CBL & Associates Properties, Inc. (CBL) 2009 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 beginning today at 1:00 p.m. Eastern time and running through November 12, 2009 at 11:59 p.m. Eastern time by dialing 303-590-3030 or 1-800-406-7325 and entering pass code 4065656. At this time, for opening remarks I would now like to turn the conference over to Vice Chairman and Chief Financial Officer, Mr. John Foy. Please go ahead, sir.

Thank you. And good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss third quarter results. Joining me today is Stephen Lebovitz, President, and Katie Reinsmidt, Vice President Corporate Communication 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 & 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 operation 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 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 made 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 express 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. We appreciate everyone joining us today to discuss recent events and third quarter results.

Earlier in the year, we outlined a plan to access equity sources and collaborate with our lending group to address our upcoming maturities. Although there is still work to do, we have made landmark progress in successfully achieving these goals.

We recently closed the extension on both of our major credit facilities totaling nearly $1.1 billion, including our $525 million and $560 million credit facilities. We retained 100% lending capacity on both facilities, which is a major accomplishment in the current environment and a positive indication of the confidence that our lending relationships continue to provide.

Given our current stock price, our FFO multiple and implied Cap rate is well below our historic average and the current peer average. We continue to explore a number of opportunities to raise additional equity through joint ventures, dispositions and other means, which we believe will better recognize the embedded value in the CBL portfolio.

There is strong interest from several different sources to joint venture a portfolio of our malls, including attention from foreign equity and pension funds. As the year continues, the level of interest has increased. And the conversations are becoming more positive. However, we are still in preliminary discussions and feel that there is no pressure to complete a joint venture unless it makes good economic sense.

We are in the process of selling our interest in Plaza Macae in Macae, Brazil, so we can bring the funds back to the US. In mid October, we entered into a purchase and sale agreement to sell our interest in the mall for $24.2 million to a third party. Subject to due diligence and customary closing conditions, we anticipate closing this transaction in the fourth quarter. As part of this transaction, we have recorded a $1.1 million non-cash impairment charge in our results this quarter.

As we indicated last quarter, we anticipated experiencing continued effects of occupancy and rent pressures through the second half of this year, which was evident in the decline in the same-center NOI for the quarter. However, we are seeing relative NOI stability year to date in the mall portfolio, as well as improvements in occupancy and stable overall base rents.

Gross FFO was down approximately 1.5% for the quarter and nine months as compared with the prior-year periods. FFO per share for the third quarter was $0.50 per share, compared with $0.78 per share in the prior-year period. FFO in the quarter was diluted by $0.26 per share as a result of the $66.6 million shares issued in the June offering. FFO for the nine months was $1.87, compared with $2.30 for the prior-year period. FFO for the nine months was diluted $0.40 per share as a result of the $66.6 million shares issued in the June offering. FFO was also reduced by $1.1 million impairment charge related to the sale of our interest in Plaza Macae. FFO in the prior-year period benefited from an $8 million of fee income received from affiliates of Centro, which was partially offset by $5.7 million of marketable securities write-down.

Other highlights include minimum and percentage rent declined approximately $7.5 million for the quarter and $17.5 million for the year for the prior-year periods. Approximately $2.5 million of the decline in the quarter and $5.5 million in the decline for the year was related to lower lease termination fee income. The remainder of the decline was a result of lower occupancy and rent pressure, partially offset by a $2 million increase in straight-line rent for the quarter and nine months. That debt expense in the third quarter and nine months 2009 was approximately $810,000 and $4.6 million, compared with $1.7 million and $5.6 million, respectively, for the prior-year periods.

Gains on out-partial sales were $0.01 per share in the third quarter, compared with $0.05 per share in the prior-year period. Gains on out-partial sales were $0.02 per share for the first nine months of 2009, compared with $0.12 per share in the prior-year period.

Excluding lease termination fees, same-center NOI in the mall portfolio declined 1.8% for the quarter and 30 basis points for the nine months as compared with the prior-year periods. Same-center NOI total portfolio, excluding lease termination fees, declined 2.2% for the quarter, and declined 90 basis points for the nine months as compared with the prior-year periods. Same-center NOI was negatively impacted by the year-over-year declines in occupancy, rent pressure, as well as lower specialty leasing and sponsorship income.

Other highlights of the quarter included cost recovery ratio for the third quarter was 99%, compared with $0.97 -- 97% for the prior-year period. For the nine months ended September 30, 2009, our cost recovery ratio was 100%, compared with 96% in the prior-year period. While tenant reimbursements have declined from prior-year levels due to lower occupancy, the cost recovery ratio year to date has been positively impacted by the expense reductions and approximately $1 million of lower bad debt expense.

G&A represented approximately 3.4% of total revenues in the third quarter, flat from the prior-year period. G&A expense represented approximately 3.9% of total revenues for the nine months ended September 30, 2009, compared with 4% of total revenues in the prior-year period.

Debt-to-total market capitalization ratio was 74.6% as of the end of September 30, compared with 71.2% as of the end of the prior-year period. The increase in our debt-to-market capital is primarily a result of the 52% decline in our stock price from September 30, 2008. We have significantly reduced debt levels using the proceeds raised in the June equity offering.

Variable-rate debt was 16% of total market capitalization as of the end of September 2009, versus 18% as of the end of the prior-year period. As of September 30, variable-rate debt represented 22% of CBL's share of consolidated and unconsolidated debt, compared with 25.2% in the prior-year period.

Our EBITDA-to-interest coverage ratio was 2.3 times as of September 30, 2009, flat compared with the prior-year period.

We are maintaining FFO guidance for 2009 in the range of $2.28 to $2.39 per share. Major assumptions in our guidance include out-partial sales of $6 million to $9 million, the estimated impact of interest expense as a result of closing both the credit facilities at higher LIBOR spreads and NOI growth of negative 1.5% to 3.5%. We anticipate coming in closer to the negative 1.5% same-store NOI growth. We are finishing our budgeting process for 2010, and anticipate providing guidance when we report fourth quarter earnings.

Now I will turn the call over to Stephen for an update on operations during the quarter.

Thank you, John. I'll be walking everyone through this quarter's operating highlights. And then we will open it up for questions.

We continue to see the benefits of our dominant mall strategy come through in our portfolio occupancy and sales metrics. Our properties still provide one of the peer group's lowest occupancy costs, which is attractive to retailers looking to renew profitable stores, and for opportunistic expansion.

The volume of leasing completed in the operating portfolio in the third quarter was approximately 1.25 million square feet of new and renewal leases, including 500,000 square feet of new leases and 750,000 square feet of renewals. We also completed 90,000 square feet of leases in our development projects. To date, we have completed nearly 90% of our 2009 renewals, with non-renewals trending slightly lower than 2008.

For stabilized mall leasing in the third quarter on a same-space basis, rental rates were signed at an average decrease of 13% from the prior gross rent per square foot. We are continuing to experience pressure on rental rates, and anticipate this will continue until we see improvement in sales trends. We are generally signing the tougher deals for a shorter lease term, which affords us the opportunity to regain market rents when sales trends improve.

This quarter, certain categories, including jewelry, shoes and sit-down restaurants disproportionately impacted spreads. Together, the negative deals in these categories accounted for roughly one-third of the decline in average rent spreads for stabilized malls. While these rent levels were lower than we would have liked, we are building an up-side potential through higher percentage rent rates and lower break points.

Stabilized mall occupancy was up 120 basis points sequentially to 90.3%, and declined 180 basis points from 92.1% at the end of the prior-year period. Total portfolio occupancy increased 120 basis points sequentially to 89.2%, and declined 300 basis points from the prior year. We are still anticipating year-end occupancy to come in roughly 200 basis points lower than the prior year for the stabilized mall portfolio.

The year-over-year decline in occupancy was primarily a result of the closure of junior boxes in the associated and community center portfolios. Of the roughly 50 junior box locations that vacated as a result of the 2008 bankruptcies and store closures, we have 28 executed leases or LOIs totaling nearly 800,000 square feet, or more than [35%] of the available square footage. The new leases represent 25 retailers. So we have been able to attract interest from a broad range of users for these locations.

Several analyst reports last night commented that tenant allowances increased in the quarter, compared with the prior-year period, and that this increase enabled us to buy our sequential increase in occupancy. This is simply not the case. We report tenant allowances as funded, not as the leases are signed. The tenant allowances paid this quarter do not correlate with the leases signed in the quarter. In fact, some of the allowances paid are for leases signed over a year ago.

While tenant allowances did increase in the third quarter, this increase is consistent with what we have experienced in past years. Year-to-date tenant allowances are flat with 2008 levels, and about $13 million lower than 2007 levels. On a per-square-foot basis, tenant allowances for leases executed in the quarter are actually less than 2008 levels.

Same-store sales trends improved throughout the quarter. September sales have shown the most progress, declining less than 2%. For the 12 months ended September 30, 2009, sales for recording tenants 10,000 square feet or less in stabilized malls declined 6.6% to $317 per square foot.

While sales continued to decline, our portfolio decreases are less than those of most of our peers. Recent trends have been encouraging and are expected to continue, with the second half of 2009 performing better than the first half. However, we anticipate that the holiday sales season will reflect the significantly reduced inventory levels and heavy discounting that we are seeing from retailers. It will be challenging for volume to increase enough to reach prior-year sales levels.

While it is difficult to predict the level of bankruptcy we will experience going forward, we have been encouraged by the number of retailers reporting improving margins. During the quarter, we experienced limited new bankruptcy activity, with filings from two national retailers -- Finlay, which operates Carlyle and Bailey Banks & Biddle Jewelers, and JDH Enterprises, which operates [Lim's and Basics]. Together they have 15 locations totaling 41,000 square feet and $1.4 million in annual gross rents. To date, our lost annual gross rents from store closures is running less than 1% of annual revenues.

On October 11th, we celebrated the grand opening of the Promenade in D'Iberville, Mississippi, part of the Gulfport-Biloxi trade area. The center opened more than 96% leased and committed for the first phase, with Target, Marshall's, Alta and Dick's Sporting Goods opening to huge crowds. All of the stores have been trending well above their plan. We understand that of the 26 stores Target opened that week, the store at the Promenade was number one.

Just a few days ago, we opened the first phase of Settler's Ridge in Pittsburgh, Pennsylvania, more than 94% leased and committed. Center Mark Theater, P.F. Changs and REI, as well as a number of specialty stores have opened to a very strong reception from the market. In just a few days, the 150,000 square foot Giant Eagle Market District will celebrate its grand opening. And later this month, L.A. Fitness will open to the public.

These new developments have garnered a very strong response from the retail community, and we are pleased to open both with leased and committed rates in the mid 90s. The positive reception of the projects is indicative of the successful positioning of the centers in their respective markets.

In December, Hollywood Theater will celebrate their grand opening at The Pavilion at Port Orange in Port Orange, Florida. The remainder of the center will open in Spring 2010. That project is also well leased and committed, currently at over 92%.

We are seeing relative consistency in our quarterly results with the sequential increase in occupancy and year-over-year stability in base rents. We anticipated that the second half of the year would mathematically be more difficult due to the cumulative effect of the negative leasing spreads and lower occupancy. We are experiencing encouraging sales momentum. However, until a sustained positive sales trend emerges, there will continue to be pressure on rent. We expect some of that pressure to be mitigated going forward as retailers begin to take occupancy in the released junior boxes and small shops, as well as contributions from the recently opened developments.

While there is no question that the operating environment is difficult, our results are demonstrating the benefits of our market-dominant strategy, notwithstanding these challenges.

Thank you for joining us today. And we will now answer any questions you may have.

Thank you, sir. We will now being the question-and-answer session. (Operator Instructions.) And our first question comes from the line of Jay Habermann with Goldman Sachs. Please go ahead.

Hi, Jay.

Good morning, everyone.

Hi, Jay

I'm here with Jehan as well. John, can you speak to 2010? I know some of the larger debt maturities that you do have -- for example CoolSprings, Burnsville, York and St. Clair -- and I know you negotiated successfully the debt extensions this year. But give us a sense of capital needs for the next 12 months. And I guess even as you think to your further capital raising plans beyond the joint ventures, any update there would be helpful.

Okay. We have approximately about $495 million of refinancings total to get accomplished in 2010. Of that number, $179 million, say $180 million are CMBS loans, which we have covered with the line of credit and negotiations we did with Wells Fargo.

That leaves us about $316 million with institutional first mortgages. Of that $316 million, we have or will have applications within the next 30 to 60 days for $178 million of that.

That leaves us approximately $127 million with institutions that we've done business with in the past and have just recently renewed with. So we feel very good about the ability to renew those.

The NOI coverage, or the debt market coverage on those is in excess of 20%. So it's really a good, good -- more than adequate coverage to refinance those debts.

And where are you seeing rates today for new mortgages?

I think they're (inaudible) a little. I think that we've seen in the 7% to 8% range, depending upon the amount of leverage on the asset as well as some amortization that might be included in that.

Okay. And you mentioned joint ventures, foreign capital, equity partners -- can you give us some sense of just how much you're looking at? Or what you'd like to accomplish in the near term? And I guess as you look out even to 2012, does it give you sort of a desire to perhaps seek to raise additional equity at this point in the cycle?

Well, I think with the cost savings that we've implemented of over $165 million or so with the dividends cut-backs that we've had, and also with the equity that we raised, we don't see the need or the necessity to raise additional equity. We've definitely focused on de-leveraging our balance sheet. And there are definitely conversations going on with joint venture partners, as we mentioned. They're very preliminary. And the amount of those will basically depend upon how we see those structured in the economic (inaudible) we can see and then the ultimate use of the capital to see how we can grow the Company with that money.

So we have not targeted a specific number to do joint ventures. But the numbers and the various parties that we're dealing with have significant sums of equity that they can invest. And it depends upon the party that's involved -- some are smaller, some are larger. But there appears to be a lot of equity money now chasing transactions. I think it's more of an indication that people are seeing or feeling that the market may has be flattened. And I think, likewise, the ability to show that we have debt on some of these assets that they can jump into as well gives them a good cash-on-cash return. So I think that's attracting the people. And I think that the market's now coming to the realization that the sun -- that the moon is not falling in and that we're going to have good results.

The negotiation process at this point, is it really coming down to price? Or is it time? I mean, give us some sense of where the potential investors are looking. Is it -- are you at this point holding off given where you think pricing might be in the market?

Yeah, I think it's a combination of those. And I think that as we see the debt markets are starting to open more as well, that that in turn gives us the ability to show returns to our joint venture partners that are better.

So I think it's a combination. And I think as things move along, and as I think our results this quarter show, that occupancies are getting better and that the overall portfolio's starting to perform better, that it attracts more attention and it strengthens our leverage position with potential joint venture partners.

Okay, just two more smaller questions. Can you just list the percent of leasing done for next year, 2010? And also, can you speak to the out-parcels that you have in your guidance, where you stand on those?

We're -- hey, Jay, it's Stephen.

Hey, Steve.

We're just about 50% of tenant leasing that's done. And then the out-parcel part, can you ask your question again? I'm sorry.

I think you guys have guided to $6 million to $9 million, so that indicates that you still have quite a ways to go for the balance of the year.

Yeah, and --

We have contracts signed, and we feel confident that that's going to get done.

On a significant amount of those. Normally a lot of them close in that fourth quarter for tax reasons and 1031 exchanges. So it's pretty typical that the fourth quarter we see a closing. And it really gets down to almost the last two or three weeks of the quarter. Because I think people feel the tax pressure to do a lot of these 1031 exchanges. So we feel pretty good about where we stand on those contracts. Because experience just shows that that's what's happened in the past. Granted, nothing seems to be working like it has in the past. But we have, as Stephen mentioned, signed contracts on a number of those.

Okay. Thanks, guys.

Thanks, Jay.

Thank you. And our next question comes from the line from Samit Parikh with Oppenheimer & Company. Please go ahead.

Hi. Good afternoon, everyone.

Hi, Samit.

To follow up on Jay's question on the capital markets, how do you feel about lender capacity overall in 2010, I guess for your space specifically, the life insurers? And you said that you're seeing interest rates in the 7% to 8% range. How sustainable do you think that is next year?

Well, I think what we're seeing is that -- and hearing more indications and getting more interest from the life insurance people today, I think that they basically are seeing and feeling the same thing, is that there is tending to be a bottoming out there. As far as capacity is concerned, I don't think there's enough capacity in the life insurance companies to take care of all of the CMBS financings. And that's why we were proactive with regard to the approach that we took, basically so that we've taken care of all of our CMBS financings through the year 2011.

So I think, Samit, I agree that the capacity's not going to be there to take care of all the CMBS. I think the capacity is definitely there with those institutions of who you have relationships with, who you've produced with in the past and who you've continued to work with in the future. So I think from our perspective, we feel very good and confident about the ability to refinance what we have with the institutions.

Okay. And then, also, when you were talking about lots of equity money on the sidelines chasing transactions, what type of assets are you seeing that this money is chasing? Is it really just the highest quality, stabilized stuff? Or are you seeing people -- money on the sidelines essentially chasing higher yielding, more opportunistic investments?

I think it all depends upon the person or the group that you're working with. I think a lot of people are driving -- are very sensitive with regard to yield. And on the other hand, I think other groups are sensitive with regard to IRRs and what that looks like over that period of time. But I think all are basically looking at stability in those assets. They're not looking necessarily at a portfolio of $400 square-foot assets. I think the assets that have shown a stability over the long periods of time are basically of interest to them, too, if they're looking for yield.

So I don't think that you can say that they're looking in any one specific category. Because I think it's amazing how many different approaches and different people and different discussions there are out there as to various things that we see in the market and the ability to see them. A lot of them want to preserve their capital. A lot of them want yields. So I think it's difficult to just outline and say one. And I think with our portfolio, we have that ability to meet the needs of any of those parties.

Okay. And then, just to follow up on that, speaking of IRR, anything you've seen -- do you have any maybe sense of what specific IRR requirements for some of this money on the sideline might be?

Well, I think it depends again. I hate to go back to the party that's involved. But you have a lot of hedge funds out there who are basically looking for IRRs significantly high, in the double-digit area. But on the other hand, you look at these other people who are basically more realistic with regard to the IRRs they're looking for and the ability to take those people and work with those. So I think some of them are looking at cash-on-cash returns, and some are looking at IRRs. The ones we're talking with are not -- we think they are more realistic with regard to those. And we think that they're not in the significantly high double-digit areas.

Sure. So then, for those realistic people, it's cash-on-cash returns of 9 to 10. Is that -- is that realistic? Or is that too high still?

Well, I think it depends on the asset and the size of the transaction. So I think it can probably go lower than that.

Okay.

And I think that's -- your numbers aren't unreasonably unrealistic.

Okay. Thank you.

Thanks, Samit.

Thank you. And the next question comes from the line of Paul Morgan with Morgan Stanley. Please go ahead.

Hey, Paul.

Hi. Good morning. Just a little bit on the leasing side. I just want to be clear on the part of your supplemental where you provide the spreads, you've got about $500,000 of -- 500,000 square feet of leasing in the quarter. And then kind of below, you also say total leasing in the quarter is like 1.3 million. Is the difference between those two just mini anchors and anchors? Or are there other types of like short-term leases that don't get put into the spread calculation?

Yeah, it's two things. It's anything over 10,000 square feet isn't in the leasing spread number, the 500,000 square feet. And then, also, certain deals just aren't comparable for various reasons. You know, the spaces don't match up or factors like that. The square feet aren't the same. So those aren't in there as well.

But if you were to just do like a 12-month extension, that would be in there?

Yes. Yeah, everything's in there. Yeah, a 12-month extension, 24-month, 10-year.

Okay. All right. And then you said you've done 50% of the 2010 leases. I mean, are those -- I mean, are those spreads on a consistent basis with what we're seeing in this quarter, based on what you've done with the expiring leases for next year?

Yeah, it's a little hard to say. I mean, they're for the most part renewals. And, hopefully, it's a little bit better than what we saw this quarter. There were a few deals, like I said, a few categories in this quarter that really skewed the results. And it's interesting, because if you -- there were -- there were actually two restaurant deals that were 15,000 square feet. And those alone accounted for over 200 basis points of the decrease. And what we do in those situations is that the restaurant had gone bankrupt and a buyer came in, bought the fixtures and bought the business, and didn't take any away from us. So they weren't able to pay the same rent. But they came into the space with very little downtime. So we thought that that made the most sense, given the circumstances. But it did hurt our spreads.

Okay. And then, what drove the increase in the straight-line rent in the quarter?

It was the -- it was the adjustments in the rent that basically you adjust down. And then you basically adjust back up.

You mean, is this rent -- is this basically deferring rent, or short-term relief, that type thing?

It's reoccurring rent. And it's short-term rent as well.

So short-term, discounted rents, and so you're straight-lining over that. Is that what you're saying.

It's the short-term period of that. So let's say that we gave some rent relief, and then it picks back up six months later or a year later. So you put all of that into the equation. And then there was some write-offs that basically -- the big -- the big significant number between this year and last year was that we wrote off a lot of tenant allowances from those big boxes. So that was the big significant number when you compare '08 to '09. And then, in addition to that, the straight-lining basically had an impact on it.

How -- I mean, we've had issues with other companies who had to ultimately write off those accruals. I mean, how are you viewing that decision to do that short-term relief? What's the kind of credit quality in your comfort that you'll actually be able to kind of recoup that discounted period?

It's not -- I mean, we go through the process deal by deal. And it's really only in the cases where we view that there's a bankruptcy risk or significant distress with the retailer that we're giving them the type of short-term relief to get them -- to get them through the cycle. And in terms of gross dollars, it's well -- it's less than 0.5% of revenues. So it's -- it did impact the straight-line number. But it's not -- in the grand scheme of things for the Company, it hasn't been that material.

Okay. My last question's just on expenses. What's been the big driver of the expense cuts? And do you think you continue -- as those anniversary, do you think there's more potential to reduce expense line to keep NOI protected? Or are you running up against some constraints there?

Well, we're definitely going to run up against more difficult comps. Because we started doing the expense reductions last year. So it's going to be more difficult as we get later into this year and into next year to see the same results. Not that we're not continuing to work to push down expenses further. But we did take the lower-hanging fruit at the beginning.

As far as what areas it's been, utilities has been a big priority. And we've been able to have some real good success in terms of pushing down costs there. Landscaping and maintenance in general, we've just tried to be more efficient and more conservative to save money where we have. Snow removal is less this year, which has been a factor of the weather. And then, on the personnel side we've looked to be more efficient. So there's a lot of different categories that go into it. And, like I said, we're still working to do more.

Thank you.

Thanks, Paul.

Thank you. And our next question comes from the line of Christy McElroy with UBS. Please go ahead.

Hey, good morning, guys. Just to follow up on Paul's question, I know that you're doing quite a bit of this junior anchor box leasing. Can you just give us a sense for what type of spreads you're seeing on that space that's over 10,000 square feet?

Yeah, the spread for those spaces is actually down 9%. But it's a little -- it's a little misleading, because there's a couple of spaces where we've done shorter-term deals at lower rents while we're working to get someone in the space. And those spreads have -- are disproportionately worse compared to most of the deals. The longer-term, 10, 15-year deals that we've done with people like Bed, Bath & Beyond or hhgregg or Jo-Ann Fabrics or Nordstrom Rack, people like that have been at good, positive spreads. But the four or five shorter-term deals have been behind this decrease.

To what extent did those larger, sort of over 10,000 square-foot boxes contribute to the sequential occupancy jump in Q3? Is there any way to sort of break that out?

Yeah, a few opened, but for the most part they're opening in fourth quarter and into next year. We didn't break it out. And I don't have the exact number for you.

Okay, maybe we'll follow up on that. Just in your releasing spreads, it's pretty clear that you're having to push a little harder to get the space leased. In the office sector, we've seen free rent jump to about six months on average from three months. I know it hasn't really been commonly used in mall leasing. But are you offering any free rent in this environment?

No, we haven't offered any free rent. One other thing, you can see the impact to the boxes when you look at the community center and the associated center stats. That's the improvement there. So I don't think you'll need to follow up on that.

Got you.

But, and then -- no, we have not -- we have not offered free rent. And we haven't heard of it happening with any of our peers. And it's just -- you don't see that in the mall business like you might in other sectors.

Okay. I'm on with Ross as well. I think he has a question.

Yeah, hi. Good morning.

Hey, Ross.

Hi.

John, you've been talking about joint ventures now I think for most of the year. And I think understandably your focus has been on getting the lines and the term loans taken care of and -- on the equity front. But in terms of the joint ventures and the volume and asset deals over the next year, do you have just a bogey of what you think you're going to be able to do? I mean, do you have to do $1 billion of transactions to get the balance sheet to where you'd really like it to be?

No, I don't think we have to do any to get the balance sheet where we -- we're comfortable with the balance sheet where it is. We'd like to see some improvement with regard to the balance sheet. But we don't feel any pressure whatsoever to basically force and do a joint venture that we don't think is in the best interests of our shareholders. So we haven't -- we don't have any bogey. We don't have any preconceived idea of what it is. We'll continue to explore with a number of people various opportunities that they see, and try to fit in with their parameters to make it work for both of us.

So can I take that -- so if I look through the other side of the cycles here to when mall companies get back into the external growth business, whether that's acquisitions or developments, that the current leverage profile of the Company is at a level where you'd be able to start doing external growth off of, say two years from now?

Yeah. I think, Ross, what's attractive to us about these joint ventures as well is to make certain that our joint venture partner provides additional capital so that when the market turns, or when we all feel that there are opportunities, that we would make acquisitions with our joint venture partner. So that's one of the things that would keep us focused on that.

We'd like to and will continue to de-leverage the Company. Through the significant savings that we've done with regard to the dividend will help de-lever that as well. And the amount of mortgage that we amortize each year is a significant number as well. So just those things in and of themselves will help de-lever. And then the ability to attract and bring in the joint venture partner not only will de-lever our company, but provide additional capital and sources to make acquisitions and grow the companies important to us as well.

And then, Stephen, what do you think the likelihood or probability is that rents across the mall industry would go down further from here? Or do you believe that we've already seen it, it's already bottomed? I mean, how do we get a sense of who's got the leverage at this point?

Well, it's -- that's a tough question. And we're trying to get them back into the positive territory as quickly as possible. But ultimately it's a function of sales. And so, the fact that sales are starting to level off, which is what we've seen in September, and then, what the -- the article today in the Journal talking about October. So sales trends are encouraging. And so I think what'll happen is that the retailers will be less focused on their expenses and driving down their costs, and more focused on growing their revenues.

So, hopefully, the worst is behind us. They're -- we're probably looking at something going into next year, just because there is a lag when sales go through the expirations. So we're not necessarily planning for rents to go up next year. But we hope they'll level off. And we definitely hope things get better faster, which seems to be happening, versus what everyone thought earlier in the year.

Thanks.

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

Hi, Quentin.

Hi. Good morning. I'm here with Michael Bilerman. Just going back to the leasing spreads, I think you've done about 125,000 (inaudible) boxes in the period. But if I look at the numbers for the quarter, the 1.34 million square feet, 560,000 for the shop space plus those boxes, there's a significant amount in between. If -- do you have a number that shows the leasing spread for the total 1.34 million square feet for the quarter and the total 3.7 million for the year? Because I'd expect that it would actually be a bigger decline than what you're showing for the shop space. Is that fair to say?

No, there's -- it's actually -- I mean, first of all, we report 10,000 square feet or less. And -- but when you go into the 1.3 million square feet, you've got development projects in there. You've got a couple of anchor renewals, which are 200,000 square feet. You've got the boxes, which some of those are in there, which I talked about a few minutes ago. So I don't think if you did it over the whole it would be any worse than what we said. It'd probably be better because of the anchor renewals are fixed amounts, and those are increases or flat. And the boxes, like I said, for all the ones we've done, it's a negative 9%. But when you factor in some of the deals that have been more recently, it's probably more positive in terms of what would go into this quarter.

Okay. And then, you spoke about the shorter-term leasing that you're doing. And I think you also mentioned that there's a lot more percentage rent deals going into those leases. What kind of an increasing sales would you need for those percentage rent deals to kick in? Because I assume you're still charging a base rent. You've just got a higher portion of percentage rent. Can you just talk about the terms of those leases?

Yeah. Well, I'll just give you an example. Like on the two restaurants that I talked about, the really lousy deals that hurt our spreads, the percentage rent factor on that is 8.5%. Typically a restaurant deal is done at say 4% to 6%. And then the break point is artificially low. And it's basically a little bit below the sales that were happening in the space beforehand. And that's what we're trying to do, is set the percentage at break point to basically level where the sales currently are so that when sales pick up, that we'll be able to see percentage rent out of the box, and also to get a higher rate than we would in a traditional lease negotiation that would've been done a couple years ago.

And so all of that shorter (inaudible) that you're doing, is the majority of it on the percentage rent-type deals?

No. No, we didn't say that at all.

Okay. And then, just the last one, on the joint ventures, could you just give us a little bit of an understanding of what kind of terms you're looking at? What kind of share of the joint ventures that you'd be looking at retaining? Is it 20%? Or are they going to be 50-50 joint ventures? And also, some of the phase and the (inaudible) you might be looking at?

I think that they're pretty typical in the industry today. There's normal management fees, leasing fees and the other fees that are normal in the market today. And as far as the ownership percentages, I think it depends upon the typical -- the type of joint venture that somebody's interested in. If they want a joint venture from the standpoint of a 1031 exchange, then that'll be a different type of ownership. And so, I think it depends upon the amount of debt on the asset as well that determines the ownership positions, et cetera. And I think what everybody's basically interested in, at least the deal makers, are the basic economics of the transaction. And so, we work to structure around so that it's a win-win situation for both parties.

John, it's Michael Bilerman speaking. Good morning.

Hey, Michael.

Do you have -- I mean, do you have active brokers marketing a package of malls for joint venture? Or this is all being done sort of in house and it's more people calling you, rather than you soliciting interest?

Well, we had a group of people who have contacted us. We've had some brokers who've brought transactions to us. So I think it ranges -- it runs the gamut of various ways of approaching us. And some of our banking relationships has resulted in people coming to us as well.

And how should we think about what your desire -- I mean, obviously pricing's going to be -- not going to hold you to something. But just in terms of size, how should we think about how much you think you're going to be able to pull out from an equity perspective out of assets? But, also, are talking about $1 billion of joint ventures? Are we talking about $500 million? Or is it something much more?

Well, I think it depends upon the parties that are involved and the cost of capital. And as we see the opportunities, how much money do they want to invest? What do they want to do on a going-forward basis? And as we've said, we don't have to do it. The balance sheet is in great shape. We saved $165 million or so with dividends and cuts that we've made. And we see that opportunity. And we're viewing the ability to generate additional income from other sources, as well. So we don't feel any gun to our head to do the joint ventures. And, depending upon what we see, the use of the capital in addition to de-leveraging and the ability to grow the company is what would drive that. Whether it's a -- whether it's a $2 million or $3 million joint venture that has some better results for us, or whether it's a $200 million or $300 million joint venture, it's basically -- the gamut's open. And we're open to discussing with anybody what makes good economic sense for us, as well as bringing a good partner into the transaction.

So we don't -- we don't identify the amount of acquisitions that we did in the past. And we just don't feel like it's in our best interest to feel that we've got to push a joint venture that's really not in the best interests of our equity partners. And we did the big equity raise. And, as I've said a couple of times, significant savings basically has made our liquidity plans very, very good. And the banks understand the liquidity plans, are very happy with those. And we've covered the ability to finance our debts going through 2011.

So that's the reason we don't feel the obligation to do it. And that's the reason we don't put any dollar number out there.

Right. John, do you still own the marketable security in another REIT?

We own some marketable securities.

Do you still own the same marketable securities that you had previously that you'd taken the impairment on?

We still own marketable securities, yes.

Have you increased that balance or sold any of it down?

I think that we haven't made any release on that. And we wouldn't -- until we basically did a disclosure on that, Michael, I don't think we would say anything on that.

I'm just curious. Because it -- from your lending relationships, they've obviously shown tremendous support for your Company. You've had the equity raise, which you've talked about. That the stake that you had is in a little bit of a different situation, as I think through things from a strategic standpoint, could you de-lever effectively by almost doing the stock-for-stock deal, and you have your lender step up and it's an opportunity for the Company? Or have you sort of passed it and decided we don't need the stake anymore?

I think that we -- everything is on the table in our organization. We look at every asset that we have on a quarterly basis, or even more often, depending upon the situation. And marketable securities are no different than that. And various ideas and ideas and concepts we continue to explore to create opportunities to both de-leverage the Company, as well as to grow the Company.

And then, how much marketable security is on the balance sheet today?

$4.2 million.

Great. Thank you.

Thanks, Mike.

Thank you. And our next question comes from the line of Michael Mueller with JPMorgan. Please go ahead.

Hi. Good morning. Most things have been answered at this point. But real quick, on the same-store on the stabilized mall portfolio, you're pretty much flat through the year. Occupancy is down 190, and the lease spreads are down double digits in terms of what's been reported. Can you walk through just kind of how the math gets there? And is part of it the lease signings are going to lag and hit the same-store plus the recoveries? Is that how the math ties together?

Yeah -- well, it's mostly the -- we've used the expense savings to offset the top line decreases. And we saw it coming last year. So we tried to get ahead of the rent decreases and started cutting expenses in the third quarter. And so, we've been able to preserve our NOI, which has been our goal. And that's going to continue to be the goal going forward, as well.

Okay. And for the year stats, they -- in terms of the lease spreads, that's signing during the quarter. That's not openings. Is that correct?

That's correct.

And what's a typical GAAP lag time?

It's hard to say. I mean, for renewals there's no lag time. For new leases, it's probably on average 90 to 120 days.

Okay. But if you sign a renewal, it doesn't take effect today. It'll typically take effect at the end of the prior term.

Yeah, that's true. That's true.

Okay. And, Stephen, I think your comment earlier was year-end occupancy down about 200 basis points. Now was that for portfolio? The whole mall portfolio? The stabilized mall portfolio? What were you referring to with that?

Both.

Both the mall and--?

I'm sorry, both the stabilized malls and the overall portfolio. So we're expecting that with the boxes opening in the fourth quarter that we'll bring the overall up to the 200 basis points versus where it was this quarter. So that's where most of the progress is going to be made in the fourth quarter.

Okay. And then, last question -- John, I understand the comments you were talking about, about the asset sales and joint ventures. But maybe just thinking about this from a different angle, when you think of leverage, what stats do you look at to gauge your leverage? Do you look at fixed charge? Do you look at debt-to-EBITDA? How do you see those today? And granted, you can take a longer-term approach. Where would you like to see them a couple of years from now?

Yeah, I think you've hit the nail on the head with regard to the coverage ratios are the important things to our banks. They're important to us as well, because we think that that generates the cash flow. I think the other thing that we look at also, which is very important to us, is recourse versus non-recourse mortgages so that if assets basically have some troubles, you're not in a situation where you can't give those assets back.

So I think we look at the coverage ratios. And those are pretty good today. We'd like to continue to see those improvements. They basically have been flat from last year to this year. And historically they've been in the same levels.

Okay. Okay, thank you.

Thanks, Mike.

Thank you. And our next question comes from the line of David Fick with Stifel Nicolaus. Please go ahead.

Hey, David.

Good morning. I'd like to circle back on the TI question that Mike -- that Stephen addressed in your commentary. And I understand the distinction that you were making. But I'm wondering, can you just tell us how the TIs per square foot per lease year are comparing to what you've done in prior years?

Yeah, they're actually down this year compared to the prior year on a per-square-foot basis. It's roughly say 10% down.

And that accounts for the shorter lease terms?

That's for -- that's for the leases signed this year, the nine months, compared to -- all of them, compared to leases signed last year.

But the distinction I'm trying to make is that if you're doing shorter-term leasing, which you've indicated, you would expect, obviously, TIs to be down. I'm just wondering if it's down in proportion to the shorter term of the lease.

No, it's not, David, the term of the lease. Basically, we want to make certain that we're going to get the right returns on any tenant allowance we give to those tenants over and above that. So it's not because of the term of the lease or whatever. It's basically to a certain extent a result of the fact that some of these tenants we've been able to negotiate deals with and lower tenant allowances. And then, the other thing I think you're seeing somewhat -- not a huge number, but it has some impact -- is cost of construction has basically gotten better. And you're seeing some lower cost numbers in that respect -- not a huge number, but that in turn impacts it somewhat.

Okay. And, John, you mentioned the dividend savings as being a source of capital. Can you just walk us through what your TI, the taxable income situation is, as far as you know today, and what your visibility might be on 2010 dividend level?

I think, David, we do those projections, we present them to the Board and I think with regard to this year, our projections are pretty well holding true as to what we thought those would be. And we do those on a quarterly basis. And those we're doing -- and we'll announce those I think in -- at the end of the fourth quarter when we do our earnings announcement or dividend -- I'm sorry, dividend declaration.

Okay. And then, lastly can you update us on the status of the [Westfield put]?

Yeah, there is basically -- those assets continue to perform well. The appraisals that we're required to do under those assets have come in well. And we've met those obligations. And the put -- there's really no put -- is that we have the right to call those assets, that after a period of time that the costs that return goes up from 5% to 9%. But basically, because of tax reasons, et cetera, there's really no put.

Okay, great. Thank you.

Thanks, David.

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

Hey, Rich.

Hello, John. Good morning, guys.

Hi.

A question for you on loan to value, John. Are -- where are those at? Or what are you hearing from lenders as you look at these mortgages that you have coming due with regard to LPVs? And also, in the same vein, with regard to potential recourse that you might not have had to have before?

We're seeing -- probably the highest leverage we're seeing is probably 65%. It's -- more realistically, it's probably in the 60% range. And it does have some impact upon your pricing, but not much if you go down to 50%. And as far as recourse, we're not seeing anything -- any change in the position of the institutions when it comes to recourse.

Okay, very good. Thank you.

Thanks.

And then, for a number of years you guys were hit a lot by people that -- maybe there was something in the makeup of the middle markets that made retailers not as attracted to those. And I think that was really shown to not be true, for the most part. But I'm wondering, in this environment -- in this tough economic environment, what is the attitude that retailers have toward the middle markets? Do you sense that it's still unwavering in a sense? Or is it more difficult?

I think that they -- that the retailers have become even more realistic. With regard to the middle markets from a distribution that channel for them is that we point out that one specific retailer said, we felt years ago that we had to be in every regional mall in Atlanta, Georgia. We're a brand unto ourselves, and ladies will come to our stores if we basically put those stores in a good relative position to where they are. We don't need to be in eight or ten regional malls in Atlanta. We can be in four malls. But we do need to cover and have a distribution network in Chattanooga, Tennessee where we -- where our mall is the dominant mall. And, therefore, what we'll do is, is if we need to close stores in Atlanta, we'll close stores there and basically keep our distribution network going across.

And then, in addition to that, I think the economies in the market areas where we are -- state capitols, university towns -- granted universities are having tough times as well, but we're still seeing good opportunities in those market areas. In Chattanooga, we're opening -- the Volkswagen plant will open I think in the latter part of 2010. And it's incredible the amount of new industry that's coming in and around Chattanooga to the tune of almost $2.5 billion. And so, university towns continue to do research projects. And Madison, Wisconsin is an incredible market area with what's going on there. So the middle markets are unquestionably the place to be, in our opinion, if we own the dominant asset. And we do that in almost every market area where we are.

So thanks for the question.

Yeah, your sense, John, is that the commitment by the retailers to those markets is as strong as your commitment -- as strong as you think they should be committed to it?

Yes.

Yeah, okay. And then, a couple of smaller questions, guys. Other expenses were up -- that line item was up. Anything special going on in there?

We wrote off some abandoned projects this quarter that we are still continuing to pursue, but felt that at this stage we didn't have enough interest in those to continue to continue the investment in those. Although, we've had -- a lot of the people who we basically have terminated options with and said we're stopping spending any money on the projects have basically said to us they would like us to continue to explore those as well.

Okay, so that was probably a couple million dollars, I'm guessing, John, somewhere in that range?

It was $1.2 million.

$1.2 million, great. Thanks. And then, G&A for the quarter was lighter. And that's kind of a seasonal thing, I know, typically. But anything else besides seasonality in that?

No, that was about it.

Okay, very good. Thank you, guys.

Thanks, Rich.

Thank you. And our next question comes from the line of [Stuart Seeley] with Morgan Stanley. Please go ahead.

Hey, Stu.

Good morning. Thanks for taking the question. Back to the issue of potential JV and JV sales, it sounds like the way you're thinking about it is there's basically two buckets of investors out there. The first bucket are logical, clear thinkers, pragmatic investors, and then there's hedge funds. And I suppose there's a lot of folks who would agree with that fundamental bifurcation. But as you -- as you discuss the headline terms such as Cap rate and price, how much of the discussions are also being dominated by things like the JV partner wanting protection on the downside with a preferred return or supercharging their upside with warrants? And would CBL only consider a pari passu straight-up JV? And if you do only consider a pari passu JV, do you take a lot of the potential money that is on the sideline essentially -- are they essentially not interested in pursuing the JV on your malls?

Well, I don't think we would close the door on any joint venture, if it made economic sense. So whether it's pari passu or with some type of reasonable preference, that -- what in turn -- there always has to be give-and-take. And so I think it would all depend upon that as to what we did in that situation. So I don't think we'd close the door on any joint venture if it was in reason.

As far as the two types of joint ventures out there, I can't comment on that.

Stuart?

We have lost Stuart. He has disconnected. At this time, I'm showing that there are no further questions in the queue. I'll turn it back over to management for closing comments.

Again, we'd just like to thank everyone for tuning in this morning and for taking the time. And we'll look forward to seeing everyone at NAREIT next week. Thank you.

Thank you. Ladies and gentlemen, that does conclude today's conference call. And thank you for your participation for using ACT conferencing. You may now disconnect.