Welcome to the Retail Opportunity Investments 2018 Fourth Quarter and Year-End Conference Call. Participants are currently in a listen-only mode. Following the company's prepared comments the call will be opened for questions. Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of the federal securities laws. Although, the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements and expectations. Information regarding such risks and factors is described in the company's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K. Participants are encouraged to refer to the company's filings with the SEC regarding such risks and factors, as well as for more information regarding the company's financial and operational results. The company's filings can be found on its website. Now, I would like to introduce Stuart Tanz, the Company's Chief Executive Officer.

Thank you, and good morning everyone. Here with me today is, Michael Haines, our Chief Financial Officer; and Rich Schoebel, our Chief Operating Officer. Notwithstanding 2018 haven't been a challenging year for REIT stocks. The underlying fundamentals of our business and our core West Coast markets remain sound. In fact, demand for space across our portfolio remain consistently strong throughout the year. As always, we worked hard to make the most of it. As a result of our efforts, we are pleased to report that we again posted another very strong year on the property operations front. We leased over 1.5 million square feet during 2018, a new record amount of leasing activity for the company. We also achieved the new record high year end portfolio lease rate of 97.7%, which is now our fifth consecutive year of finishing above 97%. Additionally, for the 7th year in a row, we posted solid same-store NOI growth and again posted double-digit releasing rent growth. In fact for the fourth consecutive year, we achieved same space cash rent growth on new leases in excess of 20%. In addition to achieving strong property operating results, during 2018, we also embarked on several key initiatives, aimed and enhancing the long term competitive strength and intrinsic value of our business. One of the initiatives is disposing of certain non core properties. Our strategy is to sell certain properties where we have achieved our target growth and leasing objectives that are now for a variety of reasons no longer strategic fit with our core portfolio. We started this process in 2018, selling one such property for $28 million, and we just sold a second property last week for $17 million. We also have another two properties lined up to sell totaling about $27 million, one that we expect to close in the next several months, and another one which has been an extended closing which we expect to occur around mid-year. Additionally, we have a fifth property that we are currently in the process of receiving bids on. Beyond that we've had several other properties that we are in the process of completing leasing objectives that once we are finished, we would hope to move forward with selling later this year. The second key strategy that we commenced in 2018 is the densification of certain shopping centers. The goal is to capitalize on strong location attributes of our portfolio in densely populated communities where additional housing is needed yet available land for new development is essentially non-existent. In 2018, through a comprehensive careful analysis, we identified 20 of our shopping centers that have the potential to densify by adding a multi-family component which if successful would increase the intrinsic value along with strengthening our long term competitive position in each center. As of start, we are currently pursuing the entitlement process on three properties. Together the three opportunities represented $200 million investment in total with a projected unlevered return in the mid-7% range. To mitigate development risk, we intend to partner with seasoned multi-family developers. In the past six months, we have vetted over 20 different developers as it's looking now we expect to establish a 50-50 joint ventures where we will primarily contribute the land and each project as our equity. While, we are in the early stages on these projects so the tangible economic benefits will take time to be realized, we firmly believe that this strategy will serve to unlock embedded value and better position our portfolio for the future. Now, I'll turn the call over to Michael Haines, to take you through the details of our financial results. Mike?

Thanks Stuart. For the 12 months ended December 31, 2018, total revenues increased to $296 million from $273 million in total revenues for 2017. GAAP operating income increased to $103 million in 2018 from $94 million in GAAP operating income for 2017. With respect to fourth quarter results, the company had $75 million in total revenues and $27 million in GAAP operating income for the fourth quarter of 2018 as compared to $73 million in total revenues and $26 million in GAAP operating income for the fourth quarter of 2017. With respect to GAAP net income attributable to common shareholders, for the full year 2018 GAAP net income was $42.7 million or $0.38 per diluted share, as compared to GAAP net income of $38.5 million or $0.35 per diluted share for 2017. For the fourth quarter of 2018, the company had GAAP net income of $10.5 million equating to $0.09 per diluted share as compared to GAAP net income of $10.8 million or $0.10 per diluted share for the fourth quarter of 2017. In terms of funds from operations, for the full year 2018, FFO was $142.1 million as compared to FFO of $138.9 million for 2017. On a per share basis, FFO was a $1.14 per diluted share for the full year 2018 on par with 2017. For the fourth quarter of 2018, FFO totaled $36.5 million or $0.29 per diluted share as compared to FFO of $37 million for the fourth quarter of 2017 or $0.30 per diluted share. Same center net operating income increased 2.5% for both the full year 2018 and for the fourth quarter. Turning to our balance sheet and financing initiatives. Given interest rate fluctuations throughout 2018, we paid careful attention to maintaining our minimal floating rate exposure. You may recall that a year ago in 2017, we took steps to lower our floating rate debt significantly, bringing it down to only about 10% of our overall debt. In 2018, we worked to keep our floating rate debt at the same minimal 10% level, and our goal is to keep it at a low level going forward. To that end, during the fourth quarter of 2018, we entered into additional swap agreements regarding our 300 million floating rate term loan, effectively fixing the rate in the loan through its maturity which is over three years from now and the blended on fixed rate for the next three plus years is 3.1%. Today, the only floating rate debt that we have is our credit line which had $156 million outstanding at year end. In addition to maintaining a minimal amount of floating rate debt, during 2018, we also worked to further our unencumbered portfolio, as well as enhance our well-laddered debt maturity schedule. During 2018, we paid off two mortgage loans totaling $19 million increasing our unencumbered GLA to 95% of our total portfolio. As it stands now, we only have four mortgages remaining, meaning 87 of our 91 shopping centers today are unencumbered. And looking at our debt maturity schedule going forward, we have no debt maturing in 2019, as well as no debt maturing in 2020. In fact the next debt that matures isn't until 2021 when our credit line comes up for renewal and we have the ability to extend the maturity. Looking out further to 2022 and beyond, our debt maturities are nicely balanced and staggered each year. In terms of equity capital during 2018, we issued roughly 1.3 million of common shares through our ATM program raising $25.4 million of net proceeds. With respect to our chief financial ratios we entered 2018 with an interest coverage of 3.4x which is our ninth consecutive year about 3x coverage. Additionally, our secured debt total assets ratio ended the year at a very low 2.8% and in terms of our net debt to EBITDA ratio we lowered it from its mid-year number of 7.7x down to 7.1x at year end. We continue to work on bringing that down further. Looking at 2019 in terms of our guidance for the year, we currently expect FFO to be between the $1.11 and $1.15 per diluted share for the full year 2019. The low end of the range assumes that we sell 50 million of properties during the year, and use the proceeds to pay down debt. The high end of a range assumes that we reinvest the sale proceeds from dispositions into new acquisitions. In terms of same-center NOI growth, we expect it to be between 2% and 3% on a year-over-year basis. Lastly our guidance takes no account locking in the interest rate on our term loan that I just mentioned adding about $1.7 million to our annual interest expense. Additionally, our guidance takes into account the change that takes effect this year requiring internal leasing cost to be expensed rather than capitalized. We expect that change will add about $1.2 to $1.4 million for our annual G&A. So FFO guidance takes into account the $0.02 or $0.03 a share added expense from the new swaps and leasing accounting change. Now I'll turn the call over to Rich to discuss property operations. Rich.

Thanks Mike. As Stuart highlighted our portfolio continues to perform very well. For the fifth consecutive year as Stuart noted, we finished the year with a portfolio lease rate above 97% finishing 2018 at a very strong record high of 97.7%. Worth noting, we have not only finished each of the past five years above 97%, we have been consistently above 97% every quarter for the past 18 consecutive quarters. Notwithstanding being essentially fully leased with not a lot of lease rollover, we continue to work hard and creatively to improve tenancies and capitalize on the demand for space. As Stuart touched on, during 2018 we leased a record amount of space, in fact more than double the amount of space that was originally scheduled to expire. In total, we leased 1,534,000 square feet including new and renewed leases and we again achieved strong growth in our releasing spreads. To take you through the specifics, during 2018 we executed a total of 406 leases including 156 new leases totaling 441,000 square feet achieving a strong 21.7% increase in same space cash rents. And we renewed 250 leases totally roughly 1.1 million square feet achieving a solid 9.1% increase in cash rents. In terms of the fourth quarter, we executed 109 leases totaling 402,000 square feet including 40 new leases totaling 118,000 square feet achieving a 26.8% increase in same space cash rents and we renewed 69 leases totaling approximately 284,000 square feet achieving a 12% increase in cash rents. One of the key initiatives driving our strong results is our constant effort to seek out every opportunity to recapture below market for underperforming space and release it to much stronger tenants. Just to highlight a few examples, during this past year we recaptured anchor spaces at two of our shopping centers and brought a new value oriented grocer that is a perfect fit for each center's demographic profile. At one of the centers as part of replacing the old anchor leaves, we eliminated several restrictive provisions such that we now have the ability to develop an additional pad at the center. Additionally, at another shopping center we replaced an underperforming tenant with a new much stronger national retailer and in the process we removed a burdensome parking restriction enabling us to now be in a position to expand the center going forward. Importantly as part of replacing these old anchor tenants, we achieved 164% blended increase in cash base rent. Turning to the economic spread between build and lease space meaning newly signed tenants that have not yet taken occupancy and commence paying rent. At the beginning of 2018, the spreads stood at 3.6% representing $7.8 million of additional incremental annual base rent on a cash basis. During the course of 2018, tenants represented $5.9 million of the $7.8 million took occupancy and commence paying rent of which $4.2 million of that was reflected in our 2018 cash flow. Taking into account those new tenants that took occupancy during 2018 together with all of our new leasing activity during the past year, as of December 31, 2018 the economic spread stood at 2.9% representing $6.8 million in additional incremental annual base rent on a cash basis. Looking ahead at 2019, we currently have six anchor leases scheduled to expire this year. Two of the six anchor tenants have already indicated that they will be exercising their renewal options. One of the six that doesn't have a renewal option we are currently negotiating a new long term lease where we expect to get a solid increase in the rent and another expiring anchor that also doesn't have a renewal option, we're negotiating a new lease along with renegotiating several other leases with the same retailer and other properties. With respect to the other two anchor leases scheduled to expire in 2019, one of them we are currently working on potentially signing a new very strong national retailer and the other involves releasing a 21,000 square foot anchor space that is substantially below market. In terms of non-anchor tenants, we currently have approximately 230 leases scheduled to expire in 2019. We expect to renew unreleased this space consistent with our past performance. Lastly with respect to pad development and densification efforts, we currently have 12 pad opportunities that are we are pursuing across our portfolio totaling about 56,000 square feet, most of which are in the early planning stages. In total we estimate these projects could add about $2.5 million in annual rent equating to an 11% return once fully completed which we currently expect will be later next year. With respect to this year, at our Crossroads Shopping Center in Seattle construction on Phase 1 senior housing multifamily densification which includes 185 units is currently 85% complete and is on track to be finished by mid-year. For those of you not familiar for Phase 1, we ground lease the parcel to a developer. However we own the ground floor retail space that is being built as part of the housing which we have already fully pre-leased. Between the ground rent and the retail rent we expect to receive about $378,000 in total of incremental additional annual rent from Phase 1. In terms of Phase 2 densification at Crossroads, which is one of the three opportunities that Stuart mentioned, we'll be structuring it as a 50-50 joint venture with a multi-family developer with us contributing the land as our 50% interest. The current design for Phase 2 includes 200 plus apartments and over 10,000 square feet of ground floor retail. We hope to complete the entitlement process during 2019 and be in a position to break ground next year. Now I'll turn the call back over to Stuart.

Thanks Rich. As our operating and leasing results firmly indicate, our portfolio continues to perform at a high strong level. We expect that to continue in 2019. We are highly focused on getting new tenants open bringing the $6.8 million in incremental annual cash flow on line in 2019. Additionally, we are highly focused on continuing to work at freeing up space in our portfolio to capture the ongoing strong demand, improve tenancies and unlock the embedded growth in below market leases. While we're always looking to improve the tenant mix across our portfolio, it's important to point out that our tenant base today as always continues to be rock solid, the cornerstone of our businesses we like to say. Over the past several years while many landlords have suffered with considerable tenant fault and bankruptcies especially regarding big box retailers, that has not been the case with our portfolio. Our exposure has been very limited almost none to speak up which is indicative of the quality and diversity of our tenant base, as well as our hands on proactive approach to running our portfolio always with a strong eye towards managing downside risk and making sure our ongoing cash flow is consistent and reliable. Lastly in terms of acquisitions, through much of 2018 there was a lot of uncertainty across our markets with prevailing expectation that cap rates would increase as we move through the year. Accordingly, we took a cautious approach and stayed on the sidelines. While there was a marginal increase from the record low cap rates that we saw in 2017, pricing for quality grocery anchored shopping centers held steady across our West Coast markets as the year progressed and is continuing here in early 2019. Today based on what we are seeing, the uncertainty in the acquisition market is subsiding and such that we could see off market opportunities become more favorable as we move through the year. As Mike touched on, the high end of our guidance assumes that we will acquire 50 million of shopping centers utilizing proceeds from asset sales to fund new acquisitions. Beyond this phase assumption, we continue to field a number of interesting off market opportunities with private sellers wanting to explore taking ROIC currency. Assuming we can structure these opportunities on accretive terms keeping our balance sheet intact, we could possibly acquire properties notably north of that 50 million base target. With that said, it's too early just yet to fully know how the acquisition market will play out for this year. Therefore we continue to take a conservative approach with respect to external growth in our guidance in 2019. Rest assured as we move forward, we will be focused as ever on seeking out every opportunity to build value not only through smart acquisitions but also through continuing to proactively manage and lease our portfolio, as well as our longer term densification pursuits. Given our focus today with a strong underlying fundamentals of our markets and grocery anchored portfolio, we continue to be excited about the future prospects of our business. Now we will open up the call for your questions.

[Operator Instructions] Our first question comes from Wes Golladay with RBC Capital Markets. Your line is open.

I want to go back to the contribution of the land that defined your part of the equity for the densification projects. Will you be planning on just getting the construction loan for the actual construction costs?

The answer is, yes.

Okay. And then looking for the build up for same-store NOI growth this year, I remember last year you had some issues with permitting. I thought maybe some of that would carry some momentum into this year's guide for same-store NOI. Are you contemplating more delays in permitting, in the new guidance?

The permitting process is still cumbersome on the West Coast and our estimates are conservative.

Our next question comes from Christy McElroy with Citi. Your line is open.

Just a follow-up on some of the comments that you made at the end there. So, if you do end up going above the $50 million, how do you think about funding at that point? You mentioned the potential for I think OP units, but could acquisitions not just be dictated by your opportunities and market pricing but also where you could issue common equity as well? I'm just trying to get a sense for how you're thinking about cost of capital in terms of the capital allocation strategy?

We have no issuance of equity in our guidance. So we're anticipating the external growth through asset sales primarily. And as we articulated in the speech, primarily through OP units, we've had a number of conversations with private sellers, those are going well but we are cognizant in terms of where that equity gets issued given where our stock price is currently trading.

And then just Mike, in terms of guidance, and I just want to say, we very much appreciate adding the assumptions to the press release. So thank you, for that. Just can you give us your expectations for non-cash rent in 2019? Just trying to get a sense for the FAS 141 burn off and what that would look like relative to FFO?

Well, since we haven't been acquiring anything recently, our FAS 141 is going to obviously naturally burn off over time in straight line rents – similar. But that also depends on our leasing activity in 2019. Going back to FAS 141, that's rolling down from last year, although, I think we're expecting a pop in Q1 from Kmart. Kmart, we acquired at the end of the year, that's going to hit Q1 in 2019.

So that would be accelerated 141 in Q1? But then what about the full year versus 2018, should that - should we expect it to decline in 141 year-over-year?

Yes. It'll start naturally burning off. Yeah.

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

Just picking up on the prepared remarks on Christy's question, just how are you thinking about where you'd like to get leverage down to over the next year or so? And just along those lines, could we see disposition activity actually meaningfully exceed that $50 million in guidance even if there isn't kind of a match for those proceeds on the acquisition front?

The answer is, yes. You could see a bit more in terms of the disposition side. Mike, I don't know if you want to comment on the balance sheet.

We're continually focusing again that net to keep it down below 7 for sure. But to the second part of your question, I think the asset sales are going to be dependent on whether we meet those leasing objectives that get those assets to position where we would want to dispose of them.

And then just going back to the densification efforts and the conversations you're having with our - had with different partners. Can you maybe just expand a little bit more on kind of what you've looked to identify as far as key attributes of potential partner and as we talk about and think about beyond the three kind of near term assets you see a lot of repeat business with one partner or do you think it'll ultimately take the shape of having multiple different partners?

Well, we've had a lot of demand from private, public partners in terms of the densification process. We really want to try to separate the number of players so that we can make sure that we diversify the risk associated with having all our eggs in one basket with one developer. However, we are talking about giving some of these developers, what I would call a first look at other densification opportunities within our portfolio. So, the process has been moving quite quickly. We have identified several partners on two of the three projects, as we're sitting here today; although nothing has been signed yet. But we're making very good progress. So to try to answer your question, we want to really put different partners on different projects, just to diversify the risk aspect. And then more importantly, we are moving down the road at this point and getting very excited in terms of the progress that's going to be made with these partners. I don't know if you want to add anything to that, Mike?

I think you covered it all. We're being very selective about our partners, being sensitive to the product type and the location.

And our next question comes from Jeremy Metz with BMO Capital Management. Your line is open.

I just want to go back to the guidance. It just seemed like there was a bit of a disconnect here between where it was and where the street was. I'm just trying to understand what you think maybe the street wasn't fully appreciating here coming into 2019. I think the lease accounting was well known, we talked last call about some of the dilution from the new swap dispositions have been on your radar. So just trying to think through some of the bigger drivers here and also maybe where some of that upside really lies.

Sure. Well, I think just going back to your comment, I think Michael did a good job articulating two very important things. One, was the additional swap that we did in the fourth quarter which did add probably a penny and a half to two penny's in terms of guidance; and then the G&A side, which was another penny. We didn't have a lot of traction in the fourth quarter in terms of what I would call bringing that spread in, and that will certainly start to accelerate as we move into the new year. But those are the primary drivers of our guidance. Mike?

Those are the three lease accounting changes. It's the interest expense from the swaps and the minor dilution from SFL. If we just pay down debt with it.

And then you did have a bit of an increase like we would normally have in terms of G&A. That also had some impact.

And so there's nothing really lingering, I think Richard mentioned maybe there is some renegotiation of an anchor tenant. There's no drags on that necessarily, that's not one of the items?

Well, there is drag from the termination at Santa Teresa of the existing tenant that was dragging in the later part of the year from that that wasn't in our guidance in 2018. That will come now as it was a big increase. But that won't come in until the third or fourth quarter of the coming year, if I'm correct which I think back in terms of what drove our guidance to bit further down. So there's that issue that we went on that we undertook that did pop out of nowhere that we didn't anticipate the ability to do that in our guidance for 2018. The good news is there's substantial pickup in rent in 2019. What else, Rich in terms of anchor repositioning that popped up that has given us some downtime, there may have been one other.

Yes, and I think as you're touching on as you take out these anchor spaces particularly when it's not anticipated when an opportunity presents itself, you know there is going to be some loss of NOI as we're bringing in the new tenant. So that can have an impact and it's a little hard to forecast because you don't always know when you're going to be able to transact. The good news is we're still playing off on the West Coast and that gives us the ability to continue to really drive value as we look into 2019 at this point.

Yes, I appreciate that. And just the last one I had from a bad debt perspective, how much are you budgeting this year and maybe for some perspective, where have you come in relative to expectations maybe the last couple of years if you haven't?

So, on the bad debt expense; to be conservative, our guidance assumes bad debt expense equal to 1.5% of revenue which is historically notably above our actual number over the past several years. But we always like to be conservative in their approach at the outset of the year, in terms of budgeting and guidance so 1.5% of total revenue.

And our next question comes from Craig Schmidt with Bank of America Merrill Lynch. Your line is open.

I was wondering what are your targeted cap rates for dispositions and acquisitions in 2019?

Target cap rates for dispositions 6.5 to 7 and on acquisitions about 5.5.

And then just looking at the property operating expense was up 7.9%. Was there any particular component that was most pushing that?

No. Nothing in particular, I think it's probably some timing elements into those expenses.

So, Rich and I were kind of talking about that early this morning, just kind of identifying single expense line - we couldn't come up with prior to the timing issue between quarters.

And our next question comes from Todd Thomas with KeyBanc. Your line is open.

Just first question Mike, for the FAS 141 increase that you're expecting in the first quarter for Kmart. How much is that?

I believe it's about $3 million.

And then, as it pertains to the 2.5% same-store NOI growth, just following up on that a little bit, can you just talk about sort of the primary drivers behind that so maybe the contributions from real escalators new and renewal leasing and then your assumptions around occupancy throughout the year?

Well I guess the question is the 2.5% in 2018 Todd in terms of occupancy on the assumption I'm just trying to dive a bit further, the questions is for 2018 or 2019?

For 2019 the same-store NOI forecast right 2% to 3%. What are you looking at in terms of the contribution from escalators leasing and then I guess what are your assumptions for occupancy throughout the year?

Well for occupancy our guidance assumes that the lease rate will hold steady in the 96% to 97% of range on average. We anticipate the potential of a slight drop off in the early part of the year following the holidays and then building throughout the balance of the year. That said thus far we are seeing strong demand for space and we expect that the lease rate could continue to stay at or above the 97%. But our guidance is a touch lower than that. In terms of releasing spreads our guidance is tied to our detailed property budgets taking into account each individual lease. So the releasing assumptions vary from one lease to the next. But generally speaking we expect to achieve a similar releasing spreads on average to what we achieved this last year.

And Stuart so the pipeline for additional dispositions that you talked about. So the beyond the $50 million that's in guidance where you have some leasing objectives that you're trying to complete. Can you just provide some color on the size of that pipeline or sort of put some, some brackets around how many properties you're targeting and do you expect any of those assets to be ready for sale in 2019 or would they likely be 2020 dispositions?

They'll be ready for sale in 2019. And we're anticipating that pipeline to be another three or four properties probably totaling between about another maybe another 50 million.

And then just lastly - are you able to share the cap rate on Vancouver market center?

Let me just see in terms of Vancouver that cap rate was about a 7 a blended 7 going in so six three quarters to 7 Todd.

And our next question comes from Jeff Donnelly with Wells Fargo. Your line is open.

Stuart you mentioned in your remarks that you would primarily contribute the land for your interest in the redevelopments. I'm just curious do you expect you'll need the supplement that with cash. And I guess if so how much do you think it would be come from cash versus land contributions?

At the present times given the performance that we're currently working with our partners on it's very little if any, very little.

And just I'm curious is there a chance these redevelopments trigger a reassessment under Prop 13 for the shopping center component. I'm just thinking that if you split off a parcel for residential developments since that entails both new construction and a change of ownership. I'm wondering if California will reassess you and I'm not sure how material that's step up is on – that could incur?

We've created very specific property lines for each properties. So we've gone in and done lot line adjustments already. And with those lot line adjustments we don't anticipate any impact from any reassessment under Prop 13.

And just one last question maybe for Rich. I apologize definitely your remarks but you're leasing spreads accelerated from Q3 into Q4. I was just curious is that a function of maybe retailers trying to get stuff done at year end is it sort of a change in the tenor of the leasing environment or is it maybe just a bit of a random walk I'm just kind of curious what your take is?

I mean I think obviously there's always a push to get people open for the holidays. So I think that certainly came into play.

Our next question comes from Tayo Okusanya with Jefferies. Your line is open.

Quick question, the bad debt expense that you discussed earlier on the 1.5 million is that built into your same-store, same-store NOI forecast of 2% to 3%?

1.5% was the bad debt not 1.6%.

Okay 1.5% right.

And yes it is in our same-store – it is in our same-store number.

So that's part of the reason there. And then second of all in regards to the process of delevering any considerations going forward in regards to asset specific JVs?

Not at the present time.

And is that just because you don't want to make the business more complex is it lack of interest I'm just kind of curious where that decision is coming from?

Well we haven't done a joint venture since 1991. So it's something that we tend to avoid given the - we just think simplicity and transparency is extremely important for our story. And now that doesn't mean we won't look at joint venture an opportunity may popup, but that's just not our thinking now. We continue to want to keep this company again as straightforward as possible.

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

So just thinking about dispositions and wondering how you're thinking about them in terms of the stuff that you have lined up. I know you talked about you could possibly do more. Are you thinking about it as we've got a set number of assets that we want to clean out at some point in time once you're finished with that. We're probably not going to see him what if the stock improves in over the next two or three years are we going to see you still be active on the disposition front or you're going to pullback and just use equity to fund growth?

Well we go through a very in-depth look at our shopping centers quarter – every quarter just in terms of looking at trends both in terms of the mark to mark and the leases as well as the risk associated with the NOI growth. But in doing so given how highly occupied this portfolio is we really are more focused in looking at dispositions as it relates to getting out of Sacramento. That's probably number 1 on our list. And number 2 is any risk we see 3 years out, 5 years out in terms of deterioration of NOI, those are really the 2 things we're focused on right now, in terms of dispositions. And that's why a number of these will be in the Sacramento market, we're making good headway there and some other areas of our portfolio as well. But nothing of concern in terms of the overall portfolio itself.

And maybe one other question on that. So if this batch is 6.5% to 7% cap rates, once you're out of Sacramento and the assets you're looking at today, if you continue to sell more assets, would you expect the cap rate on that next batch to be lower than that 6.5% to 7%?

Yes.

And our next question comes from Chris Lucas with Capital One Securities.

Just wanted to follow up on the 150 basis points of bad debt in the same-store guidance for this year. Is there - I think it's pretty conservative just generally. I was just wondering is there any specific tenants that you had in mind or if it's just a catch-all bucket?

It is a catch-all bucket, it's across the board on budget revenue.

And Mike, was that - is that the same rough amount that you used for budgeting for 2018 going into the years related to sort of same-store NOI guidance that you...

It is. We typically as a - that same run-rate in all of our budgeting each year for guidance of this year being the same. Historically though, our actual bad debt is coming below that.

And then I guess, Stuart, I just wanted to follow up on some of the development opportunities. I guess I think about mixed use, I guess just in terms of the projects that you're looking at, are any of them clear of sort of all of the sort of barriers that you need to hit, i.e., getting anchor sign-offs, getting zoning set, getting site plan approvals done; I mean are any of these projects at that point or where - how much more time is necessary to sort of get you to where you need to be in order to actually put a shovel in the ground?

Chris, very good question. The 3 that we are fast-tracking right now have no encumbrances in front of us. So there's no tenants to deal with. And that's one of the reasons why we are focusing on this group first because it's a very - we think we'll be able to fast-track the entitlement process a lot quicker than what I would call - items are things that may come up as it relates to terminating leases. What I would call our bucket 2 and bucket 3, which is the balance of the 20 other - 17 other properties, that's the next step that we've been working on. And that is you are asking does have - need a bit more time because we are dealing with relocating tenants as well as terminating current leases. We expect that bucket to really get - have more clarity on that bucket within the coming year in '19, but nothing to speak of this second because of these encumbrances, but we are making good headway with these other assets. It just takes time.

And I guess that drives me to my last question which is, in the same-store NOI guidance for this year, is their strategic de-leasing as part of future redevelopment that is included in that or is that - are we still sort of clear of those issues in '19?

There is the Kmart has gone from '19 in terms of budgeting because we terminate that lease in the fourth quarter of last year, so that's out of the equation. And that's the only impact we've got from these 3 projects. Looking forward, in terms of bucket 2 as I just touched on, very little impact right now that we can see from NOI or from taking that NOI off the grid as you might say, but we'll keep our investors informed as we move through the process in terms of any changes that that might happen as it relates to taking that NOI offline.

And I'm showing no further questions. At this time, I'd like to turn the call back to Mr. Stuart Tanz for any closing remarks.

In closing, I would like to thank all of you for joining us today. We truly appreciate your interest in ROIC. If you have any additional questions, please contact Mike, Rich, or me directly. Also you can find additional information in the company's quarterly supplemental package, which is posted on our website. Thanks again and have a great day everyone.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.