CBL & Associates Properties, Inc. (CBL) 2009 Q1 法說會逐字稿

Good day and welcome to the CBL & Associates Properties, Inc., Conference Call. Today's call is being recorded and will be available for replay beginning today at 1:00 P.M. Eastern Time and running through May 9, 2009, at midnight Eastern Time by dialing 303-590-3000 or 1-800-405-2236 and entering the pass code 11123992.

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. We appreciate your participation in the CBL & Associates Properties, Inc., conference call to discuss first-quarter results. Joining me today is John Foy, Chief Financial Officer; and Katie Reinsmidt, Vice President Corporate Communications and Investor Relations, who will begin by reading our Safe Harbor disclosure.

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. 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, references made to per share amounts are based on a fully diluted converted share basis. A transcript of today's comments, the earnings release, and an additional supplemental schedule 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 re-distribution, re-transmission, or re-broadcast 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. In March, we published our 2008 Annual Report, appropriately titled "What Matters Now." What we're all experiencing in the economy and in the capital markets is dictating a new set of priorities and setting the industry's focus on what really matters now. Our attention is directed toward making appropriate decisions to ensure the long-term success of our Company and of our properties.

Of greatest importance is enhancing our balance sheet flexibility, and protecting our income stream. Given the unprecedented challenges presented by the capital markets and the economy over the past year, we are pleased with the results we achieved this quarter. Foremost, we made significant progress in our effort to improve our financial situation. We have previously outlined a number of measures we have taken to enhance liquidity and increase flexibility with our balance sheet, including the adjustments to our dividend, reductions in capital expenditures, and tightening of our development pipeline.

We are moving forward with obtaining additional extensions with our line of credit lenders beyond what we currently have. We have also executed a term sheet addressing three of the remaining four loans that are due this year, leaving us one property level loan with a balance of $53 million to refinance this year.

Finding ways to reduce our capital needs and ultimately de-leverage will continue to take precedence. While tapping into externally-sourced equity at any level is difficult, we are seriously exploring all options available, including asset sales, joint ventures, equity offerings, and other opportunities.

We are also pleased with our operating results for this quarter given the challenging environment. FFO per share exceeded consensus FFO projections prior to the China investment write-down by a healthy margin. Our NOI results were toward the more favorable end of the range that we are guiding for the year. We are not satisfied with the decrease in occupancy and lease spreads, but we anticipated that we would experience this pressure, and took steps to offset and preserve our income stream by reducing expenses.

Our first-quarter results reflect the positive impact of a number of cost-saving initiatives that were put into place last year at the property level and our corporate office. G&A expense declined 8.4%, benefiting from the salary freeze, bonus cuts, and staff reductions. Property operating expenses declined as a result of vendor contract re-negotiations, as well as property level staff reductions. We are encouraged by the outlook for the rest of this year as well. We are building momentum in our efforts to replace vacant boxes in stores, which resulted from the record level of bankruptcies in 2008.

Also to this point, bankruptcies and store closings in 2009 have been far less than had been predicted. Retailers have proved resilient in dealing with their challenges, which is indicative of their strong balance sheet, and the quality of their management teams. Also the markets, where our properties are located, have, for the most part, held up better than most during this recession, due to the diversified nature of their major employers, such as State Governments, University, and Healthcare organizations.

We just completed our biannual leadership conference and we're able to spend time with our property teams. Despite the challenging environment, their morale is excellent and they are incredibly dedicated to CBL. We are fortunate to have such great people as part of our organization. They reported that traffic levels have improved, and that customers are more positive, which was confirmed by the jump in the consumer confidence numbers yesterday.

While we are, by no means, out of the woods, and we'll continue to battle difficult conditions, in 2009, and possibly into 2010, our results for this quarter indicate our ability, proven in prior downturns as well, to manage through these challenging times.

Now I will review with you some detail on our operating results for the quarter, and then, turn it over to John to do the financial review.

During the first quarter, we completed 1.2 million square feet of new and renewal leases in our operating portfolio, including 256,000 square feet of new leases, and 948,000 square feet of renewals. We also completed 53,000 square feet of development leases. Today, we have completed approximately 75% of our 2009 renewals. Following the difficult holiday sales season, leasing became much more challenging as many retailers were reluctant to enter into new or renewal lease deals, given the uncertainty of the retail landscape, and this impacted our leasing spreads.

For stabilized mall leasing in the first quarter, on a same space basis, rental rates were signed at an average decrease of 11.1% from the prior gross rent per square foot. There were a few primary drivers of the declines this quarter. We executed a few very large deals, at negative spreads, that had a disproportion impact on the overall spreads. We also executed a number of renewal deals on a one-year basis with retailers at a few locations, to maintain occupancy, while we look to backfill locations with better performing retailers. While we anticipate spreads will be down for 2009, we believe that the trends will flatten out as we continue through the year.

With respect to rent relief, in certain instances, we have granted a concession in the form of a deferral. However, there are many strings attached to these grants, including waiver of lease restrictions, or extension of term, or other types of quid pro quo. Before we get to that point, the retailer must establish if they have a financial need for the request to be considered. As the landlord, we must see an incentive to agree to the request.

As far as co-tenancy issues in our portfolio, we do not anticipate a material impact from co-tenancy clauses. There are a couple of box centers that have these issues with the bankruptcies in 2008, but the malls have not experienced any material impact from co-tenancy issues.

Total portfolio occupancy declined 300 basis points during the quarter, to 88.6 % from 91.6% on March 31, 2008. Mall occupancy declined 240 basis points, to 88.9% from 91.3% at the end of the prior year period. Occupancy levels in the first quarter were impacted by the residual closures from the 2008 bankruptcy activity. Many retailers, who filed bankruptcy in 2008, did not close until the first quarter. Also, the majority of our lease expirations occur in the first quarter. Therefore, we felt the brunt of the impact for the year in this quarter and are making progress in backfilling vacant locations. At this point, we are projecting year-end occupancy to be down approximately 200 basis points from the end of 2008.

We continue to experience pressure on traffic and sales in the first quarter, which was exacerbated by the Easter shift into April. Same store sales declined 4.4% to $326 per square foot for reporting tenants 10,000 square feet or less in stabilized malls for the 12 months ended March 31, 2009.

During the first quarter, three retailers in our portfolio announced that they had entered Chapter 11 -- Strasburg Children, Ritz Camera, and S&K Menswear. We have seven Strasburg Children locations, totaling 11,000 square feet, and $223,000 in annual gross rent. We have 26 Ritz Camera locations, totaling 48,000 square feet, and $1.6 million in annual gross rents. We had 16 S&K Menswear locations, totaling 60,000 square feet, and $1.2 million in annual gross rent. We are making good progress on re-leasing several of the vacant box locations that resulted from the 2008 bankruptcies.

Of the roughly 50 locations, totaling 1.8 million square feet of available space, we have executed leases or LOI's for 13 locations totaling more than 400,000 square feet, or roughly 22% of the space. The leasing team is marketing the spaces to a broad range of traditional retail as well as non-retail uses, including learning centers, community colleges, fitness centers, and others. These types of users can deliver a new source of customers and complement the mall traffic flow patterns.

There're also several retailers that are taking advantage of the retail environment to opportunistically expand, and we are currently working with furniture stores, electronics, shoe stores, sporting good stores, and others. Some of the leases we have recently executed include specialty grocer Earth Fare, for the former Goody's location at Gunbarrel Pointe in Chattanooga, Tennessee; and in Brownsville, Texas, we have signed teen retailer A'GACI to take the former Linens 'n Things location. While these locations take time, due to their size, and we still have a lot of work to do, we are encouraged by the response we are receiving.

On April 1, we celebrated the grand opening of the first stage of Hammock Landing, our open-air center in West Melbourne, Florida. This project opened approximately 80% leased and committed, with Kohl's, Marshall's, Michael's, PETCO, and small shops, and is off to an excellent start in terms of sales and reception from the community. A 132,000 square-foot Target, also, and additional shops will open in July.

We also completed two expansions in the quarter. At Oak Park Mall in Kansas City, Kansas, we opened a Barnes & Noble addition. At West County Center in Saint Louis, Missouri, North Face, BRAVO!, and McCormick & Schmick's joined Barnes & Noble, and we've recently signed Prime Bar to join the center later this year.

These openings are part of the re-development of the former Lord & Taylor space into a 90,000 square foot open-air expansion. Later this year, we will begin to open the other three major ground-up development projects we currently have underway, including The Promenade in D'Iberville, Mississippi, part of the Gulfport/Biloxi trade area; The Pavilion at Port Orange, in Port Orange, Florida; and Settlers Ridge in Pittsburgh, Pennsylvania.

While there is no doubt that the new leasing environment is challenging, we are continuing to achieve the leasing results in all of our new developments. The first phase of these projects are all between 70% and 80% of leased and committed. The projects are on schedule, and the remaining funding is in place through existing construction loans.

I will now turn the call over to John.

Thank you, Stephen. In April, we paid our first-quarter common dividend of $0.37 per share in a combination of stock and cash. The cash portion was limited to 40% of the aggregate common dividend amount, and the remaining 60% was issued in common shares. As a result, we issued approximately 4.8 million shares of common stock. We also made the quarterly distribution to our unit holders, and issued approximately 1.3 million additional common units to the unit holders that elected to receive the combined distribution.

All current and prior period-per-share information has been adjusted to reflect the issuance of additional stock in units.

FFO per share in the first quarter was $0.72 per share compared with $0.75 per share in the prior year period. Excluding the non-cash write-down, FFO increased 4% over the prior year period to $0.78 per share. The $7.7 million non-cash impairment charge was related to the write-down of the Company's investment in Jinsheng, a Chinese real estate company.

The Company determined that, given the economic deterioration in China's economy in the first quarter, the current fair value of the investment is lower than the carrying value of the initial $15.3 million investment. Recent reports have included more positive indications of economic conditions in China. However, we believe the write-down is a conservative measure.

FFO in the quarter also included bad debt expense, as a result of store closures and bankruptcies, of approximately $2.1 million compared with $900,000 for the prior year period. FFO included gains on outparcel sales of $400,000, compared with $3.4 million in the prior year period. FFO included lease termination fees of $2.5 million, compared with $1.5 million in the prior year period.

Same center NOI declined 1.2% for the quarter compared with the prior year period. Same center NOI included a $1.2 million increase in bad debt expense offset by the $1.2 million increase in lease termination fee. Same center NOI declined in the quarter primarily as a result of the declines in occupancy from the prior year period, partially offset by property level, salary, and expense reductions.

Our debt to total market capitalization ratio was 92.1% as of the end of March, compared with 67.6% as of the end of the prior year period. The increase in our debt-to-market cap is primarily a result of the decline in our stock price. Variable-rate debt was 23.3% of total market capitalization as of the end of March 2009, versus 13.6% as of the end of the prior year period. Variable-rate debt represents 25.3% of CBL share of consolidated and unconsolidated debt, compared with 20.2% in the prior year period.

Our cost recovery ratio for the first quarter was 96.8% compared with 95.6% respectively in the prior year period. The cost recovery ratio for the first quarter would have been higher, excluding the increase in bad debt expense. G&A represented approximately 4.2% of total revenues in the first quarter, compared with 4.5% of revenues for the prior year period. G&A expense declined by 8.4% over the prior year period due to the Company-wide staff reductions and salary freeze. The prior year period included $1.3 million of severance expense.

Our EBITDA to interest coverage ratio for the first quarter was at 2.29 times as at March 31, 2009, compared with 2.17 times at the close of the prior year period. We are maintaining FFO guidance for 2009 in the range of $2.95 to $3.09 per share, which has been adjusted to reflect the increase in shares outstanding, as a result of the stock issued in conjunction with the first-quarter dividend. Major assumptions in guidance include NOI growth of a negative 1.5% to a negative 3.5% and outparcel sales of $6 million to $9 million. We will continue to update our guidance quarterly as necessary.

During the quarter, we closed the $74.1 million eight-year non-recourse loan, secured by Cary Towne Center in Cary, North Carolina, with a fixed interest rate of 8.5%. The loan replaces an $82.1 million loan, which had a fixed interest rate of 6.85% and was scheduled to mature in March 2009. The loan was refinanced with the existing institutional lender.

We entered into an one-year extension with the existing institutional lender on the $59 million loan secured by St. Clair Square in Fairview Heights, Illinois, at a fixed interest rate of 7.5%. The loan was originally scheduled to mature in April. We recently executed a term sheet addressing three of the four remaining mortgage maturities for 2009, excluding loans with extension options. The loans secured by Volusia Mall, Honey Creek, and Bonita Lakes are all with the same institutional lender. We anticipate paying off the loan secured by Bonita Lakes partially funded by excess proceeds from Volusia Mall and Honey Creek Mall.

The final maturity in 2009 is a $53 million CMBS loan that matures in December. We are currently in contact with a servicer to discuss a possible extension of the maturity, and are concurrently discussing the possibility of replacing this loan with other institutions.

As for our lines of credit, we have total capacity of $1.2 billion which, at the quarter end, had remaining availability of $138.5 million. The two principal facilities are led by Wells Fargo. The $524.9 million secured facility matures in February 2010. We are making progress and working toward a renewal of the secured facility beyond February 2010. 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 2011. We recognize that, given the current conditions in the financial markets, there may be limited availability of unsecured credit going forward. To that end, the Company is working toward a plan of securing this facility.

We have included a list of our major covenants in the supplemental which demonstrates our sufficient coverage. As an example, our debt-to-process at value at March 31, 2008 was 57.5%, well under the required maximum of 65%. We anticipate that the operating environment will continue to present unique challenges but we are confident in the ability of our portfolio, and the expertise and dedication of our team. The entire CBL organization is focused, and we are making what we believe are the right decisions to not only make it through, but to succeed. We appreciate everyone's continued support and look forward to seeing many of you next month at the Shopping Center Industry's Annual Convention in Las Vegas.

Thank you for joining us today and we will now be happy to answer any questions you might have.

Thank you. (Operator Instructions) Our first question comes from the line of Jay Habermann with Goldman Sachs. Please go ahead.

Hi Jay.

Hey good morning John, the rest of the team. Jehan is with me here as well. You know John, lot of conversation about obviously the different sources of capital that you're looking at. I am just curious. I know other REITs have given more specific plans on de-leveraging, as well as time frames. I mean, would you guys be willing to sort of look at sort of a targeted, sort of de-leveraging level and I guess sort of the timing factor there?

Yeah. I think Jay we have in our own minds and in our own Company we have a plan for that and with time schedules that we think that are reasonable and can be achieved. It's a plan that basically anticipates that you got to have three or four balls in the air all at the same time in the markets that we're in today. So we're working in three, and four, and five different directions.

As we pointed out in the conference call, we think that there is a definite need to basically secure the unsecured line of credit and we're in the process of working through a plan that we think is very capable and very able to accomplish that. We think you know and we've had discussions and visited with all of our banks that are in our lines of credit and continue to visit with all of our lenders who are basically lenders to us and we're getting pretty positive results from those folks. Needless to say, some of those banks would like to see some paydowns, others are willing to step up even further. So I think we're focused on implementing a plan and it includes everything that will pull the de-leveraging down.

And you mentioned asset sales, joint ventures, equity offerings, would you say that's sort of the order of priority, do you want to start first? And can you give us a sense of perhaps what you are currently marketing for sales?

Yeah, I think they're all on the table. I mean the asset sales are definitely something that we see are things that can be accomplished as well as joint ventures and adding people into it -- into our existing joint venture structures that we have. So I think there is many, many opportunities such as that. So joint venture sales are definitely on the table -- joint ventures as well as sales are definitely on the table.

Okay. And then, just want to move a second to the comment on occupancy, you mentioned sort of, I guess Stephen mentioned, down maybe 200 basis points year-over-year, you're down a little bit more than that. Can you give us some sort of indication of where you see that 200 basis points, do you expect some sort of firming up in the market in the latter half of the year?

Hi, Jay. Well, there were a couple of things that contributed to the drop-off this quarter and one of the big items was that the bankruptcies from last year -- most of the stores closed in this quarter and the re-leasing of those spaces, there is downtime before we can open new stores. So, where part of the pickup from where we are now is going to be as we backfill those bankruptcies and those store closings and get those spaces filled back up.

And then the second thing also is for renewals. The first quarter is when we have the largest percentage of our leases that come up for renewal. So, for the stores that didn't renew, again we've got the downtime before we can bring in new stores to replace them. So, that's the factor that usually contributes to the first quarter being lower and then we build back up through the rest of the year.

And would you expect the tenants that actually fill those spaces to be paying rents? Or will that actually be contributing in terms of rents in the latter part of the year or are they going to be given free rent and other sorts of concessions?

No, I mean, we do anticipate that they'll be paying rent and we haven't seen free rent come into play.

Okay, great. Thank you.

Thanks a lot.

Thanks Jay.

Thank you. Our next question comes from the line of Quentin Velleley with Citi. Please go ahead.

Hi, good morning. Just in relation to leasing spreads which were on average 13% down, I'm wondering if you could just dig in a little deeper as to what's happening with some of the leasing negotiations there? And on top of that, one of your competitors last month stated that about 40% of the leases they've signed so far this year have been for terms of around two years, and at much lower rents. Just wondering if that's something that's happening in your portfolio?

Hey, Quentin, it's Stephen. I would say we're seeing a similar trend with our renewals that, with so much uncertainty in the economy over the course of the quarter, retailers were difficult to negotiate with and that we chose in a lot of situations to go shorter term one or two years on the renewals to keep occupancy, to keep the rent coming in, to give us time for the economy to come back, and to have a better negotiating dynamic. So, our results are consistent with that and we see that in a lot of those negotiations, if we go to a reduced rent, the breakpoint goes down, so the percentage rent starts picking up at the current level of sales. And so, there are other inducements that don't show up necessarily in the renewal spreads, but that give us the ability to make those up as sales come back.

And what sort of percentage of the leases do you think are sort of on these one or two year lease terms?

I think 40% to 50% is roughly what we're seeing in the one to two year period for these renewals that we did this quarter.

And do you think it's something that will continue throughout this year?

No. Well that's hard to say. I think for this year the -- it's still difficult in terms of negotiating dynamics, we're hopeful as the year goes on that things will get better, but that's definitely a higher percentage than we typically experience and so we're going to work to get back to more longer term leases and extensions. And even with a lot of these retailers, they have trouble going to their committees and getting a long-term lease extended because of just where the economy stands and they want to lock up space long-term as well. So, I think on those sides that you'll see the lease terms going back to more the traditional timeframes as the year goes on.

Okay. And just the last question. Just in relation to the St. Clair mortgage, and the fact you only got a one year extension, just wondering sort of what happened in the negotiations and what your expectations are with that?

Yeah, where we are on that is that the lender didn't want to increase the loan amount and we felt that based upon the NOIs and so on, that we would -- first and foremost, we thought that they were going to increase the loan amount and it took a long time and that ultimately got down to the last few minutes or so. The property is 40% or less leveraged so we wanted to basically get a one-year period of time now to go into the markets and replace them versus having to get stuck with the longer term loan with them with the same dollar amount. So, on that specific asset we are working with a lender on that and feel very good that that would be replaced fairly soon.

Okay, that's great. Thank you.

Thank you.

Thank you.

Thank you. Our next question comes from the line of John Roberts with Hilliard Lyons. Please go ahead.

Morning everybody.

Hey John.

Good morning.

You had that large decline in expenses. Was that more to get your cost basis in line with current business levels or was it strictly just reductions? Is that sort of a number we can look at going forward?

Hi John. That was I think a combination is maybe the best way to answer it. But last year when we had the bankruptcies and we anticipated that the top line was going to be down, we looked at expense reductions at all types of levels. At the corporate office, there were efficiencies that we could take advantage of and certain consolidations we -- at the property level, we also took advantage of some efficiencies. For example we went from eight regions to seven and that saved us money there. We renegotiated with our vendors to achieve savings there and that helped the expenses. And so, it's a combination and then just with the business environment like it is then we were able to do -- to work with a little bit less in terms of overhead.

Okay.

So, I think that's really the story.

I mean is it likely that will be coming back up as business improves?

I think we've created some efficiencies and some effectiveness that we can hold it in those lines. As a percentage we hope to hold it in that line at that. As you increase your business and increase the number of properties, that's going to increase. But on a percentage basis, we think that's in the right range and hopefully can see some more -- create more efficiencies and effectiveness.

Okay. Great.

Other than cutting Charles and my bonus out.

I understand that, John. Can you go a little bit more into the leasing spreads. I know you commented on that to some degree, but what do you see going forward, I mean are we going to continue to see the types of decline we saw in the first quarter, or you are looking for that more to taper off?

Well, we think that the first quarter is worse than we are going to see over the rest of the year. We're still going to see -- we were thinking flat to down in mid single-digits for the year, so the first quarter was worse than that. Over the rest of the year we do think things will be better, but they are not -- they are still not going to be great and we are pushing to get those back into the positive level as quickly as we can.

Great. Okay, thanks that's all I had.

Thank you.

Thank you, John.

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Hi Nate.

Hi Nate.

Hi, good morning. How are you doing?

Good.

Just getting back to Jay's de-levering question. Is it really -- is it realistic that you could sell enough properties into a JV to generate enough net proceeds to meaningfully reduce leverage? Your stock price is up about 300% off the bottom and there's clearly no telling where the market is going to go anywhere over the six months, it could go up, it could go down. Why wouldn't you issue say $250 million to $300 million of equity here just to take some pressure off your credit line extensions and mortgage maturities?

Yeah, I think Nate as I mentioned I think we are looking at all aspects, we have not ruled anything out from that standpoint. We think that joint ventures and the ability to sell assets and some creative things that we can do will give us that ability to de-lever. Equity is never ruled out, but equity is a consideration and that's not to say that that couldn't happen. But I think we are as I said -- we've got 4 or 5 balls in the air to make certain that we score with at least one or two of them.

It just seems from your comments earlier that you were looking first at the asset sales versus equity, is that correct?

Well, I think we look at everything all at the same time, so I don't think we rule anything out.

But, I don't think -- we didn't -- I know the question was, is this the order and I don't think that's true. I mean we are -- everything is getting the same priority. So we are not saying we will do asset sales first and then if that didn't work out, then we will do joint ventures and if that didn't work out then we will do something else. I mean we are looking at everything now.

Okay. Thanks.

Thanks Nate.

Thank you. Our next question comes from the line of Jeff Donnelly with Wachovia. Please go ahead.

Hi, good morning guys.

Hey Jeff, good morning.

Maybe I can build on Nate's question. It's just that, when you do look at your capital needs over the next few years, they are arguably pretty straight forward, but the source is obviously refinancing to retain cash flow and new capital are a bit more cloudy. Are you going to lay out or maybe just share with us how you are seeing that need and maybe where you see the greatest uncertainty or flexibility if you will or I should say variability and how you underwrite where you are going to source the capital you would be raising?

Yeah, I think when we look at our portfolios that we have to refinance that are coming up, I mean if you look at in '09 we are basically down to $53 million mortgage, which we think we can refinance either with another institution or with the servicing agent. We ultimately think and hope that something is going to come up and replace CMBS or that these guys are going to come to their senses as to how we work through these loans. But we are not counting totally on that and we did just -- just completed the term sheet this week with New York Life on those two loans and we think that we are going to -- we will be able to do that as well. So -- and it's just a combination of things that we're looking at Jeff.

Do you have any early indications from, I guess it's Wells Fargo that you mentioned that had the lines that are maturing in 2010 and beyond. Any early indications from them on what they are thinking at this point or is it a little too early?

No, I think it's not too early. We had a lot of discussions with Wells Fargo. They've been our lead bank since 1978 with their acquisition of Wachovia. Their sources and the size of the bank has grown tremendously. It's totally a relationship-driven business. And so, those conversations with them have been all positive and the ability for them to access additional people to participate in the lines have been positive. We also have visited with all the banks as I mentioned. We also have basically spread our business and given to banks other than just a borrowing base with them. We have our accounts payable system with one bank. We do CDs and other things with all of these banks and create deposits and establish a personal relationship with them.

So that's what we think basically over the years we have not been the -- we've not had bad relationships with them and have always worked with them. We also think that working with them and a number of banks we are talking to about taking over and generating some fee income from them on assets that they are ultimately going to acquire not by choice.

And then, I am curious on your dividend. I know you are looking at dividend for common shareholders that has parity with I believe the Jacobs' payment. But, have you reconsidered lowering that payment to common shareholders? It just seems like a fairly obvious source of incremental retained earnings?

Yeah, it's a discussion at every board meeting and we have a board meeting next week and there will be discussions on the dividend too. But it's been our procedure to set that dividend in the third quarter. But, we are in times and the board will discuss that and decide what needs to be done with regard to the dividend. The two things that we've done with the dividend basically to-date have saved us around $145 million to $150 million in cash.

And I believe it does, but -- or I don't believe it does, but I just want to confirm, does your FFO share -- per share guidance for 2009 include the shares that you anticipate issuing in future periods as dividends?

Just in the first quarter we took that into consideration, but it doesn't for the -- if we continue to go on the stock dividend, the 60/40 stock dividend, that guidance did not include that.

And then just a last question is on leasing spreads I know you touched on earlier, but TIs seem to be, I guess they are boosting your new leasing rates in particular. Do you have a sense of what the leasing spreads would look like if you amortize TIs into the leasing rates on renewals and new leasing?

Yeah, we don't have that information with us here. I mean we can get that to you. But, in general, we've been working to hold that on our TIs because of the capital constraints in the market and we've looked extremely closely when we are giving out any TI at all to retailers looking at their quality of credit and looking at the quality of the deal. So, I don't think that's going to have a significant impact.

Did you give out, I guess, significant or much TI in the new leasing which you did in the quarter?

It's -- that's TIs paid also, so it doesn't match up with the deals that we did this quarter. Therefore deals that were done in the past and that had opened up and then for us to pay the TIs, the tenants have to have all their -- they have to be open, the estoppels have to be in place and they have to satisfy several other items on the checklist. So it's not a one-for-one match up.

Thanks. I will follow-up with you guys later.

Thank you, Jeff.

Thanks.

Thank you. Our next question comes from the line of Ben Yang with Green Street Advisors. Please go ahead.

Hi, good morning.

Hey Ben.

I also have a question on the de-leveraging process. I was wondering if you could provide some estimates or perhaps your expectations on what type of proceeds you think you can raise from asset sales and joint ventures? And is it fair to assume that only your core properties are going to garner any type of interest on these fronts?

What we are doing Ben is that we have a plan and we don't -- we are working with the various people on these plans and they vary and to a certain extent we don't necessarily want them to know -- to advertise what we are advocating that we are going to get through these joint ventures and the others.

And it's just not the A Malls, it's basically across the spectrum because I think a lot of people are looking for income today and good solid income from assets and that means whether it's -- it's a mall in the middle market or a mall that's in the larger markets. So it's just not the A plus malls, it's every mall, it's every project and then looking basically at what the yields are and what the ultimate growth is.

And some of these malls and some of these smaller market areas can show better growth to a certain extent than some of these major metro areas. They are not subject to the vagaries of the economy whether it's a boom or bust. So it's not -- it's across the board.

And does your plan include community centers and your office buildings as well?

Yes, definitely.

And then, final question. It looks like based on your updated tenant list that Gap closed about a dozen stores within your portfolio, which looks like it represents about 10% of their store base with your Company. Were these expiring leases that were not renewed or somehow unexpected store closures?

They were expiring leases and we've known they were coming for a while.

Thanks Ben.

Okay. Ben?

Thank you. Our next question comes from the line of Michael Mueller with J.P. Morgan. Please go ahead.

Hi Michael.

Yeah, hi. I think you kind of answered in the prior question, but maybe just attacking it from a different way the asset sales. Just any -- is this something where you have potential investors coming to you, are you going out looking for potential investors, is it a two-way dialogue and any rough indications of what people are thinking in pricing? I am not sure if you are necessarily going to throw a number out there, but do you think the bid ask spread for this type of transaction is a little bit closer together than what it would have been say two or three months ago?

Yeah, I think Michael what we're doing, we're being approached and we're also approaching other people with some creative ideas. And I think that there's -- the difference I think today versus maybe 12 to 18 months ago is, is that people are looking for safety of that investment. And the fact that treasury returns and the other returns are down significantly, they're looking for stability and they're looking for coverage if they were to buy to those assets.

So I think that that's what they're looking at. And there are still a lot of 1031 exchange buyers out there as well today. So we're being approached. We're also approaching a lot of people. And there is a lot of interest in some smaller assets, such as ground lease properties or bank locations and things such as that.

Okay, great. Thank you.

Thanks, Michael.

Thank you. Our next question comes from the line of [David Willington] with Maguire. Please go ahead.

Hi, David.

Good morning. How are you guys doing?

Good, thank you.

Just circling back to the $50 million mortgage that is coming due in December, you had mentioned that you would potentially reach out to other institutions to refinance as opposed to extending to the special servicer. Have you approached any institutions at this point or held any discussions with respect to that?

Yes, we have.

You have, okay. What's the general reception at this point?

I think the general reception is good. I think pricing is an issue to a certain extent and that's why we're negotiating that. We've also been turned down by some institutions as well. So I think you have -- we have some soft quotes, but I think there is still room to negotiate and I think -- we think that this will be accomplished ultimately.

Are you able to provide what the loan-to-value is on that currently?

It's -- what we're seeing today is, is that basically people are refinancing existing debt that's in place today. They're not increasing those significantly, but basically seeing them -- basically loaning the same amount that was in place today.

Okay. And then looking ahead to next year, and I realize that it's a little far off, you have a couple or let's say about three sizable mortgages coming due next year. Are those CMBS mortgages or are those with other institutions?

37% of our maturities next year are CMBS, the balance are institutional. So from that perspective, we really feel very good about that. And of those CMBS loans, only one of those is of a size in excess of $50 million, so that the amount of institutions that can be players with those loans that are less than $50 million is much, much, much greater than those that are in excess of $50 million.

So if you look at the portfolio in 2010, we feel very good about what we can do in the year 2010 and the leverage is very, very low as well. So we think that there is good opportunities to get that taken care of. And we're positive and very, very bullish about that. And if you want to look at 2011, the same thing applies, is that there is a lot of -- not a significant amount of CMBS as a total of the percentage. So we're focused on '10, '11, and now we're even looking at '12 because we think there's great opportunities to just look out that far as well.

So when you say 37%, is that the absolute number of loans or is that the percentage of the total loan amounts coming due?

That's the percentage of the debt.

Percentage of the debt.

Yep, dollars.

Okay. You -- is the 37% representative of the entire portfolio as, I guess, a percent of CMBS?

No, it's a percentage of those loans that are coming due next -- in 2010, so --

Okay. But broadly probably speaking for the entire portfolio, what percentage of your loans are held in CMBS?

I don't know that number, I don't know the number.

Okay, all right. Thank you.

Thank you.

Thank you. Our next question comes from the line of Rich Moore with RBC Capital Markets. Please go ahead.

Hi, Rich.

Hi, good morning, guys. Hello, John. I kind of want to follow up, if I could, on everybody else's question. Do you have any assets that you're actively marketing, i.e., you have with brokers, listed with brokers, or something like that, or is this more conceptual that you might sell something if the opportunity arises?

We have some packages out, Rich, on some of those, and in some of them we basically are in direct contacts with people who are looking for 1031 exchanges. It's basically built upon relationships. And a lot of our partners and financial guys in the banks and so on are telling people that we can operate those properties well and that they should talk to us about it. So it's really been great to have the relationships with the banks who have basically told some of their clients who need to do 1031 exchanges they should contact us. And in addition, we're using some brokers on some of these deals because some of these brokers have a great cadre of followers who we think we could be buyers of these properties as well.

Okay. And then do any of these properties you're actively marketing like this, John, do they include any of the regional malls?

Yeah, yeah. I think that we're looking at the total portfolio, Rich, it's just not office buildings or community centers. It would basically be joint ventures in some of those -- some of our existing malls as well as a sale of the interests in those and sale of some of the properties outright.

Okay. And then so when you think about joint ventures for a second, are -- do you have any letters of intent of any kind or are you down the road at all or are these still, again, sort of in the conceptual phase?

I think what we do, Rich, is as soon as we sign a -- feel comfortable and confident that a deal is going forward, we basically announce it to the market. But therefore we don't speculate and give opportunities, because in what's going on in the world today we don't count anything until the money is in the bank. So we know that (multiple speakers).

That's fair. Well, now, do you think given that -- it sounds like you haven't got anything to announce at the moment. I mean could you get something done by the end of the year if so far you don't have anything in the stage where you'd have a letter of intent, I mean is that too soon to expect something to get done?

You just don't know in the markets today. I mean hopefully something could happen, but we're not counting on it to happen. We're basically looking at all the avenues and keeping those balls in the air. And so it could happen, but then again we don't want to make any anticipations that -- until the money is in the bank.

Okay, fair enough. And then I kind of echo Nate's thought, I mean your stock has done so well that I'm not sure exactly what you guys are waiting for on the equity front, but I'll leave that for a future discussion. On ICSC you guys brought that up, what are you looking like for the convention? I mean how do you feel about the number of meetings you have this year versus other years and how productive you think that adventure this year might be?

Hey, Rich. We're -- we've cut back on the number of people going, so we've got a little less than half of the people that went last year. And we think it's going to be busy. Most of the activity is compressed into Monday and Tuesday and very few people staying until Wednesday. The convention is ending at lunch on Wednesday. And I know, from my experience and also looking at the leasing schedules, that they're virtually full now. So we do think it will be productive.

And there are a lot of retailers that are still expansion-minded with the box portfolio that we have. The fallout in the boxes has left the stronger retailers in a great position and they're talking about deals and it's something that we're optimistic that it will be a good convention. The attendance is definitely going to be down, but we'll get a lot done there.

Rich, we have a lot of financial people coming as well as a lot of analysts and look forward to seeing you as well.

You -- we will definitely see you there. Okay, very good. Thank you, guys.

Thank you.

Thanks, Rich.

Thank you. Our next question comes from the line of Jay Habermann with Goldman Sachs. Please go ahead.

Hi, Jay.

Hi, John. Just to follow-up on -- in terms of guidance assumptions, can you remind us what you're anticipating in terms of short-term interest rates? Obviously you benefited with that reduction to interest expense, but can you just remind us on what you're anticipating for the full year?

Yeah, all of our budgets are based upon a 3% LIBOR price.

Okay.

Our budgets are basically assuming that LIBOR is going to be at 3%.

Okay. And then just obviously you guys mentioned bad debt and the trend there. Can you give us a sense of just the next round of potential or retailer bankruptcies? I mean do you think this gets pushed out to winter 2010 at this point or do you think it's more to fall in the second half of the year?

I think we have budgeted basically to take into consideration there could be some slippage. We're not certain if it's totally bottomed out, but we're comfortable based upon those guidance numbers where we are.

Okay. Thank you.

Thanks, Jay.

Thank you. At this time we show no further questions. I would like to turn it back to Mr. Lebovitz for any closing remarks. Please go ahead.

Thank you, everyone, for your participation. We look forward to seeing those who are attending Las Vegas -- in Las Vegas and we'll see you at NAREIT as well. Thank you.

Thank you. This does conclude our conference for today. Thank you for your participation. You may now disconnect.