CBL & Associates Properties, Inc. (CBL) 2013 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the CBL & Associates Properties Inc. fourth quarter 2013 conference call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session.

(Operator Instructions)

As a reminder, this conference is being recorded Wednesday, February 5, 2014. I would now like to turn the conference over to Katie Reinsmidt, Senior VP of Investor Relations and Corporate Investments. Please go ahead ma'am.

Thank you, Nikki. Good morning, everyone. We appreciate your participation in CDL & Associates Properties Inc. conference call to discuss fourth quarter and full year results. Joining me today are Stephen Lebovitz, President and CEO; and Farzana Mitchell, Executive Vice President and CFO.

I will begin by quickly reading our Safe Harbor disclosures and will then turn it over to Stephen for his remarks. This conference call contains forward-looking statements within the meaning of the Federal Securities laws. Such statements are inherently subject to risks and uncertainties. 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 most recent annual report on 10-K.

During our discussion today, references may defer share amounts are based on a fully diluted converted share basis. During this call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in today's earnings release that is furnished on Form 8-K along with a transcript of today's comments and additional supplemental schedules. This call will also be available for replay on the internet through a link on our website at cblproperties.com.

Thank you, Katie, and good morning, everyone. I will first spend a few minutes providing a progress report on our corporate goals and initiatives, and we'll review our operational results for the quarter. Katie will then provide an update on disposition, development and redevelopment progress, and Farzana will run through financial results as well as guidance for 2014.

We made tremendous progress in 2013 on improving our balance sheet and achieving our goals ahead of schedule. We are now in a stronger financial position, but there is still work to do. Operationally, we took advantage of ongoing opportunities to invest in growing our core portfolio. We strengthened our retail base and increased the focus on our disposition program.

We completed the sale of three mature malls and their related associated centers as well as five office buildings during the year. We are focused on these initiatives in 2014, and we utilized our stronger financial structure to reposition our portfolio for higher growth over the long-term.

During the year, we made great strides on our tenant upgrade strategy, adding a number of new retailers to the portfolio. We expanded our relationship with H&M, Michael Coors and JCrew and signed a number of firsts such Athleta and Garage. This contributed to the double-digit leasing spreads of 11.8% achieved for the full year.

However, the lost income from the down time between stores closing and new stores opening weighed on our results. And we were unable to fully convert our perspective tenant pipeline into the incremental occupancy improvements we had anticipated for the fourth quarter.

As you have undoubtedly read, the holiday sales season was lackluster for most retailers. The shorter holiday calendar in a highly promotional environment did not allow retailers to gain the traction necessary for a positive holiday season. As a result, sales for the quarter decreased 1.8%, bringing full year sales slightly negative to $356 per square foot.

Contrary to reports in the media, traffic in our malls was strong over the holiday season, which translated into positive results for restaurants as well as entertainment. Jewelry continued to perform well, as did athletic footwear. At the same time, certain categories experienced weakness such as children's and juniors' apparel and ladies' specialty.

Given the end of year results, retailers are being cautious with inventory levels, which should allow for a less promotional and more profitable year in 2014. Currently, retails are maintaining their expansion plans for 2014 and 2015, which bodes well for our leasing efforts.

We remain proactive in managing our risk for potential anchor closures as we did recently when JCPenney announced four store closures in our portfolio. We continue to actively monitor our JCPenney locations for potential risk of closure and have contingency plans in place which include active discussions with various box retailers. We view these as opportunities for exciting revitalization of the space. While we do not anticipate any additional closure announcements this year based on our conversations with JCPenney and were encouraged by their recent sales improvements over the holiday season, we are staying ahead of any future impact to our portfolio.

Despite some challenges associated with the current environment, we are confident in our solid core market dominant properties. We are in the early stages of our portfolio transformation, which includes investing in redevelopments and expansions to drive higher growth and profitability over the long-term. And we are actively selling the lower tier assets that adversely impact our overall results.

Over the next few months, we will continue the review of our core business and portfolio and will communicate a more detailed path of where we intend to take CBL. While this year's NOI growth is not compelling, we are confident that over the long-term, our Company will generate strong growth in NOI and FSO as it has over our 20 year history as a public company.

A key pillar of this multi year strategy is to hone our core portfolio so that consists of more productive properties by culling mature assets with limited growth prospects and reinvesting in our higher growth assets, including redevelopment and expansion. We began this process in 2013 and made solid progress toward aligning our portfolio and our financial structure in this manner. The pace of change will accelerate in 2014 and beyond.

Lastly, based on feedback directly from investors and analysts, we are undertaking an effort to increase our transparency levels. In this regard, we have taken a number of steps this quarter to improve the information flow you receive from CBL, starting with our supplemental. Our goal is to provide more relevant disclosures for many of our primary metrics.

Katie will now provide you with more specifics on what to expect from this initiative, as well as commentary on redevelopment and portfolio related activities.

Thank you, Stephen. Some of the improvements you will see in our supplemental this quarter include occupancy on a same center basis, more detailed portfolio segmentation, shadow development pipeline disclosures for projects under pre-development and other frequently asked for metrics such as weighted average interest expense by maturity and the straight line rents receivable balance.

We have added information on leases that are commencing in addition to the information we provide on leases signed and have also converted to cash NOI standard, which will exclude non-cash and non-comp items. Our objective is to help the market better understand our portfolio and our results, and we will continue to evaluate additional improvement.

Now, turning to dispositions and capital markets. Many of you have read the report and real estate alert discussing three assets that we are actively marketing for sale. While still early in the process, we have received strong interest as far as the quantity and quality of prospective buyers. We have a number of interested parties visiting the properties and are actively engaging in due diligence, which we view positively.

We have another small mall of under $20 million for which we have received an executed letter of intent. Due diligence is ongoing, but we do not have hard dollars in escrow. We will provide a progress report on these deals as appropriate.

We opened two expansion projects at existing centers during the quarter. At Cross Creek Mall in Fayetteville, North Carolina, we opened a 46,000-square foot expansion, a prime example of our focus on investing in our higher growth assets. The district at Cross Creek allows us to enter -- allows us to deliver new to the market retailers including LOFT, Chico's, Reed's Jewelers and White House/Black Market, driving new traffic and contributing to a stronger future growth rate at the center.

In November, we opened a free-standing 50,000-square foot Dick's Sporting Goods at our South County Center in St. Louis. We have several anchor redevelopment projects in various stages. During the fourth quarter, we celebrated the grand opening of Dunham's Sporting Goods in a former Dillard's location at Randolph Mall in Asheboro, North Carolina.

We are also under construction at our College Square Mall in Morristown, Tennessee, redeveloping a former Sears location into a T.J. Maxx and a Longhorn restaurant. We anticipate a grand opening for T.J. Maxx in May. Burlington is under construction at our Northgate Mall in Chattanooga, Tennessee. The new 65,000-square foot store is taking space formally occupied by a Bellcom store in shops.

Some of you may recall that we purchased Northgate Mall in an auction a few years ago. Since that time, we have redeveloped the associated center, adding Michael's and Ross, Old Navy opened in January and will be joined by additional retailers and restaurants on the front side of the mall. And we completed a renovation at Northgate last year. The mall is seeing increased traffic and sales and has been a very nice addition to the portfolio.

Nordstrom Rack just announced -- was just announced as a new addition to West Town Crossing, our associated center next to West Towne Mall in Madison, Wisconsin. The 31,000-square foot store will open in the fall. Dick's Sporting Goods is under construction at our Monroeville Mall in Pittsburgh, Pennsylvania and the remaining portion of a former department store space. The new store is expected to open this summer.

We are receiving strong interest for this year's redevelopment projects at Fayette Mall and CoolSprings Galleria. We provided some cost return and timing guidelines in our new and improved supplemental. We will announce additional retailers joining these projects shortly as we finalize leases and are excited that we'll be announcing many that are new to the market. We recently started construction at Fayette Mall with a opening in 2015, and construction at CoolSprings Galleria will commence later this year with an opening scheduled for 2015 as well.

Switching to ground-up redevelopment -- ground-up developments, construction and leasing is progressing on the outlet shops at Louisville between Louisville and Lexington. With a grand opening scheduled for July, the center is already 96% leased or committed with a first-class line up including Coach, Banana Republic, Brooks Brothers, Chico's, Nike's and Saks Fifth Avenue offsets. Given the continued demand for space at our 100% leased outlet shops at Oklahoma City, we will begin construction soon on a third phase to accommodate additional retailers. Oklahoma City's 35,000-square foot expansion will include new retailers, Forever 21 and Lids. Phase 3's grand opening is scheduled for August.

At the outlet shops at El Paso, we will begin construction on a 45,000-square foot expansion with H&M, Love Culture and Kate Spade. This will be a great addition to this already successful center, and we look forward to the grand opening in late summer.

Construction of our new development, Fremaux Town Center in Slidell, Louisiana is on schedule for an opening of phase 1 in March. The project is over 95% leased with anchors including T.J. Max, Michael's, Kohl's, and Dick's. We are also pre-leasing the more fashion-focused phase 2, which will be anchored by Dillard's. Construction is expected to start this spring on the second phase.

I will now turn the call over to Farzana to provide an update on financing, as well as a review of our financial performance.

Thank you, Katie. 2013 was a transformational year for the balance sheet, and our hard work yielded many impressive results.

We informed the market in November of 2012 that we would begin positioning our balance sheet to achieve investment grade ratings and reached that goal ahead of plan in July 2013. We continued to execute our strategy of creating a more balanced financing structure by retiring more than $280 million in wholly-owned property-specific secured loans, resulting in the addition of over $650 million of gross book value to our growing unencumbered pool.

We closed on more than $130 million of new secured loans for joint venture properties, replacing the existing maturing loans and generating approximately $20 million in net proceeds. We also closed on a new $400 million, five year unsecured term loan at an attractive rate of 150 basis points over LIBOR. We ended the year with a successful $450 million inaugural bond issuance with more than 70 investors participating. Today, our balance sheet is more flexible and stronger than it has been in many years, and we are not done yet.

Looking forward, we have a clear plan to continue to add high quality assets to our unencumbered pool. In January, we prepaid a $122 million loan secured by highly productive St. Clair Square in Fairview Heights, Illinois, adding another $125 million in gross book value to our unencumbered pool. Today, 30% of our total consolidated NOI is generated by unencumbered assets, and that number will continue to increase over time.

In 2014, we will retire with unsecured borrowings the $113.4 million loan secured by Mall Del Norte in Laredo, Texas. This is one of our most productive properties with sales over $560 per square foot.

In keeping with our plan of maintaining secured nonrecourse debt on our joint venture assets, we expect to refinance the loan for Coastal Grand in Myrtle Beach, South Carolina later this year. Our 50% share of this maturing loan is approximately $39 million. We ended the year with more than $1.06 billion available on our lines of credit.

Our financial covenants remain very sound with a fixed-charge coverage ratio of 2.2 times as of December 31, 2013 compared with 2.0 last year. Our debt to total market capitalization was 56.7% compared with 53.8% as of the same period last year. The increase is primarily due to our lower stock price.

Our bond covenants remain well in excess of the maximum required, and we expect continued improvements over time. The secure debt to gross book value ratio was 42% at year end, and currently has improved to 40.6% due to pay off of this loan secured by St. Clair Mall.

The foreclosure of Citadel Mall was recently completed, and we are working with a special servicer for the Columbia Place Mall to achieve the same results. The $95.4 million combined loan amount will be extinguished which will be reflected in our balance sheet. Additionally in the fourth quarter, the loan secured by Chapel Hill Mall was transferred to the special servicer, and we are discussing options.

Also this quarter, we determined that it was appropriate to write down the value of Madison Square, an unencumbered property in Huntsville, Alabama to the current fair book value. This property had been slated for redevelopment for some time; however, we have now decided to look at alternative options.

Turning to our financial results, FFO in the fourth quarter was $0.63 per share compared with adjusted FFO of $0.62 per share for the fourth quarter 2012. Contributions from new properties and rent growth from existing properties are partially offset by dilution from the dispositions completed in the third quarter and high interest expense from the bond issuance closed in November.

G&A as a percentage of total revenue was 4.4% for the quarter compared to 5.7% in the prior year period. Our cost recovery ratio for the fourth quarter was 98.4% compared with 107% in the prior year period as a result of higher operating expenses. Fourth quarter portfolio same center NOI declined 10 basis points, with the mall category declining 20 basis points.

Same center based rent and net tenant reimbursements improved by $2.5 million in the quarter. This was partially offset by $1.1 million decline in percentage rents and a $621,000 increase in snow removal expense. We also experienced an $800,000 increase in operating expenses during the quarter, primarily as a result of higher securities and marketing expenditures. Occupancy improvements achieved during the quarter were lower than anticipated, resulting in a minimal top line contribution to NOI.

There were two primary factors impacting NOI growth in 2013. One is a low performing asset. As we have been discussing, we will continue to divest these centers over time. The other is down time associated with our tenants' upgrade strategy.

The typical down time between stores closing and opening is between six and eight months, with the majority of our store closures occurring in the first quarter and the majority of replacements coming online beginning in the third quarter. These months of lost rent as retailers are replaced were a drag on results. However, in the long run, we expect a stronger property with higher future growth prospect.

In 2014, our focus will remain on upgrading the retail mix, redeveloping underperforming locations, and divesting mature assets. With this ongoing portfolio transformation in mind, we are providing FFO guidance for 2014 in the range of $2.22 to $2.26 per share.

I will take a minute to run through a few of the major items contributing to our FFO expectations for 2014. We anticipate that the additional interest expense resulting from the bond issuance completed late last year will be offset by lower interest expense as we pay off loans using our lines of credit throughout the year. Our guidance incorporates $0.06 per share of dilution from the dispositions completed in 2013. These items are offset by contributions from new properties including developments and expansions opened in 2013 and those expected to open in 2014, as well as internal growth.

Our FFO guidance assumes same center NOI growth in a range of 1% to 2%. Our guidance of modest NOI growth is reflective of the short-term impact of the down time associated with replacing underperforming retailers and redevelopments. And a conservative occupancy assumption of flat to up 25 basis points throughout the year. Our guidance does not include the impact of any future asset sales, bond issuances or acquisitions.

I will now turn the call over to the operator to open the line for questions.

Thank you.

(Operator Instructions)

One moment please for the first question. Our first question is coming from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Hello, good morning.

Morning.

Good morning. Stephen, your comments about not being able to convert prospective leases in the pipeline into actual leases or occupancy in the quarter, is it your sense that they delayed decisions to sign leases? Or did they decide against signing these leases all together, and what was behind those decisions? I was just wondering if you can expand on that a bit.

Yes, hello, Todd. It wasn't any delay in leases. We just didn't get the occupancy increases that we had thought over the year that we would.

It was a combination of just the -- some of it was fallout that happened over the course of the year that was higher than we had projected and just taking really a longer time to replace those faces. So, that was really the primary factor behind it.

Okay, and then I was just looking at the renewal leasing activity. I see 789,000-square feet of same space, renewal leasing, the spread was 3.8%. But there was nearly 1.4 million square feet of renewal leasing in the quarter overall, and looking back there is generally a big discrepancy. I was just wondering what the other 600,000 square feet of renewal leasing is and why that's not considered same space?

Yes, it's box leasing over 10,000 square feet. So, what we included in there was only the under 10,000 square feet on a space per space basis. And we have been doing a lot of boxes coming into the malls, or seeing a lot of the boxes coming into the malls, so that's definitely a factor that's been helping our overall occupancy.

Can you talk about what the spreads are, generally on what's not in the same space leasing?

Yes. It's tough to say, Todd, because usually when we do that, we're taking a combination of vacant spaces, existing retailers that are moving to other parts of the center. And even expanding out into parking lots or common areas. So, it's just generally hard to say.

I think the best way to evaluate it is the way we evaluate our redevelopments where we are typically getting a 7% to 10% return on those. And when we are looking at the box redevelopments in the projects, that is the return on capital that we'll typically look for. And that will include the offset of the rents that we were getting from the spaces before. So, it's a net improvement.

Okay, and then just one last question in terms of guidance. Farzana, can you provide a little more detail around how you get to flat interest expense year-over-year? It would seem that the $450 million bond deal, 5.25% which was primarily used to pay down the line, that's well over $10 million of additional interest expense. And just looking at the maturity schedule, it doesn't look like there is that much that would be available to prepay or open for prepayment. What are you baking in terms of mortgage repayments throughout the year?

Todd, yes, we baked in paying off St. Clair in that guidance, so that's -- we recently paid that off and we made that disclosure in the supplemental. I think our usage of short-term and continued to use the lines of credit to pay more of the secure debt later on in the year earlier in terms of Mall del Norte at the open to Part A, that also helps us quite a bit. So, with all the property and also with all the property payoffs that we had, even though we have issues of $450 million, it's offset, it was pretty much flat.

Okay. Thank you.

Thank you.

You're welcome.

Our next question comes from Christine McElroy with Citi. Please go ahead.

Hopefully it's a lot warmer there than it is here.

It is (laughter).

As you think about noncore asset sales beyond the three to four that you have identified, in the sense that you're looking to balance improving portfolio quality with earnings dilution, do you see selling primarily from that tier 3 bucket? Can you provide some -- a little bit of color on the private market for malls with sales below $300 a foot?

Sure. Well, I'd say yes. The primary focus on the dispositions is in the tier 3, which is the properties below $300.

Not all of those malls would be ones that we would be looking to dispose of, because some we expect will be increasing in sales over three and hopefully, into the mid threes. Based on some redevelopment activity that we have done there and some other opportunities. But that's really the primary focus, is those properties where the sales are lower, the NOI growth is less and they're, like Farzana said, they're really a drag on our overall results. So, by selling them, then we are able to have a higher growing portfolio with what's left over. That's, I think, answer to question 1.

Then as far as the private market, it's strong. We've -- like Katie said, we have these properties out in the market now, the three malls. We have gotten a lot of people looking, a lot of people doing serious due diligence. And it's -- I think the financing markets are continue to be open for those properties on a lower loan to value basis and -- but there is financing available through banks, through other sources that those buyers are able to tap into.

And obviously, we'll know more when we get bids and we see who the real active buyers are over the next 30 days to 60 days. But from every indication, that market seems strong, and we are not the only one out there trying to sell properties as well. And there has been decent activity in terms of those malls of the $250 to $300 per square foot range trading.

In terms of your comment about the performance differential, can you provide same store NOI growth and occupancy costs by bucket? Just to get a better sense for the difference in performance among the buckets?

Yes. We didn't include that in the tiering, as you saw. We included the sales and the NOI as a percentage. But it's definitely lower.

The higher sales per square foot tier has the highest NOI growth. So, we're just not at the point where we're comfortable disclosing that specific number right now.

Okay, and then looking longer-term, what should we expect in the coming years? You talked about a multi-year plan to transition the portfolio. What should we expect in terms of earnings dilution from asset sales and reinvestment of proceeds over the next few years?

Well, our goal is to grow and -- but it's to take two steps back to go three steps forward. And so we're looking at the dispositions, not as way to shrink the Company or create dilution. But as a way to provide the proceeds for us to recycle and invest in assets like Cross Creek Mall like we did last year, like the Sears project at Fayette in CoolSprings where those malls are $500 a foot, plus they have strong growth profile going forward. So, that's really the long-term plan.

The -- as far as the dispositions, we're a little bit subject to the market and how quickly we can execute. But one of the things we determine is if we can accelerate it, then we will. And that would be short-term dilutive, but we feel like given the opportunities out there for us that we could overcome that in very quick fashion and put ourselves on a long-term trajectory that would be much more positive.

Thank you.

Thanks, Christie.

Our next question comes from R.J. Millligan with Raymond James. Please go ahead.

Hello, good morning. Stephen, I was wondering if you can give a little bit more color on your discussions with JCPenney that you noted in your opening comments about not anticipating any additional store closures this year? Is that within your portfolio, or is that from JCPenney as a corporation?

Sure, R.J. We were actually in Penney's office not that long ago, so we had the chance to talk to their real estate people. And they explained to us that this round of closures was really all they had anticipated for this year at this time.

Now, we all know things can change. But at the time, they assured us that what we're going to see now is all there is going to be for this coming year, and so that's why I made that statement.

We also, like I said, we're looking at our entire portfolio of Penney, and not just Penney, it's Sears. And trying to be proactive, looking at what we would do with the spaces if they came back. We know based on sales per square foot, based on profitability, which stores we need to focus on more than others. So, we're trying to be ahead of the curve and if they do announce more closures, then we'll be prepared for them like we were for this round.

Can you quantify how many of your Penneys are not profitable?

No. They don't tell us that. We don't know which ones aren't profitable, but we know just based on their volumes we can kind of come up with our list.

And we see very limited risk. I think this whole thing has gotten overplayed. We feel very confident that JCPenney will survive.

I wouldn't say that they won't close additional stores at some point because they probably will. But we see them having a place in the mall and a place in the retail world given their strategy. And we see them doing the right things and slowly coming back.

And it's competitive and there are certainly challenges out there. But we're -- we don't stay up at night worrying about getting all our JCPenney stores back. We see a few out there that we think will be redevelopment opportunities over the next few years. And we've got about four or five leases per year that expire over the next five years.

So, even if they were closing more stores that were leased verses owned, it's at a pace that we could definitely absorb. There's just -- it's definitely a big factor out there in the market, and given our concentration at JCPenney and Sears, it's an overhang that we've had to deal with. But we see JCPenney on the right track, and Sears also doing a lot of things that are heading in the right direction.

Great. Thanks, Stephen.

And I guess I just have one related question for Farzana as to whether or not she's had any recent discussions with the credit rating agencies and what their relative comfort level is with the JCPenney and Sears exposure, given recent store announcements and their deteriorating fundamentals, at least with Sears. And if there has been any recent discussions with them with the credit rating agencies?

I haven't had any recent discussions directly on the JCPenney or the Sears stores. They have put out their own analysis on that. But it all, as Stephen pointed out, it's property specific, it's mall specific and how they're performing in each of these properties.

So, their overall strategy of improving their portfolio, and maybe they will close some stores and they will have some critical math that they will work with. But with the rating agencies, they don't seem to be concerned with our portfolio or with our rating and so far, I haven't seen anything negative from them.

Great. I appreciate the color, guys. Thank you.

Thank you.

Our next question comes from Nate Isbee with Stifel. Please go ahead.

Hello, good morning. Just to clarify the comment about the occupancy pickup not being as strong as expected. I believe last quarter you mentioned you had $8 million of NOI that was teed up, signed but not yet opened. And I think $4 million was supposed to open in the fourth quarter.

Can you address those leases? Did all of those open? Did all those open on time?

Hello, Nate. In terms of leases opening in the fourth quarter, I think what we need to clarify is the difference of the old rent verses the new rent. So, it's not the gross rent that needs to be factored in.

We had, as I mentioned in my remarks, about $2.5 million of base rent increase in the fourth quarter, so that's reflected of the prorated rent for the spread difference. So, even on renewal, it's a spread, and on the new leases, it's also the spread, because you have the stores vacating, so that rent is lost. That's what goes into our numbers. For the fourth quarter, $2.5 million base rent is -- was the number that picked up -- we picked up.

However, we did have the offsetting percentage rents decline and operating expenses increasing that muted our results. Otherwise, we would have had a good same center NOI quarter as we were hoping for.

Sure.

Additionally, as Stephen mentioned earlier on the occupancy piece, it was not so much that -- we were expecting more of a pick up in the occupancy, and that did not materialize. That's the additional spread we would have achieved within our NOI guidance or within the same center NOI.

Okay, so of all the leases that were signed last quarter on the last quarter's call opened on time, would you say?

Yes. They opened, and in the commencement -- the commencement dates that we have provided and the additional color that will give you a little bit more color on the commencement dates in 2013 and 2014. Again, you have to prorate that, and they all have opened on time.

We do pride in ourselves of making sure these -- the new tenants open on time and we do everything possible to accelerate. The last thing we would like is for any delays, and we work pretty hard to get these stores opened on time and if not earlier.

And then Stephen, you mentioned the fallout -- some of the tenant fallout. Asking Christie's question a little bit differently, would you say that most of that fallout was in lower tier and the spread on NOI growth was bigger -- was significant, I should say?

Yes. It was more disproportionate in the lower tier than it was in the higher tier. You look at the occupancy in the higher tier, and over -- it's close to 98%, so those malls, for the most part, are full.

And that's why we are trying to come up with the redevelopments, to expand them and to create the additional capacity. The challenges for leasing are definitely more in the lower tier and some of the lower productivity assets.

Okay, and then just going back to the JCPenney question, when could we expect to hear specific lease announcements for those four boxes?

We don't have -- the first year lease doesn't expire until August of this year, and then the others don't expire until next year, next October. We're still collecting rent. And I'd say in terms of announcements as to tenants, we are probably looking at sometime late second quarter. So, probably even into the third quarter, just because it takes time in terms of getting the leases signed before the retailers are willing to announce.

And we're still at the phase where we're evaluating which retailer we want to put and reach in which location because we do have options with different boxes, whether it's some of the sporting goods guys who we are talking to, some of the arts and crafts and other retailers that are growing. And the box interest that we've gotten is something that we're pleased about.

Okay, and then just one final question. If you could just maybe address the decision to raise the dividend this year, given the Penney's closures that were announced and perhaps the need to spend upwards of $40 million to backfill them. And perhaps -- even you mentioned that there could be more down the pike and how you weigh the desire to raise the dividend but also to conserve capital in an uncertain world, here.

Well, our JCPenney exposure from the four leases closing is $1.4 million. So, in the grand scheme of our revenues over $1 billion, it's not material.

No, I know but --

Our payout ratio is, I think one of the lowest in the business where within our peer group we are in the mid 40% range. And the decision to raise the dividend was consistent with our taxable income increasing.

And like we said for a while, our dividend tracking our taxable income. And it's not a day for day tracking, and that's something that influenced also by the dispositions, depending on what happens with them. But that decision was really driven by that primarily, and we didn't see capital conservation being a consideration at all.

Okay. Thank you.

All right, Nate, thank you.

Our next question comes from the line of Craig Schmidt with Bank of America. Please go ahead.

Thank you. I am looking at two of your bigger mall redevelopments, CoolSprings and Fayette. They're both targeted for 7% returns. I wonder if there was something specific that was keeping that a little bit lower than some of your other yields?

Hello, Craig. Yes, it's a combination of factors. We had to buy the boxes from Sears. It's a combination of doing expansions and also redevelopments of those boxes.

There is a couple of retailers that are real exciting, [Bellcow]-type retailers that we can't name today, but that -- the deals are favorable, but their impact into the center will be tremendous. They have upside in terms of percentage rents that we don't include in our pro formas and upside possibility there.

So, the 7% is a starting point. We see a lot of growth in that, and that's just where we are going to come out of the box. It is lower, but when you look at the cap rates of those malls, it is still a very accretive investment. And we're excited about getting those going and getting them open, part of it -- getting them open next year.

Great. And just real quick, do you know how many RadioShacks are in your portfolio?

I do. We have, well, I think it's 58 stores, to be exact, and the total gross rent is about $4.7 million. We did talk to RadioShack after the rumored closing of 500 stores yesterday, and what they've told us is, number 1, that that announcement is premature. Number 2, that they haven't decided how many stores are closing, and that if we were impacted at all, it would be very minimal.

You look across our portfolio and our occupancy cost is 12%, so it's very much in line with that type of use. And we've worked with them over the past few years to bring that down because it was higher. And we have also in the past years replaced several of the RadioShack locations. They said that, really, the closings would be for leases that are expiring naturally over the next few months, and it sounds like that report just got ahead of where the company was.

Great. Thank you.

Thanks, Craig.

Our next question comes from Michael Mueller with JPMorgan. Please go ahead.

Yes, hello. I guess when you were talking about 2014 NOI guidance, you were talking about down time as playing a factor in that. I was wondering if you can talk a little bit about the whole idea of just -- it seems like the down time to upgrade the tenancy.

How is that different from the down time associated with just replacing tenants with the similar type tenants from before? Is it you are just being I guess more proactive in terms of letting people fall -- letting tenants fall out? Or is it -- does it actually take longer to build these spaces out for this other type of tenant?

Yes, it's a little of both. It's -- definitely, we have been more willing to let tenants fall out and to bring in better retailers that we think will be the right retailers for the stores, for the malls and more productive over the long-term. And that we announced earlier this year as a change in our strategy because over the past years, we have been maintaining occupancy, doing a higher percentage of short-term leases. So, that's one component.

And then the second component is just bringing in the larger users. Whether it's H&M where we are doing a lot of business with them. Those stores are 15,000 to 20,000-square feet. There's a lot of moving pieces in terms of retailers having to relocate, create vacancy and it's a bigger store, so it takes longer also.

We are doing -- we have done several deals with them. Again, similar when we are doing the box deals, they're more complicated and they take longer. And it's an impact in terms of the down time that's lowered our NOI growth. And I don't think we adequately projected it earlier this year when we were factoring in our NOI growth into our projections. But now we've done a lot more research and done a lot more work in terms of building that into the expectations for next year.

And then the third factor is, like Frazana said, some of the tier 3 malls, those are the ones where it's just taking longer to release some of the spaces. That's a factor that's been weighing on the numbers as well.

So, with those types of tenants, I guess your renewal spreads, what have been generally widening out over the past year or two, in your new leasing spreads. Do they start to compress again with this different type of tenant, or doesn't that impact the trend?

No, I think our renewal spreads are going to continue to improve. Our new leasing spreads have been strong and are continuing to see the progress there, and we're trying to do more new leasing because of how positive that's been.

And then even though our occupancy was flat, we're 95% leased. There is really no new construction or virtually no new construction, and we're seeing good demand.

And this isn't by any means a doom and gloom or a negative scenario. We've got a lot of strong fundamentals in our favor. The economy is improving, and the retailers have not slowed their expansion plans. We have seen, just in our higher occupancy levels, we feel like we'll be able to maintain and continue to improve the leasing spreads, and that's a top priority again in 2014.

Okay, and just two other quick ones here. I was wondering if you could -- you talked about laying out the three tiers in the supplemental. If you are just thinking about market pricing, what's right cap rate? Where are the market cap rates for malls that fall into those three buckets? And then secondly, with the stock down again, do you consider buying stock back at some point?

Well we're not planning on buying stock back just in terms of our capital uses. We feel like the best use of capital, even at the stock price, is to invest it in our assets, our higher productivity assets, to create that long term growth. And the source for that is not issuing equity, but it's the dispositions of the lower tier assets, like I said.

And as far as cap rates, it depends on if you are buying or selling. Obviously, for selling we want a more attractive cap rate and a lower cap rate.

And when you look at these assets, there are factors that influence cap rate, whether they have debt in place, what the rate is, how long that debt is there. That's going to influence the pricing. Redevelopment prospects.

There is just a lot of different factors that come into play, so I don't really want to get out there and start quoting cap rates. Green Street likes do that, so you can check their reports.

Thanks.

Our next question comes from Ben Yang with Evercore. Please go ahead.

Hello, great, thanks. Another question on the disposition strategy, Stephen.

You mentioned possibly accelerating the pace of sales if the market is there, but you also mentioned the private markets are strong and financing is actually still there as well. I just don't quite understand. Why subject your investors to this water torture, dribbling out three to four malls a year? Why not just rip the band-aid off and try to sell, I don't know, 15, 20 malls as aggressively as possible?

One of your peers obviously was very successful with that strategy last year. So I just don't understand why it wouldn't be successful for you guys either.

Well, we apologize for the water torture. That's certainly not our intent.

We are looking at accelerating it, like I said. We only were successful in our first large disposition of malls last fall, and it unfortunately takes time when you are dealing with private buyers and a private process. And there is a lot of properties out there in the market, and we feel like that over a three year -- three to four year time frame, we can get this done.

We would love it to happen faster, but we are trying to be realistic with our communications on this. And I know other peers have done things a little differently, and some things have worked better than others. But we think that we'd like to set expectations at that level, like we talked about, and if we can do better, then we'll certainly communicate it. And that would be our goal, to accomplish this transition as soon as we can because it's going to be better for us because it will allow us to have that faster growth profile.

And the three or four malls that you're marketing, is that in your guidance currently, the dilution, or will that impact your numbers once those deals close?

It's not in our numbers. We don't know what the timing's going to be. We don't know what the ultimate pricing's going to be, so we figure it's better not to include it, and then it will update as we make some progress.

Okay. And maybe a last question, switching gears a little bit. I definitely appreciate the comments on the mall traffic, but the other big story during the holidays was obviously the rise of e-commerce. Just wondering if you can maybe share your views on this dynamic and maybe specifically address how e-commerce might impact B malls differently from A malls, if that's the case at all?

Yes, no, it was certainly a major topic, and it's something that everyone is trying to get a handle on and understand. What we feel like is our malls, given that they're the dominant or the only mall in their markets that -- it's more than just a shopping experience. It's a social experience, entertainment experience.

There are the town centers in our communities, and their role has evolved in terms of adding restaurants, adding experiential uses, adding more events and programs. Those are the types of things that we are focused on in terms of "competing" with the internet, is to make them all as experienced, as compelling as possible to our shoppers. And like I said, we didn't really attribute the decrease in sales to traffic.

I know a lot of retailers have jumped on that band wagon in their comments over the last month or so, but our food courts were for the most part higher in sales. Our restaurants were busy. The types of impulse uses that we see in the malls, their business was up.

So, the sales decreases, we didn't see coming from traffic. We saw it coming from the highly promotional sales environment, from deflation, from discounting, from all that types of things and then from the juniors. And other people talked about it, but we have a higher percentage of junior's and of children's, American Eagle, Arrow, Abercrombie, Buckle, Hot Topic, those kind of -- those retailers which, as has been documented out there, their sales have been down, just given all the competition and then given some of the fashion preferences out there and other struggles like teen employment and issues like that. So, we don't see traffic being the problem.

And the internet is -- it's a double-edged sword. It's got a lot of positives in terms of what retailers are doing to adapt, and our peers have talked about it in their calls as well. But the retailers are really investing in making omni channel work and putting their inventories online, allowing shoppers to buy anywhere, pick up anywhere, have goods delivered anywhere, make it a seamless transaction.

We have looked at the same day delivery that GGP and [Massridge] and Simon & Westfield have, and we think that's got possibilities as it expands to other parts of the country. And it's all about providing the service for the customer. And retailers are being very innovative. They've got the footprint, they've got the bricks and mortar locations that they can use, whether it's for distribution or for giving customers the opportunity to return goods.

So, we don't see this as a negative. We think it's something that's going to help our business over both the short and the long-term.

I guess maybe more specifically, are you at all concerned that maybe a retailer might not need a store in the only mall in town if they can get the same presence on the internet? Are you having those types of conversations? Or is maybe that something that's not really going to affect your business longer-term?

We think it will be the opposite. We think the retailer will want to maintain their store in where it's only one mall in the market because that's part of the experience, giving customers the opportunity to touch and feel the merchandise, to return it. And so it's just in the markets where you've got seven or eight malls or five or six malls where they might not need as many locations. So, those are the more vulnerable situations from the retailers.

Great, thanks, Stephen.

Okay, Ben, thank you.

Our next question comes from Carol Kemple with Hilliard Lyons. Please go ahead.

Good morning. Stephen, earlier in the call, you mentioned that Sears was doing some things that made you think the company was heading in the right direction. Can you share those with us?

Sure, Carol. Good morning.

Well, Sears has invested a lot in their online, in their loyalty programs. They've got some strong brands that everyone, whether it's Kenmore or Die Hard or Craftsman or other brands like that, that they've really been focused on.

And the strategy has certainly had its challenges in terms of some of the losses that they've had. But what they have been able do in a number of their locations, in terms of sub leasing them and bringing in retailers like Whole Foods or Dick's Sporting Goods or stores like that, and downsizing or right sizing their footprint to the right level, is something that we find encouraging.

We have -- one of our properties in Greensboro, North Carolina a Friendly's center where Sears sub leased to Whole Foods. They own the building. They renovated their store.

Their sales are equal to or even better what they were from the larger footprint. And from our point of view, the Whole Foods is a new anchor and drives a lot of traffic. That's the type of thing that I was referring to earlier when I made that comment.

Okay. And then, do you all have any thoughts on calling your preferred D shares at this point?

Not at this time. We should be -- we're still sticking with the rate where it is. And unless and until we have an opportunity to refinance it at much lower coupon, that's when we would consider it.

And if your disposition strategy, you were able do it a lot quicker than you thought, would you all just speed up redevelopments in your mind, or would you call those preferred shares?

We will use those proceeds temporarily to pay down our lines of credit or -- and otherwise, that money will go right into developments and expansions that you have seen in our supplemental. We have a very robust pipeline and also with our shadow pipeline. So, those are the funds we anticipate earmarking to recycle into our properties.

Okay, thank you.

Thank you.

Our next question comes from Daniel Bush with Greet Street Advisors. Please go ahead.

Thank you. Just going back to CoolSprings and Fayette quickly, now that they're on the development schedule as a shadow schedule can you share with us what the cost of data are that's in the developments in progress line item?

One second. Yes, we'll get back to you after the call, but we have literally just -- we haven't even started construction at CoolSprings, so it's probably premature.

Staying on that point, just thinking about Sears and JCPenney boxes, as I think about -- when you think about your portfolio, how far down the productivity spectrum does the return make sense for you to purchase the boxes back? Is it really just reserved for your tier 1 assets, or is there some opportunities in the tier 2 as well?

Yes. Each one, really we have to look at individually. We're not purchasing those. The JCPenneys were leases.

So, it's more a question of investing the capital to do the redevelopments and bring in the boxes. And also creating out parcels and other uses. We would look at them, and even if our goal is to sell the asset, it might make sense to go ahead and either tee up or do the redevelopment because then we'll create a higher income stream, we'll create more stability in the property long-term. Those are the type of things that we're thinking about.

Okay. One last question. Just thinking about the three different tiers, and not speaking really about what the NOI growth was, but as you think about -- you spoke -- the profile for the tier 1 is obviously materially better than the tier 3. What do you think, or can you quantify what the long-term NOI growth profile is between the three tiers?

We haven't really gotten into the specifics as to what the difference is in the NOI growth. But it's clearly higher for the tier 1 than the tier 2 or tier 3.

Okay. Thank you.

Thank you.

Our next question comes from Rich Moore with RBC Capital Markets. Please go ahead.

Hello, good morning. Good afternoon, guys.

Good morning.

First of all, thank you for the extended disclosure in the supplemental. That's all very good stuff and much appreciated from my standpoint.

The first thing I have for you is the, as you think about that tier 3 group, Stephen, some of those assets I understand what you're saying. You could do some redevelopments, you could push the sales per square foot perhaps to the $350 level or higher. But there's got to be, just doing the math, there has got to be probably half of those anyway that you probably can't do that with.

What are you thinking in terms of the total size of the disposition group? Is it 20 assets? Is that what we're talking about?

Well, I think last quarter I said that we had roughly 20 assets that we were looking at. And it's not a list that is set in stone, and certain properties might have different factors that weigh in. But I would say that's roughly the number that we're looking at. And like Ben said, it's not going to happen quickly at the pace we're going, but if we can find a way to make it happen quicker, then we will.

Okay, so if you are thinking about 10% plus of the NOI of the company, it seems like you should maybe give us some guidance as to what you are thinking. You had $0.06 of lost earnings this year, just from the dispositions you did last year, and that was a smaller pool. I am thinking that it's a bit of an overhang, I guess, if we don't have some guidance as to what you are thinking.

I understand that they may -- that it's fluid and you may get different pricing, but some kind of guidance might ultimately be helpful. Just as a thought for you.

We'll take that into consideration. That's a good point.

And I realize traditionally you don't give guidance for acquisitions and dispositions, and I understand the rationale behind that. What are the three assets that are for sale at the moment? Are they the three in the noncore group, or is it three different ones?

Actually, one is the York Galleria, which is not -- which is interior/exterior and Stroud Mall, and Randolphs Mall are the three that we have got listed right now.

Okay, and then you said there was one other that you had?

Lake Shore Mall in Sebring, Florida. That's in tier 3.

Okay, good. Thank you. And then the only other thing I had was the percentage rent change year-over-year. As you guys noted, that was down from last 4Q. Is that just sales, or is there something you changed structurally in your leases? Got fewer -- recaptured the percentage rents as base rents kind of thing?

Rich, yes, it is just sales. That's just a function of sales and with the lower sales, low break -- the break point, not meeting the break point, therefore, the sales -- percent sales declined.

Okay. So, if sales pick up this year, Farzana, we can bump those numbers back to the historic --

Yes.

And department stores were -- JCPenney was a big part of it because of their sales decreases, and in the leases with them, we were getting decent percentage rent.

That's correct.

A lot of the other cases with the small shops, then we will convert percentage rent to base rent. So, that -- we don't see as much of an impact on percentage. That will impact percentage rent, but then that transfers to base rent, so we're able to absorb that.

Okay, all right. Great. Thank you guys.

Thanks, Rich.

Our next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead.

Hello. We kind of touched on this earlier, but just on the topic of being the only mall in the market, do you have any view on whether it could potentially be a negative from the standpoint that it would be more difficult and expensive for retailers to his distribute to the center?

Hello. We haven't seen that in terms of the retailers. Mostly, even though it's the only mall on the market, that geographically they're organized into regions. They haven't indicated that they have those distribution issues.

And in one situation, we have been working with department store on a location and for a pure retail store, their evaluation has changed because now they're looking at their stores not only for retail, but also through the distribution through internet sales. So, they view it as a gap in the market, and so it's something where they feel like they can justify the store on that basis when maybe they wouldn't have just on sales alone. So, that's more the way we see it playing out.

Got it. And then just a second question. You mentioned that you wouldn't want to necessarily dispose of all your tier 3 properties because some of them could ultimately achieve at least $300 per square foot in sales. I was just wondering if you could comment whether Monroeville, Foothills and Northgate fall into that bucket as the three are currently under redevelopment or were recently redeveloped?

Yes. Those are all good examples.

Monroeville, really, the sales have been over $350, or in the $350 range. Then we had a closed department store for a couple years. And so now with the new activity, the new theater that opened, Dick's under construction, H&M open, we have made some really good in-roads on vacancy there. So, that's one that we definitely see progress.

Northgate, we bought it at a 23% cap rate in an auction 2.5 years ago, and we have been adding boxes and expanding it and redeveloping the property, and it's very accretive to our shareholders. And Foothills is a property where, with the Sears lease expiration, we were able to replace them. And so we feel like its positioned now for either to retain it in the portfolio or something that, if we decide to sell, we've got that flexibility. We also have a supermarket coming in just across the street, so that's an opportunity for us.

Okay, great. Thank you.

Our next question comes from Ross Nussbaum with UBS. Please go ahead.

Hello, guys. I am here with Jeremy Metz. Two questions.

One is, I understand the explanation, how long the same store NOI growth with respect to some of the elevated expenses on marketing securities, snow removal. What I guess I don't understand is why those were not recoverable under CAM pools and why that actually had a negative impact on same store NOI. Shouldn't the tenants have reimbursed you for that?

Hello, Ross. You would expect that if we were on a pro rata CAM that that would happen, but we have converted a majority of our leases to fixed CAM. And we do have 3% annual incremental increases that we'll get in the future, and any new tenants that come in, we build that into our CAM pool.

So, the new fixed CAM numbers are reflective of higher cost. So, it's a matter of timing. Of course, in the future we pick it up, but as of the quarter, that doesn't happen.

So, basically, your OpEx went up more than your fixed CAM adjustment did.

That's correct.

Okay, question number 2 is sort of related to that. As we look at the positive, healthy releasing spreads, and then I think about this CAM reimbursement ratio, are you, I don't want to say intentionally, but is there any sacrifice going on between top line rent and the terms that you're getting on the CAM pools of these leases?

We of course have certain leases that we will do on a growth basis. It just -- it all depends, lower tier, the tier 3 properties tend to have that pressure on the recovery, on the fixed CAM, whether we do it gross or whether we end up separate fixed CAM with base rent. It's all a combination.

It's hard for us to tell you today how all of this plays out. But if you look at our occupancy cost ratio, overall, it is less than last year. But because of operating expenses, however, its still above -- close to 97%, 98%,so we are recovering a lot of the cost.

Stephen, on the asset sale front, what is plan B if these malls don't actually sell for whatever reason? Whether it's lack of buyer interest or buyer and seller are too far apart on price? Then what?

Well, that's a good question. The -- certainly, the plan A is our preference, and that's the direction we're heading. But the plan B is to continue with running these properties and maximizing the rents and the operations and the NOI, and we have done that over our history successfully.

This is more of a unique couple of year period that's created the slower growth in that portfolio. But we don't feel like these assets are long-term problems. We just don't see them having the growth over the next couple of years. And so we want to be able to transfer the portfolio into a faster growth portfolio by doing those dispositions.

Lastly, on Madison Square where you took the impairment, can you walk through, what specifically prompted the timing for taking that impairment? Maybe start with that, and how do you come up with the resulting value that you did toward the end?

Ross, let me make a correction. I meant to say cost recovery ratio as opposed to occupancy cost.

And as to Madison, we have been working on a redevelopment plan on Madison Square for some time now. We have been working with various different tenants, working with the city. We had redevelopment options and we were considering those as part of our impairment analysis.

And we had consultants involved, and once we determined that this was not a viable option for us, we went through the process of analyzing the future cash flow, which is the normal typical process of calculating the impairments. And when we determined that the future cash flows will not be there and they will not equal our net book value, that's when we determined what the amount of impairment is.

It is a calculation, it's a discounted cash flow analysis that we do. And we have a terminal cap rate and we determine what the discounted cash flow would be. And then compared to the net book value, that determines our impairment loss that we recorded. It's a mathematical calculation with a lot of inputs, and once we determine that, that gives us a number.

Should we be expecting any other impairments over this year as you do some more analyses on other malls that might not get redeveloped?

Well, we have some properties, as you know, that we are in discussions with the lender. We took impairments on Citadel and Columbia in the past.

We are in discussion, we have been working with the servicer on Gulf Coast. We have been working with the servicer in Chapel Hill.

We have inputs on all of those as to what potentially might happen in terms of restructuring, and if those bear fruition, then we would not have an impairment. It just all depends what the ongoing results would be, and it is a quarterly analysis.

Unless there is some immediate decision that we make on a certain property, whether we sell or whether we decide that that's no longer an option. So, at that point in the interim, if it's a big enough number, then we obviously will report it. But on a quarterly basis, that is an analysis we conduct and we will make those decisions in the future. But as of right now, this is the only one we impaired.

Our next question is a follow up from Christine McElroy with Citi. Please go ahead.

Thank you. It's actually Michael Bilerman. Stephen, I wanted go back to something you said in your opening comments, and I am not sure if I heard you right, but when you are talking about sort of this multi year plan. I think you had said something about sharing more details over the coming months.

I guess, did I hear you right? And what are your plans, if that's the case?

What we're hoping do is at some point before our next call, to have a call with our investors and analysts and just to talk more specifically about strategy and about how we plan to execute this over the next three to five years. And when you get into an earnings call, there is a lot of other considerations. So, what we're hoping to do is to, when we're ready, and like I said, we are doing the review right now and we don't want to rush it. We want to do it so we're prepared to talk about it. But that's our plan, that's what I was referring to.

Right, and so something like that it would be much more detailed in terms of, here is potential sources of capital we're going to raise, here is potential uses of that capital over time. Here is where we are from portfolio perspective today, here is what we want to get to be. A very in depth exercise about where the portfolio is and where you want to take it to.

We'll let you write it for us. You sound like you know exactly what we should say. That's the type of thing we're thinking about.

Okay. I think that would be helpful. Just obviously, there is a lot of questions obviously today surrounding what eventually would come.

I do want to come back to the guidance decision. You do have the three malls that are listed, and I think Katie mentioned another one for $20 million, so call it upwards, getting close to $200 million. And I know you don't know the pricing of it, what was the decision in terms of not at least layering in some dilution. Or some potential in terms of an assumption of saying, look, if we sell these assets in our guidance mid year, and we're going to pay down the line initially, it's going to be X-cents dilutive, or upwards X-cents dilutive to at least guide the Street a little bit in terms of what potentially could come in the near-term.

Yes, we hear the suggestion, and we'll take it into consideration. We appreciate the feedback.

A question just on the percentage of same store on the line in terms of the buckets, and I think the disclosure is extraordinarily helpful. I know in years past you have provided the sales productivity per asset, but having in the supplemental the percentage of NOI is helpful. This says percent of same center NOI, almost upwards of 10% of your NOI is not same store, and you mark here the assets that are excluded. What would -- how would these buckets change if you were to look at it as a total of percentage NOI?

Would the -- the tier 1 today is 30.5%. Does that go up to 33%? And tier 3 is at just under 20%, does that go up when you include some of the assets under redevelopment? I am just trying to understand same center verses total.

Yes.

Let me answer that. It will be a little bit different, not materially different.

We understand we use the same center, but even if you add back the non-comparable malls, it will not make a material difference. Probably the 30% might be 28% and that sort of number. So, it's not a big difference. But we will clarify that next time.

Okay. I didn't know what the basis was, whether it was the quarter or for the full year in terms of the NOI. I don't know if you have this, but how many of the 80 malls have NOI below $10 million verses above $10 million?

Yes, we don't have that here, and we'll -- most of those malls, Michael, also are going -- that aren't in same center are going to come in in 2014. It's just a function of 2013, so that will all be in the next disclosure.

Okay. That's helpful. It sounds like if York Galleria is for sale and you're talking with a servicer on Gulf Coast that the tier 2 assets are candids as well for sale, this sounds like, or foreclosure, right? It's not just these tier 3 assets that we need to be mindful of.

Well, York Galleria, when you look -- when we looked at the package, we felt like it made sense to improve the overall sales and also cluster it with Stroud, just given the proximity. But for the most part, the focus is really the tier 3. And tier 2, the assets are stable and the metrics are more favorable, and those we view as tier 3.

Okay. Thanks for the clarification.

Okay, Michael. Thank you. See you soon.

And we have no further questions from the phone lines. I will now turn the call back to you, Mr. Lebovitz.

Thank you, everyone, for your attention. I think we set a record today, and we'll look forward to hearing from you and communicating in the future. Have a good day.

Ladies and gentlemen, that does conclude the conference call for today. We thank you once again for your participation, and ask that you please disconnect your line.