Eastgroup Properties Inc (EGP) 2008 Q4 法說會逐字稿

Good day and welcome to today's program. The EastGroup fourth quarter earnings conference call. All participants are in a listen-only mode. Later you will to opportunity to ask questions during the question and answer session. Please note, this call may be recorded. I will be standing by if you should need assistance.

It's my pleasure to turn the conference over to President and CEO, David Hoster, please go ahead.

Good morning and thanks for calling in for our fourth quarter 2008 conference call. We appreciate your interest in EastGroup Properties. Keith McKey our CFO will be participating in the call. Since we will be making forward-looking statements today, we ask that you listen to the following disclaimer covering these statements.

A discussion today involves forward-looking statements. Please refer to the "Safe Harbor" language included in the Company's news release announcing results for this quarter, that describe certain risks factors and uncertainties may impact the Company's future results and may cause the actual results to differ materially from those projected. Also, the content of this conference call contains time sensitive information that subject to the "Safe Harbor" statement included in the news release is accurate only as of the date of this call.

Thank you. Operating results for the fourth quarter met the upper end of our guidance range. Funds from operations were $0.85 per share as compared to $0.86 per share for the fourth quarter of last year; a decrease of 1.2%, If the gains on the sale of land in both years are excluded, FFO per share would have increased 11.8%.

For the year, operating results met the upper ends of our original earnings guidance, which was issued in January of last year. FFO was $3.30 per share in '08 as compared to $3.12 per share for '07, an increase of 5.8%. The 2008 results include the expensing of the original issuance cost related to redemption of our Series D Preferred Stock in July and the gains from the sale of REIT shares and sale of building in our taxable REIT's subsidiary.

The 2007 results include the gain on the sale of land of $0.11 per share, and unusually large termination fee of $0.05 per share. Same property not net operating income growth for the fourth quarter was 2.1%. Both with and without straight line rent adjustments. These calculations both been negative in the third quarter.

In the fourth quarter on a GAAP basis, our best major markets, after the elimination of termination fees were El Paso, which was up 22%; the San Francisco area up 16.6%; Los Angeles up 7.6%; and Charlotte up 5.9%. The trailing same property markets for the quarter were Jacksonville down 9.4% and Tampa down 5.9%. The differences is between quarters are basically all due to changes in property occupancies in the individual markets.

Occupancy at December 31, was 93.8%. A 60 basis point decrease from the end of the third quarter a 160 basis point drop from one year ago. Our California markets were 97.6% occupied and the Texas markets were second best at 94%. Houston, our largest individual market, with 4.2 million square feet, was 97.2% occupied.

Leasing activity generally continues to be anemic. The good news is there is still prospects looking for space, although there are fewer of them and it takes a lot longer to complete lease negotiation. Prospects understand that they have numerous lease alternatives and as a result do not feel any urgency to act. In addition, they and brokers expect to receive lease incentives. Our leasing statistics illustrate that, although our markets are still alive the level of activity continues to deteriorate. Overall, of the 784,000 square feet of leases that expire in the quarter, we renewed 77% and released another 3% for a total of 80%. The renewal rate is above our historical average and we believe reflects the desire of tenants not to make major new lease commitments in a uncertain economic environment. In addition, we leased another 330,000 square feet that had either terminated during the quarter or was vacant at the beginning of the quarter, an indication that there continues to be at least some users out in the market looking for space.

As you can see in our supplemental information, we again achieved rent growth for GAAP with a straight line of rents in the fourth quarter, but the 4.5% increase was below our average for the year. On the other hand, cash rents declined for the first time in 11 quarters. Average lease length declined to 3.2 years reflecting the unknowns in the market, and was well below our overall 2008 average. Average tenant improvements were $1.22 per square foot for the life of the lease, or $0. 38 per square foot per year of the lease, which was roughly our average for the year.

At December 31, our development program consisted of 17 properties, with 1.7 million square feet, and a total projected investment of $119 million, 10 of the properties in lease up and 7 were under construction. Geographically the developments are diversified in three states and 9 different cities and are currently 22% leased a decrease from the end of the third quarter. During the fourth quarter, we transferred 5 properties with a total of 286,000 square feet to the portfolio. Located in Tampa, Houston, San Antonio, and Denver, these properties have a combined occupancy to 76%. In the quarter, we also began construction on just one property, World Houston 30, and acquired 94 acres of development land in Orlando and 8 additional acres at World Houston. Overall in 2008, we transferred 16 development properties with 1.4 million square feet and an investment of $88 million in the portfolio. These assets currently 92% leased.

We had originally anticipated new development starts for the year, of between 60 and $70 million but ended up with $49 million in new starts. From the land standpoint, we absorbed 49 acres in the development and added 130 acres for new development. At December 31, our land inventory consisted of 330 acres with a potential to develop approximately 4.3 million square feet of new industrial space.

Given the current economic climate, and continuing deterioration of the industrial real estate markets, we are projecting no new development starts in 2009. Our development program has had a good long run and has a quality state of the art investments to our portfolio, but we do no expect to see opportunities for new development in the near-term other than a possible build-to-suit or two. Theses opportunities will reappear and we plan to be ready to take advantage of them when they do. We did not have any acquisitions or sales of operating properties during the fourth quarter and do not currently have any under of contract.

For 2008, we purchased a portfolio of 5 building with 669,000 square feet in Charlotte, North Carolina for $41 million last February. In May, we received a condemnation award for $4.7 million for our 123,000 square foot North Stemmons1 building and a portion of its land in Dallas. In August, we sold a small building for $635,000 in Memphis. Also in August we acquired and then sold a 128,000 square foot warehouse in our taxable REIT subsidiary for approximately $6 million.

Keith will now cover a variety of financial topics.

Good morning. As David reported, FFO per share for the quarter decreased 1.2% compared to the same quarter last year. Lease termination fee income was 68,000 for the quarter compared to 133,000 for the fourth quarter of 2007. Bad debt expense was 307,000, for the fourth quarter of 2008, compared to 269,000 in the same quarter last year. Gain on land sales was 8,000 for the fourth quarter of 2008, compared to 2,579,000, in the same quarter of last year. The net affect of these items reduced FFO per share by $0.11 for the fourth quarter as compared to last year. FFO per share for the year increased 5.8%, compared to 2007. Lease termination fee income was 798,000, for 2008, compared to 1,149,000 for last year. Bad debt expense was 1,590,000 for 2008, compared to 738,000, for 2007. Gain on sales of nonoperating real estate primarily land sales, was 321,000, for 2008, compared to 2,602,000 for last year. Also, 2008 included the expensing of the original issuance costs on the redemption of the preferred stock of 674,000, and a gain on sale of securities of 435,000. The net affect of these items reduced FFO by $0.16 per share compared to 2007.

Our balance sheet is in good shape. In December we closed a $59 million first mortgage with a fixed rate of 5.75% and our bank debt was 110 million at year end. With bank lines of 225 million, we had 115 million of capacity at December 31. The bank lines did not mature until 2012, and we have the option to extend the $200 million line for one year. Also we comply with all bank line covenants.

Debt maturities for 2009, amounted to 31.4 million (Inaudible - technical difficulty) and we had none in 2010. Currently, we have a loan package out to several lenders and have received quotes with a wide range of proceeds and interest rates. We are evaluating the quotes and hope to sign an application soon.

Debt to total market cap was 43.8%, at December 31, 2008, and for the year interest coverage ratio was 3.75 times and the fixed charge coverage ratio was 3.59 times; a small improvement from last year. Our floating rate bank debt amounted to 6.9%, of total market cap, at year end. We had no impairment charges. You are probably tired of hearing us say we are not merchant builders but it sounds pretty good now. We bill and buy to hold and operate our properties for long-term growth.

In December, we paid our 116th consecutive quarterly distribution to common stockholders, this quarter dividend of $0.52 per share equates to a analyzed dividend of $2.08 per share, our dividend to FFO payout ratio improved to 63% for the year. Rental income from properties amounts to almost all of our revenues so our dividend is 100% cover by property net operating income. We believe that revenue stream gives stability to the dividend.

FFO guidance for 2009, is projected to be in the range of $3.09 to $3.21 per share. Earnings per share is estimated to be in the range of $0.89 to $1.01. We think we have a conservative projection, occupancy rates are projected to average 1.3%, to 3.3%, below the occupancy at December 31, 2008. No acquisitions or dispositions are projected. No development starts are projected. Which also results in increased G&A by $0.10 per share because of the reduction in capitalized cost related to development.

In addition to the decrease in the occupancy percentages, we provided for bad debt expense of $0.05 per share, and no termination fee income. As we noted earlier we have a loan package out now and we are obtaining quotes for 5-year and a 10-year fixed rate mortgage. The 5-year fixed rate quotes are from banks and rates vary from 5.5 to 9% and are recourse, the 10-year quotes are from insurance companies, and the rates are around 7.5%, with varying proceeds and a non-recourse and we plan to sign an application soon.

Now, David will make some final comments.

2008 was a very productive year for EastGroup. From balance sheet standpoint, we raised $57.2 million through the sale of common equity, at a net price of $47.81 per share, that the net price. We concluded new 4-year bank lines totaling $225 million, at the lowest spreads in our history. And we closed 2 non-recourse fixed-rate first mortgage loans, totaling $137 million, which we use to reduce floating rate bank debt.

Looking at operations, our FFO of $3.30 per share, met the upper end of our guidance range, and was the highest per share results since we started reporting that calculation. This enabled us to increase our dividend for the 16th consecutive year.

2009 is obviously not going to be as much fun. Given the deteriorating economy, we expect occupancy to decrease by 250 to 350 basis points by the end of the year. Our FFO to decline for the first time in five years. The good news is that we are facing the downturn with a strong and flexible balance sheet and a proven management team that has been together working for a minimum of 8 years as a group. We believe that we are about as well positioned as we could be to handle the recession and certainly will be prepared to take advantage of the recovery when it occurs. Keith and I will take your questions. Thank you.

(Operator Instructions). We will take your first question from Mark Biffert with Oppenheimer.

Good morning, guys, Dave, first question for you, you guys obviously made quite a bit of land acquisitions during the quarter, and I'm just wondering what you are seeing in terms of the greatest opportunities of return whether in land or assets. Given that you haven't given guidance for acquisitions next year, could that still happen if you see certain opportunity?

As Keith mentioned earlier, Mark, we were trying to be conservative on rejecting new developments and acquisitions, it's been a crazy market I think as everybody knows, big spread between -- big mask on property sales, and the acquisition we did in February of last year was really an ' 07 acquisition because it was negotiated in that fourth quarter, we are bidding on different assets that come available on the feel to us. But too crazy now to try to project what we might buy and what we -- what yield might achieve on the purchases. To answer the first part of your question on land the parcels the that we bought in the fourth quarter, a large one in Orlando we working on for at least a year, and I wish I could show you the aerial on it. It's an amazing piece of ground with almost a mile of frontage along the Beachline Expressway adjacent to the Florida Mall and Beachline and Lake Road. (Inaudible - audio difficulty) We believe we can develop a 1.2 million square feet of space on it. It's between not quite adjacent to but -- (Inaudible) other complexes along the beachline. So we are really optimistic about that being an incredible location for us. The other piece is a small parcel in Houston, one of the out parcels to the holdings there. It gives us the opportunity to build two small service center buildings which we think we will be able to round out offerings in Houston.

Okay. My next question is related to what you're seeing in terms of leasing in the Florida markets it seems like those markets continue to under perform, wondering if you are seeing stabilization in terms of occupancy and rent as you look out to 2009?

Certainly not a stabilization in rents. But our small holdings in south Florida, -- (Inaudible - audio difficulty) continues to be reasonable activity there and keep our occupancy above our averages, Orlando seems to go in spurts and I think most believe the land will be the city in Florida that leads the state out of the recession. There is a lot of different businesses going on there now other than simply tourism. Tampa is one of our most suffering markets of the whole portfolio. Bigger job loss than the other Florida cities and maybe more over building than the other markets from an industrial stand point. So we are more optimistic about doing well in Orlando, and less optimistic in Tampa.

Lastly, Keith, you mentioned that you are going to start expensing some of your capitalized G&A during the quarter. Is there any possibility of restructuring charges in 2009 if you were to cut back on your development personnel?

We already cut back some on development personnel. And I will let David speak to any further deterioration or any other comments.

Mark, we are little different with structure than most of our peer groups we never been set up with a development team and acquisition team and disposition group management group leasing group our senior people are responsible geographically for everything that goes on in their region. They spend their time where they seen the opportunities to make money for the lease group over the last few years the opportunities have been in development so they have spent more of their time doing that. Going forward that's going to have a lot less emphasis finishing up and our emphasis is going to be looking at acquisitions, because we have the capability to making acquisitions. (Inaudible - audio difficulty) And over seeing a difficult leasing environment. We have a small construction operation in Florida and reduction in head count is more related to that market than any places. (Inaudible - audio difficulty)

Thanks.

We will take your next question from the site of Paul Adornato from BMO Capital Markets. Please go ahead your line is open.

Yes, good morning.

Good morning.

Guys, you recently reviewed your line of credit, was wonder if you could talk about the banks in the lending group, did you lose any, add any banks, talk about the appetite of banks for real estate business these days.

Quick summary, then I will let Keith comment. A year ago really now, 15 months ago when we started negotiation on it we had a couple of banks drop out and had a couple that were interested in didn't fit. So we are really pleased with the group we now have, it's very strong, led by [PNC] in Pittsburgh, we have -- [BofA], Wells Fargo, US Bank, Regions, SunTrust, and Trust [Mark] Bank, a bank big based in Mississippi, all of those banks seem to be doing reasonably well and leaders in the business right now, we have not received any requests for anybody to reduce their participation or exit the lines. We feel flattered about that.

Okay. With respect to your guidance, I believe that you said that you expect conditions to worsen steadily throughout the year, is that the way that you see the year unfolding?

Yes. I mean, -- I -- in looking at economic forecasts, there is still some people talking about a recovery of the economy in the second half of the year. Although more and more seem to be talking about 2010. Although more and more seem to be talking about 2010. That would be a positive that happened this year, but there always seems to be some lag before your current customers or prospects buildup the confidence to start to expand again, new space and be willing willing to commitment to development spaces. (Inaudible - audio difficulty) Holding -- on from a FFO standpoint operational standpoint in 09.

Okay.

(Inaudible - audio difficulty) We can't count on that.

Okay. Here we are in the middle of February, how has the beginning of the year started out for you?

We are actually doing a little bit better in the first quarter then we had thought and went back five or six months ago and looked at it. We would expect occupancy to drop probably another 100 basis points in the first quarter.

Okay.

Just to add to give you little color, we are renewing retaining customers, higher rate than we ever have in our history. Difficulty is the ones that are moving out for one reason or another, they there are less prospects to fill that space. So we increase vacancy, it's from a slowdown in leasing, the space that's being vacated while at the same time better than we ever have on retaining customers.

Okay. Thank you.

Thank you.

We will take your next question from the site of Chris Haley with Wachovia. Please go ahead your line is now open.

Good morning. It's Brendan Maiorana with Chris. Hi, guys. First question as it relates to occupancy and thinking about your guidance, David you mentioned by year end about your guidance, David you mentioned by year end you would be down like the 250 to 300 basis points. How much of that is attributable to the development properties that will be coming on line throughout the year versus how much decline did you expect for the -- (Inaudible - audio difficulty).

What goes on in the development properties in leasing is going to be a major -- could be a major swing for us to the good or bad within that range. I don't have an exact figure for how much of the drop is related to it but some of it.

Can you give us maybe just a sense of -- in terms of same-store pool, how much you might expect in terms of occupancy and deterioration throughout the year?

It would be, I would say in the 200 -- this is a little bit of a questions, 250 to 300 basis point range is same-store and another 50 is maybe slightly more would be related to development.

That's helpful. And in terms of the development pipeline, what are some -- what are you assuming for the lease assumption shall be assumption -- as I look at your come development for 2008, especially the ones that have been transferred and completed pool and the first and second quarters are all well leased now and Q3 is reasonably leased as well, as we look at the development pipeline for '09, how should I think about the progression of that lease up as we go through the year?

In our supplemental data on the page with development, we show the projected occupancy during the first two quarters of '09, so -- but each one there is a big swing, we are projecting slower lease up, for example, Phoenix, one of our weakest markets and projecting a stronger lease up in Houston which is our strongest market.

Brendan, also what we did is go through all of our development projects that are coming on line and to see what leasing we were projecting in the numbers -- (Inaudible - audio difficulty) that on development coming on the space had never been leased before. I think that number was $0.06 a share something like that. And that's a soft spot for us whether we can lease this up and hopefully we will beat that. To give you some idea on future development what we got to lease up.

That's helpful, Keith just to I understand, your saying there is $0.06 of kind of delusion on the development pipeline to which if you are able to lease up that would be potentially be additive to your guidance range?

No we projected $0.06 in our numbers for leasing up some of our development.

Okay. Okay. Got it.

We leased no new space in development we would lose $0.06 a share.

That's helpful. It looks like there were a couple of yields that were adjusted and project costs over adjusted is that attributable to a longer lease up time that you're assuming?

Longer lease up and in some cases lower rents and with the yields we report our straight line in this market, in development give a whole more free rent than we have in the past and that affects the straight line yield more than the cash yields. So, yes, I would expect that if the markets continue to deteriorate, that some of those straight line yields could deteriorate a little bit further.

On the lease up, I'm relative to 6 or 12 months ago, on average for your development portfolio, are you expecting 6 month longer lease up time?

Each property is a little different. Yes, I would say 6 months is generally been what's worked for us in the past and especially looking back to 01, 02 recession. Instead of 12 months we generally were getting 18 months, whether we get hit harder in this recession or not I don't know but 18 months is the extreme when we look back 7 or 8 years ago.

Thanks. Then just lastly in terms of your reserving policy and assumption, can you refresh my memory on what the policy is and the $0.05 of delusion in the guidance might be factors that would cause the number to bounce around a little bit?

We projected no termination fee income, hopefully any bad debts in excess of the $0.05 would be taken care of by termination fees. If you look at '08, bad debt net of termination fees was $0.03. So -- usually we project no bad debt and on the theory that bad debt termination fees will offset each other, this year we added that in.

What did it take to get you to reserve a tenant?

Well the $0.05 is just a projection, we don't have any tenants that we are reserving on that $0.05, so that's just a number that we thought to put in to be conservative to actually record a bad debt this there is a number of things, move out, quit paying rent on various other factors involved.

Now that's something we review at least quarter -- sometimes more often than that, our asset people are very good and geared to reporting problems before we actually see it in the numbers. We have watch list tenants, whole different series, almost like the way a bank looks at it.

Thanks, guys.

Thank you.

We will take your next question from the site of AV Learner with Robert Baird.

Hi everyone. Wondering in terms of the tenant retention looking forward to 2009 do you see those same mentality continuing of tenants staying in place not looking to make major changes.

Yes. It's held for all of '08, and people in the field are not reporting anything differently, so far this year.

Is that across all markets? Sort of the same sentiment or some markets showing more of that than others?

It seems to be across all markets. Can't identify one or another that's higher significantly higher or lower than that average.

Okay. That's it, thanks.

Thanks.

We will take your next question from the site of Jason Payne.

My questions have been answered.

We have a follow up question from the site of Mark Biffert with Oppenheimer , please go ahead your line is now

Sorry, I was on mute. Keith, for you, a question on the capitalized interest you're assuming for 2009?

Yes.

What are you expecting?

Let me find the number on that. 5.6 million.

Can you talk a little bit about the lease renewals that you have coming up in 2009 and '10, on Palmer Distribution you have 400,000, Premier Beverage, have they indicated they plan to renew or give backspace?

We know we are going to lose Premier Beverage in two locations because they are finishing up a build a suit for themselves in Tampa, we will lose two locations. We are negotiations with basically -- well we are going to lose the post office in Tampa 35,000 square feet, they are moving into a large consolidated operation. We are in negotiations with everybody else.

Okay. Thanks.

Thank you.

We will take your next question from the site of Justin Maurer from Lord Abbett.

Good morning, guys.

Good morning.

On the bridge from '08 FFO to 09, call it midpoint of 315, you said $0.10 is expense G&A, $0.05 bad debt, I was unclear as to whether that was incremental to '08 or just what you are assuming and how that compares?

That's $0.02 extra from last year.

Okay. A $0.06 from the lease up of development contribution, right?

Yes. Which is -- don't have a good comparison for '08, but it's at a slower rate than we leased up in '08.

I'm trying to see if there is anything else I'm missing. Within the 330, with term fees and other things what's the pro forma number if you will when you exclude that and the preferred redemption and all that stuff.

Are you talking about for '08?

Yes.

The '08, probably 700,000 reduction in those unusual items. About $0.03.

So 327 kind of operating number, if you will?

Goes other way about 333.

It is? Okay. Even if you take out lease term and all the stuff that was additive?

For '09, what we are projecting to go from the 330 or 333 down to 315, is as you mentioned the G&A we recording reductions in NOI's, those are the two big items in it and then you go to various other things, interest expense and --

Yes.

And those. But the two big items, reduction in NOIs and then a increase in G&A caused by the capitalization development.

We had several reoccurring or non-reoccurring items in '08, sale of REIT shares.

Right.

Then penny and a half on the sale of our building in Tampa that we bought in our TRS and we sold. Those are unusual items.

Okay. That's what I was getting at was the basis to reduction in NOI. Sorry if I missed it. You talked about the occupancy what are you anticipating there?

From year end, to year end, the drop of -- this is broad range, 250 to 350 basis points. I guess last fall when I was at different conferences I was talking about 250 to 300. And that we had 5 or 6 months ago, I've added another 50 to my gut reaction on what we are going to do on temperature downside for occupancy in the guidance we give an average range.

The NOI decline assumed.

We did not actually put in the guidance but saying property reduction was.

Same property is 1.5, 4.5 on a negative basis and average occupancy projecting 90.5 to 92.5 on that.

That's helpful on the NOI, thanks. On the dividend, philosophically you are in as good of position as anybody from a balance sheet perspective, but now that you're starting to see guys pay in stock and so on, over your dead body so to speak or what's your --

I'm not sure I say it quite that strongly, but we management and Board feel very strongly that one of the great appeals of REITs and I have been doing this longer than anybody else in the public REIT business, great appeals for REITs is that cash dividend. That's why we have a awful lot of investors and probably we have almost all our retail investors and the retail we have almost all our retail investors and the retail investors were what helped build EASTGroup in the early mid-90s. Unless we go in to some sort of deeper recession depression, and we get in to an issue of survival of the Company, it's our goal to pay a cash dividend. I think that's important for recovery of the REIT market in general to draw back in the investors, back in the '90s REITs were pitched as a way to get total return of 8 to 12, plus percent, a year. Total return. Half of that total return was going to be in a cash dividend, half to, -- two-thirds of that was going to be a cash dividend. For a period that looked very boring with all the tech stocks the market was going up 35% a year. Then in the mid-2000, 2003 to '07, cap rates were coming down, and people started to use their TRS's to become growth engines and REIT stocks got pitched as a growth vehicle when that's really not the nature of real estate, so I would like to think we are going to go back to the basics and EastGroup Properties splurged at doing the basics. Hopefully ever increasing cash dividend to its shareholders.

Should we think about -- I mean you guys obviously done a good job protecting your balance sheet and I suspect you wouldn't want to take on little bit of time or debt to just pay the dividend, and correct me if that statement is wrong, but is the delta, should we think about cad or fad, in the 230, the 40 range, you know on that level of FFO or is there some more room there, thinking about the dividend and the $2.80 range, how much flex or room do you think we need to have between those two metrics.

Let me come at it from one direction and Keith from another. In '08, our dividend was almost exactly equal to our taxable income. Even with FFO going down some in '09 or projected to, we didn't have a lot of room to begin with in terms of to look at reducing it. In the last recession, we got to a point where we were paying out I guess maybe 80% of FFO and about 110% of fad or cad, and we were able to share management was able to share the board that we were going the earn our way out of that quickly, we managed to increase dividend in '01, '02, '03 era by just a little bit and did what we said we were going to do was earn our way back to the FFO payout now is 63% for the past year.

If you look at '09, on the 315 if you stay with the 208 that's about 66% payout ratio and then we are still projecting adjusted funds from operations to exceed I can't tell you how much room there is on it, everybody come it differently but in our projection adjusted operations to exceed any dividend payment.

I guess my only thought of versus the last recession would be seems like folks are much more guarded about protecting their balance sheet which I can totally understand given the environment we are in.

Well, I think maybe difference between now and the last recession, I can't give you the statistics is that things moved a lot more over the last couple of years, people were doing things because of ever increasing asset values that looked fine at the time and in hindsight looked like they have gone way too far. That's not something that for just the way how we operate the Company and maybe a bit of luck, we ever done. I think we are in a different situation and we are proving the strength of our balance sheet by the results now that the kind of borrowing that we are able to look at in' 09. An interesting side light, the 31 million that's secured by a group of properties that matures in March of this year, we are talking about being able to borrow two times that amount, in a new line. So the markets are certainly a lot more difficult than they were a year ago, but I think for the right buyers and properties they haven't shutdown yet.

Yes. You're saying the bank money is 5 year, 5 to 9% is the range, is that right?

5.5 to 9.

5.5 to 9.

It's wild.

Congress needs to hear those numbers relative to them wanting the banks to lend, right?

They will lend you what you want to pay for it.

Thanks, guys.

Thanks

As a reminder if you would like to ask a question, press the star one on your touch-tone telephone. We will take your next question from the site of Stephanie Krewson with Jamie Montgomery Scott. Please go ahead your line is open.

Good morning, guys. Two quick questions, first is what is -- the frictional run rate that we should expect for quarterly lease termination fees in '09?

We are projecting zero.

Okay. The second one and Keith you may want to address this offline, fixed charge coverage ratio you give of 3.8 times that's not the same fixed charge coverage ratio calculation that you have for your line of credit covenant; right.

That's correct.

That's something that's lower, correct?

Correct.

Would you have 10 minutes to go through my calculations before my team and I publish our model?

I would be happy to.

Thank you, great quarter, guys.

At this time we have no further questions.

Thank you very much for your continuing interest in EastGroup Properties as always Keith and I are available to clarify anything we didn't a good job on here, if you have questions that come up as read our published data, please do not hesitate to give either of us a call, thank you.

This concludes your teleconference for today, thank you for your participation, have a great day.