CBL & Associates Properties, Inc. (CBL) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the CBL & Associates Properties, Inc., conference call. (Operator Instructions). As a reminder, this conference is being recorded today, Thursday, February 5, 2009.

I would now like to turn the conference over to President, Mr. Stephen Lebovitz. Please go ahead, sir.

Thank you, and good morning. We appreciate your participation in the CBL & Associates Properties, Inc., conference call to discuss year-end and fourth-quarter results. Joining me today is John Foy, Chief Financial Officer; and Katie Reinsmidt, Director of Corporate Communications and Investor Relations, who will begin by reading our Safe Harbor disclosure.

This conference call contains forward-looking statements within the meanings 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.

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 Management's discussion and analysis of financial condition and results of operations included therein for a discussion of such risks and uncertainties.

During our discussion today reference is made to per-share are based on a fully diluted converted share.

A transcript of today's comments, the earnings release, and additional supplemental schedules will be furnished to the SEC on Form 8-K and will be available on our website. This call will also be available for replay on the Internet through a link on our website at CBLproperties.com. This conference call is the property of CBL & Associates Properties, Inc. Any redistribution, retransmission, or rebroadcast of this call without the expressed written consent of CBL is strictly prohibited.

During this conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. A description of each non-GAAP measure and a reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on Form 8-K.

Thank you, Katie. As everyone knows, we are in the middle of very difficult economic conditions. While this has created challenging circumstances, we feel that our portfolio of malls has proved to be resilient. Despite the impact of the $4.1 million decline in percentage rents and the $7.9 million increase in bad debt expense over the prior year, our same-center NOI for the year declined 1.5%.

Stabilized mall occupancy suffered only a 70 basis point decline in the face of unprecedented bankruptcy activity due to a record number of lease signings in our operating portfolio and overall positive leasing spreads.

New revenue records were set in specialty leasing and sponsorship, and we opened more than 1.7 million square feet of new developments in 2008 that are performing well.

We're seeing meaningful results with our cost containment program, to date reducing expenditures by more than $26 million on an annual basis.

We successfully refinanced all of our 2008 maturities and in total completed more than $1 billion of new financings and extensions in 2008.

We also made the difficult decision to reduce our dividend, generating an additional $80 million of free cash flow on an annual basis.

I will take a few minutes to provide additional color on operational results and then will hand things over to John to discuss financial results and guidance.

We completed more than 6.1 million square feet of new and renewal leases at positive rental spreads in 2008 and achieved a new record for lease signings in our operating portfolio with more than 4.1 million square feet signed. Our leasing activity also included approximately two million square feet of development leases.

The 4.1 million square feet in our operating portfolio was comprised of one million square feet of new leases and 3.1 million square feet of renewal leases. To date we have completed approximately 67% of our 2009 renewals.

For stabilized mall leasing in 2008, on a same-space basis we achieved an average increase of 7% over the prior gross rent per square foot.

During the fourth quarter we experienced pressure on our renewal spreads as a result of a portfolio renewal with one of our small shop retailers and overall reduced rental rates. Excluding the rental reductions from this portfolio, total leasing spreads in the fourth quarter would have increased 1.6%.

Holiday sales were not strong, as expected. The majority of retailers offered deep and early discounts in an effort to drive traffic, and sales volumes suffered as a result. The holiday season was mixed with the week of Christmas posting strong increases and the other weeks posting considerable declines.

Same-store sales declined 4.3% to $331 per square foot for reporting tenants 10,000 square feet or less in stabilized malls for the year ended December 31.

The top holiday sales season contributed to additional bankruptcy announcements as well as certain retailers already in bankruptcy being forced to liquidate rather than reorganize. Steve & Barry's, Goody's, and Circuit City recently announced a liquidation of their stores.

In total we had 21 Steve & Barry's stores comprising 813,000 square feet and $7.3 million in annual gross rents.

We have eight Circuit City stores, three of which are owned by Circuit City, comprising 256,000 square feet and $1.9 million in gross annual rent.

We have four remaining Goody's stores in operation comprising 121,000 square feet and approximately $690,000 in annual gross rents.

B. Moss entered into bankruptcy in December and liquidated. We have 17 stores totaling 63,000 square feet and $1.3 million in annual gross rents.

KB Toys also entered into bankruptcy in the fourth quarter. We have 23 stores representing 88,000 square feet and $1.7 million of annual gross rents.

Construction continues on our four major development projects, and we're making good progress on the leasing front. We recently announced more than a dozen new retailers joining The Pavilion at Port Orange in Port Orange, Florida. In total, Phase I of the project is over 85% leased and committed. Hollywood Theaters will open at The Pavilion in the fall, and additional stores and restaurants will follow in 2010.

Where we will soon open the first phase of Hammock Landing, a 750,000 square foot power center located in West Melbourne, Florida. Kohl's, Michaels, PETCO, Marshalls, and other retailers will join us to celebrate the grand opening of the project in April. The first phase is more than 84% leased and committed.

Settlers Ridge in Pittsburgh, Pennsylvania and The Promenade D'Iberville, Mississippi will also celebrate grand openings later this year with a great selection of anchor and junior anchor stores. Sellers Ridge is currently 80% leased and committed. The Promenade is 70% leased and committed.

We're also enhancing existing centers where we should see a positive effect for the overall property. For example, Barnes & Noble opened at West County mall in St. Louis, Missouri and will soon be joined by McCormick & Schmick's, and BRAVO!.

Two additional Barnes & Noble stores will be opening this year at Oak Park Mall in Kansas City, and Ashville Mall in Ashville, North Carolina.

Also we will be opening two Carmike Cinemas and a Regal theater in our portfolio this year.

Beyond the current slate of construction projects, we're not pursuing any additional new developments.

I will now turn the call over to John.

Thank you, Stephen.

FFO per share in the fourth quarter was $0.80 per share compared with $0.83 per share in the prior year period. FFO per share for the year increased 3.9% to $3.22 compared with $3.10 in the prior year period. FFO in the quarter and year were impacted by $0.20 and $0.33 per share, respectively, related to a write-down of marketable securities, abandoned projects, expense, and bad debt expense compared with $0.17 and $0.19 per share, respectively, in the prior-year period.

Except for these items, FFO per share for the quarter would've been flat over the prior-year period and would have increased 8.3% over the prior year. I will take a minute to provide additional detail.

FFO in the quarter was impacted by approximately $11.4 million related to the decline in value of marketable securities the Company holds. The fair market value at December 31, 2008 was $4.2 million. As we have indicated previously, these are real estate equity securities, and as the market has experienced pressure, these securities have experienced significant price declines. At this time, these losses are non-cash and have not been realized. When the market recovers we will have the opportunity to recover some of these losses.

For the year, the write-down -- -off totaled $17.2 million compared with $18.5 million in the prior year.

As we continue to focus on the existing portfolio and development pipeline (technical difficulty) made the decision to be even more judicious with our capital and not pursue a number of projects in the predevelopment stages. As a result, we incurred a write-off of abandoned project costs of $9.4 million in the fourth quarter, an increase of $8.1 million over the prior-year period.

These write-offs involved a number of projects in various stages of predevelopment but did not impact any projects that are currently under construction.

For the year, abandoned project expense was $12.4 million compared with $2.2 million in the prior year.

Bad debt expense as a result of store closures and bankruptcies was approximately $3.8 million in the quarter and $9.4 million for the year. This compares with $1.5 million for all of 2007.

Other major variances in our results included a $2.1 million decline in percentage rents for the quarter and a $4.1 million decline for the year, resulting from continued pressure on sales.

FFO included gains on outparcel sales of $0.01 per share compared with $0.05 per share in the prior year period. For the year, gains on outparcel sales were flat at $0.14 per share.

G&A in the quarter included approximately $1.1 million of additional severance expenses related to staff reductions and development in other areas of the Company. For the year G&A included $3 million of severance expenses.

Same-center NOI decline 4% for the quarter and declined 1.5% for the 12 months ended December 31, 2008 compared with the prior year. This was within our previously issued guidance range. Same-center NOI growth for the quarter and year were impacted by increases in bad debt expense of $2.9 million and $8.1 million, respectively. Excluding the impact of bad debt expense from both periods, same-center NOI declined 2.5% and 0.8%, respectively, from the prior-year periods.

Our cost recovery ratio for the fourth quarter and year ended December 31, 2008 was 94.4% and 95.8%, respectively, compared with 98.3% and 101.1%, respectively, in the prior-year period. The cost recovery ratio for the fourth quarter and year were impacted by the increase in bad debt expense.

G&A represented approximately 4% of total revenues in both the fourth quarter and year ended December 31, 2008 compared with 3% and 3.6%, respectively, of revenues for the prior-year periods. The fourth quarter and year included severance expenses of $1.1 million and $3 million, respectively. Excluding the severance expense, G&A was 3.5% and 3.7%, respectively, of total revenues.

Our debt-to-total-market capitalization ratio was 86.3% as of the end of December compared with 64% as of the end of the prior year. The increase in our debt-to-market cap is primarily a result of the decline in our stock price.

Variable-rate debt was 21.2% of total market capitalization as of the end of December versus 14.1% as of the end of the prior year. Variable-rate debt represented 24.6% of CBL's share of consolidated and unconsolidated debt compared with 22% in the prior year.

Our EBITDA to interest coverage ratio for the year ended December 31, 2008 was flat at 2.4 times.

We are initiating FFO guidance for 2009 in the range of $3.10 to $3.25 per share. The guidance assumes NOI growth of a negative 1.5% to a negative 3.5%. The guidance also assumes outparcel sales of $0.08 to $0.11 per share and does not include any acquisitions or dispositions. Given the higher level of uncertainty in 2009, we have taken a more conservative approach to our guidance, allowing for a $0.15 range.

We will continue to update our guidance quarterly as necessary.

In 2008 we completed more than $1 billion of new financings including eight new construction loans with total capacity of approximately $331 million, more than $360 million of refinancings or extensions on maturing mortgages, and approximately $344 million of new term facilities.

In 2009 we have only $309 million of mortgages maturing excluding loans with extension options. All these loans are property-specific and nonrecourse to the Company. All the mortgages are held by life insurance companies except for a $53 million CMBS loan that matures in December.

We have only one additional loan secured by [Ocala Mall] that is reflected on the debt schedule as a February maturity. We have previously obtained an option to extend that loan to February 2013 but have gone back to the lender to renegotiate the loan at more favorable terms to the Company.

We have two loans that mature in March, secured by Cary Town Center and Volusia Mall. We have signed a commitment letter to refinance Cary with the current lender and expect to close within the next 60 days.

The loan secured by Volusia Mall, Honey Creek, and Bonita Lakes are all with the same lender. We are executing a short-term extension on the Volusia Mall loan to provide additional time to complete our negotiations and close, along with the loan secured by Honey Creek Mall and Bonita Lakes.

We are in active negotiations to refinance the loan on St. Clair, which matures in April. We're still negotiating the new loan and will announce terms when they are finalized.

In January we completed the extension of a $17.5 million term loan on Milford Marketplace. The loan was extended for three years with an additional one-year extension option.

As to our lines of credit, we have total capacity of $1.19 billion including two principal facilities that are led by Wells Fargo. The $525 million secured facility has an original maturity date of February 2009. We exercised the extension option on this facility, which was recognized by Wells Fargo, for a maturity date of February 2010 and are in discussions for extensions beyond that.

The $560 million unsecured facility has an expiration date of August, 2009 with two additional one-year extension options for an outside maturity date of August, 2011.

Our debts to gross asset value on December 31, 2008 was 56.5%, well under the required maximum of 65%.

We have included a list of our major covenants in the supplemental, which demonstrates our sufficient coverage.

At December 31 we had approximately $156 million of remaining capacity on our lines. We have construction loans for all of our major developments that are currently under construction. We believe that our sources and uses are adequately matched to continue our business but will continue to enhance our liquidity position.

In December we held a bank meeting in Atlanta with the majority of the 20 banks participating in our lines of credit to provide an update on the Company's operations. We are currently working through the secured facility extensions, but at this time it is too early in the process to provide any color on the terms.

These are unprecedented times that demand more than ever a dedicated and creative team to overcome the obstacles that challenge us all today. We're focused on overcoming these challenges and will continue to make the tough but necessary decisions that are facing us.

Our dominant retail properties are crucial to the local economies they serve, and we're continuing to work with the cities to create into additional enhancements. While 2009 will no doubt be a difficult year, we're confident in the resiliency of our portfolio and know that we have the right team in place.

We appreciate your joining us today and will now answer any questions you may have.

(Operator Instructions). Michael Bilerman, Citi.

It's actually [Mannie] here with Michael. I had a question for you guys on the way you disclose occupancy. It looks like at the end of 4Q '07 you had occupancy of 94% -- in that earnings release, and now I think that number fell to 93.2%. Could you just discuss why that change in reporting?

In '07 we disclosed it both including and excluding acquisitions that we had made that year. This year we just disclosed it one way. So it includes everything. So it's not exactly apples to apples.

So going forward it's going to comparable to today's number?

Right.

Okay. And then I think I caught the number before -- 67% of 2009 leasing completed. We've heard from some tenants that they're renegotiating leases signed before the holiday season. Have you seen any of that?

No. We haven't seen that. I think we're talking to tenants when the leases come up for renewal, and those who negotiate consider going on, but if something is signed, it's signed, and everyone lives with it.

And then finally, in your guidance what are you assuming for LIBOR rates?

3%.

J. Habermann, Goldman Sachs.

This is [Aika] filling in for J. and Jehan. The first question is, could you please comment on your NOI assumptions for '09? Negative 1.5% to 3.5%. Is this a base-case scenario? And what would it get us -- what would it take us to get there?

I think our base case is based upon our estimates and using the NOI budgets that we put together for the year, and it took into consideration what we see in the market today, what we envision as occurring in '09 with the bankruptcies and things such as that occurring. So that's based upon where we are today, and that's -- we feel comfortable with those numbers and in discussions with retailers, etc.

And it includes about a 100 basis point decrease in occupancy from where we ended this year.

Thank you. Could you give us updates on retenanting your Steve & Barry's and Lehman's stores?

Right now we are working on it. We have letters of intent on five of those boxes, and we are not budgeting for anything to open this year.

Okay. And finally, on your G&A what should we expect in terms of severance expenses going forward in '09?

I think we basically have done most of the severances that will occur at this point in time, and I would assume that what we've done is the correct run rate.

Ben Yang, Green Street Advisors.

Stephen, earlier in the call you commented on a handful of bankruptcies and store closures in your portfolio. Do you have any thoughts on how far into bankruptcy season that we're in? I'm wondering if there might be a slew of retailers who announce either bankruptcy or store closures in the coming months, specifically names that we might not have heard about in the media.

Sure. We're watching it. I think one of the things that we have seen is because the debtor in possession financing is so impossible to find, that retailers are a lot more hesitant to go into Chapter 11 because basically if they go into Chapter 11, they're going to be forced to liquidate, like happened at the end of last year, while in the past there wasn't the same disincentive for them.

So I know retailers like Borders, who have been mentioned pretty much out there by a lot of people, have been doing everything they can probably to avoid Chapter 11.

So we -- it's really hard to answer your question. There's a lot of names out there on the watch lists, on retailers -- as far as the retailer watch list, and we are watching it carefully as well and talking to the retailers all the time. And it's tough times in the retail world out there -- no question.

But when we look at our top-25 portfolio, I think we feel pretty good about the stability of the balance sheets of those retailers and their ability to weather this storm. So that's really where we stand. And it's the kind of world out there -- nothing shocks us anymore after what's happened, but we are pleased that we are into February and we haven't had any major bankruptcies announced this year beyond what we had as of last year.

So given your discussions with retailers, do you think the worst is behind us at this point? Is that kind of what you're sensing at this point?

No. I wish, but I don't think we can be that positive. And as you saw in our renewal spreads for leasing, on lease renewals the retailers are pushing to get their costs in line with the lower sales environment, and that's going to continue. And the retailers are aggressively doing what they can to manage their costs, because their sales are down and their margins got under so much pressure in the fourth quarter. '09 is going to be a tough year, and we are braced for it, and that's why we have been managing the expense side of our budgets to compensate for what we anticipate will be more revenues down.

Great. And then given the closures that you've had to date, are there any cotenancy issues that concern you. Maybe how much of your -- of a typical mall might have certain cotenancy clauses in them?

At this time we don't have any in the malls. The malls -- typically there's cushion in terms of any anchor closings, and so we're not facing anything there that concerns us at this point. In a couple of the associated centers, we've had -- between Linens N' Things and Circuit City, we have a couple centers where they're anchors, and we're dealing with cotenancy issues there. And that's really the impact that we've felt from that.

So within a mall could you see, say, maybe two dark anchors and not have that -- any type of cotenancy issues for the rest of your tenants there? Is that possible?

It depends on the mall. If a mall has three anchors and two go dark, then that's a problem. If it has five and two go dark, then we're okay.

A lot of -- and we've been working over the past four or five years to replace anchors in a lot of malls, wherever there was duplication with the same retailer, and bring in people like Dick's Sporting Goods, and strong boxes into them.

And then, can you tell us how far sales fell during the quarter? You gave that number for the year, but I'm wondering what the sales decline was during the first fourth quarter?

We just gave the annual -- the 4% number, and so that's really the way we are releasing it at this point.

Okay. And then maybe for John, I'm just wondering why your depreciation expense increased significantly during the fourth quarter given that your portfolio was pretty much the same size it was a year ago. Is there any reason that -- for that large expense increase?

Yes, Ben, it was the write-off of those TIs and expenses in conjunction with those bankruptcies.

Okay. And then just last question, wondering if you can finally just tell us what the marketable securities were that you invested in?

We continue to say that they were in a company that we desired to -- thought that it was a good company. If they wanted to merge with us at some point in time, we thought it was a good investment. But we have not revealed that name.

Joseph Dazio, JPMorgan.

Stephen, I think you mentioned in response to a prior question that you are budgeting a 100 basis point decrease in occupancy this year. Is that including the impact of the bankruptcies that you talked about earlier in the call, or is it on top of that?

That's on top of, and that's in shop occupancy which is less than 10,000 square feet. So the boxes don't show up, and that is in the small shop occupancy number.

Okay. And then just one other question. With respect to the unsecured credit facility, I guess you have two one-year extension options. If you -- well, when you do extend those, does anything happen? For example, does the cap rate increase on the asset tests with respect to the coverages, or is it just a matter of you signing up for the increase and that's it?

So long as we're in compliance with the covenants, there's an obligation to continue those extensions.

Ryan Levenson, Privet Fund.

Thanks for taking my question. What was drawn on the unsecured revolving lines?

Well, the total availability that we had at the end of the year was about $155 million or so.

And is that all on the unsecured line?

What we do it is -- with regard to our lines is that we draw down under the least costly expensive line, so the unsecured lines today are priced at like 10 basis points higher than the secured lines. So I would say that most of that -- the availability is probably under the unsecured lines.

Okay. So I think just on my estimate, that the $560 million revolving line -- revolving facility, that actually got paid down a little bit in the quarter?

Yes, it was paid down by 37.5. It depends upon where -- what we have [got] with the funds and what we think we're going to use, etc.

Now, I'm assuming that the covenants that are on page 11 in your supplemental apply to that facility; correct?

It basically applies to all of our facilities.

Okay. Well, can you walk me through the debt service coverage ratio? Just the mechanics of how that works?

We can do that off-line if you would like to. I think we can give you some examples or walk you through that if you would like (multiple speakers)

I think I understand. It just -- it kind of segues into my next question. I just wanted to confirm that I'm understanding it correctly. It's LTM EBITDA to -- divided by interest expense plus principal repayment?

That's correct.

And is that principal repayment over the next 12 months?

It's over the past 12 months.

Over the past 12 months. Okay. So I don't really understand something then. If I look out 12 months and assume that your EBITDA is going to be roughly flat -- I think that that's probably within -- probably shooting at the right number according to your guidance -- then interest expense plus -- even if you're able to get all the extensions you want to get -- interest expense plus principal repayment is going to be $684 million, which is -- takes you below the covenant line, doesn't it?

That's amortization, and it's basically interest into -- it's interest into the EBITDA number.

I'm sorry. I don't -- pardon my ignorance. I don't really follow what you just said.

Ryan, it's -- this is Katie. It's strictly just the amortization payments. It doesn't include payment -- repayment of the loans. So I think you are probably adding that on top (multiple speakers)

So it doesn't -- it doesn't include (multiple speakers) maturity?

Yes.

So what are the amortization payments other than the maturities?

It's about $70 million to $75 million.

Okay. But I think that that's right at that covenant line, assuming you are -- what -- assuming your guidance. Is there any -- are we at risk of blowing a covenant here?

NO. I think -- we need to just walk you through these covenants later. But we have plenty of capacity with regard to these covenants.

And are there any -- consider -- because it's so -- it seems -- even in the most recent quarter it seems like it's so tighter. Are there any other cash preservation maneuvers that you would consider taking?

Yes. I think that we look at all the preservation and the liquidity studies. We do constantly, and that's definitely something that we look at and take into consideration.

Okay. And the roughly $150 million that you could save by paying for -- I mean, a little less than that -- but by paying your dividend not entirely in cash? Is that not on the table?

Well, I think everything is on the table, and everything is looked at quarter by quarter and month by month. And the best way to make the Company grow and to preserve every aspect of the Company is what we focus on. So everything would be considered and everything is considered. So we don't preclude anything.

Thanks for your time.

Robert Goch, MAK Capital.

Thanks for taking my questions. I guess the first, on your leases coming up for renewal in 2009, what is your assumption just regarding rent compression? If any?

We're not -- it's a case-by-case basis. But I think on the renewals that we're going to see results probably in the flat to down 5%, kind of consistent with what we had over the past year.

The one thing that I would add to that is that the renewals were impacted in the fourth quarter, like I said in the script. We had one retailer that had about 94,000 square feet that -- we did a portfolio review of renewals, and that actually impacted our renewals pretty significantly. If you took that out, we would've been up about 1.5% on the renewals. So I think to use something in that flat range is probably safe.

I know you addressed this before, and I just want to try to be clear on this. It sounded -- what you were saying about -- with respect to go-forward bankruptcy with regards to the lack of DIP financing, that retailers have been holding off -- in your belief. Is that into your assumptions with respect to the go-forward occupancy that such an environment continues?

I think we would envision that the bankruptcy situation is a case-by-case type of approach by each retailer, and they measure it against their sales, and they measure it against what their credit facilities are, etc. I think what's happening is that -- in the retail businesses is that just like landlords are getting squeezed, everybody is getting squeezed in that line. So I think a lot of it depends upon the retailer and their availability of getting not only credit but their vendors shipping to them as well.

So it's hard and it's really impossible to generalize as to what forces companies to either go into bankruptcy or put off bankruptcy. But we are in times that we -- I don't think any of us have ever seen, but I think that we're focused on that ability to cope with that and really have the ability to overcome these challenges.

Right. Well, one way that the retailers are dealing with it -- and you said that this has not been your experience -- is coming pre lease expiration to the landlords and requesting relief, and you have not been seeing that. I guess going forward, do you anticipate any of that?

Oh yes, we have seen that. And we do -- and we will constantly see that, not just from those tenants who are going into bankruptcy, but every tenant basically is trying to pressure and squeeze everything out of it so that they can hold their margins and so on.

Likewise, we in turn are doing the same thing with regard to our vendors and our ability to cut back in those areas, not only from the standpoint of with utility companies, but insurance premiums, etc. So I think everybody is on the table. In this environment, everybody understands and everybody I think is cooperating and working together to try to make the best of a difficult situation. So I just don't think it's the retailers pressing down on the landlords. I think it's the landlords pressing down on all their vendors, as well.

Right. But at least in 2008 you've been holding firm?

We've had some. Like Stephen mentioned, is that one portfolio was a significant cut, and it was our thought process that to hold occupancy, even though it was going to cost us something in rental spreads, made a lot more sense for a number of reasons -- basically, is that it continued to hold the traffic in the mall versus vacancies in a mall is not a good thing.

So we did take some -- we did work with the tenants, and we will continue to work with the tenants to hold up that occupancy, even though it might cost us a little on the short run in our spreads. But that I think is our business, and I think as we build traffic and as we show to the cities and the municipalities how important this is to them from a sales tax standpoint, that hopefully they in turn will come along and help us as well. And in certain situations they are, and I think we will continue to see that.

And as we build traffic and as we do other things, we can bring in non-retail users, our sponsorship income increases, and things such as that. So it's hard to just generalize and focus on rents that you might have to cut with these tenants versus the fact that it's a total overall project, it really benefits from the standpoint of full occupancy.

So there's a push and a shove on all aspects of this business today. I don't think it's just in the retail business. I just don't think it's in -- in the shopping center business, as well. Sorry for the lecture.

I appreciate it. Again, thank you for your addressing my questions.

Wes Golladay, Royal Bank of Canada.

John, in your recent discussions with the loan officers, have you noticed an improvement versus say maybe the beginning of the fourth quarter?

I'm not so sure that we've seen much of an improvement. I think everybody is very realistic. I think it's a flight to quality. I think that as somebody said -- one of the major banks said to me, it's not as much about loan to value as it is coverage ratios. And so I think that's what we're focused on, the ability to show that coverage ratio.

And it's also the fact -- we're going to see decline in sales from these tenants. It's going to happen just because of the overall economy. What I think we're looking at is the health of the retailers and the health of the communities where we are, and I think we are in some really good, good communities where we haven't been impacted.

The middle markets I think have been less impacted today, but then maybe some of the major metro areas. And so as a result of that, I think we are enjoying some encouragement from our lenders, and it's a -- totally a relationship driven business to a certain extent today. It's quality and relationships and the ability to work together. And so that's what we are focused on, and hopefully the people that we've had great relationships with are focused on the same thing.

Okay. In regards in regard to the Meridian loan, do you see that going to $80 million in the near future?

I think we're comfortable with where it is today. What's going on in Michigan -- I mean, I think that the lower debt levels and the ability to deleverage that asset is where it should be, and I think we're comfortable with it. We do still have the flexibility on that so we want to preserve that to a certain extent, but if our partners who have loaned us some money on this would like it at that level, we're fine with that as well. It's a cooperative attitude in how we look at each property.

And I guess on the store opening front, can you comment on retailers that are opening stores?

Sure. There are still a number of retailers that are expanding, and they are doing well. We just opened a -- Anthropologie and a Williams-Sonoma at Friendly Center, with Apple opening in the next couple of weeks. You know, Forever 21 -- and XXI is probably one of the most expansion minded retailers out there. The boxes that we're working with -- Kohl's, Bed Bath & Beyond -- their Christmas tree division -- are still doing new stores. Dick's Sporting Goods has slowed down, but they are still doing new stores.

And then in the malls, we're doing the theaters, like I mentioned, in three locations this year. Some of the Juniors, Buckle, and Aeropostale had good results over the holiday season. Gymboree had good results -- Vanity. So there's still expansion going on among a number of retailers. And it's slowed down. They are more selective, and there's no question about that. And everything is more of a challenge. But the business goes on. And for us to give the impression that it isn't, it's just not the case.

Thank you. In regards to the dividends, do you anticipate that still being a cash dividend going forward, or a combination of cash and stock, or --?

Well, that's a Board decision, and we meet with our Board, and we do a liquidity study for them and keep them up-to-date on our liquidity picture every quarter and take all of those things into consideration. So that's a Board decision, and as the Board makes that decision we will faithfully announce it.

John Roberts, Hilliard Lyons.

Pretty much all of my questions have been answered, but John, I would just like you to address the dividend issue. First, what -- when are you going to meet with the Board and when is the announcement expected?

Well, we just finished a Board meeting just yesterday -- to be exact -- and the next Board meeting is probably in about three months. It's February. We have -- it's late February when we have our next Board meeting, so that will be a topic of discussion as well, and when we look at all the numbers and the liquidity, etc., that's when that decision will be made as to what we're doing with that dividend.

Can you maybe just comment a little -- obviously we, sitting on our side of the table, have our opinions on the whole dividend question at this point, but in light of Simon's move and the fact that a lot of particularly our investors, retail investors, have bought securities in the sector for the income component, sort of what you see going forward for REITs as dividend investments? But also what you're hearing from investors you talk to on the subject?

Well, I think you hear all different voices on that particular question, and you know, which one speaks the loudest is the one that you're probably talking to at that time. I think there's no question that the retail investors are looking at cash type dividends versus a stock dividend. On the other hand, liquidity and safety of that dividend I think is paramount and important to the companies as well. So I think it's a balancing act between those two constituencies.

So it's hard to say in any particular situation, and I think just because you give stock doesn't necessarily mean that the company is having a liquidity crunch or whatever. Maybe it's an idea and a concept that they have some things in mind with some maturities coming up versus not having those extensions in place. It's really difficult, John, to say which way to go, and I understand from a retail analyst standpoint that cash is king. And likewise, cash is king to those companies who wants to preserve it as well, so --

Nathan Isbee, Stifel Nicolaus.

I hate to beat this dividend question to death, but could you please give some detail on how Jacobs [family] shares might impact any further cuts or the decision to pay the stock dividend?

Yes. When we negotiated the transaction by issuing these SCUs, to a certain extent they were looking at the fact that it was going to be an income source for them, and under our Jacobs transaction, we can -- there is a small cut that we could still make in that, not much of significance, but they are not a huge -- they owned 20% of the Company -- or approximately so. It is a portion, but we can cut that dividend if we cut it for four straight quarters on the common.

And we can also offer them a stock dividend if the Board decides to do that. But they have the option of electing cash or stock.

Thank you, sir. At this time we have no further questions. I would like to turn the conference back to Mr. Lebovitz for any closing remarks. Please go ahead, sir.

We would like to thank everyone for coming in this morning. As John said and I said, these are unprecedented times. But we are definitely up for the challenge and focused to work together with our partners, our lenders, our retailers to work through this. So thank you all for your support. We will see you shortly.

Thank you, sir. Ladies and gentlemen, this does conclude the CBL & Associates Properties, Inc., conference call. You may now disconnect. Thank you for using ACT Teleconferencing. Have a pleasant day.