Welcome to Retail Opportunity Investments 2016 Third Quarter Conference Call. Participants are currently in a listen-only mode. Following the company's prepared comments, the call will be opened up for questions.

Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of Federal Securities Laws.

Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the company can give no assurance that these expectations will be achieved.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations.

Information regarding such risks and factors is described in the company's filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K.

Participants are encouraged to refer to the company's filings with the SEC regarding such risks and factors as well as for more information regarding the company's financial and operational results. The company's filings can be found on its Web site. Now I'd like to introduce Stuart Tanz, the Company's Chief Executive Officer..

Good morning everyone. Here with me today is Michael Haines, our Chief Financial Officer and Rich Schoebel, our Chief Operating Officer. We are pleased to report that the Company posted another very strong, very solid quarter.

We continue to steadily grow and enhance our portfolio making the most of the ongoing strong fundamentals across our core West Coast markets.

Starting with our portfolio growth, year-to-date we've added eight terrific grocery anchored shopping centers through our portfolio for a total investment of $332 million, including two properties that we acquired during the third quarter and another two that we just closed on here in the fourth quarter.

We continue to source these acquisitions through a variety of off market sources and long-standing relationships.

Importantly, through our sources and relationships, we continue to gain unique assets to acquire exceptional shopping centers that are situated in the irreplaceable locations within some of the most dynamic densely populated protected market from the West Coast. A great example of this would be our recent acquisition in Long Beach, California.

We've known the seller for years. In fact, the first shopping center that we acquired nearly seven years ago in 2009 was from this seller. Our long-standing relationship was instrumental in acquiring this new shopping center, which is located in the heart of one of the oldest, most established residential communities in Long Beach.

The target area for our shopping center has a population base of over 680,000 people. Additionally, our property features a new Trader Joe's that just recently opened at the center. In fact, it was one of most successful store openings in Trader Joe's history.

Another great example is the terrific grocery-anchored shopping center that we acquired in Portland. We landed the acquisitions through an off market source. The property had been privately held, family-owned for years. Given our team's success and presence in the Portland market, dating back 25 years to our Pan Pacific days.

The family new our reputation well and was comfortable moving forward with us on an off market basis. Like the property we acquired in Long Beach, this shopping center is located in the heart of one of Portland's oldest, most established residential communities.

And similar to Long Beach, the Trader Joe is from a very strong demographic profile with the trade area population base of over 400,000 people. This Portland shopping center is also anchored [ph] by a very strong successful supermarket that have a well-established customer base in the community.

Going forward, this property have significant upside potential. The majority of the space roll out within the next 24 months and is substantially below market by as much as 75% to 100%. Additionally, there is the potential to add a new freestanding pad that will push our yield even higher.

To highlight one of the recent acquisition we just closed on Bridle Trails shopping center up in our Seattle market. As we noted on our last call, we first put this property under contract back in the spring, but the seller, a family we’ve known for many years, requested a delayed closing in order to execute a 1031 exchange.

We've had our eye on acquiring this property for a long time, so we were happy to accommodate the request. Like our Long Beach in Portland acquisitions, this shopping center in Seattle is also situated in a very protected, established residential community. Additionally, this new acquisition has considerable upside potential as well.

Similar to the Portland property, at the Seattle shopping center, the majority of space will be expiring during the next 12 to 18 months whereby we expect more than double the rent on average and on top of that we were already in the works of adding a new 5,000 square foot pad.

In step with growing our portfolio, we’re also continuing to achieve solid growth and strong results with property operations and leasing, all geared [ph] was enhanced in the long-term value of our shopping centers. We continue to maintain our portfolio at a very high 97% leased.

We continue to consistently posts solid same-store NOI growth 5.5% through the first nine months and we continue to achieve strong same space rent growth, achieving an increase of over 35% for the third quarter. Thanks in part for our ongoing initiative of recapturing the low market underperforming space.

Additionally, as we discussed on our last call, we continue to maintain our strong financial position. In fact, as a result of our equity and debt raising initiatives during the third quarter, whereby we raised over $330 million of capital. Our interest coverage for the third quarter was a very strong 4.2 times.

Our debt level at quarter end was a very low 29%. Over 94% of our portfolio was unencumbered. All in all, 2016 is shaping up to be another highly successful year for the Company. Now I'll turn the call over to Michael Haines, to take you through our financial results.

Mike?.

Thanks, Stuart. For the three months ended September 30, 2016, the Company had $59.4 million in total revenues and $18.2 million in GAAP operating income as compared to $50.1 million in total revenues and $16.4 million in GAAP operating income for the third quarter of 2015.

In terms of property level net operating income, on a same center comparative basis, as Stuart just noted, cash NOI increased by 5.5% for the first nine months of 2016, including a 4% increase during the third quarter. As we discussed on our last earnings call, the Company had minimal exposure to sporting good stores.

In fact, out of our entire portfolio, we only had two sporting goods store closings, which is reflected in our same-center numbers. Excluding those two closings, same-center NOI increased by 6% for the first nine months and 5.3% for the third quarter.

And as Rich will discuss in a minute, we’ve new tenants already lined up to take both of the sporting good stores basis.

With respect to GAAP net income attributable to common shareholders, for the third quarter of 2016 GAAP net income was $7.4 million, equating to $0.07 per diluted share as compared to GAAP net income of $7.5 million or $0.08 per diluted share for the third quarter of 2015.

For the first nine months of 2016, GAAP net income was $23.1 million or $0.22 per diluted share as compared to GAAP net income of $16.9 million or $0.18 per diluted share for the first nine months of 2015.

In terms of funds from operations, for the third quarter of 2016, FFO increased to $31.3 million as compared to $25.9 million of FFO for the third quarter of 2015.

On a per share basis, taking into account the stock offering that we completed at the beginning of the third quarter, whereby we issued 6.6 million shares, FFO for the third quarter of 2016 was $0.26 per diluted share, which is on par with the third quarter from a year-ago.

For the first nine months of 2016, FFO increased to $91.6 million as compared to $70.2 million of FFO for the first nine months of 2015. On a per share basis, FFO increased by 12.7% to $0.80 per diluted share for the first nine months of 2016.

[Indiscernible] proactively growing our portfolio and enhancing the value of our shopping centers, we continue to proactively and prudently manage our financial position. Always with an eye towards maintaining our sound financial metrics and our financial flexibility.

To that end, as Stuart indicated, during the third quarter, we successfully raised $333 million of capital. In early July, we issued the 6.6 million of common shares that I mentioned through an underwritten public offering, raising $133 million in common equity.

Additionally, at the end of the third quarter, late September, we issued through a private placement $200 million of senior unsecured notes. The notes bear interest at a fixed rate of 3.95% and the bonds mature in 10 years in 2026.

Notwithstanding the bond market being volatile this year, given the uncertainty regarding where interest rates are going, 3.95% rate that we achieved is a new low for the Company and we believe reflects in part our long-standing track record of maintaining a strong, straightforward and conservative balance sheet.

Taking our capital raising initiatives into account, at September 30, the Company had a total market cap of approximately $3.7 billion with approximately $1.1 billion of debt outstanding, equating to a debt to total market cap ratio of just 29%. In terms of the $1.1 billion of debt, the vast majority is unsecured.

In fact, we only have $71 million of secured mortgage debt outstanding. Additionally, as a result of our capital raising initiatives, our credit facility has been reloaded. First, at September 30, we only had $8 million outstanding on our $500 million unsecured credit line.

In terms of interest rate exposure, which continues to be a key topic in the market, from our perspective over 80% of our total debt at quarter end was effectively fixed rate. The majority of which was long-term debt. In fact, we’ve virtually no debt maturing for the next two years, only a couple of small mortgages.

Looking out further, our debt maturities are well latered, being spread out over eight years from 2019 through 2026. So our debt profile continues to be very stable.

Finally, in terms of FFO, looking ahead at the remainder of the year, we expect FFO for the fourth quarter to be between $0.25 and $0.27 per diluted share, which takes into account not only the stock offering, but also the $200 million of bonds that we issued at the end of the third quarter.

Assuming we achieved the $0.25 to $0.27 of FFO in the fourth quarter, it will put us in the range of a $1.5 to a $1.7 for the full-year 2016, which equates to an increase of approximately 10% over 201. Now, I'll turn the call over to Rich Schoebel, our COO, to discuss property operations.

Rich?.

Thanks, Mike. To underscore Stuart's and Mike's comments, we continue to be on pace to post another stellar, record-setting year with property operations and leasing. Starting with occupancy, we continue to maintain our portfolio at a very high, very strong 97% leased.

In fact, this is now the ninth consecutive quarter, that we've achieved a portfolio leased rate at or above 97%, which is a new record for us even going back as far as our days of Pan Pacific.

Our continued success speaks volumes not only in terms of the strength of our markets, but also it speaks to our team's commitment and discipline, as well as our skill sets, market knowledge, and tenant relationships that we’ve cultivated over the past 25 years operating and leasing shopping centers, exclusively on the West Coast.

Breaking the 97% lease number down, between anchor and non-anchor space, at September 30, our anchor space was 98.7% leased and our shop space was 95% leased.

With respect to the economic spread between build and leased space, during the third quarter, new tenants representing approximately $2.7 million in incremental annual cash flow took occupancy and started paying rent, of which about $384,000 was reflected in our third quarter cash flow.

And as of the end of the quarter, at September 30, the economic spread was approximately 3%, representing about $6.4 million in additional incremental annual base rent on a cash basis. You may recall that on our last earnings call, we noted that we’ve roughly 350,000 square feet in total scheduled to expire during the second half of 2016.

We’re pleased to report that in the -- that in just the third quarter alone, we easily surpassed that, leasing over 450,000 square feet, which is another new record for our team. Importantly, along with leasing space at a record pace, we’re also continuing to achieve strong increases in same space comparative cash rents.

Specifically, during the third quarter, we achieved a 16.5% blended increase between new and renewed leases. Breaking that down, we executed 41 new leases, totaling a 157,000 square feet achieving a same space comparative cash rent increase of 35.5%, and we executed 54 renewals totaling 296,000 square feet achieving a 6.9% increase in cash rents.

As Stuart indicated, we continue to have good success with recapturing the low market underperforming space. As an example, we recently recaptured a large anchor space that the tenant has moved out of, yet was still paying rent and had another four years to go on their lease.

We’re able to successfully recapture the space and now have several national tenants lined up to take the space, pursuant to long-term leases whereby our incremental base rent will increase by over $400,000 annually over what the prior tenant was paying.

Additionally, as Mike touched on, with respect to the two sporting goods store vacancies in our portfolio, we now have new tenants lined up to take all of the space at a blended increase in rent of approximately 30%, which will have roughly $300,000 of incremental annual base rent [indiscernible].

It will take a bit of time for the spaces to be refitted, so we currently expect that the new tenants will take occupancy and commence paying rent in 2017. Now I'll turn the call back over to Stuart..

Thanks, Rich. Before opening up the call for questions, I’d like to add a bit more color regarding our acquisition strategy. For 25 years running, our focus continues to be on acquiring traditional, pure play grocery and drug anchored shopping centers that are in irreplaceable locations and densely populated mature markets.

With these underlying attributes, the shopping centers that we acquire are well leased properties featuring daily necessity retailers that by and large have established customer bases, which in turn provide us with a very reliable, stable base with cash flow from which to build. Our acquisitions this year fit this profile perfectly.

The eight properties that we’ve acquired thus far in 2016 are 99% leased and the anchor tenants have been offering at the centers for over 23 years on average, very stable.

Additionally, this stability combined with our acquisitions been in very protected supply constrained markets, translates into very limited downside risks, which is at the very core of our strategy. Equally important to us is the potential to enhance value going forward.

Given that the vast majority of our acquisitions continue to come to a variety of relationships and off market sources, we were able to achieve reasonable terms at the outset and position our team to quickly enhance value once we close.

For example, as it relates to the $332 million that we've acquired this year, we expect to increase the in-place cash flow by as much as 15% to 20% over the course of the next 12 to 24 months, which if successful, we estimate could add as much as $50 million to $60 million of additional value.

In summary, all of us here at ROIC take pride in building our portfolio and business, following a prudent risk-adverse strategy that has consistently generated solid growth and results for the past seven years, and we believe we will continue to do so for years to come. Now we will open-up the call for your questions.

Operator?.

[Operator Instructions] Our first question comes from Christy McElroy of Citi. Your line is open..

Good morning, Christy..

Hi. Good morning, everyone. Good morning. Just Rich, just following up on the comment about the $2.7 million of rent taking occupancy in Q3, and it sounds like the bulk of the impact will be felt in Q4.

How should we be thinking about the offset of the rent coming off line in terms of your retenanting effort? So, I mean, what's your target for same-store NOI growth in Q4 incorporating all of that?.

Same-store, the fourth quarter, we think the same-center NOI growth for the full-year will be still be between 5% and 6%, which takes them into [indiscernible] foreclosing.

And as it relates to fourth-quarter within the pool of properties included, in the fourth quarter [indiscernible] which is every shopping center that we have owned since October 1 of last year. There are a number of new tenants that are close to taking as usual then start paying rent.

It's difficult to predict the exact timing and therefore hard to predict, but it could be anywhere between 3% on the low side to high as 5% on the upside..

Okay.

So pretty big range at this point?.

Yes..

Where are you targeting occupancy at year-end?.

I mean, I think occupancy at year end given that hopefully we can get the last sports lease executed will certainly I believe be well over 97%..

Okay.

And then just with the acquisitions that are closed year to date, do you anything under contract today that’s likely to close prior to year-end? I think your prior guidance [indiscernible] at $19 million a year?.

The pipeline looks strong as we’re heading into the fourth quarter. I can't comment as to what we have in escrow or under contract, but if what we've got in the pipeline does -- what we have in the pipeline moves to execution and then closing, we will certainly meet guidance and even exceeded.

But at this point, I can't comment whether we will meet that target or not..

Okay. Thank you so much..

Thank you..

Thank you, Christy..

Our next question comes from Collin Mings of Raymond James. Your line is open..

Good morning, Collin..

Hey, good morning, guys. First question for me, just following up on Christy's question, just I think at the Investor Day you hosted last fall, you suggested really a multi-year opportunity as far as acquiring, maybe $300 million plus per year.

Obviously, you’ve exceeded that this year, but has that outlook changed at all, Stuart, as you start thinking about 2017?.

No, it has not. We -- in terms of what we see in the pipeline right now, again it's hard to predict the future as it relates to '17. But certainly feeling good right now in terms of what's in front of us..

Okay. And then in terms of cap rate, I mean, last couple of calls, Stuart, we’ve talked about just still seeing some cap rate compression out on the West Coast, called over the last 3 to 6 months.

Can you just speak to what you’re seeing in cap rate, maybe even by market, and then just the competition for assets?.

Sure. Well, cap rates over the past quarter really haven't moved much. For fully marketed shopping centers in California, cap rates continue to hold steady in the low 4% range. In the Pacific Northwest, cap rates in Seattle continue to hold steady as well.

In Portland, there is -- there has been some downward movement in cap rates with a recently fully marketed deal now trading in the low 5s and high 4s. So that’s for the quick overview in terms of the markets as it relates to cap range. The second part of the question was ….

Just competition..

Well, I think as we articulated last quarter, competition due to the volatility as Michael touched on in the bond market, that we have found that the number of buyers for high quality assets on the Coast have substantially receded.

They’ve come down, which is proven to be a benefit from our perspective in terms of looking and acquiring assets and underwriting them. I don't see that changing right now. And so, looking forward, I think the market is going to probably stay in a pretty high range as to what we've seen.

And more importantly, it certainly gives us a bigger advantage in terms of sourcing off market transactions with the relationships that we bought on the West Coast..

Okay.

And then just as far as switching to dispositions, I think you guys have talked about $25 million being incorporated into your model before year end, has that changed at all?.

We are working on a number of -- small number of non-core properties to market. The pipeline ahead of us about $50 million. These are properties I think as I've talked about that we -- we're up and we're part of a re-leasing process and before putting them on the market we wanted to make sure that we were in a better position to achieve full value.

These tenants have now taken possession and have gotten through the permitting process. So everything is now sort of complete which puts us in a good position to move forward soon. So I think by our year end conference call, we will definitely have some definitive information to share with you..

Okay. And then one last one, Stuart, before I turn it over.

Just curious just -- your perspective as a long time owner of grocery anchored shopping centers, what are your thoughts now about Amazon starting to test the drive-up grocery store concept in the Seattle market?.

I don’t know, Rich, you want to articulate on that in terms of Amazon. I mean, we’ve been -- that’s the next question were recently in terms of what we've seen from Amazon, I guess the first thing is a number of our grocers are fulfilling Amazon's orders.

And so, number one that benefits us from the standpoint that those sales are going to us in terms of percentage rent.

In terms of the new prototype, Rich, what are your thoughts there?.

I think you can look at it in a lot of different ways. I mean, for one, it could be an opportunity for us to lease space to Amazon. Another thing to look at it relates to our portfolio is that the grocers on the West Coast already have a significant presence.

So if this concept proves to be successful, they’ve already got the infrastructure in place to replicate what Amazon is doing. So while it's interesting to see what Amazon is attempting to do. We currently think that our portfolio given their location are well-positioned to compete.

And I think it also demonstrates that potentially Amazon just online only strategy, needs to be supplemented with a brick-and-mortar presence..

And then more importantly, it always comes down to sales and I can tell you that sales at our grocers continue to show very good improvement as we move through '16 as it relates to '15..

Thank you. Great color, guys. Good luck to the rest of the year..

Thank you..

Our next question comes from Michael Gorman of BTIG. Your line is open..

Good morning, Michael..

Good morning, guys. Good morning. A quick question and maybe going back to Rich, you mentioned the spread at the end of the quarter was about 3%, $6.4 million. Just curious, can you give a little bit of color on how that kind of rolls out over the next, I don’t know, three or four quarters.

And then, just given the volume of leasing that you guys have been doing, what do you think that spread looks like at the end of the year?.

I think if you look back over the last few quarters, we've been maintaining somewhere in that $6 million range. We are obviously commencing a significant portion of that rent every quarter, but with the recapturing initiative and all the leasing that we're doing, we are adding right back into the pool.

So we kind of expected to continue along those lines right now as we continue to execute the repositioning initiatives and the lease up and the properties..

Okay, great. And then, Stuart, you mentioned a little bit about some of the market environment for acquisitions on the West Coast. Can you talk about with some of the financial volatility.

Have you seen any deals being re-traded that have been on the marketed side?.

The only deals that I’ve seen that has been re-traded have been transactions that have been in the tertiary or secondary markets. Those markets have slowed down not nearly as much activity and periodically I have seen some of those transactions been re-traded.

But in terms of the primary markets where we are very active and we have not -- we’ve seen nothing, but more of the same. Cap rates at very, very low levels and valuations continue stay where they are and in some cases even though higher..

Great.

And then, on those tertiary markets, where do you think the cap rate spread is right now versus the prime market for the high quality assets?.

That spread is probably widened over the last six months 50 to 100 basis points..

Okay, great. Thank you..

Thank you, Michael..

Our next question comes from Paul Adornato of BMO Capital Markets. Your line is open..

Good morning, Paul..

Good morning, Paul..

Hi. Good morning. Yes, sorry if I missed this, but are we seeing a tougher grocer environment in part coming from food price deflation.

And so was wondering if any of your tenants are seem to be a little bit more stressed in terms of competitive pressures?.

Well, stressed. So, nothing that I’ve seen -- I don’t know, Rich if you want to comment. I mean, what I can tell you is there are a series of grocers both at the high end and in the middle that are expanding very rapidly again on the West Coast. I will give you an example, Sprouts.

Sprouts is now very aggressively heading into the Pacific Northwest with us. So from a growth perspective, things have not slow down in terms of the grocers. But in terms of what we're seeing as it relates to your question, we haven't really seen much impact, I mean it hasn’t impacted rents, it hasn’t impacted renewals.

Rich, I don’t know if you want to add to that..

I think there has been a select -- couple of grocers that we've taken out of our spaces and brought in other grocers. So maybe some of the ones that are feeling that stress are the ones that are leaving the party, but we’re able to quickly re-leasing with better capitalized stronger grocers.

We get calls constantly from grocers looking to penetrate these markets and hoping for opportunities to arise, and that’s why we’ve been so successful with the repositioning recapturing initiative. So we’re not seeing if sales continue to do very, very well and we're not hearing that from our grocer base..

With some of the more recent acquisitions, as I talked about during our remarks, like Bridle Trails where we're repositioning to grocer in that aspect. I mean, the amount of activity in terms of the number of grocers looking to get to this location is tremendous. I mean, the demand has never been stronger on the West Coast..

That’s great. Thanks so much..

Thank you, Paul..

Our next question comes from Paul Morgan of Canaccord. Your line is open..

Good morning, Paul..

Hi, good morning..

Hi, Paul..

So on the same-store NOI, I appreciate the color you gave there about the impact of the sports stores and your [indiscernible] Dick's, Crossroads. Just to be clear, did they acquire the designation right to the store? You said you’ve kind of found replacements for the two.

Are they the replacement there and if so, how do they work out in terms of the rent impact?.

Well, I mean, we are overwhelmed with a number of offers that we had on the space and we did aggressively get to the courthouse steps and buy the lease, because of the overall demand. So we made the decision to go with Dick's for a number of reasons, but the good news is the down time it was probably one of the quickest leases Dick's has ever done.

And number two was that the increase in rent was about 50% over what we were getting.

And then more importantly, it was the down time that we were really focused on and right now we are -- the plans are [indiscernible] on up, we’re going in for permit, but it does look like we will get rent as early as the third quarter of next year, given that Dick's wants this location very badly..

Okay. That's great. And then in terms -- so you mentioned that you're still looking at a 5% to 6% same-store growth.

So even with the sports events what -- it would be correct to interpret as kind of you would have been running a little bit ahead of plan in the absence over the closings?.

Absolutely. I mean, if we didn't have these two closures in the only two power centers, but they’re great assets that we own, we would've been over 6%..

Okay. And then ….

Above the range is we would say..

Yes, great.

And then, Stuart, could you maybe try a little bit of color just in terms of the markets, not so much in terms of acquisitions, but just in terms of what demand is looking like for the shop space in particular and whether its varied up and down the West Coast, and whether there are any categories that are strong, people talk about maybe restaurants, near being a little weaker, but what areas you’re seeing strength in terms of demand?.

Sure. Well, I will let Rich comment on the tenants, but in terms of the markets, in terms of demand, we continue to see very strong demand across all our markets. Portland continuing to lead the charge right now and Southern California, but really the demand is coming from all aspects of the West Coast in terms of the primary market.

And from a tenant perspective, Rich?.

Yes, I mean, I think the demand still comes from very broad range of retailers that continues to grow. The types of retail vary depending on the various markets. For example, up in the Pacific Northwest, which is a very highly sought after market for retailers looking to expand.

The grocers are at the top of that list as Stuart and I touched on, with new grocers trying to move into the market for the first time. Additionally, across all of our markets, new restaurant food concepts [ph] still actually are highly in demand, not necessarily the chains that have had some troubles recently, but the independent operators.

If we get a restaurant space back, its leased immediately. But in addition there's health, beauty, medical, fitness sectors all continue to expand across the markets..

Great. And then just lastly, you had the two anchor leases that with an 83% markup in the quarter and you talked about your plans for -- anchor replacement like that. As you look into the next, few quarters in the '17 in particular, should we expect to see more of those hit? I know it kind of lumpy..

Yes, I mean, we’re currently working on about a dozen different initiatives, our leases that are in our sites, that we're pursuing, which altogether total about 0.5 million square feet and potentially represent another $2.5 million to $3 million in incremental rent, assuming we're successful in recapturing the space.

So, yes, there are lot of -- a lot to come, but as you say it's hard to predict the timing of it..

So it's that sort of -- I mean, as you think about just kind of broadly into the timing is that kind of maybe two years worth of activity that it would take to address those or longer than that?.

It better not to take two years from my perspective. I’m getting hold by the way, Paul. [multiple speakers].

In the part of love for you..

As I think we’re going to -- identified in '17, some of the rent may not come in until the 18 timeframe, but again its really dependent on when we’re able to get this space back and get the new tenants fit it out..

Okay, great. Thanks..

Thank you..

Our next question comes from R.J. Milligan of Baird. Your line is open..

Hey, good morning, guys..

Good morning, RJ..

Curious for some of the properties that have been in the same-store pool for a while, the ones that you've already repositioned and re-tenanted and gotten great leasing spreads.

Is there -- are you getting any pushback about raising those rents within some of the more mature properties that you’ve already repositioned, are you rolling over and still getting pretty good spreads on those?.

We are still getting very good spreads on the lease rollover. The demand is still there and in order -- the marketplace is just where -- setting those market rates and our property given their location within the market typically commenced higher rent..

And so you would say that the leasing spreads are pretty even throughout, the properties that were acquired five years ago versus the properties that are acquired over the past two years?.

I mean a lot of that is the function of when the lease was originally entered into and whether the tenant had options, one of the options are fixed for fair market value, so there are something that are beyond our control, as it related to contractual increases.

And our renewal spreads include both the exercise of contractual options, which in some case could be flat or are fixed as well as negotiated renewals..

I mean, I will tell you RJ, a lot of what we continue to see is a lot of these OP transactions that we've done over the years have [indiscernible] in these assets, the sellers.

I think as we’ve articulated to the market typically kept the properties 100% occupied without and much more focused on the cash flow that on the incremental increase on the rollover and that still coming with a lot of these assets we've acquired like the Crossroads, Santa Barbara, Warner, all these a lot of newer assets, but there's some tremendous upside in these assets as we look forward over the next 2 to 3 years on the anticipation that the market space is healthy..

Okay. I guess that a good segue.

Looking at your acquisition pipeline currently what percentage of those could potentially be OP unit deals?.

Right now in front of us, a number of them potentially could be OP unit deals. That is starting to again pick up some cases we move into the last part of the year. Again these trends actually do take -- they take some time.

The good news is that we certainly are going to be issuing that currency at or above where our stock is currently trading and where we’ve done our last set of transactions. But as always, its evolving.

I mean, it flows back and forth, but that pipeline is looking -- it looks like there potentially could be more that as we move into the balance of the year..

Great. Thanks, guys..

Thank you..

Thank you..

Our next question comes from Chris Lucas of Capital One Securities. Your line is open..

Good morning, Chris..

Hi, Chris..

Good morning, guys.

I guess, Mike, just to start with you, just on the guidance pump, was there anything specific to what drove the [indiscernible] for the full-year guidance?.

Nothing in particular, it's just kind of tied low into the range, given there were three quarters away through the year and kind of [indiscernible] fourth quarter given the Sports Authority and Sports [indiscernible], so that’s why I kind of give a range of 3% to 5% for the four quarters, but not sure it's going to call in.

But we still think we will be in the range we gave for the guidance for the year as we did before..

Okay. And then, just on the anchor repositioning process, I guess, two questions there.

One is that when you do that, I'm assuming that the asset stays in the same-store pool and if that's the case, what sort of is the rough guidelines we should be thinking about for next year or it relates to the drag to same-store NOI for that process?.

Well, every situation is going to be different, so some of that will be accelerated and some of them wont. What we try to do is certainly stay way ahead of that process..

We will establish guidance on our next call once we get through our full budgeting process as well..

So Chris, it's just tough to try to quantify at this point, but the good news is that there's a lot of demand for the anchored spaces. And I think next quarter as we finish out the year we will be able to provide you with some nice commentary in terms of what’s coming..

Okay. And then just jumping back to Crossroads, I think, Stuart, last call you talked about the ability to move forward with your development -- redevelopment plans there, given Sports Authority had a -- had some tough components [ph] with the lease.

Is that still the case with Dick's going in and if so, sort of what are your thoughts about next steps at Crossroads?.

Sure. Well, the answer is yes. We are moving forward and with Dick's coming in, it really had little impact or no impact in terms of our plans. But going forward, we are focused on Phase 2 of the Crossroads. We are making some progress there. Rich, I don’t know if you want to add to that in terms of the timing..

Yes, with all of our leases, since we’ve been involved with the Crossroad, we’ve taken a very strong position as it relates to making sure that we protect our ability to continue to redevelop that property and that was the approach we took with retenanting the Sports Authority box.

So we still have the ability to continue with the Phase 2 plan that we are currently working on and we still have a lot to come at Crossroads..

Okay.

And then, last question for me, you talked about the demand on the non-anchor spaces being pretty broad, I guess, was just curious as to the composition of the demand as it relates to sort of national tenants versus regional versus mom-and-pop, whether you’re seeing any shift in that demand right now, say over the last couple of quarters?.

Well, the national tenants always take a bit longer, which is very frustrating from my perspective.

In terms of the allocation across the tenant spectrum, I would tell you demand in, correct me if I’m wrong, Rich, is really continues to be on a national level or regional level, and a local level, maybe even some more pick up at the local level more than anything else..

Yes, I think it still comes from a very broad range and it really depends on the opportunity that we have in front of us for the -- the anchor boxes we’re dealing with primarily anchor grocers for the most part and -- but when you get that in the [indiscernible], there the local tenant base is still very active and they will typically pay the most rent and quicker than what regional or national tenant will as Stuart is touching on.

So, the demand still seems to be very broad..

Okay, great. Thank you..

Thank you..

Our next question comes from Jay Carlington of Green Street Advisors, Your line is open..

Good morning, Jay..

Good early morning, Stuart..

Good early morning is right..

[Technical difficulty]..

Right.

Is the sun up yet California?.

It's not. So, just wanted to kind of go back and touch on the 80% spread on your new anchor leases, they came at a pretty decent TI costs.

I wanted you kind of talk a little bit about what drove the sizable investment for those two deals?.

Sure. Sure. This is Rich. In this case that drove the 80% was we need to let the space which involves some significant dollars to split the utilities, demise the space, put in [indiscernible] and refit a space that really hasn't been touched for a number of years. So there is some seismic upgrades and things like that.

So that’s what’s driving that number..

Did you change [technical difficulty], did it go from like a grocery to something else or was it just purely splitting the box or what were the specifics on that?.

Yes, there was a change in use in that particular one, yes..

National tenant, but it change in use..

Correct..

And we probably -- we do have an offer for the balance of the box from a national tenant as well. So, but yes there was a change in the use..

Okay.

And maybe related to that you’ve got five anchor leases coming up next year and I think you’ve talked about some other anchor boxes that you’re going to get control of, where these two leases kind of unique situations with respect to the TIs or is that kind of what's required to get these deals done today?.

I would tell you that probably more unique and that you were taking an existing box and having to refigure it or almost create a whole new building whereas I think, I mean, every situation is going to be different, Jay, but ….

I mean, every situation is different, we did an H-mark [ph] this year up in Northern California where there was essentially no cost to us and so -- and it didn’t cost us anything to get the box back. So in other situations we’re getting paid termination fees upon getting the box back.

So every situation is going to be slightly different and then as you’re touching on, it really depends on the condition of the existing space and the new use and what’s going to be involved in fitting it out. So it can vary..

Okay. Thank you..

Thank you..

Thanks, Jay..

Our next question comes from Todd Thomas of KeyBanc Capital Markets. Your line is open..

Good morning, Todd..

Good morning. The 15% to 20% increase in income over the first 12 to 24 months that you cited for the $330 million of property acquired this year so far.

As you look ahead, do you think that that value creation opportunity could persist in what you're underwriting today?.

In what we're underwriting in terms of new acquisitions or in terms of what we've acquired?.

In terms of new acquisition.

So what might we see close by the end of this year and sort of looking ahead into 2017?.

Tough question to answer. The answer though is that what we're currently looking at in the pipeline, the answer is yes. There is some interesting moving pieces in terms of rollover on some of these assets and the ability to recapture some of the space on a number of these assets.

So the answer is yes, if these acquisitions do come to fruition of course. But as you know, Todd, that’s our story at this Company.

We are very disciplined in terms of what we acquire and more importantly even though our costs -- even though the value and the -- our cost of capital has come down and the cost to acquire these assets have gotten more expensive, for us the story is all about what we can do once we close and the value that we can deliver to shareholders in terms of building on what we're buying..

Okay. And then, realizing that there's meaningful growth there and you’re wanting too, for some of the properties that you just acquired.

Can you share the initial yields on what you closed on in the quarter and the two properties that were acquired in October?.

Well, October -- the two properties we acquired in October, which was Bridle and -- so let me just [indiscernible] and Rose City. So Rose City and Monterey you’re looking at about a 5.5 -- I can't really -- 5.5 and on the other two that we just acquired closer to the 5 number, but just over a 5 cap rate..

All right. And then, Rich, just a question on some of the recapture opportunities that you’re pursuing.

Are tenants more willing to negotiate and work with you to give back some space than they had in the past? Are you sensing that at all?.

Well, I would say they’re more willing. I think it's situation by situation, we have -- we are working right now with one of our grocers to expand into an adjacent anchor space, which will really turn the corner for this particular property. So I wouldn’t say it that way..

Okay. And just one last one. Stuart, the portfolio is growing, its closing in on 90 assets, and I know you like to stay fairly involved with the property level.

At what point do you lose the ability to maintain that level of involvement and how scalable is the platform today?.

Well, the platform is very scalable. I mean, just in general the real estate platform is an incredible platform in terms of the efficiencies you gain with scale. In terms of myself, the runway still looks very good in terms of our hands-on approach, in terms of operating and creating value for shareholders. The runway still looks very good right now.

And so, I don’t know, whether that begins to tail off at a 120 properties or 140 properties, but the good news is that you got a portfolio that’s very well leased, very stable, and that helps in terms of rolling the portfolio and having the ability to do what we've done in the past..

Okay. Thanks..

Our next question comes from Michael Mueller of JPMorgan. Your line is open..

Good morning, Michael..

Yes, hi. Hey, good morning. Going back to the past couple of questions about the 15% to 20% upside on acquisitions and the NOI that you stay.

Can you talk about like how much of that is just marking below market leases to market and how much of it more of what you talk about sport stores where you got to put capital [indiscernible] and just kind of either upgrade or put some real capital [indiscernible] on it, just like what’s the mix of that stuff?.

Well, it's about 50-50.

I mean at Rose City that is a -- that will be no cost and that will go -- that increase is going to be, I don’t know, hundred and something, but I don’t know yet, but at Rose City it's substantial and there will be no cost, because all you're doing is taking a very successful growth, just adjusting the lease to market value, which is three times base to what they’re currently paying.

The situation like at Bridle Trail is where you’ve got to go and spend some capital, because you're going to be putting a new grocer in, probably a very high-end grocer into that space and that will require some capital. So it's about a 50-50 mix in terms of building on that value, Mike..

Okay. Got it.

And then, I guess, as a follow-up to that, let's say you buy a center in five and if there's a -- and everything is going to be a little bit different here, but if you go in and you put capital in and you get the higher rent, typically what happens to the yield? Like on a, I guess, a net effective basis after you think about the capital spend, is it the same as what you’re getting and you just end up with lower cap rate property, is it higher, just -- how does that typically work out?.

Well, it’s a good question. Obviously, what our goal and the criteria that we set for ourselves is to lift that patch [ph] unlevered yield about a 100, 200 basis points within 18 to 24 months.

That’s our goal, but remember the one important thing outside of lifting the cash flow is the quality of the tenants that you’re putting in and you’re taking a tenant that’s weaker and you replacing it with a stronger grocer, which is going to not only drive yield, but it's also going to drive valuation, long-term.

So it really is a program that does both. It drives cash flow, and it drives long-term value. And that's really our story at this Company in terms of what we do best for shareholders..

Got it. Okay. That was it. Thank you..

Thank you..

Thanks, Mike..

There are no further questions. I'd like to turn the call back over to Stuart for any closing remarks..

In closing, I’d like to thank all of you for joining us today. If you have additional questions, please contact Mike, Rich, or me directly.

Also you can find additional information on the Company's quarterly supplemental package, which is posted on our Web site and for those who are attending NAREIT's Annual Convention, in Phoenix, in a few weeks from now, we hope to see you all there. Thanks again and have a great day everyone..

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day..