Yahoo Finance Taubman Centers Inc (TCO) Q1 2019 Earnings Call Transcript
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Taubman Centers Inc (NYSE: TCO)
Q1 2019 Earnings Call
May. 01, 2019, 10:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Thank you for holding, and welcome to the Taubman Centers' First Quarter 2019 Earnings Call. (Operator Instructions)
On the call today will be Robert Taubman, Taubman Centers' Chairman, President and Chief Executive Officer; Simon Leopold, Chief Financial Officer; and Ryan Hurren, Vice President, Investor Relations, Interim Chief Accounting Officer.
Now I will turn the call over to Ryan for opening remarks.
Ryan Hurren -- Vice President, Investor Relations, Interim Chief Accounting Officer
Thank you, Michelle, and welcome, everyone, to our first quarter conference call.
As you know, during this conference call, we'll make forward-looking statements within the meaning of federal securities laws. These statements reflect our current views with respect to future events and financial performance, although actual results may differ materially. Please see yesterday's earnings release and our SEC filings, including our latest 10-K and subsequent reports, for a discussion of various risks and uncertainties underlying our forward-looking statements. In addition, a replay of this call will be provided through a link on the Investor Relations section of our website.
During this call, we'll also discuss non-GAAP financial measures as defined by SEC Regulation G. Reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures are included, when possible, in our earnings release, our supplemental information and our historical SEC filings. Non-GAAP measures referenced on this call may include estimates of future EBITDA, NOI, after-tax NOI and/or FFO performance of our investment properties. Such forward-looking non-GAAP measures may differ significantly from the corresponding GAAP measures net income due to depreciation and amortization, tax expense and/or interest expense, some or all of which management has not quantified for the future periods. Following today's prepared remarks, we'll open up the call for questions. (Operator Instructions)
Now let me turn the call over to Bobby.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thanks, Ryan, and good morning, everyone.
Yesterday, we released solid first quarter results, in line with our expectations. Comp center NOI growth, excluding lease cancelation income, was up to 2.3%. Adjusting for the impact of foreign currency, NOI was up 3%. First quarter adjusted FFO of $0.95 also met our expectations. Year-over-year comparability is impacted by $12.5 of lease termination income received in the first quarter of 2018. If lease cancellations were removed from both periods, adjusted FFO would have been up $3.5 or 3.8%.
At March 31, comparable center occupancy was 93.5%, our highest first quarter level in 5 years, and up 30 basis points over last year. Lease space in comparable centers was also very healthy at 95.9%, up 70 basis points. Our trailing 12-month releasing spread improved to 7.1%, nearly 10% on an NOI-weighted basis.
Turning to sales. Sales per square foot were up 18.6%, marking our 11th consider quarter with positive sales growth. Trailing 12-month tenant sales per square foot was $832, up 10.3%. Both sales statistics now include CityOn.Zhengzhou as the center has 2 full years of sales history. In the U.S., trailing 12-month tenant sales per square foot were $919, up 10.9%.
There were several factors that impacted the significant sales increases this quarter. First, Tesla, a tenant that reports sales on a 1 quarter lag, delivered a substantial number of Model 3s in the fourth quarter of 2018 resulting in a materially positive impact to sales this quarter. Second, foreign exchange rates negatively impacted Asia by about 5% but less than 1% on the portfolio. Third, the Easter holiday shifted out of the first quarter into the second quarter this year. And lastly, we had a very tough comp as sales per square foot were up 12.4% in the first quarter of 2018, which also included an extra week in the January retail calendar. Removing Tesla and the impact of currency, we were likely positive against a very tough comp after considering the shift of the Easter holiday.
Our key categories, apparel, shoes and electronics, continue to grow. Luxury also continues to perform well with brands like Louis Vuitton, Gucci, Burberry, Dolce & Gabbana, Saint Laurent, Chanel, Coach, Versace and Tumi all posting strong results. UNTUCKit, Aerie, North Face, Fabletics, Lululemon, Zara, everything but Water and Lotte, were among the best performers in apparel.
There's been a lot of discussion around store closures and tenant bankruptcies. On our last call, we stated that our exposure to the most recent round was relatively low, representing about 31 stores. At that time, we expected 16 of those to close. Today, we have about 50 stores, which could be impacted by bankruptcies. We now anticipate about 20 of those will close, which is approximately 70 basis points of occupancy. We're actively working on retenanting and expect to have nearly 2/3 of this space backfilled by year-end and are maintaining our year-end occupancy guidance of 95%.
So generally, tenant demand for space in our portfolio remains solid. Our best assets are generating the most interest, particularly from the growing tenant pool of digitally native retailers, emerging brands, coworking and entertainment concepts. In 2018, we signed 57 deals with digitally native and emerging brands compared to 40 in 2017. And we're off to a good start in the first quarter having reached agreements with more than 20 such concepts. Many of these deals represent additional locations for some of the most successful and proven digitally native brands, including Warby Parker, Kendra Scott, Casper, UNTUCKit and IndoChino. Additionally, this year, Shoots, Flower Child, Chubbies and Worth, they are a few of the brands that have signed their first leases in our centers.
Third-party research has recently confirmed our portfolio as the largest concentration of digitally native brands in the sector. Coworking has also become another source of demand for space and high-quality retail asset. As an example, Industrious, an upscale provider of flexible workspace with 65 locations in 40 cities, will be opening their second mall location and their first in New Jersey at The Mall at Short Hills later this year. We have taken -- they have taken 30,000 square feet on the third floor of the former Saks store and completed the leasing of that box. This was space that was not conducive to retail, but it adds a unique use, creating traffic and more density to the center and greater cash flow.
As we highlighted in our press release, we were also delighted to announce the acquisition of a 48.5% interest in The Gardens Mall in Palm Beach, Florida. The Gardens is considered the best retail asset in the affluent and growing northern Palm Beach market. Its overall quality and sales productivity is above our portfolio median. Analysts generally rate the center as an A+, and it's producing about $900 per square foot of sale. The Gardens includes luxury in contemporary retailers such as Apple, Louis Vuitton, Chanel Tiffany & Co., David Yurman, Jimmy Choo, Vince, Salvatore Ferragamo, Williams-Sonoma, Athleta and Madewell. Emerging brands with new leases signed include Vineyard Vines, Palatine, Johnny Was, Kendra Scott, True Food Kitchen and South Moon Under. The center has a strong department store lineup with Nordstroms, Bloomingdale's, Saks and Macy's. There is also a Sears, which is currently still operating.
We acquired our interest from members of the Cohen family who, together with the Forbes family, jointly owned 97% of the center since its opening in 1988. The additional 3% is owned by a former employee's estate with no governance. The close of this transaction marks another partnership with The Forbes Company, our operating partner at Waterside Shops and The Mall at Millennia, the best centers in the Naples and Orlando markets. We now own great assets in 6 of Florida's top market. Like many others, we're extremely bullish on Florida's growth prospects. Its weather, increasing tourism, income levels, favorable taxes and the country's aging demographics all point to continued population growth and a strong economy.
We are also very pleased with the structure and the pricing of this acquisition. In this off-market transaction, we benefited from our long and profitable relationship with Forbes. In this noncash deal, we were able to utilize our operating units as tax efficient currency to structure an agreement that is leveraged neutral and is expected to be slightly accretive to FFO this year.
Total consideration for our 48.5% share of the asset consisted of 1.5 million operating partnership units and our share of the existing $195 million of property-level debt. The negotiated value for the contribution agreement was $83 per operating partnership unit. On the date of the closing, the TCO share price was about $53. In pricing this transaction, the seller agreed to essentially mix NAVs and accepted 1.5 million units on the basis that our current share price did not reflect the true value of the under -- of the operating partnership. For the purpose of mixing NAVs, we agreed with the seller to use the third-party consensus net asset value of the company, which was about $83 per share. Using 2019's full year budgeted NOI, this pricing results in a high 4% cap rate.
Overall, we're very pleased to acquire a significant interest in a top-tier retail asset. Clearly, among the best 5% to 10% of all centers in America, let alone, on an accretive basis. Assets like these rarely trade and have tremendous scarcity value. We believe that we are buying this center to trough NOI with the likely opportunity, not the risk, of repurposing a department store box. All in all, this investment is a positive result stemming from the current disruption in the retail environment.
The redevelopment of the Mall at Green Hills remains on schedule and will be completed in June. We're very pleased with the quality of the brands and food that will be joining the center, both in the expansion wing and in the existing mall. Our Asia's new 57,000 square foot design gallery flagship has already opened very successfully. Crate & Barrel will be opening later this year in about 27,000 square feet. North, an Italian food concept by Sam Fox, the founder of both P.F. Chang's and True Food Kitchen, will open in the fall. Digitally native brands, UNTUCKit, IndoChino, Palatine, Warby Parker and Casper as well as unique-to-market tenants like Sundance, CAV and Sauce Surrounding have recently signed leases at the center.
We're also delighted that our investment has led important brands like Apple and Louis Vuitton to substantially expand their stores. We expect the expansion to be over 90% leased by year-end. As many of you who have seen at the recent ULA Conference, National is truly on fire. We have the best assets in another great market.
Overall, we've completed a lot of activity across a variety of centers, and we're delighted that the strongest 2 concepts recognize the value of our high-performing centers.
So with that, I'll turn the call over to Simon.
Simon Leopold -- Chief Financial Officer
Thank you, Bobby, and good morning, everybody.
I'll begin by reviewing the year-over-year FFO variances for the quarter that are listed on Page 8 of our supplemental. FFO per share for the first quarter was $0.93. This quarter's adjustments included the change in fair market value of our Simon Property Group shares prior to liquidation, a restructuring charge and costs related to shareholder activism resulting in AFFO per share of $0.95, which compares to $1.04 of AFFO per share in the first quarter of 2018.
The primary variance was lease cancellation income. It was $0.125 unfavorable due to relatively modest receipts this quarter and a very large settlement received last year on the first quarter primarily from a single tenant closing all of its mall locations. Our other year-over-year variances included the following: minimum rents up $1.5 due to higher occupancy and average rents; interest expense was unfavorable $0.75 due to higher rates and borrowings; and our noncomparable centers, Beverly Center and The Mall of San Juan, were an aggregate of $0.10. This includes $0.45 of San Juan business interruption proceeds received in the quarter. We expect to receive an additional $0.01 or so of proceeds next quarter, which will resolve the claim.
Now moving to the balance sheet. In March, we completed a new mortgage financing at CityOn.Xi'an. This 10-year fully amortizing nonrecourse loan bears interest at an all-in fixed rate of 6%. The facility has a maximum borrowing amount of CNY 1.2 billion, which translates into USD 179 million. Of that amount, approximately $49 million has been borrowed at the end of the quarter. These proceeds will be used to unwind the existing financing arrangements of the joint venture, ultimately resulting in the repatriation of approximately $95 million of cash. This amount was included in the $455 million of additional liquidity expected from the Blackstone agreements and related refinancings that we announced last quarter.
Updating on guidance, as stated in the release, we continue to expect 2019 AFFO per share to be in the range of $3.62 to $3.74. And comp center NOI growth, excluding lease cancel income, to be about 2%. This guidance includes the impact of The Gardens Mall acquisition. The expected FFO contribution from the addition of the center will be largely offset by the dilution of additional units resulting in a net nominal positive impact in 2019. Embedded in this assumption are several purchase accounting adjustments, including an adjustment for the above-market debt, which will reduce the stated rate from 6.8% to an effective rate of 4.2%. Debt on The Garden matures in 2025.
Our 2019 total interest expense guidance remains unchanged. However, we have updated the breakout of consolidated and unconsolidated portions of the ranges to reflect more favorable LIBOR projections for the year, which will lower consolidated interest expense. Offsetting this favorable variance will be the interest expense associated with The Gardens in the unconsolidated joint venture line. All other guidance measures are unchanged. As a reminder, a summary of key guidance assumptions can be found on Page 6 of the supplemental.
Please note that the Blackstone transactions and the planned refinancing of the loan on CityOn.Zhengzhou remain excluded from guidance. We remain on track to complete all aspects of this transaction before year-end. As is our practice, we continue to exclude any potential future costs associated with shareholder activism. You should also note that a payment of $5 million to reimburse Land & Buildings for a portion of their expenses, which was disclosed in yesterday's proxy filing, will be included in second quarter FFO but is not currently in our guidance.
As we said on our call in February, we have included new disclosures related to our share of pro rata NOI on the supplemental on Pages 21 and 22. We have included our share of NOI for the full year of 2017 and 2018 to offer some historical perspective. Prompted by the growing number of centers owned through joint venture, we felt this disclosure will provide a new level of clarity and transparency into the company's financials. As you'll see, our pro rata share of NOI in 2018 was $576 million, up 4.7% over 2017. Our first quarter's 2019 pro rata share of NOI was up 5.7% over the previous year. These NOI numbers exclude lease cancel income.
And with that, I'll turn the call back to Bobby.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thanks, Simon.
Recently, we announced that we're recommending to shareholders to add Michelle Goldberg to our Board at the May 30 Annual Meeting. Her unique background in finance, consumer-facing technology, digital commerce, data analytics and retail disruption as well as her significant public company and report experience will be a strong addition. With Michelle joining the Board, Jon Litt has decided not to stand for reelection. We would like to thank Jon for his time, service and efforts.
Over the last 3 years, including Michelle, we have nominated 7 new Independent Directors bringing the average tenure of our 8 independent members to 2.5 years. In this period, we have also transitioned to an annual election of Directors, created a new Independent Lead Director position and increased gender diversity on the Board. With 5 female Directors, they will represent the majority of the Board.
We've had a very productive start to the year. We delivered solid first quarter results, completed some important and strategic leasing. We remain on track with the Blackstone transaction, and we've added a great asset, The Gardens Mall, to our portfolio at an excellent value.
So with that, we'll now take your questions. (Operator Instructions) Michelle, are you there? Operator?
Questions and Answers:
Operator
(Operator Instructions) And our first question comes from the line of Jeremy Metz with BMO Capital Markets.
Jeremy Metz -- BMO Capital Markets Center. -- Analyst
Yes. Can you hear me?
Ryan Hurren -- Vice President, Investor Relations, Interim Chief Accounting Officer
Yes. We can hear you.
Robert Taubman -- Chairman, President and Chief Executive Officer
Now we can, Jeremy.
Jeremy Metz -- BMO Capital Markets Center. -- Analyst
Yes. Great. Bobby, it looks like you're no longer pursuing a partner in Asia on Starfield. And so in last few times we spoke, it sounded like you were trading paper with a couple of potential partners there. I think you even had deal terms agreed to 1 pointer. It sounded like you did. So just wondering what happened there. Was it driven more by that side where they pulled out or got skittish so you felt like you -- should you go at it alone for now or was it something you saw where you decided you wanted to keep the larger percentage?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, Jeremy, as you know, we closed down the Blackstone or we're in the process of closing on our Blackstone transaction. We announced it in the last quarter. And yes, we were pursuing both things on a simultaneous basis. We decided -- once we announced Blackstone, we decided the way to bring a partner in -- once the Anseong project is complete, it really gives you retail pricing versus wholesale pricing. And so we're -- and we're very excited about Anseong. The construction is progressing well. It continues to be on time and on budget. Shinsegae is, once again, our partner there.
They were an incredible partner in Hanam. Once again, they are leasing a tremendous part of the shopping center there. And I was just there 1.5 weeks ago. And I went by the new Samsung semiconductor factory, which is right near us. And it's truly the biggest building I've ever seen in my life. It's going to have over 100,000 people in that building. And their building towers every where. To house the people -- they expect 250,000 people will be growing into the market in the next 2 to 3 years. So we believe that it was a prudent decision once we had been able to announce Blackstone to actually pull back from bringing partner in more on a wholesale basis than a retail basis.
Jeremy Metz -- BMO Capital Markets Center. -- Analyst
That makes sense. Appreciate that. And then in terms of your lease rents. I know these can fluctuate quite a bit at times, just given the size of the portfolio. There's obviously a nice reacceleration here from last quarter. If we go back, I think one of the last call or maybe it was a call before that, it felt like you were still doing some shorter-term deals where it made sense beyond those initial ones that really drag the spread numbers down. So is that fairly -- are you still doing some of those? And therefore, can we expect to see these metrics go back down here?
Or are you finally just lapping those initial comps and it should be better? Or maybe it was just a mix issue here between large and small spaces and we just shouldn't read too much into it? Any color there?
Simon Leopold -- Chief Financial Officer
Yes. Jeremy, it's Simon. I do think we're going in the right direction on spread. You could see it in the numbers improving. And if you look at that number on an NOI-weighted basis, the 71 goes to almost 10%. We are still doing some short-term deals so that we preserve occupancy and generate some cash flow. We're doing less of those. We talked about 22 affecting the spread. The last time we spoke, that number is down to 15. So things are getting better, and we're moving in the right direction. I will say, it's still a volatile environment out there. And it's not the last short-term deal we're going to do for the reasons we've talked about, but we feel like we're going in the right direction.
Operator
And your next question comes from the line of Alexander Goldfarb with Sandler O'Neill.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Hey good morning out there. So Two questions. First, on the Land & Buildings and Jon Litt. So with him stepping down and the $5 million settlement, or however you want to characterize it, in the second quarter, is everything now here done like so we won't see any more activism charges anymore, like everything is settled between you 2 or is there stuff that's still ongoing?
Simon Leopold -- Chief Financial Officer
Alex, it's Simon. So we accrue activism-related expenses in the quarter when we incur them. In most quarters, we have to make some estimates as the amount and exact timing of billings because they are uncertain coming from our advisors. We've accrued on average somewhere between $3 million and $3.5 million a quarter for 10 quarters now, but the number has fluctuated. If you look in this quarter, we took a $4 million charge, for example. And that, again, includes some estimates.
As I said in the remarks, there's a $5 million payment to Land & Buildings that'll be recognized in the second quarter. That agreement was reached in April so it wasn't known in the first of quarter. So it's not in the numbers now and it's not in the guidance. And we have certain compensation arrangements that were made a while back that will effectively amortize over the course of this year.
And there will be some other things that we're going to need to do to true up I guess and really clean up work that was done in April and some work that'll still needs to be done. So it's a relatively small amount for the comp expense. There will be that $5 million charge and some other things in the second quarter. And the reason we don't put them in our guidance is they're unpredictable and they're generally nonrecurring in nature. So that's a long way of saying we're not done. There will be more in the second quarter and a little bit potentially in the third, fourth as those compensation arrangements amortize.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Okay. But just on that point, Simon, if you know the $5 million now, I guess why not put that in guidance? And then, the stuff is still outstanding. This is all L&B related and are like -- I guess I'm confused as to why there's stuff still ongoing when it seemed like everything was resolved.
Simon Leopold -- Chief Financial Officer
We -- I'll sort of reiterate what I said before. It's been our practice over the last 10 quarters to put things in as we know about them, estimate them if we don't. But that means there will be more in the second quarter.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Okay. And then just a second question for Bobby. With the 7 of 9 Board members now refreshed over the past 3 years, you certainly have a lot of new people, a lot of new perspectives. So was there anything that -- that's different in the way of their interaction with the Board or questions that they're asking or some of the surprises, things that they may be asking if you that your other -- that you prior Board had not been asking? Just sort of curious because you've done a lot of refresh at the Board level. I'm curious how it's playing out as far as the strategy, the operations, investment style, et cetera.
Robert Taubman -- Chairman, President and Chief Executive Officer
Alex, we've always had an outstanding Board that has always had significant healthy tension at it. We're -- we obviously -- we have new people. And they have their own backgrounds, their own set of experiences and wisdom that they bring to the table. Their skill sets -- we're delighted with the matrix and skill sets that we have on the Board. I mean it's -- we're across all many industries.
We have investors. We have the people who understand real estate and retail. They're really bringing tremendous added value to the decision-making around the Board table. So we're delighted. And we talked about the lead director position, the very robust set of responsibilities we'll put in place for them. And we -- it's a very important and a very positive refreshment of Board. But I really mean that we had an outstanding Board since the day we went public. And it's very important to us to have that healthy tension from very capable people at management all the time.
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Okay. Thank you.
Operator
And your next question comes from the line of Todd Thomas with KeyBanc Capital.
Todd Thomas -- KeyBanc Capital -- Analyst
Just first question on The Gardens Mall acquisition. Bobby, you mentioned you feel like you're buying it at trough NOI. Can you just elaborate on that comment a little bit and maybe talk about where the upside is and what the growth profile looks like for that asset maybe in terms of leasing? And is there any update on the Sears box or potential to get that Sears box back near term?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, the Sears box is still operating. It's about 150,000 square-foot store. Forbes has expressed interest in recapturing that space for a number of years. And we mentioned the other department stores, Saks, Nordstroms, Bloomingdale's, Macy's, are all productive stores at the center. So from a Sears -- as I said, Forbes has tried for some period of years to improve and densify, I would say, the -- that location. But there's -- we had made a deal. Nobody's made a deal with Sears yet.
So on the question of trough NOI, it -- the center has -- it's been going through a complete remerchandising. We mentioned a number of the outstanding lux tenants that have come in the center, the new digitally native tenants, some of the new food that's coming into the center like True Foods. So there's just a tremendous reworking on the merchandising that's been under way.
Obviously, tenant allowances are important to lure some of those tenants to the table. And that has led to, I'll say, more volatile cash flow for the owners than historically they've had. It's been a very stable growing cash flow for many, many years as the market around it has continued to grow. The demographics around this market are excellent, and the market continues to grow disproportionately. So it's also -- it has significant tourism and snowbirds that also are at play in the market. So when we talk about trough NOI, it is industry merchandising efforts that's going on.
And obviously, everybody is subject to the retail disruption that is going on right now for the last number of years. But this is a terrific asset that we're going to be delighted to have in our portfolio on a long-term basis. It is rare to be able to buy an asset like this and actually do it on a slightly accretive basis. I mean most transactions for assets like these are highly dilutive. So we are delighted.
And we actually see coming out of this trough that the retail disruption just opportunity that we otherwise probably would not see. And I mean the estate -- the patriarch of the estate actually passed away about 15 years ago. And the estate has enjoyed the cash flow here for some time. So there -- this was a good decision for them. It was a good decision for the Forbes Family and it was a good decision for Taubman.
Todd Thomas -- KeyBanc Capital -- Analyst
Okay. And then just following up on that, Bobby, I think you mentioned the high 4% cap rate on that -- on The Gardens Mall. Was that -- just to clarify, was that what you think the market cap rate is for the asset? Or is that the company's initial GAAP yield for the noncontrolling interest? And maybe Simon, can you share what the cash cap rate looks like?
Simon Leopold -- Chief Financial Officer
Yes. Let me take that a little bit in pieces, Todd. So Bobby mentioned that the estate was interested in some kind of transaction here. They owned the asset for many years. Their tax basis was well below current value. And in today's volatile environment, they really wanted to find a tax efficient way to exchange their interest in this 1 center to a broader, more diversified portfolio with similar cash flows at similar overall quality. Forbes, who you know is our partner in other situations, is a great partner. They really preferred us as the partner for a bunch of reasons. One, they're familiar with us.
They know we can add a lot of value in the process even if they manager a day -- are doing it day-to-day. And Forbes also wanted a partner who is more prepared to deploy capital if there are accretive opportunities like Bobby mentioned with the department stores. So we were really the right partner for them. This was the right asset for us. There was one big question that we had to answer, though, which is, how do you price this off-market transaction with no cash component, particularly when our stock is trading at such a discount at current market value?
The mechanism we both landed on was that we would determine market value for the asset. And at the same time, agree on a third-party and of their view of the NAV of ROP units. For our units, as Bobby said in the opening remarks, we used $83 a unit. That was essentially consensus NAV per share for us. I want to make it clear, though, that's not necessarily our view of NAV for us, but it was acceptable for purposes of the deal.
And then to determine value for the Palm Beach asset, we agreed with the seller to use what were really the best available third-party cap rate estimates for assets of this quality. But we had to make a couple of adjustments. One, it's the above market that we talked about before. They also -- this is also a noncontrolling interest in a partnership where the rights and governance was really below what market today would be. Those 2 things or all the things we talk about really do affect value. But I want to point out, we've amended the partnership agreement so much. It looks like a lot more like what we have with Waterside and Millennia. When you put all of these things together, it resulted in a high 4% cap rate for the asset, which we feel is a very good price. We feel it's an acceptable discount to what the market value would be for the factors described. And that is a GAAP NOI. The GAAP NOI is lower than the cash NOI would be by a notable amount for a variety of reasons. If you were to use cash, you might be somewhere in the 50 to 75 basis points wider on cap rate than you are on a GAAP basis.
Todd Thomas -- KeyBanc Capital -- Analyst
Okay. Thank you.
Operator
And your next question comes from the line of Derek Johnston with Deutsche Bank.
Derrick Johnson -- Deutsche Bank -- Analyst
Hi, good morning. How you doing, I was wondering if you could talk about the partnership with Blackstone. What are your thoughts regarding future growth initiatives in China and Korea? And can you quantify how you see this relationship expanding?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, I think we'd be both disappointed if we look back 3, 4, 5 years from now and hadn't found a way to together grow the relationship. And they obviously are looking to place capital on behalf of their clients in Asia but specifically, in China as well as in Korea, that demand remains. And from our perspective, the really smart capital that brings a lot of added value to the table in their relationships, their network, the opportunities that flow to them. So we would both be disappointed if we hadn't found a way over time to expand that relationship. Where exactly that is?
Well, it will likely be in those 2 markets. And -- but we built a really impressive platform over there, which they recognized in their -- in the deal structure that they created with us. And so we're talking to them daily and we're looking at things together.
Derrick Johnson -- Deutsche Bank -- Analyst
Okay. Thanks And secondly, can you break down the category mix that contributed to the strong sales per square foot performance? Can you quantify how much was driven by Tesla? And perhaps, how did their apparel perform and electronics? And maybe any other notable callouts?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, I think in our prepared comments, we talked through this. Tesla was obviously very important. And the combination of Tesla plus the foreign exchange impact was -- largely took us to about even. And what we talked about then was the Easter shift as well as the 5 weeks, 4-week in January. And as we look at that impact, we likely would have been positive in the quarter without Tesla and without the foreign exchange impact. We also talked about apparel, electronics, shoes as areas that we're very good. And I think that the other issue is that we were up against very tough comp from the first quarter of 2018, which was about 12.5% up a year ago. And most of that, we talked about at the time was in apparel and in those areas. So to have the kind of -- be able to say that we are -- we had a likely positive result even taking Tesla and taking the foreign exchange out in the context of this quarter, I think we're very pleased with.
Derrick Johnson -- Deutsche Bank -- Analyst
Thank you
Operator
(Operator Instructions) And your next question comes from the line of Rich Hill with Morgan Stanley.
Rich Hill -- Morgan Stanley -- Analyst
Good morning guys. Simon, maybe a question for you. I appreciate you beginning to report the total portfolio NOI growth of 5.7%, which you mentioned that you would start doing on last quarter's call. Maybe this is an impossible question and maybe I'm asking you to give guidance on something you don't give. But can you help us put that in sort of context of maybe how that would've trended -- how that's trended compared to historical and maybe how you think about it going forward?
Simon Leopold -- Chief Financial Officer
Yes. I can try, Rich. I think that clearly, the results in '18 over '17 benefited from the new developments. That was a big piece of the overall growth, and that was a 4.7% year-over-year growth. And that's not surprising. We've been telling folks for a, while now that those new developments are adding a lot. And they were a material part of our outperformance last year when we gave guidance and then did quite a bit better during the course of the year. So that -- I mean that sort of talks about '18 over '17. In the first quarter of '19 over '18, it's less about the developments. It's a lot of things that are growing. San Juan is helping. We also -- a lot of our best assets are wholly owned assets. And so when you look at that mix, that helps as well versus the comp center number. I think that's probably the best way to answer your question.
Rich Hill -- Morgan Stanley -- Analyst
Okay. That's fair. And I want to come back to Gardens Mall. We view that as one of the best malls in the United States. So I'm curious as you think about Gardens Mall within your portfolio of properties, does it rank top quartile? Does it rank -- how do you think it shakes out within your portfolio properties?
Robert Taubman -- Chairman, President and Chief Executive Officer
Oh, Rich, we talked about it being above the median in our portfolio. We also talked about $900 a square foot, which is about where our U.S. portfolio is. So it's, I would say, right in the middle but with higher growth prospects over time. And it has an excellent luxury component that is performing and we think can grow. So we think, again, it's sort of just above the middle right now. But it's something that we expect to outperform over time compared to the rest of the portfolio. We love Florida. We think Florida is one of the great markets in America. And we're delighted to have 6 great assets, and we look at every one of those assets. They are the top of the game in those markets.
So -- and this is a great partnership with the Forbes family over many, many years. And they have 4 great assets. The fourth one is here in Detroit and is the #1 asset in Detroit. So they have a really terrific history and they've been great partners.
Rich Hill -- Morgan Stanley -- Analyst
Great. And I know two questions, but maybe just one quick follow-up. Who is managing the mall? And are you paying a management fee on your interest?
Robert Taubman -- Chairman, President and Chief Executive Officer
They are managing the mall as they do at Waterside and at Millenia in Orlando. They do get paid management and leasing fees. We generally get paid for the work that we do as well, whether at Millennia or Waterside. But they're the ones that operate the center. They have their own team of people. They -- we work with them hand and glove all the time. And we have various relationships with retailers where we'll step in or they'll take the lead as they're supposed to. But they manage it. They do an incredible job. And you can eat off the floors of every one of their shopping centers, let me tell you.
Rich Hill -- Morgan Stanley -- Analyst
Got it. Bobby, congrats on what looks like a really nice transaction.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thank you.
Operator
And our next question comes from the line of Greg McGinniss with Scotiabank.
Greg McGinnis -- Scotiabank -- Analyst
So first, I want to say thank you for continuing to provide the components that -- of rent that ASC 842 took from us. Despite what GAAP says, I do find it to be pretty useful information. Simon, it looks like tenant bankruptcies have trended. It touched higher than last year. And you mentioned it's still a volatile environment. So are there tenants that you're worried about declaring bankruptcy this year? I'm curious if this is in line with your original full year expectations now. Obviously, same-store NOI guidance hasn't changed much. It hasn't changed, but I'm curious if the underlying drivers have shifted at all?
Simon Leopold -- Chief Financial Officer
We did have more bankruptcies in the first quarter of '19 than we did in '18. In fact, that 1.6% in '19, that was equivalent to the total for 2018. So it was higher. And that's elevated even compared to history. Now remember, when you have bankruptcies, that doesn't mean they're all going to close. And of the, say, 50 stores or so that are affected in our portfolio by these bankruptcies, we only expect about 20 of those to close. So it's -- bankruptcies make good headlines. They don't always have quite as large an effect on your overall performance. We do think that the pace of bankruptcies will slow during this year just based on a very granular look at tenants.
So you can't -- certainly, you can't take the 1.6% and multiply it by 4 to get to a total number. I think historically, what you would see at 1.6% in the first year as you probably have something closer to 2.5% or 3% on the year. And that may happen. We'll see. But as we were saying, it doesn't affect our portfolio as much of the headlines would suggest. We prepared for this when we talked about guidance for the year. If you go back to 2018, we built a pretty conservative budget because they're building in the potential for bankruptcies. The sales environment was better than we projected at the time. And so that really helped us outperform over the course of the year.
We've built in a similar level of what I would call appropriate conservativism into the budget for this year. And we still have meaningful reserves left for the year. I don't want people to extrapolate from that, that we are poised to significantly outperform the guidance that we've given for the year. It's still way too early to do that. Remember, Bobby said, we were at 12.4% growth in sales in the first quarter of 2018. You've not seen anything close to that in the first quarter of this year.
We also had -- the 4 developments helped us a lot in outperforming last year. I don't think you can count on that happening this year, even though we're still very pleased with the trajectory there. And we also had a bunch of cost savings that were coming in line last year that we had to actually see through to fruition, and they did and that helped us outperform. And we've really annualized those at this point so you can't rely on all of that. So it's a very long answer to your question. But all in all, the bankruptcies were a bit higher. We think we're managing it, and we still think that we're working well toward being on track for the guidance that we gave earlier this year.
Greg McGinnis -- Scotiabank -- Analyst
Okay. Great. And for the second question, Bobby, you've consistently talked about strength of best assets generating significant tenant demand, growth. In the last call you mentioned that the same-store NOI growth is being dragged by results at a couple of assets. I'm curious how you're thinking about long-term exposure to those properties that are causing the drag today. How are you addressing those assets? Do you expect those properties are going to look materially different from a tenant or NOI contribution perspective over the next few years?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, we're always assessing our individual assets, and this is a constant process internally here. And over time, we make decisions. When you look at -- when we went public, we had 19 assets. And we look at how many we've developed and how many we bought and then how many we've sold or exchanged over time. No one's really recycle capital like we have. So part of the recycling in capital is to best position the portfolio for what we see coming.
The transaction we did a few years ago at the end of 2014 was very much that. We were positioning the portfolio because we felt we would grow better with the remaining assets as opposed to the ones that we were selling at the time.
So we are actually serious on looking at our assets constantly. It's never easy to deal with an asset for all kinds of reasons, but we have been able to find the way over many years. So you're actually right. The best demand from our retail community is always in the best assets. We have very good demand in our best assets today, and we have over 90% of our years leasing complete at this point.
And so -- we -- and we really -- there isn't a lot that we would change in the portfolio, if I would -- if you could just wave a magic wand. But there's always a less-productive asset, and yet for whatever group of reasons, either competitive or otherwise, it turns up that way. And we're looking and we're focused.
Simon Leopold -- Chief Financial Officer
Yes. And maybe just to add to that, we always look at our weighted average stats versus our actuals that way. I talked about the spreads before being 9.8% weighted average versus 7.1%, if you look at just the total. Our trailing 12 sales would be $971 versus $832. Our average rent growth in the first quarter of '19 would be 2.5% as opposed to 1.3%, and our weighted average occupancy would be almost 95%. So the 93.5%, that's the actual. And I'll point out that, that 93.5% actual is actually the best first quarter we've had in 5 years. So it just points to the overall quality at the top end of our assets. We're always trying to make this portfolio better. You see that with the Palm Beach Gardens acquisition. So if we have an opportunity to do that, we're absolutely going to take it.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thanks guys appreciate it.
Operator
And your next question comes from the line of Craig Schmidt with Bank of America.
Craig Richard Schmidt -- BofA Merrill Lynch -- Analyst
Given that The Gardens is now your third JV with Forbes and they clearly like JV-ing with you, is there any potential in the way you do others like you had mentioned Forbes Properties' Somerset Collection in Detroit?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, we certainly take things one at a time. We're delighted with the 3 assets that we're involved with. And they are one of the few families that own multiple high-quality assets in the country. Most families that own a great asset, they own what? Whether Belle Harbor down in Miami or whether it's the Segerstrom family out in South Coast Plaza or whether it's Bellevue up in Seattle, they own 1 asset. And it's a great asset and it's been incredibly positive for that family. So it is unusual to have -- for the Forbes what they've been able to accomplish and control 4 great assets in the United States. They're are all top, top assets. They would all be in the top 5% or 5% to 10% easily of assets in the United States.
Craig Richard Schmidt -- BofA Merrill Lynch -- Analyst
And do you know if they're still pursuing the Mall at Miami Worldcenter?
Robert Taubman -- Chairman, President and Chief Executive Officer
Yes. Together, we are leasing the space. We've had certain opportunities to move into ownership if we would -- if we want to once the project is complete and leased. And we are working on it. They're taking the lead on the leasing effort, but we are also involved.
Craig Richard Schmidt -- BofA Merrill Lynch -- Analyst
Great. Thank you.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thank you, Greg.
Operator
And your next question comes from the line of Caitlin Burrows from Goldman Sachs.
Caitlin Burrows -- Goldman Sachs Group Inc -- Analyst
Hi, good morning.Maybe just one question outside of the same-store pool. You mentioned that San Juan and Beverly Center added -- I think it was $0.10 year-over-year in the first quarter. So I was just wondering if you could any additional color on the expected incremental growth of those 2 properties maybe over the course of this year and going forward.
Simon Leopold -- Chief Financial Officer
Well, we had a fairly substantial insurance settlement for business interruption in San Juan in the first quarter. It was $4 million. We're expecting at least another $1 million. That's what we had in our guidance, and we continue to expect to see that in the second quarter. So you do have that. Both Beverly and San Juan continue to improve. They continue to do better. I will say that Beverly Center, right now sales have returned very, very quickly. In fact, quicker than we thought they would to near historic highs. There's a lot of good things going on at Beverly. The cash flows are where we underwrote them to be at this stage, and we're seeing some upside opportunities there that we did not expect that we think we'll be able to get to. We've got the Webster opening toward the end of this year, and we're very excited about that. And then we're still working through what we're going to do with the food on the eighth floor there. And that will really complete for the renovation.
But the trajectory of Beverly is great, and we're feeling like San Juan is really finding its legs. A lot of the shoppers there are still locals, but tourism is getting better. We're seeing a lot more of the hotel rooms there being filled. Total sales in the first quarter of '19 were up 20% versus '18. Total sales were up 12% versus '17, which was a pre-hurricane quarter. So we're happy about all that. We are largely leased. We got 93 stores open. With the number of our reviews, a lot of good things happening with the food there. And most of the hotel suppliers reopened, and the hotels are getting lots and lots of people showing up. The airport passengers are now actually even with where they were before the hurricane. So we're happy about the trajectory of all those. And we're happy that the business interruption proceeds there, particularly in San Juan, are coming to fruition because that was in our guidance.
Caitlin Burrows -- Goldman Sachs Group Inc -- Analyst
Okay. Got it. That's all thanks.
Operator
And your next question comes from the line of Haendel St. Juste from Mizuho.
Haendel Emmanuel St. Juste -- Mizuho Securities USA LLC -- Analyst
Hi. I guess close enough. Hey guys So I guess my question's on sales. You've obviously produced a very healthy number during the quarter, 11%, U.S. only held by Tesla. I guess I'm curious, what's the latest on Tesla? There was talks of potential store closures earlier this year. It looks like that plan has been put on hold. Do you expect them to just not open up anymore stores, maybe less store openings going forward?
And then some thoughts on luxury sales in the overall sales trends going forward. It appears that some retail -- potential headwinds on the horizon, rising consumer debt loads. A lot of folks, especially in blue states, were shocked by income tax bill this year. So just curious on conversations with Tesla and then thoughts on sales for your portfolio going forward.
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, I think we were all surprised by Tesla's, I think, top-driven decision to suddenly announce the closing of their stores. They had been in discussions with us about expanding the number of stores that they have with us in weeks leading up to that announcement. They have been an incredibly productive tenant, which everybody is seeing and their sales results impacting our first quarter, not just our first quarter, but I would say across our sector. So you've got a very productive tenant that seems to be operating stores in a very positive way.
I can't tell you what their -- the future holds for them. You obviously would have to talk to them. They do have leases with us. And I think when -- once they had recognized that you can't just close the doors, they stepped back and said, "Well, do we really want to do this?" They had closed one of their locations with us that was a short-term lease. But otherwise, we have 7 of the 8 that we have plus we have 1 in Korea. So really, 8 out of the 9 that are operating. So we would love for them to continue to operate. We think they're a unique use. In Hanam, we actually had 9 car dealers in our shopping center there, and we're adding 2 more so that we will have 11.
So it's clearly an idea that seems to be gaining traction. There are certain issues here in the U.S. that would make it more complicated for dealers to come into malls but nonetheless, it is something that has proven that it can work. So I think -- and that addresses the Tesla question.
On the -- for the lux sale -- luxury sales question, we have not seen an abatement in our sales productivity and gain. Fashion and are you fashion right is very critical how lux operates. And at the high end, we named a whole list of stores in our prepared comments that are selling right now. So we really don't see -- it's one of the strengths of our portfolio today is the lux customer. So yes, all the things that you mentioned are questions and concerns as we go back through the full year. And -- but for the moment, we're seeing good growth and we're seeing growth even over a big '18 in areas like apparel and electronics. So I think that gets it, Haendel.
Haendel Emmanuel St. Juste -- Mizuho Securities USA LLC -- Analyst
That's helpful, Bobby. I got another question just to follow-up on some earlier lines of question on The Gardens. I guess I'm curious -- more curious on what perhaps you can tell us about the market for JV interest, when, what your appetite for maybe acquiring further JV interest. Beyond just Forbes, are you out looking? What perhaps -- are you seeing -- any sense of what the market in your appetite for JV interest in high-quality malls?
Simon Leopold -- Chief Financial Officer
Haendel, it's Simon. I would say, just generically, it's extraordinarily strong. If we can do a transaction like we did with The Gardens with a great operator and we can do it in a way that doesn't increase our leverage, that adds to earnings, we're going to do it every single time as long as it's really additive to the portfolio. That said, the opportunity to find things like these is extremely limited.
There is no broad market for it. It has to be the right partnership. And there are not a ton of situations where you've got a family that doesn't run the asset that's there and wants to find a way to exchange into something else. So we're extremely open to it. We'd love to be able to find other opportunities to do exactly what we just did. We're really happy with The Gardens' deal. There just aren't a whole lot of them out there.
Haendel Emmanuel St. Juste -- Mizuho Securities USA LLC -- Analyst
Got it. Got it. And if I could squeeze one last question. And it looks like there was a small increase, $5 million or so, at Green Hills. Not too material obviously, but just curious what caused the increase, if it's any change in, let's call it, pricing on the project or perhaps higher construction costs?
Simon Leopold -- Chief Financial Officer
Yes. We saw that written in one of the research notes. But to be honest, Haendel, that's not something that's in our public filings. So I think that may just have been a misread from somebody.
Haendel Emmanuel St. Juste -- Mizuho Securities USA LLC -- Analyst
Got it. Got it. OK thank you.
Simon Leopold -- Chief Financial Officer
Thank you.
Operator
And our next question comes from the line of Christy McElroy with Citi.
Christine Mary McElroy Tulloch -- Citigroup Inc -- Analyst
GAAP impact on The Gardens on the debt versus the NOI. But can you give some color on why the cash cap rate is higher than the GAAP cap rate? I guess it would usually imply above-market rents, but you mentioned the center is at trough NOI. And then just to follow up on Richard's question on the management fees, did you give that management fee impact in terms of figuring out the full FFO driver impact?
Simon Leopold -- Chief Financial Officer
Maybe I'll take -- Christy, I'll take the second part first. We think that The Gardens, if you had a full year, would add somewhere between $0.06 and $0.08 of FFO that is basically offset by about $0.06 of dilution from the unit. That's where you get the accretion for the year. We are in the process of really finalizing a number of the purchase price adjustment to try to figure out really where you end up after you do the debt and other things.
When you get a value or to look at asset -- an asset after you acquire it, they look at the debt, they look at the assets and liabilities and they look at the rents. And in today's market, it's reasonable to expect that rents would end up being -- from a GAAP perspective, would have the potential to be marked down. We did a very close look at every tenant, every piece, every amount of rent revenue that they're paying, all the costs, we looked at it very granularly.
And when you take it all together, we feel, as Bobby said earlier today, that NOI has sort of gotten to a point that we think will be the lowest point and it's poised to grow from there. So irrespective of what you see with the GAAP adjustments, which will be there when you see in the second quarter, we think the rents here and the tenants that are in place are pretty much where they should be.
Christine Mary McElroy Tulloch -- Citigroup Inc -- Analyst
Okay. That's helpful. And then just on Asia, wondering if you could provide -- I understand that it's not in guidance at all, but maybe just an update on what your expectations are for the closing of each of the assets with Blackstone. Just trying to get a sense for the moving parts, and how that relates to your expectations for the earnout?
Simon Leopold -- Chief Financial Officer
Sure. So if you'll recall from the presentation, we did -- when we announced this deal, there are really sort of 5 pieces that all need to close. Three of them are the joint ventures on each of the assets and then there were 2 loans that needed to close as well. The accretion to earnings was almost all related to the 3 joint ventures. The refinancing that are going to occur -- that will occur, one in which it already has in Xi'an and the other one that will occur in Zhengzhou was really more about repatriating cash to the U.S. to pay down debt here.
But you got the bulk of your accretion really from getting those JVs done. And we said at the time -- I'm going to try to recall correctly, we said at the time that they've closed serially. The JVs were closed serially, and we were hoping to have at least 1 done in the second quarter and then the rest over the course of the year. We continue to see that happening. It's not in guidance, as you pointed out, because it's still uncertain as to what will happen. We feel like -- where we thought we were when we announced this deal is exactly where we think that we are right now. And we're going to update to you as we go. But we're certainly working hard to get them closed as quickly as possible. We'd like to get that accretion just as much as you guys would like to see it. But no impediments to getting it done.
In terms of the earnout, as we outlined last time, the earnout is actually a very simple calculation. It's against a budget for this year on NOI and how much you can grow the NOI above that over the course of this year. That is potentially affected by currency, which, right now isn't helping. It's not really hurting, but it isn't really helping. At the end of the day, I can't give you too much of an update on where we are on that. That's still very early in the year. I can tell you if the assets in Asia continue to perform well, then we'll give you an update as we go.
Craig Richard Schmidt -- BofA Merrill Lynch -- Analyst
But just given that all 3 of those assets are in the same-store pool now, you -- it was a 70 basis point negative FX impact to same-store this quarter. What is your expectation inherent in that 2% forecast that would be the FX impact for the year?
Simon Leopold -- Chief Financial Officer
It's actually very small. It's much less than the 70 basis points. I think it's on the order of 20 to 30 basis points. And that's really because you saw the dollar strengthened against those currencies over the course of last year. If that does not continue -- if we continue flat to where we are today over the course of that year, you will see the effect of currency naturally lessen because of the comps over the course of the year. So there's very little currency impact really on the year based in that 2% number.
Operator
And your next question comes from Michael Mueller from JP Morgan.
Michael William Mueller -- JP Morgan Chase & Co -- Analyst
Just one quick one. After Green Hills, is there anything in the shadow pipeline domestically for redevelopment, expansion development?
Robert Taubman -- Chairman, President and Chief Executive Officer
I would say not in a substantial project like that. We have nothing that we're looking at this minute. There are obviously the big boxes that we may find ourselves repurposing. We have two Sears stores plus now the Palm Beach Gardens store. Any of those could get repurposed. So those are the kinds of things that we have in front of us. And we have a few other boxes in other centers that also could be addressed, but there's nothing substantial expansion like Green Hills or certainly like Beverly Center in the context of a significant renovation that was there.
Simon Leopold -- Chief Financial Officer
Yes. Nothing even close now, Mike. I'd say the only other thing I'd add to what Bobby said is, we are putting Nordstroms in a country called Plaza, but that's known as top shadow. And that's all of our projections and thoughts about capital going forward.
Operator
And your last question comes from the line of Tayo Okusanya from Jefferies.
Omotayo Tejamude Okusanya -- Jefferies LLC, Research Division -- Analyst
Just two quick ones from me. The first one, could you just talk a little bit about -- you did talk about just you're doing some short-term leases and things of that sort this quarter. It's a bit of a looking in a crystal ball, but could you just talk about when you think a lot of the store rationalization could start to kind of slowdown over the next few years as all retailers kind of go through their underperforming stores and kind of call their store count?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, there's no question that they're resetting their footprint based on the omnichannel world. And that's happening daily with all of their decision-making. And I think the transition is going to take some time. We've talked about a lot publicly that there are over 1,000 malls in America. And in our view, that 90% of the value of the sector is going to be in the top 300. So when you think about that, you're in this big transition. And will it be 3 years, 5 years, 10 years? It's going to take time for that market to remake. And as it does, the great assets are going to gain all the great retailers. They're going to gain more market share. The sales are going to increase in those assets, and NOIs will start to really grow as will valuations. So I don't know what that time frame is, but we still have a lot of rationalization of those footprints that is going on with retailers. And -- but in the meantime, you're seeing all these digitally native guys and the emerging tenants that are coming up anew. And again, they want to be in all the great locations. So everything is moving toward the -- sort of our footprint and our positioning as a company. And -- but it's going to take time. And transitions really hurt companies that aren't well positioned quickly.
Simon Leopold -- Chief Financial Officer
Yes. Transitions create winners and losers. No question.
Robert Taubman -- Chairman, President and Chief Executive Officer
Yes. That's true.
Omotayo Tejamude Okusanya -- Jefferies LLC, Research Division -- Analyst
That's helpful. And then with most of the Sears that are now behind us, as you kind of take a look out in regards to weak retailers, are you still kind of seeing a lot concern over anchor boxes? Or it's more kind of what you're looking at, more kind of classic in-line-type retailers who are maybe struggling?
Robert Taubman -- Chairman, President and Chief Executive Officer
Well, I think we've seen a lot of shakeout over the last 3 years in the specialty store group. And as I was saying, you're seeing a new tenant pool emerge in that process. In the anchors, there's no question that Sears and their demise is going to accelerate and hasten the real estate shift that we were talking about. Because once a box closes if there isn't a good answer over time, it's not a great asset with demand for it. Then what happens is that, that decision and that closure then starts to force other large anchors to make decisions in the same location. So we -- that the -- there will be other boxes, too. But if you have good assets, you'll be able to find good demand and you'll densify your markets and put other property types, if not retail, in there and it will -- they will continue to outperform.
Omotayo Tejamude Okusanya -- Jefferies LLC, Research Division -- Analyst
Okay. Congrats on the acquisition.
Robert Taubman -- Chairman, President and Chief Executive Officer
Thank you.
Simon Leopold -- Chief Financial Officer
Thank you, Tayo.
Operator
And there are no further questions at this time.
Robert Taubman -- Chairman, President and Chief Executive Officer
Michelle, thank you very much. And for those of you still listening, thank you. We look forward to talking to you in the coming months. Bye-bye.
Operator
This does conclude today's conference call. You may now disconnect.
Duration: 75 minutes
Call participants:
Ryan Hurren -- Vice President, Investor Relations, Interim Chief Accounting Officer
Robert Taubman -- Chairman, President and Chief Executive Officer
Simon Leopold -- Chief Financial Officer
Jeremy Metz -- BMO Capital Markets Center. -- Analyst
Alexander Goldfarb -- Sandler O'Neill -- Analyst
Todd Thomas -- KeyBanc Capital -- Analyst
Derrick Johnson -- Deutsche Bank -- Analyst
Rich Hill -- Morgan Stanley -- Analyst
Greg McGinnis -- Scotiabank -- Analyst
Craig Richard Schmidt -- BofA Merrill Lynch -- Analyst
Caitlin Burrows -- Goldman Sachs Group Inc -- Analyst
Haendel Emmanuel St. Juste -- Mizuho Securities USA LLC -- Analyst
Christine Mary McElroy Tulloch -- Citigroup Inc -- Analyst
Michael William Mueller -- JP Morgan Chase & Co -- Analyst
Omotayo Tejamude Okusanya -- Jefferies LLC, Research Division -- Analyst
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