Prime Group are brighter today than when I joined the Company two years ago. The reason why is straightforward: Our decision to focus upon financial wherewithal and operational efficacy has resulted in increased visibility.
“There is still a heck of a lot to be accomplished. Notwithstanding, the incremental progress we make every single day confirms that our labor is not Sisyphean in nature. While there is still an ‘uphill battle’, the slope has become dramatically less steep. We muster our formidable operational, financial and strategic resources in concerted fashion and every time we roll the stone up the hill, it is with purpose. Rest assured, my colleagues and I will keep pushing on until this proverbial boulder gathers momentum and on its way down crushes those pundits who doubted us.
“While the following might qualify me as master of the obvious, if you want cash flow, lease space. To wit, during the six months ended June 30, 2018 total leasing volume for the core portfolio was 2.0 million square feet, of which 44% was to lifestyle tenancy, which includes food, beverage, entertainment and fitness. This excludes an additional 400,000 square feet of total leasing volume completed in July 2018. We continue to incent our leasing professionals as it relates to diversifying tenancy and during the six months ended June 30, 2018 we had 100 leases qualify, which compares to 220 leases in 2017.
“As a percentage of core NOI, Tier Two was closer to 25% when I took the helm of Washington Prime Group. As of June 30, 2018, Tier Two represents approximately 10% of core NOI. Contrary to popular belief, these assets make money. We have pared 13 of these assets with another three recently classified as Noncore. As a reminder, 42% of Tier Two NOI is encumbered with an indebtedness yield of 12.5%, and we have proven several times we are not averse to handing back keys to special servicers when the situation is warranted. In addition, I have previously emphasized the intrinsic volatility within the Tier Two portfolio. These assets require a higher risk adjusted ROIC threshold, hence, a transaction has to make the utmost financial sense before a marginal unit of capital is allocated.
“Turning to inline tenant bankruptcies, the black cloaked, scythe wielding grim reaper of bankruptcy mentioned during last quarter’s conference call appears to have reduced his workload for the time being. During 2017, the full year impact was approximately 716,000 square feet, while 2018 inline bankruptcies have totaled approximately 114,000 square feet through June 30, 2018. Recall, since 2014, we had approximately 2.3 million square feet, or nearly 10% of inline space, negatively impacted by tenant bankruptcies. In spite of this, we evidenced minimal variance as it relates to financial and operating metrics. For instance, between 2014 and 2018, comparable occupancy decreased less than 2.0% as of June 30, 2018, while comparable NOI is forecasted to increase 1.0% and tenant allowances have generally decreased for the core portfolio. Make no mistake about it, there will be additional bankruptcies and we have planned accordingly.
“Recent operational improvements are admittedly a source of pride as I have observed our entire Company rally around these measures. I’ll quickly mention a couple: Redefining local management. Think about it, General Managers serve as the primary interface for our more than 300 million annual guests. Hence, they should serve as a ‘goodwill ambassador’ acting as ‘local eyes and ears’ by identifying relevant goods and services. As a result we have reconsidered their role and have increased their revenue generation responsibilities as it relates to procuring local leasing and sponsorship.
“We also are in the process of implementing what we refer to as ‘The Hub’ and have 52 locations so far. Let me further explain by evoking the Netflix television series Stranger Things. Instead of sequestering local management in an alternate dimension similar to that of The Upside Down (also known as the ‘mall management office’), we have moved them ‘front and center’ into the common area. As a result, one does not have to journey down a dimly lit labyrinth replete with Demogorgons in order to inquire about the upcoming Easter egg hunt. From the overwhelmingly positive responses we’ve received, one would think we had invented the Slurpee. Take a look at our website for examples of this highly sophisticated technological innovation. Wait a minute, it’s just a large table with electrical outlets and visible signage. Bottom line: A little common sense goes a long way.
“Turning our attention to redevelopment, we currently have 43 projects underway between $1.0 million and $60.0 million with an average estimated yield of approximately 10%. In addition, six projects are currently in the final review phase. As a reminder, we have allocated approximately 90% of redevelopment capital spend to Open Air and Tier One assets since the beginning of 2016. Related to redevelopment is the adaptive reuse of former department stores. In this regard, our proactive approach has served us well. During the second quarter of 2018, the Company proactively gained control of six Sears department store spaces located at Tier One properties for future redevelopment efforts. Currently,