Bryan McCarthy - SVP-Marketing & Communications John Kite - Chief Executive Officer Tom McGowan - Chief Operating Officer Wade Achenbach - Executive Vice President Portfolio Management David Buell - Senior Vice President, Chief Accounting Officer.

Christy McElroy - Citi Group Todd Thomas - KeyBanc Capital Markets Collin Mings - Raymond James Alexander Goldfarb - Sandler O’Neill Craig Schmidt - Bank of America Linda Tsai - Barclays Chris Lucas - Capital One Securities.

Good day, ladies and gentlemen, and welcome to the Third Quarter 2018 Kite Reality Group Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] I would now like to introduce your host for today's conference Mr. Bryan McCarthy, Senior Vice President, Marketing and Communications. You may begin..

Thank you and good morning everyone. Welcome to Kite Realty Group's Third Quarter Earnings Call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements.

For more information about the factors that can adversely affect the company’s results please see our SEC filings, including our most recent 10-K. Today’s remarks also include certain non-GAAP financial measures.

Please refer to yesterday’s earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results.

On the call with me today from Kite Realty Group are Our Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Tom McGowan; Executive Vice President Portfolio Management Wade Achenbach, and Senior Vice President, Chief Accounting Officer, David Buell. I will now turn the call over to John..

Thanks Bryan. And good morning everyone. So during the past quarter we continued executing on our strategic objectives while remaining focused on our long-term goals. As set forth in our earnings release we generated FFO of $41.1 million or $.048 per share. We grew a same-store NOI by 1.5% compared to last year.

This increase was driven by base rent growth of 1.9%. We improved our ABR by 5% over the past year to $16.77 per square foot and we continued growing our small shop lease percentage to 90.9%, 120 basis points higher than this time last year.

Our investment grade balance sheet remains strong and we currently have only $20.7 million of loan maturities through 2020. Following the third quarter we closed on a new $250 million ten-year unsecured term loan.

Based on the indicative pricing we expect the all in swap rate on this loan to be approximately 50 basis points inside of a public bond issuance. The unique structure was a result of our team's ingenuity and our strong lending partnerships.

The loan allowed us to improve our weighted average debt maturity to six years which is an increase of one full year.

The loan also improved our debt maturity ladder so that no more than 20% of our debt comes due in any calendar year and we use the loan proceeds to fully retire the $200 million seven-year term loan due in 2022 and prepay $50 million of the five year term loan due in 2021.

This innovative credit product reduces our risk and improves our financial flexibility. While our net debt to EBITDA slightly picked up this past quarter to 6.7 times, we remain committed to reducing our leverage in the near term.

Looking at operations, approximately 70% of our executed leases and tenant openings in the third quarter are restaurant, grocery and service offerings.

We made further progress than our anchor leasing efforts by executing two box leases in the third quarter and subsequent to quarter end we signed two additional box leases bringing our current anchor lease percentage to 95.5%.

Thus far year-to-date we've signed anchor boxes in our operating portfolio compared to having signed two at this time last year. On a related note we continue to make progress on our Toys vacancies. To-date we have two executed leases and two leases in negotiation collectively accounting for 40% of our Toys square footage.

With respect to development, in September we completed the embassy Suites at Notre Dame. The newest addition to Eddy Street Commons mixed-use development. The development features a 170,000 square feet of restaurants, retail shops, and office space along with 266 multifamily units and 201 previously sold residential units.

Construction on phase two is currently underway with the addition of 452 multifamily units, 21 for sale residential units, 8,500 square feet of retail space and a community center. Eddy Street Commons is an exciting and vibrant development that demonstrates our team's ability to execute an uncomplicated mixed-use projects.

Regarding earnings, we've reaffirmed our 2018 guidance at a range of $1.98 to $2.01 per share. Looking forward to next year please keep in mind the following previously disclosed items which will impact 2019. In 2018, we received a substantial development fee at Eddy Street Commons that will not reoccur in 2019 which is $0.0 3 per share reduction.

2019 will be the first year that reflects the full impact of our TH joint venture a $0.02 per share reduction. 2018 included accelerated non-cash below market rent amortization and partial year income from Toys that will not reoccur in 2019, a $0.03 per share reduction.

New lease accounting standards will impact G&A in 2019 causing $0.05 per share reduction and depending on the outcome of our hedging activities the new term loan will increase interest expense in 2019 by between $0.02 and $0.03 per share.

In addition, we anticipate continued disposition and deleveraging activity in 2019 and will provide more details along with the anticipated range of asset sales when we issue guidance next quarter.

Our guidance will also take into account all of the positive variances that we expect for 2019 including for example our expectation that the anchor deals executed year-to-date will generate approximately $4 million of incremental NOI half of which we expect will come online in late 2019.

Lastly, we're looking forward to having Heath Fear join us as our executive vice president and chief financial officer. Heath’s credentials are well known and we're excited to bring his talent and vision on-board, also Wade Achenbach was recently promoted to Executive Vice President Portfolio Management.

Wade has been a valued and [indiscernible] member of our team since 2004 and we anticipate that that will continue. These changes at the executive level represent our commitment to maintaining a best-in-class operating platform. Thanks everyone for joining us on the call today and operator we open for questions. .

Hey, good morning everyone. John I appreciate the early color on 2019. Just been thinking about some of the fundamentals occupancy drivers that you mentioned to recognize that you have made a lot of progress on the leasing side and you did a couple of more deals subsequent to quarter end. It sounds like you're at 95.5% lease today.

Just as we think about moving into next year and you talked about I think it's $4 million of NOI half of which is expected to commence in late 2019, how should we be thinking about that lease rate that 95.5 and as the spread between the commence and the lease rate narrows as some of those deals commence how should we be thinking about that impact of occupancy next year to offset some of the drag that you detailed?.

Well, I think what we're trying to lay out is that we've made a lot of progress Christy particularly in the last quarter and if you look out and again trying to walk a fine line of not really giving guidance here but trying to shed some light on what's going to be happening.

If you think about it in total 95.5% leased in the anchor space that leaves us about 450 approximately 450,000 square feet of vacancy.

If we lease just half of that that gets us back to 98% I'm obviously not saying that's what we're going to do at this point just to give you kind of a big picture that it really we're well on our way to kind of getting back to where we were. I think we were at 98% leased in the anchors for a while.

For a while we're at 99 but I mean we certainly see as we're looking out right now when we look at these at this 450,000 feet which is about 15 boxes and we don't want to get too caught up in the number of boxes because obviously some of these boxes we split. So it changes the number a little bit but the important part is the 450,000 feet.

I mean we have great activity on a lot of those deals and obviously a couple of them are larger spaces. So even those getting one of those done is impactful and I think kind of segues into when you look at our spreads this quarter we did 80 deals and literally just one deal being pulled out is 200 basis points a positive impact to our blended spread.

So you can see incrementally getting a few of these deals done make a big difference.

So without we will certainly be giving you a range of our occupancy, our lease percentage when we give guidance and I think as our spread between leased and commenced begins to contract I mean the laws of these small numbers can also help us on the upside as they've kind of hurt us on the downside..

And recognizing it's not quite box it's more in the middle but your metrics from exposure how are you thinking about that into next year and the potential further closings and rent lease that you could see from those boxes or from those stores?.

Sure. So from a big-picture perspective Christy because we're still in conversation with them obviously we have – we started with 22 as through this process to two of the deals we had, we had pretty near term expirations. So those deals are going to be coming back to us and then there was a third deal that I believe will be outright rejected.

So kind of puts us down to 19 deals but from there we're currently in conversations with them on all of those. Generally speaking it feels like pretty decent. It feels like we'll be able to come to a place that's pretty favorable for us because of the size of those spaces.

We are generally not afraid to take them back but by the same token I think they want to be – they need stores to be an ongoing company coming out of bankruptcy.

So I feel actually pretty decent about it and again I think when we give guidance in February we'll be pretty locked into what that is going to be for 19 but at this point it feels pretty good..

Okay and then just lastly on same store you kept the range 1% to 1.5%, you're at 1.5% today on a year-to-date basis.

Are you sort of implying a deceleration into a Q4 or is it more just that you're maintaining conservatism on the range?.

I think it's the latter. We have about 750,000 of bad debt expense assumed in our Q4 same-store number. This quarter we only have about 500,000 of bad debt expense. I think we've averaged about 450,000 over the first three quarters.

So there's some conservatism but there's -- that's warranted in the environment with all the things that we're talking about with Mattress Firm and others. So we'll just have to see, I mean hopefully we don't need all 750 and we'll be more at the top end of that range or better but we want to be cautious around in case we have that bad debt expense..

Okay. Thanks for the time..

Thanks Christy. .

Thank you and our next question comes from the line of Todd Thomas of KeyBanc Capital Markets. Your line is open..

Hi thanks.

Just back to the anchor leasing and the $4 million of NOI what will any of the eight anchors signed to date so far commence in later this year or early ‘19 or all the commencements essentially beginning in late 2019 as you mentioned?.

Well, I think there's a couple that commenced in early ‘19 but and there was maybe one there, I'm sorry there are two that are actually open right now.

So fourth quarter of ‘18 gets a little bit or actually the remaining months get a little bit but when you look at the majority of it, Todd it's very much weighted to the back half and then in 2020 we feel like it's all flowing through..

Okay and are any of those anchors or how many of those are in the same store pool?.

I believe seven of those are in the same store pool so it's almost all of them..

Got it. And then so you've talked about some of the factors that are impacting same-store NOI growth this year. Base rents are growing at a decent clip in the same store.

Do you expect some of the drag from recoveries to normalize next year and smooth out a little bit? Should we expect 2019 to be a little bit more straightforward sort of below the base rent line?.

Well, I think look the great majority of this has been through from the vacancy. So as these – as we get into the back half of ‘19 and I think that gets better. I think the front half of ‘19 probably it's pretty similar.

Again not giving guidance right now but I think the back half as these things get more open and then certainly into 2020 we should be back to our more normal run rates but I think when you have that much box vacancy, it's going to impact that in a big way and that's what's happened.

I mean obviously if you really think about same-store at 1.5% the Toys alone on an annualized basis is a 100 basis points and then you take in the other vacancy in there that's probably another 50 so you're getting significant both same-store impact and recovery impact that since we've already leased eight deals you're going to start feeling that coming back but it takes time.

I mean the lease doesn't create the recovery. It's the commencement of rent that creates the recovery..

Okay. Got it and then just lastly I was just wondering if you could talk a little bit about Pan Am Plaza in the potential hotel developments there that were in the press a little earlier last month. Maybe you can just share what the REITs involvement might be and how much sort of capital might be required what the upside is to the REIT..

Sure. Well, as I think we kind of indicated and certainly in our discussions in the press etcetera. That it's early that we're excited that there's a very major potential opportunity. This is – in the end of the day this is all about the real estate that's something that we as we said that we knew eight years ago that this was great real estate.

As far as that goes it's going to take time. We've got quite a bit more to do along the lines of making determinations what works and what doesn't. Look based on the potential size of this I think we're going to be very cautious around what the REITs risk would be and what their capital would be.

The REIT owns the land, so obviously that's a positive but from there it's really going to be determined based on the overall cost of the deal, the capital structure, returns and we're obviously a retail REIT. So we're going to be very, very thoughtful around what the endgame is there..

Okay. Thank you..

Thank you and our next question comes from the line of Collin Mings of Raymond James. Your line is open..

Thanks. Good morning. John just recognizing you're not going to provide more specific details until the next call but maybe just update us a bit on how you're thinking about assets as again you previously communicated maybe $100 million of assets you'd look to bring to the market to big deal ever.

Just anything at this juncture you can kind of provide on where that process stands and kind of like as you kind of been moving through that just asset pricing levels any sort of movement as you look to bring some assets to market?.

Sure. Yes, I mean we definitely will be giving a very clear update on that when we issue guidance Collin, but as I mentioned on the last call we talked about just disposing of at least $100 million I think we're frankly working on dispositions as we speak. There's a chance that one or two more would occur this year but maybe not.

So I think we're really going to have to sit down and look at our overall strategy for ‘19. That's something that I want to have Heath involved in and that as we're looking at our 2019 capital structure.

So I guess it's pre-matured to say but suffice to say that we are continuing down that path and we're kind of looking at everything and thinking through everything from a capital plan and a capital structure perspective.

So I think we'll definitely come back to you on that but we feel pretty positive that we're able to find fair value and the assets we're looking to sell..

Okay. Fair enough.

Just as you've been kind of executing on the big box surge and some of the communication around that maybe either or Tom talked about what are some of the biggest push-back from tenants you've been receiving and just on the margin it sounds like maybe your willingness to split up some of that space has evolved over time maybe just talk a little bit about that dynamic as well..

Yes, I would say it's just from a push-back standpoint one of the things we obviously try to do is move as quickly as possible and I think in this new environment everyone's being a little more cautious and going through their diligence and with a fine tune and – so that is one that we got to keep pushing keep pushing through committee, keep pushing to get at documents actually executed but if you get back just to the basics of the deal we feel like things are relatively stable in terms of, if they have the demand and the need to that market we're going to be able to get fair and equitable lease numbers off of these.

So things haven't changed tremendously. It's just we got to keep moving and move quickly..

And I look Collin as it relates to splitting your question, that's just a case-by-case basis and it really comes down to the tenancy and the returns and in the example of Toys "R" Us, we are going to be splitting a couple of those boxes. So that's not something we're opposed to doing.

If there's just a cost associated with it and you want to get the right return on that and also sometimes splitting just brings in a more vibrant retail base that doing one deal might not.

So I don't think we're opposed to it and I just think we look at it on a case-by-case basis and we'll see how it evolves but as Tom said I mean we're very focused on getting these deals done and we're making strong progress and there's less and less competitive inventory frankly.

So I think we feel good going into next year that we'll be able to execute completely..

All right. And one last kind of housekeeping question for me. It looks like in the stuff you kind of referenced one strategic anchor renewal that kind of weighed down spreads a little bit apologizes if I missed that but maybe you can just touch on that as well..

Sure. I mean it was just simply a deal that we did similar to a couple quarters ago where we renewed a tenant and we put no capital into it and because of that the spread was pretty negative.

There was no capital at all went into the deal and it was strategic in the sense that it allowed us to do another box deal at the same shopping center to stabilize the property. So those were the kind of the three factors but probably the biggest factor was zero capital.

That's why you got a – it's impossible to look at these metrics in a vacuum and we really have to talk about the strategy associated with all this stuff. I mean in the end we've got to produce positive cash flow but there is strategy that we go through when we do every deal..

Okay. Understood..

Thank you. .

I'll turn it over. Thank you..

Thank you and our next question comes from the line of Alexander Goldfarb of Sandler O’Neill. Your line is open..

Hello and thank you. Good morning out there. So two questions John. The first is just going through the items, the headwinds for next year, it sounds at least like $0.15 of negatives and then depending where dispositions go that's even more so.

You talked about back selling anchors but it sounds like that will take time plus it will only be a partial year contribution. It won't be the full year.

So what are some other elements that may offset the $0.15 at a minimum reduction in earnings for next year?.

I mean off the top of my head Alex again we're trying not to get too big into this but obviously they're still NOI that's going to be flowing in through both the completed development and redevelopment pipeline.

I actually think that's in the [south] for about $3 million that's expected and then you've got – if the NOI growth can firm up you can get a little more from there. You've got based on the contractual rent bumps, etc.

And then just any small shop leasing that would occur, I mean it's funny thing about we've got a lot of focus on the boxes obviously but if you look at the impact of leasing up shops more versus the impact of boxes they're pretty similar in their NOI impact.

So I think there's several things that we can do from a positive perspective but it also is what it is as it relates to the things that occurred there were one-time events and obviously the bond deal there's a short-term cost to that. To the term loan deal there's a short-term cost to that but we think there's a long-term value.

So but really in the end it's lease up. It's lease up will impact all the stuff..

And then the hotel side in [indiscernible], is that a potential fee that may be a positive in ‘19 via similar to the to the Eddy Street thing you had this year?.

Yes. I mean there would definitely be fees associated, significant fees associated with it whether or not any of that could occur in late ‘19 it's just too early to tell Alex but certainly down the road there could be some substantial fees there and again you deal with that you get – it's cash but it's generally not particularly reoccurring..

Okay but and then and I'm going to ask about dispose but just in what you said it sounds like that we're down 15 on negatives there's probably plus 4 or 5 on positive. So as far the leasing that's and NOI that's coming online. Then on the disposition side you spoken about [indiscernible] to refine.

Do you see a significant amount like Brixmor for example they were selling just a little bit, little bit and then suddenly it's up on the north side of a half a billion plus of dispose.

Do you guys -- do you see significant sales next year or is it yes something small like maybe a 100 million?.

I think it's too early to say Alex but and I think again as I mentioned we have got-- I got to have Heath involved in us looking at our capital plan and not just for one year over the next five years but I do think to the extent that we find good opportunities and we can accelerate the deleveraging that we want to do and then utilize proceeds for redevelopment projects, etc.

we're not afraid to do more than that but I want to make sure that when we do it we're doing it at fair value and we've got good use of proceeds but clearly there's an opportunity for us to try to get that completely behind us in 2019.

So that's really the objective is to for 2019 as I said on the last call to be the year that we are pivoting towards putting any deleveraging behind us, leasing up the boxes and focusing on 2020 and beyond growth. So if that takes a few more asset sales to do we'll do that..

Okay. Thank you John..

Thanks..

Thank you. And your next question comes from the line of Craig Schmidt of Bank of America. Your line is open..

Thank you.

Yes, I mean I saw that you picked up again obviously in the small shops and you alluded to just earlier but given now that you're significantly above your peers, how much room do you think you can push the small shops and still get occupancy lift here?.

Well, Craig look I think we're slightly above 90, almost 91 it continues to be healthy. So I don't think there's any reason why we can't assume that we can get another 100 basis points at least which gets us around 92 and maybe a little better because again inventories are relatively low on quality space.

Now you obviously as you get higher and higher you're going to have also more opportunities to push tenants out that can't pay – that aren't keeping up so maybe that you've got pluses and minuses but I definitely think there's opportunity there.

Before we were very focused on just getting to 90 and that's right now we're almost 100 basis points above that. So no reason to think we can't continue to push it..

Okay and are a lot of the small shop pick up are they services that like you had mentioned in the service grocery and restaurant?.

Yes. I mean I think a lot of the small shop space that we've been doing is both service restaurant oriented has been a big, big push.

Tom any other things you can think of?.

Yes. I think diversification in general has been big as it ties back to medical where you have a pediatric dentist, you have different forms of health personal training. So it's much diversification as we can bring in. It's just going to help growth full and give us pricing power and drive occupancy..

Great. Thank you..

Thank you. .

Thank you and our next question is from the line of Linda Tsai of Barclays. Your line is open..

Hi. Regarding the boxes, anchor boxes you talked about the eight leases that have been signed.

How many more anchor boxes are vacant in your portfolio and what are the plans for those, does it relates to redevelopment, dispositions, or back-filling for the longer term?.

Yes. Linda as I mentioned little earlier we have -- in total we have about 450,000 square feet remaining in the boxes in total that's approximate that's about 15 boxes currently.

Now again that number we want to be careful with the numbers that can change based on splitting spaces but what we're really focused on is the 450,0000 feet and as I mentioned I mean if we can just lease half of that we get back to 98% lease in the anchors.

So and we think we'll do better than that but I think we're less focused on the number more focused on the square footage..

So the primary goal is releasing as opposed to redeveloping any of those remaining --.

Yes. Yes I mean as of right now the primary goal would be that's probably more of what we would call repositioning.

If we're just leasing the box we might be splitting the box and if we are splitting the box sometimes we're doing some adjacent work on the shops and so you could call that a minor redevelopment but in general these are pretty straightforward and these we have good activity on quite frankly the majority of it. So it's pretty straight forward.

Now again if we're going to split a box, maybe take out some shops what we're doing at whatever that could be a small redevelopment, re-reposition but it's mostly leasing it..

And then based on the comments so far in this call, sorry it's not totally clear would you expect overall anchor occupancy to improve by year-end in ‘19 or is that more of a certainty in 2020?.

No, I think we would expect overall lease percentage and occupancy to both improve in ‘19. Obviously it's going to be more weighted towards to the lease percentage but occupancy is occurring particularly in these eight deals that we mentioned because half of that income we expect to get in ‘19..

And then –.

Go ahead. I am sorry Linda..

No, go ahead, sorry..

I was just going to say when we give guidance we will be pretty clear about our lease percentages..

Okay thanks and then it just seems like overall the retail environments improved in spite of some ongoing closures.

Has this played out at all in your lease negotiations? Do you think the tide is turning yet in terms of landlords having more pricing power?.

Yes, I mean I think it's pretty clear that the tide has turned.

It's always a push-pull with the relationship between the landlords and the retailers and we're always kind of looking at the macro relationship we have with each retailer but when it comes right down to it its property by property and I think in the fact that we've been able to sign eight leases this year as compared to two the previous year shows you that there's volume and there's pickup and when we look at the remaining vacancies we feel that we have strong activity, pretty much across the board but again that doesn't mean that you don't have these individual deals that are negative spreads as we just highlighted this quarter and when I look out over the next kind of year-and-a-half you've got spreads that are up, spreads that are down but when you look at the total picture it's probably a small positive there but certainly as it relates to demand there's definite demand in the space.

Then it's down to Tom and I and everybody else working together to try to figure out what's the best user for the shopping center and just because you have demand you may make a determination that that's not the best user. So that's why this takes time as well..

I would also add that the productivity of the retailers that we're working with and continues to increase on the value side, on the grocery side, and different segments health and beauty. So the ones that are out there being productive and pushing are pushing at a strong pace which is helping demand for us for sure..

Thanks..

Thank you..

Thank you. [Operator Instructions] Our next question is on the line of Chris Lucas of Capital One Securities. Your line is open. .

Hey good morning guys. John, you mentioned earlier in the call about the term loan which was unique that you expect to have sort of a cost savings relative to sort of what a comparable bond would have been priced at.

I guess are there other terms that you look at in the term loan that provide you with greater flexibility than you might have had if you had done the unsecured debt route?.

For sure. Absolutely Chris. I mean one of the primary ones is the prepay ability right.

When we're trying to think about the long term and you're looking at your flexibility the idea that we can have this debt that's pre-payable and we just kind of highlighted that by actually pre-paying the seven-year term loan and then pre-paying $50 million on the other $200 million term loans, so that's real good as relates to our ability to think ahead.

Also just from the perspective of as we look at our [lattered] maturities and we think about that all the time, that's as important to us as what our debt EBITDA is, I mean in the end of the day we continually want to be in front of that and I think some people might have been surprised that we would hit that 20/22 maturity right now but when we look at the future and we think about people's kind of complacency as it relates to capital availability and frankly the huge stacking in the REIT space in 2021 and 2022, that was a big part of that as well..

Great and then I guess going back to the shop space conversation, a couple questions on that front.

One is sort of from lease signing to rent commencement what's the typical sort of gap there?.

I think shop spaces is definitely quite a bit faster than box space. It's hard to say it’s typical because there you might have a restaurant deal that's got a lot of build-out or you might have a nail salon deal that has, no, no build out. So it's probably on average six months, six to nine months on average Tom –.

Yes, the area where we really pick up time as we move to the lease much more rapidly with a smaller tenant and then at that point, at times we're at the mercy of their contractors. So we always try to push and help them get through permitting.

So it's a much quicker process but of course we always want it to go even faster and we work on that every day..

Yes. Okay. Thanks and then just as it relates to again the shop space, you've got actually kind of a fairly favorable at least from a number of leases expiring, ‘19 and even ‘20 is fairly light relative to sort of what the out years look like.

What are the mark-to-market look on those rents generally and then given the somewhat lighter volume of maturities, does that help you get to a higher number on the overall lease rate?.

Yes. I mean look if you look at – if you're looking at 2019 and 2020 right we have our rents are 24 box and 25 box and our average is 26, so certainly you look at that and you think in general we should be able to do better. So but it's not huge. It's not a tremendous difference but there's opportunity there.

And part of that Chris is where that gets into is the rent bumps I mean if you – we didn't talk about this on the call but probably maybe a little more so than most of our peers, I mean our gap rent spreads versus our cash rent spreads there's a tremendous difference there and a lot of that has to do with our small shop leasing and the fact that we push extremely hard there and I say 95% of the deals we do in shop space have a minimum 3% annual bump after a 10% bump from a renewal print period.

So we're really focused on that but I think – so I think that the cash mark-to-market won't be as substantial to the gap mark-to-market is what I'm saying. But again when you look at cash flow there's a real that's kind of earning capital -- it really starts to grow as it grows on itself it's a big deal. It's kind of like interest on interest.

So I think that we're very focused on it and I think that we can do some things there and again I mean if you can lease another 2% in the shops on just at our average rent that's what is that 3 million off the top of my head of NOI maybe approximately. So we're focused on it..

Great. Appreciate it. Thank you..

Thank you Chris..

Thank you and at this time there enough further questions. I'd like to turn the conference back over to Mr. John Kite for the closing remarks..

Okay. Well, I just want to thank everybody for joining us. Look forward to seeing everybody at Nareit hopefully next week. Thank you..

Ladies and gentlemen thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day..