them with?.

Well, there would be grocers for all six properties we’ve got interest, in fact on five of them we have at least two, I am sorry five of the properties have at least three interested parties and there is two interested for all six and some of the names that they are out there stocking, you got smart and final and we have also got [Galsons] and we love [Galsons], in particular there are – they are more compatible I think with their high end demographics but you got target [inaudible] interested there is whole -- North West [Winco] is interested.

[Lazy Acres] which is part of – farms so pretty much a whole host of good names..

Great. .

And the offers that are coming in are also remains to be seen whether we can get control of these leases are whether they’ll – by somebody else at auction one of the grocers but the offers that we are seeing are just really, really strong I mean you talked about $4 rents going to $28. .

Wow! And then I notice for ABR you have got 17% restaurants given the consumer demand for this type of product, would you be willing to raise that exposure?.

I think we love to have as many great restaurants as we can get. The problem is that we are restricted, in some cases we are restricted by the grocers who have prepared food they want to sell and the biggest issue would be the parking and city code how much restaurants you can do..

Great. Thank you..

Thanks Craig. .

Our next question comes from Rich Moore with RBC Capital Markets. Please proceed with your question..

Hi. Good morning guys.

Last quarter you mentioned that you were looking at about $650 million of potential development is that still the case?.

It is. We are working on $650 million in 2015 and 2016, we are getting near the year end I think we are going to – you’ve seen our guidance I think we will end up it's a very high end of that guidance and then next year it's going to be a strong year.

More guidance to come but I wouldn't be surprised if we were in the $250 million to $300 million range and so therefore we would be averaging around that $200 million a year that we talked about lumpy but on average we are going to hit it..

Okay.

So do you Brian still feel that within the last quarter you said you felt that the current environment was the best environment you have ever seen for tenants and we’ve seen a little bit of, I don't know maybe uncertainty in some of the other reports this quarter, do you still feel like it's the best quarter you have ever seen – the best environment you have ever seen for leasing and for your business?.

I do think it's still the best environment just given the fact that there is so little development going on that the retailers are doing well.

I mean when I look at our portfolio I see nothing that's showing any reason for concern I mean the leasing environment is strong, that there is no let up in momentum when it comes to the new leasing, tenants are not moving out. We have had the second highest year of renewals in our quarter renewals and the lowest quarter of move-outs.

All those trends continue really, really strong. The only thing that I would say is that whether it's talking to brokers out in the market if you go to the regionalized CSC, you go to ULI I think everybody is and if you talk to our own tenants they are just cautious. They are taking a long time to open.

They are being very, very careful about opening new stores and that’s part of why I think it's a really good environment because nobody is getting caught up in the exuberant. And they can't really point anything but it's just that market is nothing to worry about little bit you hear that the traffic is down but conversions of sales are up.

So, it's just that I think it's a healthy caution out there. But it's not translating to anything we’re seeing in our current metrics or in our pipeline..

Just reiterate that last point that Brian made, is I think this healthy caution on the part of retailers and restaurants and tenants in general is a very healthy trend because you are not sitting there, they are making it appears to be very rational decision and on the last cycle sometimes maybe we should have scratched our head and said, what the tenants doing doesn't make sense or why are they doing that now they are cautioned and they are – when they do move forward it does make sense so I feel good about that..

Okay, good. Thanks guys.

The other thing is I wanted to ask you second – it was a [Liddell] on two German grocers are you running into those guys and kind of what you think of them?.

We are putting all the – in one of our centers a back filling them and then up in North Carolina [Liddell] is going across the street from one of our developments.

I don't know anything about [Liddell] I hear what they are talking about that we heard about that from Fresh Needs on the West coast that didn't pan out so I just reserve comment on that one.

All the I would say by and large I think they are obviously good retailers and they drive a lot of traffic but they typically are going to go and demographics are different from our portfolio..

Okay, good, great. Thanks very much..

Thanks Rich. .

Our next question is from Michael Mueller with JP Morgan. Please proceed with your question..

Couple of questions on the Boca acquisition I mean, should we think of that as just stabilized core acquisition or is there something significant that you kind of do with it overtime?.

Well yes, I mean we have a saying around here that we would like to invest in properties where bad news becomes good news and this is the ultimate center like that I mean the bad news here is that the tenants are generating mall like sales, I think they are averaging about $850 a foot across the entire center.

It is now the number one whole foods in our portfolio. [indiscernible] if the sales are absolutely at the top of their chain. Same with [indiscernible] and beyond. We get calls through brokers, competitors, head of real estate congratulating us.

So the growth you see there, it's about 3% is contractual over the next ten years but after that we are going to see a lot of growth and it's any of these retailers – whoever should go out the rents across the board are about $1.6 million below market.

So if you could just bring that up to market, which we will get to do obviously eventually I mean there is a huge pop in value..

Okay and then you talked about contractual growth.

Can you just walk through I know you have been trying to push bumps a little bit harder get more frequent bumps in leases, get higher escalators, can you just kind of walk through how that whole process has been trending in the past couple of years?.

Sure. If you look at our – we have been focusing on this for two and three years – we’ve been focusing forever, but the focus on the midterm steps is relatively new.

So our portfolio on the deal specific basis so just the leases that contain round steps averages about 1.6% if you look at what we average for the last three quarters it's about 2.3%, so 70 basis points higher.

That's pretty significant and then if you translate that into all leases including those that don't have steps but remember we are getting this now from about 90% of our tenants. The growth in the portfolio is about 1.2% and we have been averaging over the last five or six quarters about 2% so really, really healthy midterm increases..

And you have to take time that percentage increase but I think we are projecting with the next three to five years we got to be another 30 or 40 basis points in that..

Got it. Okay. Thank you..

[Operator Instructions] Our next question is from [indiscernible] with Evercore, please proceed with your question..

Hi, good morning guys.

As you guys kind of look in the next year and I know that you haven't provided any kind of official guidance could any kind of this proactive re-tenant or re-bunch merchandising efforts that impact NOI growth like some of the other REITs or sort of start to mention 4Q next year, could that impact growth I am just trying to get a sense of how should we think about growth rate for next year?.

As we have communicated in the past we believe that we can generate 3% plus same property NOI on the sustainable basis given the quality of our portfolio along with some of our re-tenanting and redevelopment activities and we hope that that would get us to the 3.5% range.

I will remind you that this year if we stay north of 4% which is looking extremely likely at this point that that will be our fourth consecutive year of 4% and as you know, for our product type that's difficult to achieve and so something that we are really proud of.

When you think about the contribution of redevelopments and Jay was asking this earlier it is going to vary and it's going to depend on how many properties that we are actually redeveloping at one time and we have given general direction that we would expect that that spent could be $20 million to $50 million and so at any given year redevelopments could be a positive contribution of 50 basis points roughly to 100 basis points.

And so if you think about our contractual rent steps that Brian just talked about plus our rent growth that gets you to about 2.5% and then the redevelopment activities would add $50 to $100 so that's your 3% to 3.5%..

Got it and just curious on your thoughts about [Howard] square assets that one of your peers announced this morning as an acquisition.

I know you guys likely looked at it considering your interest in sort of increasing exposure to the North East?.

I am not aware of it..

Okay. It was one of your peers announced that acquisition I was just curious. Okay thank you..

Our next question is from Chris Lucas with Capital One Securities, please proceed with your question..

Good morning.

Just wanted to see if there has been any change in the cycle or getting leases completed, in other words have tenants been accelerating the process or they have been slowing down given where we are in the cycle?.

I think it’s slowing down. If you look at our down time it was above this quarter, so largely that's because we are leasing space and they can last longer. I think if you look at the vacant two to three years we did 49% of our leasing was in that category whereas just the prior quarter just 34% so that accounts for some of it.

But I think overall it's taking longer because everybody is just battling. It's kind of what happens talking about they are going to be really careful about not doing a bad deal.

We are fighting for all those things that just take a lot of time and we are striving to get not only the economics like fighting for the initial rent growth or the bumps in there but things like termination rights, relocation rights, so we can do renovations and redevelopments. We are fighting those kinds of things.

So a lot of it’s a negotiation and then just getting the stuff through the cities is taking an awful lot of time.

Having said that if you look at our development that’s working on right now I mean lots of rep, as we parked out and we expected it to, we talked about Persimmon on the call but that thing in 20 months is 99% leased and now we have started CityLine phase two and we haven't broken ground it's 100% lease. And I think the first phase is 98%.

So, we are getting things done very rapidly. We are finding robust demand. We are working on a project in Huston and we hope to announce next two or three months and that one maybe three months away from closing and we have activity on 93% of the space.

So, while they are cautious and while there is many things to slow down the process and it is taking longer, it’s still pretty robust. .

I guess the follow up then Brian would be and you mentioned that Huston and so maybe I will call that out, but are you seeing the decision making processes that being impacted by market or is it very specific to location?.

I don't think it's that specific to location. I think the locations we have people are excited about it's just getting the leases signed.

It's difficult we have that situations where retailers will change their hurdles and they will have to go back to their committee and again you get through that it's a good thing because they are being cautious but I think that's more across the board rather site specific..

Okay. great. Thank you very much. .

Thanks Chris. Operator The next question is from [indiscernible] with Wells Fargo. Please proceed with your question..

Hi, good morning.

Brian I was just wondering if you could quantify the move-outs in the quarter relative to your expectations and then maybe I will just start to think about 2016 is there any reason to think that move-outs will normalize or do you expect that they will continue to be these historical levels?.

Well we haven't been very good at predicting that. It is pleasantly surprised us – surprised last two years. What we do is we do two things and try to estimate them.

We start with the field and go space by space, who is struggling, who do you think is going to be moving out, who told you they’re going to move out and we start there and then what we do here Jacksonville, we make an adjustment and what we do is we look at the trend of move-outs not absolute but as a percentage of occupied space.

And then stuff happen. That trend has been on a downward slope since 2010 but also a bit accelerating so in 2014 it was 1.6% of occupied space, so in 2015 we budget 1.7 and year-to-date it's 1.4.

So I don't see anything right now that would, well it's getting so low you would think that if it just flattened out at this it would be great because our move-outs for this full year are going to be about a million square feet less than it were in the 2008 – 2010 time frame so at some point they can’t keep going low.

But I don't see anything that's going to cause that trend up..

I will add that I mean Brian hit it right on it's just really difficult we are – we have been talking about this internally because we really have continued to overestimate what we have thought move-outs would be and it might offset by chasing all downhill.

So in 2010 or 2009 with the highest, but even 2010 is a little bit more of a normal year the number was 2.4% and it fell to 1.6% of occupied space basically of people moving out and we thought we were being reasonably conservative if you will by budgeting 1.7.

So thinking that move-outs would stabilize the quality of our portfolio has significantly improved. The tenants help has significantly improved and all that is contributing to and this continues to improve and we don't know when it will stabilize and obviously at some point it's going to go the other way.

And so, we are trying to being as reasonably conservative but realistic..

Virtue of cycle is a good thing. .

And then maybe just one more question following up on Texas I can see the leased rate is up versus last quarter but I guess I am just curious what you are hearing from retailers about there is sales in that market and if you are seeing any change in future demand there? Thank you..

Sure. So what we are hearing is kind of what I mentioned before for those in the portfolio everybody is happy. Nobody is moving out. The renewals are up again. But they know there is going to be a slow down at some point.

But if you look at the new demand our pipeline is stronger now than it was even a couple of quarters ago and again what we measured that as a percentage of vacant space. I will talk about new leasing so if you look at this year it looks like we are going to lease about 71% - 72% of our vacant space.

If you compare that to the average in last five years, the average last five years about 75% so it continue to do a lot of new leasing not so much on absolute basis but we continue to lease a smaller and smaller amount of vacancies.

And if you look at our pipeline it was over the last four quarters about 46% of vacant space and this quarter it's 54% so tenants start moving out we are continuing to do a lot new leasing and the pipeline behind it remains strong..

Okay. great. Thank you. .

Thank you..

Our next question is from [indiscernible] with Morgan Stanley. Please proceed with your question..

Hey good morning..

Good morning..

So, a question for you first on construction labor, I wonder if you are seeing any labor related bottleneck in your development activities.

I asked because the number of home builders in particular who share your market footprint largely have noted these labor related bottlenecks I am curious if you are seeing anything on that front?.

You see those on the smaller projects. I mean overall we have not experienced the problem. We are aware of where cost are trending and we budget for them.

But you are right, whereas material costs are pretty benign that labor is increasing I think what’s driving that is the construction spending and spends of 2008 and you are seeing worker shortage is growing.

The unemployment for September was 7 year low and employment was 6 six year high and the interesting thing is if you look at the actual wage increases year-over-year it was the highest since 1986. And we are seeing across the country especially in the Mid West the associated general contractors reporting significant labor shortages.

So that's translating this past year about 5% increase and 4.5% increase in total cost but you see that as high as 10% or even higher on small projects where basically the contractors don't want to work on it if you want them to pay them enough then they will work on it but for a large projects we haven't seen that. .

Okay and just the few clarification.

So first of all it sounds like you are not taking that issue yet but then I just want to clarify the numbers if you’re discussing and those are purely labor cost doesn't reflect materials or land rate?.

Yes that's correct.

That's just labor and then the materials I mean if you look at cement, concrete, that's pretty much like I said 3% -4%, precast is 2% to 3% glass is stable, the only material were we are seeing – we’ve been given notice that you can start to see increases would be on steel and this was about three months ago they said they expect 10% increase in steel prices.

But overall material prices are pretty benign..

Okay. Appreciate that and then Lisa for you, sorry if I missed this but a clarification on the partial notes redemption. The $100 million I guess redeem next month.

Just curious want to make sure that one these costs are baked into the current guidance and then also any current – any update on current thinking on the remaining $300 million of note that will be outstanding pro forma?.

First yes, the make all is in our existing guidance and we will – it would be, there have to be some unusual reason why we would not just let the notes go to maturity and then refinance them at that time because I will remind that you that we have a forward starting swap in place for $250 million of that issuance so at a minimum we certainly expect to refinance at least $250 million..

Okay. Thank you. .

Thank you very much..

There are no further questions at this time. I would like to turn the call back over to management for any closing remarks. .

We appreciate your time. And want you to have a great remainder of the week. Great Halloween and great weekend. Thank you very much..

This concludes today's teleconference. Thank you for your participation. You may disconnect your line at this time..