CBL & Associates Properties, Inc. (CBL) 2002 Q3 法說會逐字稿

Good day and welcome to the CBL & Associates Properties, Incorporated conference call. Today's call is being recorded and will be available for replay starting today at 3 PM Eastern Time and then running through November 4th at 8 PM Eastern Time by dialing 719-457-0820 and entering confirmation code 733614. At this time for opening remarks I would like to turn the call over to the President, Mr. Stephen Lebovitz. Please go ahead, sir.

Thank you and Good morning everyone. We appreciate your participation in today's call to discuss our results for the third quarter of 2002. With me today is John Foy, the company's Vice Chairman and Chief Financial Officer and Charlie Willett, Senior Vice President of Finance who will first read our Safe Harbor disclosure.

Thank you. This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise may differ materially from the events and results discussed in the forward-looking statements. During our discussion today, references made to per share are based on a fully diluted converted share. We direct you to the company's various filings with the Securities and Exchange Commission including without limitation the company's Annual Report on Form 10-K and the management's discussion and the analysis of financial condition and results of operations incorporated by reference therein for a discussion of such risks and uncertainties. I would like to note that our dividend has increased substantially and that a transcript of today's comments including the preliminary balance sheet, detailed debt schedule, development schedule and leasing information will be filed today as a Form 8-K and will be available upon request. This call is also available for replay on the Internet through a link on our website at www.cblproperties.com. This conference call is a property of CBL & Associates Properties Inc. Any redistribution, retransmission, or rebroadcast of this call without the express written consent of CBL is strictly prohibited.

Thank you, Charlie. I would like everyone to know that Kelly Sargent our Director of Investor Relations is away this week attending a wedding, but she will be [Narete] and we look forward to visiting with everyone as a part of meetings out there. As our earnings release stated, the third quarter was a very successful one for our company in a number of respects. We are pleased to be able to report 12.3 percent FFO growth year-to-date and an 18 percent dividend increase. We have a number of exciting of accomplishments to discuss on today's call, let's start with our developmental program.

Two weeks ago we held the very successful grand opening of Parkway Place Mall in Huntsville, Alabama. This mall was developed with our 50:50 joint venture partner Colonial Properties Trust. Parkway Place represents to complete redevelopment of an older urban malls venture purchase in 1998 demolished and rebuilt in phases. Parkway place has 630,000 square feet and is anchored by two flagship department store - - department stores. Parisian then opened last fall and Dillard's that opened with the mall on October 16th. The mall opened 75 percent leasing committed and we expect that the mall will reach 85 percent occupancy by the fourth quarter of 2003.

We have an excellent lineup of tenants that are new to the [Huntsville] market, including William Sonoma, Chico's, and Joseph A. Bank, Houlster. The initial yield for the project after development and management fees is 8.5 percent with a stabilized yield of 10 percent. During the third quarter we commence construction on the mall of South Carolina at Myrtle Beach, South Carolina a 50-50:50 joint venture with [Burrows & Chafen] that contributed the land to the venture. The mall will be anchored by Belk, Dillard's, and Sears and will contain a Bed Bath & Beyond, Border's Book store, and Dick's Sporting Goods has senior anchors.

In addition we have more than 60 percent of the mall shops space committed, which is encouraging to us given that the mall, will not open until march 2004. Upon the opening of this mall the older undersized Myrtle Square Mall, which is owned by our partner will close. Including the Myrtle Beach Mall, we have a total of 2.4 million square feet under construction this includes two associated centers, the shops at Hamilton Place in Chattanooga, Tennessee and Parkdale Crossing in Beaumont, Texas and two community centers Waterford Commons and Waterford Connecticut and Cobblestone Village in St. Augustine, Florida.

We have several other projects in the development pipeline, which is driven by retailers who direct us to marketing in which they are seeking to expand. We will continue to be conservative as we consider new development opportunities. A pro forma share of the total investment of the new projects currently under construction is approximately 169.6 million dollars of which 47.6 millions dollars has been invested as of September 30, 2002. Construction loans or credit facilities are in place with the remaining cost. Initial unleveraged yields on these developments are expected to range from 9 to 10 percent after management and development fees with stabilized yields ranging from 10 to 11 percent.

Also during this quarter, many exiting development activities were now set on properties, which is a division of federated, will open as the fifth department store at Arbor Place Mall in Atlanta, Georgia in the fall of 2004. At Parkdale Mall in Beaumont, Texas, Police Department Store held in August grand opening of their 170,000 square foot department store that replaced a close [McGeomery Wareds]. Also under construction in the mall is a 26,000 square Linens N Things that will open in the summer of 2003. The total renovation of Parkdale Mall commenced in August and will be completed in August 2003.

At Meridian Mall Lansing, Michigan, Galyan's opened their new 80,000 square-foot store in August and last month Yokers (ph) announced they will open next spring in the close Jacobson store. Dillard's opened two new department stores one at Randolph Mall, Asheville, North Carolina, which replaced a close Rose's and the other Asheville Mall, Asheville North Carolina replacing a vacated [McGeomery Wareds]. Dillard's will also be opening an expanded store at Jefferson Mall in Louisville, Kentucky in November. During the quarter we added a 10,000 square feet David's Bridal to the Springdale Mall in Mobile, Alabama. We are renovating 7 malls at this time and 5 of these will be completed for the holiday season. We continue to see strong results at our malls and believe that their updated luck is a big part of this success with the retailers and the customers.

As of the third quarter, we increased the total portfolios occupancy to 92.8 percent, a 170 basis point improvement over the second quarter's occupancy and a 60 basis point improvement over the same quarter one year ago. These increases indicate the fundamental stability of our properties as well as the success of our proactive leasing strategy. We expected the occupancy levels at year-end will be slightly higher than in the third quarter. During the third quarter we executed over 3000 square feet of new leases and renewed 204,000 square feet of existing tenants for a total of approximately 504,000 square feet. For the quarter average renewal base rents as compared to prior base rents increased 15.2 percent in the malls, 6.7 percent in the associated centers, and 4.6 percent in the community centers. On new leases, the average base rents increased 22.4 percent over the rent paid by the prior tenant. For the first nine months of 2002, we had 158,000 square feet of bankruptcies compared to 368,000 square feet for the first 9 months of 2001. Our 8-K filing will include a schedule detailing the leasing of new and renewal tenants.

During the third quarter there was no dispossession or acquisition activity. Subsequent to the quarter, we sold one community center - Salem Crossing in Virginia Beach, Virginia, which would be reflected in the fourth quarter results. We continue to look at acquisition opportunities where we can enhance the value of the properties through our aggressive hands-on approach to leasing, specialty leasing, and management. I will now turn the call over to John to discuss the financial results for the quarter.

Thank you Stephen. The third quarter results reflected improved operating performance. Let me briefly review the financial results. FFO per share increased 6.2 percent over the prior year. Of this increase 40 percent was a result to the addition of the Lakes Mall, Muskegon, Michigan. The acquisition of the remaining partnership and interes in Columbia Place, Columbia, South Carolina, and the acquisition of the Panama City Mall, Panama City, Florida and Richland Mall, Waco, Texas.

The other 60 percent of our growth was attributable to increases in occupancy, base rents, and interest in savings. Our cost recovery ratio was 93.1 percent for the nine months compared to 98 percent for the same period a year ago. The cost recovery ratio trended down as a result of bankruptcies, store closings, and new lease negotiations with certain tenants. We anticipate that our cost recovery ratio will be approximately 93 to 94 percent for the full year 2002. For the quarter out parcel sales would have increased FFO by one cent per share to one dollar and four cents. Before consideration of out parcel sales our dividend pay-out ratio for the quarter was 53.9 percent based on the fully diluted converted share account. Including out parcel sales, the pay-out ratio was 53.4 percent.

As announced we are increasing the dividend for the fourth quarter by 18 percent to 65.5 cents per share and we expect to have an annualized dividend of at least 2 dollars and 62 cents to 2003. We will continue to maintain a conservative dividend pay out ratio. Also, a good indication of the strength of our balance sheet is the fact that considering available extension options we do not have any debt maturities in the next 15 months other than normal principal amortization. As we stated in our news release same-center NOI growth was a positive 1.4 percent for the total portfolio driven by increased rents and occupancy levels.

The breakdown for the third quarter by property types is as follows: the same-center mall NOI increased 1.4 percent with lease termination fees and 2 percent without, as lease termination fees were less this quarter than in the same period last year. NOI for the associated centers increased by 9 percent due to releasing of space vacated last year as a result of bankruptcies. Same-center, community- center NOI decreased 1.8 percent for the quarter, the vacancies resulting from the bankruptcy of Home Place at Kingston Overlook in Knoxville, Tennessee and Quality Stores at Sattler Square in Big Rapids, Michigan continue to impact community center results. The space at Sattler Square has been released to tenants, two tenants both of which are under construction and scheduled to open within the next few months.

The Kingston Overlook property has a lease under negotiations for the entire vacant space and we except that lease will become operative in the first half of 2003. Year-to-date, we spent 19 million dollars on tenant allowances, which includes deferred leasing costs of 1.2 million dollars, 10.5 million dollars on revenue neutral capital expenditures and 44.4 million dollars on revenue enhancing capital expenditures. Year-to-date the revenue neutral expenditures include the following: 4 million dollars spend on resurfacing and improve lighting in the parking lot, 6.4 million dollars for roof repairs and replacement and a small portion of this amount was included in the renovation costs. Revenue neutral capital expenditures are billed to the tenants as common area maintenance expense and the vast majorities recovered over a 5 to 15-year period. Revenue enhancing capital expenditures are for remodeling and upgrades of our malls, which approximately 30 percent are recoverable from tenants.

In 2002 for the total portfolio we are projecting to spend 25 million dollars on tenant allowances, 35 million dollars on revenue neutral and 62 million dollars on revenue enhancing capital expenditures. Based upon the criteria of including only stores of 10,000 square feet and less for mall stores, same-store sales year-to-date decreased 1.5 percent of those tenants reporting. Total mall shop sales volume decreased to 1.867 billion dollars for the first 9 months compared to 1.951 billion dollars for the same period in 2001. Occupancy costs as a percentage of our sales at our malls was 13.8 percent for the 9 months ending September 30, 2002 compared to 12.8 for the same period one-year ago. Occupancy costs as a percentage of sales has increased due to the relatively flat sales results reported by retailers while certain operating expenses and other recoverable costs have increased. As the recommendation of the audit committee, the Board of Directors stated that effective January 1st, 2003, the company will begin expensing stock options granted after that date.

In anticipation of new rules being considered by the SEC and the New York Stock Exchange, the company is actively involved in updating the charters of all the committees. We have also formed a Nominating/Corporate Governance Committee. Our conclusions, based upon the third quarter results and borrowing any further disruptions from unforeseen economic events we are comfortable with the current first call consensus estimates of 4 dollars and 31 cents for 2002 and 4 dollars and 58 cents for 2003. Before we open the call up for question and answers, I would like to share our thoughts on the following. At CBL, we continually split challenge ourselves to improve upon our results and performance.

Our sound and disciplined management approach to our business has resulted in sustained success for the company and our shareholders. Despite the difficult economy, our properties continue to perform well as their improved occupancy and relatively stable sales. Not only the state of the portfolio was important to us but also the strength of our balance sheet. As of September the 30th, 2001, our debt-to-market capitalization was 62.3 percent. As of September 30th, 2002, our debt-to-market capitalization was 50.3 percent. Granted last year we had the tragic events of September the 11th, which impacted our stock price. Since that time we have done a common offering which raised a 115 million dollars, completed a preferred offering which raised a 100 million dollars, enclosed a 10-year fixed rate CMBS transaction of 407 million dollars. All of this was accomplished and we still were able to show a growth in our FFO on a per share basis for the 9 months at 12.3 percent.

Given the strength of our balance sheet we have the flexibility to make acquisitions and pursue other growth opportunities as their arise. We have and we will continue to look at new markets where we can further geographically diversify our portfolio. We appreciate the confidence and support. Thank you again for joining us today and we welcome the opportunity to show you our newest development Parkway Place in Huntsville, Alabama. We also look forward to see many of you next week at [Neiri]. Stephen and I will be happy to answer any questions you might have.

Thank you Sir. Today's question and answer session will be conducted electronically. If you would like to ask a question, you may signal by pressing the star key followed by the digit one on your touchtone phone. If you are on a speakerphone, please be sure your mute function is turned off to allow your signal to reach our equipment. Once again, for any questions please press star one. Our first comes from Jim Sullivan of Prudential Securities.

Hi Jim.

Good morning guys. Two questions from me. In the prepared comments, Steven you talked about the sale of the assets in the fourth quarter, can you share with us what the cap rate trends are that you are seeing? I know that you are fairly active in selling these assets? What kind of cap rate trends are you seeing and are they low enough for you to may be more aggressive in selling some of the Food Lion properties?

Yeah Jim. The transaction that I talked about Salem Crossing in Virginia Beach was sold at a 9.5 cap rate and we have been encouraged with the interest that we have seen in the community centers including the Food Lion centers and there is a lot of liquidity chasing single assets. Its mostly local buyers or individual asset-type transaction, but we are continuing to look at those opportunities and we are hopeful that in the fourth quarter and early next year we will be doing more dispositions in the community center side.

So, in connection with the 03, your comments on 03 that John made, what level of asset sales are we assuming?

I think, Jim, we had, basically, similar to what they were last year, around 58 million dollars or so.

Okay. And then the other question for me regarding Parkway. Your physical occupancy at opening was a little bit lower than what you've been achieving in some of the other developments over the prior years, can you talk about that a little bit and you obviously think it's a successful center, why you think it may be talking a little bit longer to get to the sort of occupancy rate that you customarily have?

Sure. Well, we wish you could have come down for the opening and hopefully we will get to show you the property because it's a terrific, it's a terrific asset. It had great result in its first two weeks and you are right, the leasing at opening was lower than our other new malls that have been opening up in the past few years and we weren't happy with that. But part of our strategy for Parkway was to differentiate it from Madison Square which is our other mall in the market and to bring in some of the higher end stores that I talked about, Williams-Sonoma, Chico's and it's just going to take time, one example is ,we've been working with Pottery Barn and they want to come, but they said they want to see how Williams-Sonoma opened and now that Williams-Sonoma had a great opening, we feel that that deal is going to move ahead and that we'll be able to bring them in as well. We could have leased their space probably and put in a tenant that was also in Madison Square and created cannibalization and duplication, but we wanted to be more patient to really, to rate the tenant mix for Parkway that was fitting with our strategy.

Okay and the stabilized yields once again in Parkway that you anticipate?

Stabilized yield is right around 10 percent.

Okay. Good, thank you.

We will now go to Ross Nussbaum with Salomon Smith Barney.

Hi good morning. Couple of questions first on the occupancy front, can you give us a little more color on how you achieved this sequential gain, were there any large spaces that you leased or was it just knocking of a lot of smaller ones?

It was really more of the latter. It was a lot of progress across the portfolio. We looked at the breakdown of the former Jacob's mall's and there was a 160 basis point improvement there and looking across those malls there were a couple of malls that had 5 to 6 percent improvement. CherryVale Mall and Fashion Square mall had some good improvement, but really across the portfolio it was just consistent leasing progress. That you know, the results of the pushing that we've doing all year, I think we finally started to see both this quarter and in the renewal leasing. Then some of the renovation work like in Fashion Square and in Michigan, the project was renovated in the fourth quarter of last year and now the leasing is really kicked in and the renewal leasing spreads have improved as well.

Okay. In terms of your outlook for 2003, what are you expecting and how much of your leasing have you already tackled at this point for 03?

Well we start our renewal leasing 12 months to 18 months before the tenant is up for renewal so, as far as the renewal we've done at least 50 percent of the renewals for next year and we are also making some progress on the vacancy as well. So, that's you know, a rough number but I'd say that's about where we are at this point.

Is your retention rate holding steady?

Yeah, our retention rate has held steady, one of our strategies has been to retain tenants and some of the renewal leasing earlier in the year. The reason that, that was lower than it had been was in some of the categories like books, like music, have been struggling in the mall's, we renewed some tenants and to retain them but it impacted our renewal leasing spreads, but a big part of our leasing strategy has been to retain tenants to keep them in place, to allow the renovations that we are doing in lot of these malls to kick in because usually what we see is that if we can keep these for a couple of years and then the renewal leasing, and then the renovation kicks in then we see long-term leases and better results down the road. The other thing that we benefited from this year less fall out to bankruptcies and just through unanticipated type of store closings. I think you would ask about 2003 and John is going to address that.

Well I think you asked about '03. Ross that we will see some additional improvements in the year 2003, probably in the you know, I think it could be adding another few boxes to some of our malls and so on so we'll we think we will continue to see some improvements with the occupancy numbers in '03.

Okay. If I look at your rent spread numbers this quarter I mean in the malls, 15 percent on the renewal's it's been higher than it was in the past couple of quarter's and I know, we've talked previously about what was in the calculation of that number. Has anything changed this quarter do you still have your malls into redevelopment in there, how do you strip this out?

It's the same malls, we haven't taken any malls out it's across the whole portfolio of stabilize malls. And it really I think there are couple of points, one is it's hard to look at a quarter because you are looking at a smaller universe of stores and so that you know -- so you can have to store that results in one quarter versus another. The second point is you know, the leasing done for this quarter we feel like that we gotten the results from some of the pushing that we've been doing earlier in the year on our leasing people and just this satisfaction with where our leasing spreads were coming out.

Ross as some analysts have suggested to us we should do as in the past what we have done is we compared the last rent of the tenant pay, which would have included percentage rent in that number is a comparison number versus the new number. This quarter we did not do that. That resulted in a 15.2 percent. If you had taken the percentage rent in as we have done in the past it was still a very, very healthy 12.3 percent increase from that standpoint. So if you are comparing the way we used to do it versus the way we announced it today that 12.3 percent the old way 15.2 percent the new way, so, as you can see it's a still a very healthy thing as Stephen pointed out.

Okay to be clear the 15.2 is final year basic cash rent over initial cash, is that?

That's correct.

Okay two quick final questions and I'll turn it over. Number one on the dividend, this is your second dividend increase of the year, it look's like you typically increased it during the first quarter. Are you up against your pay out limit is that why you decided to increase it now?

But I think it's a number of things basically, that it resulted in our doing so. I think that we felt very comfortable with our numbers and we also felt that we you know with our tax projections in place and if we were going to do a lot of sales in the fourth quarter that would then basically balance us up against our net tax pay income number. So I think it was a combination of those things and also the interest rates helped us tremendously, we did not do any cost segregation so that from a tax standpoint we took a conservative approach so that we will not jeopardizing the future from the tax position. We are very, very conservative in our approach with regard to this. So, we are very pleased with the ability to do this and the fact that there our portfolio has been performing so well especially in light of the fact that the new offerings and the new equities that we've done and in addition to that we have issued some of the operating partnership units when we bought out those additional partners in those deals. So we've had a good year, I think it's basically a conservative focused approach on our business that's resulted in this and we think it will continue next year as we pointed out we think that dividend would be at least 2 dollars and $2.62 cents.

Okay. Final question, with respect to your guidance, last quarter you beat consensus by 6 cents and at that time you expressed comfort with the then consensus estimate of 429. This quarter you beat numbers by 2 cents and so over the past two quarters you beat consensus by 8 cents and you've only raised your guidance up by 2 cents. So in my mind that means one of two things, either your guidance for the full year is low or your fourth quarter estimates need to come down, which is it?

Well, I think Ross basically we've had some excellent results that is basically afforded us to beat these numbers but the first call projections and so on. I think we tend to be conservative I think we anticipate that we've positioned our portfolio very well from the standpoint of floating rate risks, but also there is the interest rate exposure for next year. I think we've all enjoyed some great, great opportunities at these interest rates and in anticipation of that we think there could be some increases in it's interest rates and we had as you know, that one-time lease termination fee that was fairly extensive that boosted us up last quarter, so, may be we tend to be conservative but we think that, that's a appropriate approach to our business and we are going to be aggressive but we are going to be conservative.

Okay. Congratulations and good quarter.

Thanks Ross.

Our next question comes Tony Howard of Hilliard Lyons.

Good morning and again congratulations on a good quarter.

Thanks Tony.

Thank you.

Couple of questions similar to the first question was regarding the acquisition stuff, can you comment on the [Grindo] Galleria acquisition and express if that the yield is possibly with estimated to below 7 percent and where you, did you guys participate in that auction?

Yeah we did not participate in that process and we really don't know that asset that well to comment. I think that we have seen cap rates in general come down across the mall sector and I think this is the latest evidence of that and you know, we are encouraged because we think that obviously that the malls are terrific asset and investors are recognizing the stability as well as the growth potential of regional malls, whether it is Grindo-ph Galleria or whether it's corporate in our portfolio.

So that encourage you got then to look at, I think, this is partly as before as part of this, with this cap rates at record levels as far as someone with more properties?

Yeah, we are going to, I mean, we continue to look at acquisitions and we have always had the disciplined approach to our acquisition program. We don't budget any number of acquisitions that put us into a box as far as being forced to do acquisitions. If we see an opportunity and we see the growth potential then that could justify a lower cap rate. It really depends on a lot of different characteristics of the property and we have been very successful with acquisitions over the past two years and we expect continually to be doing more of them in the future.

And Tony with regard to your question on dispossessions, we are encouraged, I think, the announcement yesterday that IRT has sold their company at about a 9.6 cap rate basically is encouraging us well and we think that we will take up the opportunity to sell off more of our community centers. As this has been our strategy all along since we formed the company in 1978, as you say, we think community centers are good investments but regional malls are where the growth is. Their franchise on to their own areas, so that, what the ideas is to, is to re-deploy that capital by selling our community centers and we will do so when we see the opportunity to achieve our shareholders the best value.

Okay. Good answer. Second question more fundamental is that rather retailers are coming out over the last week or so predicting that Christmas to be quite dismal and even worst then last year, which worst was in ten years. So obviously your fourth quote is fine but you might see a pretty significant uptake in as far as vacancies or bankruptcies, as far the marginal players have trying to hang on to Christmas. What kind of reserve you know, you are doing for that potential and as far as your 2003 estimates?

We look, we are just finishing up our budgets for 03 and we go space by space, we look at occupancy cost to total sales and project the fall out. We, you know, we take into account, we have a watch list of tenants that have said that they are considering cutting back and that's really the basis for our 03 numbers. We, you know, saw this, the holiday season, we have heard for the past few years about this time of year concerned over to holidays, you know, last year wasn't great the economy is challenging this year so, we haven't built then any type of great holiday results. The one thing that we have seen the retailers do is adjust their income statements and focus more on their margins. Focus on other aspects below the top line as a way to manage their profits and we don't see a lot of evidence of retailers that are wobbly or weak and there was an ICSC in Chicago last week and at least some people came back encouraged by the attitude of the retailers at that conference and with our conversations out there we feel that even if the Christmas season isn't stellar that 03 leasing environment is going to be okay.

Likewise I think that the middle market should not as impacted as some of the major metropolitan areas so our strategy been in middle market investors is really great for this type of economy and we are very, very excited about what we done and the strategy we are following. We are not a boom or bust but we are just a conservative growth type company.

My final question is - I've learned at an early age that cash is king and that the dividend increases always better than earnings. Sounds great, congratulations on 18 percent increase. My question though is that over the last 5 years your increase has been 4 to 5 kind of range, does this preclude increases, you know, going out of beyond this next year?

No I don't think so, none whatsoever, I think that the, that lot of it's driven by net taxable income and as we pointed out we with sales and the FFO generation, interest rates where they are, our ability to fix our interest rate and floating rate dead in a situation is, I think as we pointed out our dividend for the year 2003 will be at least $2.62 barring any unforeseen economic debacles but now we don't think that this in anyway indicates that an 18 percent increase this quarter precludes additional increases over the years to come. None whatsoever.

Okay, thank you and then congratulations.

Thanks Tony.

We will now go to Louis Watson of Legg Mason.

Hi, it's [Inaudible] here great quarter guys.

Thanks.

I want fall back on the growth in roll over rents question, it clearly was with sale being flat to down, you know, that's defying gravity to some extend and it's not sustainable to maneuver you know, a permanent forward scenario. I am very interested in your view on how tenants are justifying these increases in and what you think is driving the demand for space in the face of a very tough retail environment. Is it existing national tenants or adding new concepts, were are these tenants coming from and what is giving you this kind of leverage in terms of rent increases?

Well it's a good question. And earlier in the year our renewal leasing results were disappointing and we've been pushing real hard on our leasing people. We are renewing a lot of leases that have 10-year terms, 12-year terms, 8-year terms and so even though the sales for the past couple of years have been weak over the course of those leases there is built up increases that we can take advantage of when we do our leasing. The other thing is that we are always careful when we build malls and we would look at when we buy them about the amount of GLA in the malls and not to be over built and not to have too much capacity, we've been proactive and we contain to be in putting boxes in the malls doing the Barnes and Noble, Linens N Things those type of deals and because of those transactions we are able with the leasing space that's left to drive better rents. And that's part of our strategy going forward as well, so it's not easy if these negotiations are tough to retailers cry the blues because of the economy and it takes time but you know, we are going to contain to push to get increases and to keep those in the double digit range.

Very good answer. It gives the franchise value against of the regional mall. The second question is and my last question relates to the dividend also. If I remember correctly, some of your larger shareholders do not participate in the dividend increase at this stage and in essence the non-Jacob's shareholders get sort of a disproportionate benefit as you are required to increase your dividend going forward. Its almost a leverage effect for the regular common shareholders. Is that correct?

That's correct when we did the special -- when we did the Jacob's transaction we created the special common units that basically had a $2.90 dividend to it and so that's correct. As this is a non-SCU shareholders who are not in at that level do get a disproportionate benefit.

Okay and so we probably have a couple of years going forward here. Where your, any earnings growth that you have disproportionately benefits the non-Jacob's common shareholders in that and you probably will have to increase your dividend if I do the math correctly at a faster rate than sort of your standard earnings growth. Similar to this but not actually at the same pace.

That's correct.

Okay great, that's pretty good. Thank you.

We should hire you to do our projections you are great.

[Laughter] thank you.

Thanks.

Next is Craig Smith of Merrill Lynch.

Good morning.

Hi Craig.

Hi, how are you.

Good.

I was wondering, the rent spreads and the occupancy increase, if you look at it on Jacobs versus some of the older CBL stuff, is it similar or is there preference for one?

Yeah it was, Craig it was, it was very similar and the Jacob's Malls it was 160 basis points, pick up in occupancy, but the CBL malls it was 150 basis points, so those were comparable. And I think the rent spreads were pretty comparable as well, you know, in anyone quarter it's hard to extrapolate, you know, but I think that we are going to continue to see the benefit of the remodelings that we have done at the Jacobs Malls and the rent spreads. We hope that those will, we expect them to continue to be at the levels that they are or even higher because of the remodelings that we are doing at those malls for the most part.

Great and then the comment earlier, John, you had made about middle markets being a little more immune in the downturn. Is that something you've seen in your own portfolio? When you look at may be from the malls and slightly larger markets versus those that are in the small markets?

Yeah, I think that's true Craig. I think you know the economies in the smaller markets are a little more resilient to the downturn, less dependent, I mean, you know, I think everybody somewhat impacted by Wall Street, but I think that these folks are less impacted in some of these market areas where we are.

Okay great.

Thanks Craig.

We will go next to Greg Andrews with Green Street Advisors.

Hi Greg.

Good morning Stephen and good morning John.

Hi Greg.

Couple of just sort of technical questions, the occupancy cost ratio that you cited is that a rolling fourth quarter number?

Yes, that's a 9-month number.

Oh! its a 9-month number, so it doesn't include the fourth quarter?

No it's just year-to-date that's...

Okay.

That's why it's 13.8.

Yeah okay that's why I was asking. And John you talked about the cost recovery, the recovery ratios are trending down and you mentioned some reasons and I didn't catch all of those, would you mind going over that again please?

Yeah, cost recovery ratio was 93.1 percent for the 9 months compared to 98 percent for the same period a year ago. It trended down as a result of bankruptcies and store closings and in some of the new lease negotiations basically have caused us some as far as, as a sporadic [commentary] maintenance type of approach.

So the 93 to 94 for the year is that also a good run rate into '03 as well?

Yes we think so.

Okay. And then in terms of '03, you know, its best to compare it with consensus, you have a base case for interest rates that gets you there? What's your outlook for in your own budget, what's your outlook kind of a for the interest rate environment?

We think that interest rates are going to tick up basically they are not you know, not going to go dramatically crazy or whatever but you know, we continually update that so you know. To give you a precise number at this point I have to get back to you on that but we you know, what we feel comfortable with that number and I think we are conservative with regard to that.

Okay that's really what I was getting at and then finally you mentioned you know, an interest in diversifying geographically and I wanted to see what you thought the advantages of that were. It seems to me that part of the appeal of your business is that you know your markets and you know them very well and there seem to be ample opportunity in those markets, what's the appeal of diversifying geographically at this point?

Well it's a couple of things, I think that if there is an opportunity in the South East in our core area then we are all over it and we are not getting away from that focus. I think that from a geographical diversification point of view one of the things we saw through Jacob's was that it worked out very well. We did pick up some exposure to other parts of the country to diversify our decentralized management at the malls. Really allowed us to integrate malls from other parts of the country without any disruption and it worked out very well. We have a lot of the retailers who are asking us to get involved in projects that are in different parts of the country and one of the effects of the consolidation is that we've been getting more calls from department stores like May Company, Diller's for example who are saying look there is a project in this town either new development or an acquisition for redevelopment. That they want us to get involved in because they feel like we have the leasing horsepower to get the job done and with urban having been sold with Westcor now being part of MaceRich some of the company's that had the strongest development expertise are no longer competitors with us. So you know, this retail relationships are driving that you know, we are obviously going to be cautious about anything that we do and conservative but you know, we also foresee a really good opportunity that makes sense for us and we are going to pursue that as well.

Great thanks a lot.

Thanks Greg, look forward to seeing you in San Francisco.

I'll be there.

Our next question comes from David Kostin of Goldman Sachs.

Hi David.

Good morning thank you. A question John regarding the expensing of options that you indicated that you start doing that in the first of the year. What were the result of this period look like if you would expense the options and second on going forward will be expecting just current options or will you go back into on a historical basis as well?

David, for this year our estimates based up on the modeling that every body has done would have been about 190,000 dollars in expense. Going backwards I think that it would be very confusing and I think which is going to look at that on a going forward basis from 2003 going forward.

Okay, and again that 190,000 dollars will be for the quarter or for the -

That's for the year.

The year, okay thank you very much.

Thanks David.

Once again that is star one for questions. We will take our next question from Allen Conway with Morgan Stanley.

Hi Allen.

How are you doing? First question with your 200-bit occupancy increase minimum rent was flat quarter-over-quarter. What was the reason for that?

It really takes effect in the future quarters Allen, you will see it probably in the fourth quarter and then more in 2003. So those occupancy levels just happened probably toward the later part of it because this is when the retailers want to open up for the holiday season. So that's what we will probably see more of it in the fourth quarter as far as an impact on minimum rents.

Okay and could you discuss a little more there, your assumptions on your '03 guidance? Maybe that seems for NOI retail sales?

Well I think I think you know, on an NOI growth basis we think you know, it's going to be - we are not predicting it's going to be a very aggressive year with regard to NOI growth. The remodelings and the other things that we are doing basically we held a lot of tenants at their base rents on just short-term renewals so that we can take advantage of that. So we don't think that our NOI growth is going to be a significant in our projections. We don't think that the NOI growth is going to be significant, we are projecting in the range of 2 to 3 percent for next year that's impacted as you remodel these centers. You will see that that has an impact also - but the positive impact occurs in probably '04 as a result of these remodelings as we are seeing this year has to what we did in '02. So I think that that's part of it and as we have emphasized we just are concerned whether interest rates can stay at these incredibly low levels; and we would anticipate refinancing some more of our assets in the first half of next year and fixing some of those interest rates that are floating today, although we do not have a great deal of exposure to the interest rate fluctuations. We are very conservative when it comes to that, we think it's not our job to guess what's happening with regard to interest rates. And as a result of that we always try to fix our interest rates as soon as we can and make certain that we don't take that additional risk.

John, it's Matt Austrau-ph.

Hi Matt.

Oh yeah. Just on the interest rates side of it what did you say what you were exclusively assuming in your '03 guidance at that rates. That they were basically stayed flat or is it assume some kind of an increase or this is not that explicit?

No, we weren't that explicit but basically we did we think that interest rates will tick up some next year as to that percentage that it will tick up - is basically and our models is a floating thing and we change it from quarter-to-quarter and month-to-month. Basically based upon the market. So, our outlook and our projections with regard to our conservative approach on the consensus estimates for next year is -- based upon these conservative facts and the fact that we will be fixing rates and be disposing at more of our community centers. Which all impacts us in that respect so we didn't tell you exactly what we are using as far as the percentage increase in interest rates but it is our general feeling that interest rates will go up next year. But, in turn it's no different than our history from 1978 is just the fixed rates and not take interest rate risks.

The good news is the interest rates were going up that's because the economy has improved and then we'll benefit through percentage rents in other parts. So, we in the budgets the interest rate increases would be offset by other categories.

Final question, are you seeing more difficult lease negotiations in your renovated centers and your price of the construction than your existing centers?

I think it's basically across the board. Allen I think that the lease negotiations with retailers today. They have so many opportunities and therefore they can drive a pretty hard bargain, but in turn the ability to show them what we are doing to our properties and upgrading those makes it more attracted to our projects. But they have never been but they are probably today more intense to the negotiations than they ever have been. But I think the upgrading of our properties and the fact that we are very, very focused on tenant mix attraction to our properties.

Have there been any tenants that backed out of deals?

There aren't any that come to mind I am sure there have been I mean that's always a part of the business side. There is really nothing that comes to mind and we are not seeing any kind of trend with retailers cutting back on commitment today and made it some point in the past.

Okay thank you very much.

Thanks Allen, thanks Matt.

Next is Rich Moore of McDonald Investments.

Hi Rich.

Hi good morning guys. How are you?

Great.

I just want to add my congratulations on all your successes this quarter. Could you talk a little bit about some of the new concepts that you are seeing in the Malls? I know Chico's, Abercrombie, Hot topic; they have all got some new concepts. So, are you guys seeing some of those and what kind of success are they having?

We are seeing that, we are opening Hollister which is the Abercrombi concept and they are doing great and I think we are going to continue to see them expanding throughout other malls and their focus is exactly our type of property. Mostly in the middle markets, the 300-dollar a foot sales range so, that is a concept that we are doing well with. We are seeing a lot of retailers looking at our children's furnishings and home. Pottery Barn Kids, Bombay has a kids concept and that seems to be a category that is doing well these days. Then the Hot Topic the new division that they are rolling out the Limited 2 has its concept, second concept that they are rolling out American Eagle has a new concept that they are starting to, starting to roll-out and we are doing a couple of those. So it is a great thing, it is important for us to be able to have new retailers. I mean we are opening Build-A Bear in Chattanooga next or a tomorrow night on Halloween night and that is a really exciting thing for the community to get a new store like that and that is a big challenge for us just to continue to have these concepts in the malls.

Rich I think also you have seen a lot of the older formats coming into the middle markets because of the stability that we are showing in these market areas. So, I think coupled with the new concepts, coupled with the concepts of, of good stabilized companies such as Huntsville, Alabama and Pottery Barn. It is just a, we think that our leasing guys are doing a great job. We would not want to tell them that because they want more salary increases but they are doing a good job for us.

That is right you guys keep the G&A down I understand. How would you assess mall traffic, recently, recent mall traffic?

I think that the mall traffic hasn't been nearly as bad as some of these reports that are coming out. And we are basically seeing it flat and you know, you come out to our malls on the weekends or the evenings and they are packed you know the, so the traffic is held up. I mean we haven't seen any evidence of falling off of mall traffic like some of the publicity out there has talked about.

Okay so, okay, good, wonderful, thanks. As far as, I am just curious you know, as far as acquisitions ago, are you guys seeing the amount of interest the sort of feeding frenzy when you look at a mall in one of your markets versus something that may have occurred say Glendale or the [Westford] portfolio that kind of thing.

We are seeing more interest for acquisitions. We are seeing some private buyers buying some malls which we haven't seen for quite some time and I wouldn't say that is a Glendale Galleria type, type frenzy but we are seeing competition and new names on acquisitions that are we haven't seen in the past few years.

Rich one of the things that helps us too is as to what we have done to our balance sheet and the stability and growth that we have shown makes us very attractive to people who have some low basis tax properties. So that they that, we are definitely high priority for them when and if they want to sell those assets. So we have done it in the past I think that was one of the things attracted Mr. Jacobs to our company as well as some of the most, some of the recent things we have done. So I think our stock as a currency is basically something that is very attractive to people and gives us maybe a leg-up if we want to do certain acquisitions.

Yeah no question John absolutely. Let me ask you guys if I could, a couple of clean up items. Do you have a number for land and for buildings and improvements on the balance sheet? We want those in our models and it is helpful if you have them.

It will be filed in the 8K this afternoon.

Yeah, that's okay fine. And one thing maybe this is my imagination but it looks like real estate DNA on joint ventures jumped a bit. Is that, is there anything there of is that a, that just happened.

Say that again Rich, I am sorry.

Well you know how you add that real estate depreciation, and amortization on the joint venture. You had that back FFO John when you are calculating FFO. And it seems higher certainly than last year and even as a percentage of JV income. It is not huge but is there anything to that or is it just an anomaly?

It is just an anomaly.

Okay, okay great thanks guys' nice quarter.

Thank you Rich.

Our next question comes from Ian Weissman from UBS Warburg.

Good morning how are you?

Hi and great. How you doing?

Okay. Terrific. Just a couple of questions. Despite the continued weakness in the economy, 2002 is a relatively light year for retailer bankruptcy and store closing. What are your, what is your 2003 guidance for occupancy, in other words are you expecting pent up bankruptcy announcements and store closings beginning the first of the year?

No we're really not. You know, we got a couple of Kmarts in the portfolio and we are working on replacement prospects for them, although they haven't told us anything as far as plans to close, we're just being proactive to be prepared in the event that they do reject those leases. But I think that the last couple of years have been high in that area. This year it has been more of a normalized level. I think we expect next year to continue pretty much where this year is. And as far as occupancy, we're hoping to continue to make some headway like John said, with some of the box deals that we are doing in the malls. When those come into occupancy next year, we feel like we'll see some progress in our occupancy levels as well.

Can we expect occupancy in your shift then portfolio to trend up to historical levels, beyond the high 96-97 percent?

Yeah, there's, the strip center portfolio, if there's one or two boxes that have closed which is what happened, that'll dip down, but now we are in the process of replacing those and it'll go back up to where it has been.

Thanks, and just one follow up question on Parkway Place, I guess your initial yield which you expect right now, 8.5 percent, is down I believe from what you had originally anticipated. Is it just an occupancy issue or are you seeing other rents well?

It's occupancy, the rents have come in right after pro forma, so it's just a function of, we thought we would open closer to the 80 percent level.

Okay, great quarter, thank you very much.

Thank you.

Thank you.

We will now go to Jessica Colley-ph with Real Estate Management Services.

Hi Jessica.

Good morning. I wanted to ask you and I apologize, I joined a few minutes late, on GAP or Old Navy do you have any significant leases expiring in the next year?

We do have leases, well, all of the '03 renewals with the GAP we've done and we are continuing, you know, they are the second largest tenant in our portfolio. So, we have leases with them expiring every year, but as far as '03 we have dealt with the renewals with them and we are working out on '04 now.

Great. And then, Charlie, I had a question for you on swaps and caps. Do you have any maturing next year because I know you have done a good job over the years of putting a lot of LIBOR-based swaps and caps in. And I was wondering what the maturity schedule of that list for the next year?

Jessica, you made his day. Charlie was feeling neglected [Laughter].

Really have one swap influence right there, I think it's 80 million dollars and it does mature next year.

And what is the rate on that?

Some 5.8 --- 5.8 percent.

Great. Thanks.

Thanks Jessica.

Thank you.

We will now go to Patrick Deed-ph with INVESCO.

Yeah. Just a couple of questions. First, John with regards to the occupancy cost ratio, I know that this is a nine month number and it will sort of go down for the fourth quarter, but at what point, what level does that number become a concern to you or do you get a push back from retailers as far as, it's getting too expensive coming to your malls.

Yeah, Patrick, I think that we think that that ratio, you know, is right around the 15 percent number.

Okay. Second question, Parkway Place it seems to me what you guys were saying is that although you performa that you wanted the mall to open up a little bit stronger that, it opened up less than that. And there was a conscious decision to get some higher-end retailers in that aren't and haven't been in that marketplace before. Is that correct?

Yeah, that's is true.

They said you're holding back space.

The mall did open up extremely well when it comes to sales. The only situation is that the occupancy levels weren't up to the high standards that we normally have and that was a direct result of a conscious decision to go after the Pottery Barns and things such as that. I know that on opening day, I spent some money in the Sonoma (ph)store and it took a long time to do because it was such a packed store. So, hopefully that has that type of impact on it, on Pottery Barn and making its decision to come, but no, Huntsville is a great, great market area. This mall is strategically placed on the right side of town. It's around 690,000 sq.ft. on 33 acres and it's just a great, great asset and a great project. And it's going to do sensational.

Okay. And last question. A kind of combination question, but I was just wondering what, do you lose sleep at night and then on contrary to that, what gets you most excited these days?

I think, what makes us loose sleep at night is the, probably, I haven't lost any sleep, to be honest with you. Last night I lost some sleep because we had a retirement party for one of our Vice Presidents, who runs Corporate Relations. So we were out a little late last night. But I think by and large, our business is very good and we are excited about the prospects for the future. I think what really excites us is the retailers referring so many new projects to us. And the ability to do those as well as leaving us to acquisition opportunities and really the confidence that the retailers have shown in us as well as the fact that the market has shown good confidence in us too. I mean, our stock prices are not where it should be, and where we would like it to be, but you know, we've worked and we are all very satisfied with the results that we've achieved on leasing. We would never tell our leasing guys that and we'll never be satisfied, but I think we're pretty excited about our business.

I think that the things we lose sleep over are the things that we don't control. You know, and just the things that are out there, like stock strikes and war and all that are going to affect out business, and that we'll have to deal with and we will deal with and we've dealt with events in the past, but you know, that's really the biggest concern that we have today and there are from a positive point of view, we continue to see good opportunities, both acquisition and new developments. Our company is very energized and focused and we just feel great about our results for this quarter and this year and also about the future.

Okay, thank you very much.

Thank you.

We'll now take a follow up from Jim Sullivan.

Hi. Back again with a couple of quick questions on tenants and this is a kind of, first one is a follow up, I guess, to Jessica's question. In terms of Gap, we understand that Gap has decided they were not going to open any more new stores other than what they had committed to already. Have they committed to open stores in Myrtle Beach with you? I know you meet with them frequently. Do you understand that that policy of not opening new stores that they are making more exceptions, so that perhaps some people thought they might?

Yeah Jim. First of all, I am impressed that you are still on the call, but the Gap has, they have not made any commitment to Myrtle Beach. We have had continued discussions with them, they ask us to hold a space for them, which we say we are not going to do and we are not. We don't have them on the lease plan today. If they were released to do new stores, we would talk to them about the best available space, but they are not going to get the 50-yard line space that they have gotten in the past because their inability to commit and the real estate people realize that. The leasing people said that last week in Chicago that Gap was encouraging about Banana Republic that they were encouraging about Old Navy that they thought that the first, those would be the first divisions to get released to do any new deals, but then nothing had been released yet. They are hoping that that for 2004, there will be some expansion coming out of them although they have learned a lesson and they are going to be a lot more conservative. They are going to look at cannibalization and things that they didn't look at all in the past when they went crazy with their expansion and when they do come out of this they are going to be a lot stronger forward, which we view as positive.

So, your assumptions earlier about Merytle Beach assume that Gap doesn't go there?

No, the 60 percent leasing has no Gap and those were tenants where we have deals that are committed and where we are negotiating the leases and the leasing of Myrtle Beach is going great.

Okay. One other quick question, maybe, John can answer this, your friends at Goody's have announced a kind of a change, I guess, in ownership, I think that was a buy-out attempt there. Does that have any change in your view of the credit worthiness of Goody's?

Well, I don't think so Jim, I think that we have not heard whether Bobby is staying involved in the management, but I would assume that he is. I think that that he was a 60 percent owner of the company and I think he is still actively involved in the business from all indications. You know that in conversations in the past with Bobby he basically felt to certain extent that the public markets didn't understand his business that they were doing better than that. He is an excellent retailer and we don't think it changes our outlook as far as their credit goes in that respect.

Okay good. And then the final question for me on Foodline (ph) again the, I know their parent reported negative comps in the third quarter. You of course reported your comp-store sales, the Mall stores in the portfolio, but if you get sales reports from Foodline and can you share with us your understanding of how they doing in stores in your portfolio?

We don't get their reports till they give us an annual basis. So, we will get those probably in march. I would guess seeing their stores in this market area, they are probably flat, I think every grocery operator in Americas is going to be somewhat impacted by Wal-Mart and Wal-Mart's aggressive plan with regard to groceries and what they're doing there. I think Foodline is probably going to be less impacted than some of the others because they're basically strong in the Carolinas and they are low cost producer of product and I think that they will be okay. In turn I think when the opportunity avails of itself, we will continue to dispose of those Foodlines as well as any other community centers. Foodline is probably the 19th as far as total as far as our exposure on our total portfolio. Our exposure to food line is probably in the four and a half to five million-dollar range max. So it's not a big exposure but in turn the ability to sell in a heated up market where demand for grocery acquired centers hopefully will be proved beneficial to us as well.

Okay. Very good. Thanks John.

Thank you Jim.

Thank you Jim.

Your next question comes from Ross Nussbaum.

Hi guys, couple of follow-up questions. Number one, acquisitions next year, how much really do you think you can do?

Well Ross, as you know, we don't budget acquisitions in our budgets or pro forma those, because we don't want to feel any pressure to accomplish those and I think with the feeding frenzy that is in place today, we are pretty disciplined when it comes to acquisitions and we don't like to over pay. I think, that there is some opportunities for us where our stock can be used and therefore it is not in a bidding contest. So, basically, we have not projected to make any acquisitions next year.

Okay. Looking into third quarter and annual growth again, was there any real difference between the Jacob's and the CBL assets, and if so what was it?

Hold on a minute, Ross, we are struggling to get it. We got it for you. Let us get back to on that Ross if we can.

Okay. Specialty leasing [Inaudible] revenues were down sequentially and year-over-year and actually on a sequential basis, it is two quarters in a row that they have declined. What is going on that business that has caused the declines there?

What we do is just, it is sort of an incubator approach. Yes, there is a lot of these specialty tenants come in on a short-term basis and what we have been able to do is, the results are project to them and have gotten them to go into long-term leases with us. So, that is basically the impact there. Just like in our percentage rent, if there is one of the tenants achieved as percentage rent number, our leasing guys are in there, trying to get them to fix that and take it up to it. So, it is up about 23 percent on the specialty leasing basis, but you will see that that is our approach to specialty leasing, get those guys in there, get them operating well, make sure that they are good operators, and then try to put them in on a long-term basis lease and that will reflect overall and the whole company's operations.

Okay and final question. You mentioned of the seven malls that you have under renovation and five are going to be completed by year-end. How many do you expect to start next year and do you have a CAPEX forecast for next year yet?

The two of them that we have started already that will be completed next year and the total CAPEX for those is probably in the 10 million range and then there are three others that will be starting on next year and will probably be completed with one or two of those by the end of the year and I can't give you the exact number, but they are averaging in the five to six million per mall. That will give you a kind of a rough estimate.

It sounds like CAPEX is actually going to fall next year.

It could.

Yeah, it could.

In turn if something could occur that could push it up some too, as if we see the ability to fit something into a slot that works out then we would move that up. So, CAPEX today as we pointed out is probably down a little for next year, but it will change. You know, that is an area that is basically driven to certain extent by our retailers and our ability to get the people in position to do it.

You know we are probably looking kind of more in the 40 million range, total including tenant allowances and all that. Just for the CAPEX versus about 62 this year.

Ross, with regard to your question on NOI, Jacob's versus our own is that, we are just looking through the properties. What we have done is that we don't treat all of those malls technically as if they were just our own, and so in just [Inaudible] looking at those numbers, ours is the, the core portfolio was up slightly and the Jacob's portfolio was somewhat flat. So, we don't have a percentage break up because we don't do that if you want us to or whatever we can get back to you on that.

It's John. Question on comp sales. What are you expecting to have in your comp sales for next year?

Without inflation, we think it is flat to maybe down.

And you know the thing I guess I struggle at, if you are down one-and-a-half percent in the most recent quarter, how do you continue to be able to push rent and how the retailers continue to make the decision to open more stores?

I think a lot of sales Jonathan is driven by the fact that a lot of tenants expand, and therefore their sales per square foot are going to go down in the short-term, but ultimately they will grow back over the long term. I think that is number one. Number two is as I said, I think the old rule of law of supply and demand really, really applies and our ability to develop projects with less square footage in line, and creating those values and attracting new retailers to those spaces and replacing weaker tenants.

It is on even cost categories. You know the decrease is largely the result of family apparels. Some categories like, stores like American Eagle and [Inaudible] , have had close to 10 percent sales decreases. But if you look at other categories, homes continue to be strong, jewelry is very strong, athletic footwear has been good. So, you know, we are able to get good increases and get good leasing from the categories where the sales are and a lot of the retailers such as, like I was talking about American Eagle. A lot of that is driven by the competition and the fact that you have got buckle down on American Eagle and a lot in that category in the mall, so there is competition that those guys didn't have in the past, and they are doing instead of a 400 dollar foot store they are doing 360 which is still a very profitable and successful store. So, you know, we still feel that we are going to be able to achieve good increases in the future.

Okay, thank you.

Our final question comes as a follow up from Craig Schmidt.

Hi, I just wondered if you had a couple of bouncing items for me. I need properties that cost at the end of third quarter and the accumulated depreciation?

We will put those in our 8-K we have to file later today Craig.

Okay. Thanks.

Thanks Craig.

Gentlemen we have no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks.

I just like to thank everyone for being patient and staying with us for a record-long conference call, and we are very pleased with our results that we've accomplished for the quarter. We think the dividend increase is a terrific thing for our stock and our shareholders, and for the company. And we are just looking forward to continuing to work with everyone and thank you for your participation.

That does conclude today's conference, you may disconnect at this time.