EPR Properties (EPR) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2009 Entertainment Properties Trust Earnings Conference Call. My name is Tanya and I will be your Operator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions) I would now like to turn the call over to Mr. David Brain, President and CEO of Entertainment Properties Trust. Mr. Brain, please proceed.

Thank you, Tanya. Thank you, everybody, for joining us this morning. This is David Brain. Let me start with our usual preface, which is as follows. As we begin this morning, I'd like to inform you this conference call may include forward-looking statements defined in the Private Securities Litigation Reform Act of 1995 identified by such words as will, be, intend, continue, believe, may, expect, hope, anticipate, or other comparable terms. The Company's actual financial condition and results of operations may vary materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause actual results to differ materially from those forward-looking statements is contained in the Company's SEC filings, including the Company's report on Form 10K for the year ending December 31, 2008.

Let me say again, thank you for joining us. We always appreciate your investment of time and interest, particularly today in a time of volatility and seeming capital markets rehabilitation. With me to provide you all the Company news and updates, of course, are Greg Silvers, our Chief Operating Officer.

Good morning.

And Mark Peterson, our Chief Financial Officer.

Good morning.

As we get underway this morning, please remember there is a simultaneous webcast available via a link from our website at EPRKC.com. If you can, please go there now for the visual dimension as well as this audio portion of the presentation.

Going to the first slide, here are your headlines for EPR. Earnings, although not entirely satisfactory, are consistent with expectations and guidance. Portfolio tenant fundamentals are ascending in stark contrast to general headline economic reporting. And third, development project challenges are being met and being cleared in part and remain in part with some delays in adjustments in income but no investment write-downs.

I'll elaborate on these headlines a bit. Mark will go through the detail in the financials, Greg about our capital spending and a portfolio status information. And then you can, of course, join in with your questions. But as I make my comments, I want to refer you importantly to our press release as well as we regularly refer you to our quarterly reporting. Please note our earnings press release has greatly expanded to accommodate detailed discussion of a variety of topics, particularly our development project investments.

I want to start with the first headline and with our per share performance for the quarter. This is the first time I think I've ever used the term "decline" in reporting EPR's financial results. We have made a habit of quarterly ascending per share performance for over a decade; and as I've often noted to you for the last five years or more, it has generally been double digit increases.

The financial results we're reporting this morning are not acceptable, but the good news is twofold. The primary reasons for our less than stellar results this quarter are few in number and in the process of being fixed. Our per share reported results and guidance of $3.40 to $3.60 FFO and a $2.60 dividend more than support our recent stock trading range in the mid-20s and even multiples of seven times FFO and a dividend yield in excess of 10%.

Our FFO per share this quarter was $0.84 -- of $0.84, was down year over year by $0.27. As we pointed out in our press release, $0.24 or 90% of this reduction can be attributed to our change to recognize income from our current major development projects on a cash rather accrual basis. As I've said before and will discuss further, these are solid projects with in-place or committed traffic anchors that are challenged not by their specific performance but rather by the financing environment generally.

But for the income recognition change and a $0.04 per share write-off due to Filene's Basement bankruptcy, our FFO would've been up 7% over the prior year and consistent with our original 2009 guidance given in our last quarterly call.

If you'll remember during that call I specifically walked through a potential adjustment to FFO guidance of about $0.50 per share and a dividend reduction of about $0.35 if we deducted all development project returns for projects without full completion financing in place.

On March 10 as a part of our first quarter 2009 dividend announcement, we clearly stated we were invoking the previous mentioned adjustment to our guidance and we were taking non-cash income related to our major development projects out of our guidance. This is how our dividend guidance went from $3.00 to $2.60 per share.

Unfortunately, this revision was largely ignored by the analyst community so there's an appearance of an off guidance performance but this is not the case. To be clear, I will say again, we have taken all non-cash aspects of our major development projects out of our guidance. We are not counting on anything from the Concord project this year. Zero. The Toronto Life Square project has been taken out for nearly three quarters of the year, our expected period to accomplish our in-court restructuring process.

Schlitterbahn is counted on only for the cash pay portion of our recently completed restructuring that is fully described in our press release with its enhanced collateral and funding elements that I will not repeat here.

I want to be clear about the premises for our guidance and I want to also be clear that I believe with this highly conservative guidance position there is considerable opportunity for upside performance.

Our second headline is that our tenant portfolio fundamentals are ascending in stark contrast to general economic reporting in other retail categories and segments. I often point out box office performance on these calls because I'm not sure everyone has noticed current trends. This one you can't miss. The robust performance of the first run exhibition box office has been carried on every major media outlet in conspicuous fashion because of its contrast to the otherwise sagging economic and retail landscape.

Box office is up about 15% year to date, and this is not just due to a couple of films or a couple of weekends. Broadly, deeply, across months and content, box office revenue and attendance are up repeatedly and significantly.

Please note we do have a bit of diversity in our tenant base, but still over 50% of our investments are specifically theaters and about 70% are either that or theater traffic related retail. This is great news and I believe still under appreciated in the marketplace.

Further, as I've explained in prior calls but won't detail now, this is just the beginning of a growth cycle that will enlarge with the expansion of our properties' media platform and content breadth and thus enhancement of our financial performance and value as well.

I just alluded to our tenant diversity. Let me update you there as well. Our ski properties completed their season in the first quarter with revenues off less than 1% but with record profitability. Season pass sales for next season have already begun and are running ahead of last year.

The domestic wine industry has recorded solid increases in three out of the four months of 2009 with the first two months displaying about 7% year over year gains with a fall off of 1% to 2% in March but April showing strength again with a reported 9.5% gain over 2008.

I don't have any specific charter school update to offer you beyond the material enrollment and occupancy gains already reported to you in our last call for the current school year.

Our third headline, development project challenges are being met and cleared in part with income delays but no write-downs is a message of both progress and ultimate investment reliability. Each of our three major development project investments is discussed not only in our quarterly filing but also, as I said, in our earnings press release in great detail and clarity.

Both Mark and Greg have comments on these, and with all that I won't go through a lot of details, but I want to point out a couple of highlights.

Number one, our issues associated with the Schlitterbahn water park development are concluded with favorable result and hold the promise of considerable upside. We have restructured our arrangements to provide us with greater and more tangible collateral and credit support. The park will open this summer season. We have no near-term maturing loan or tripwires associated with the investment. We feel we have a reasonable base cash paid return on our investment as is and considerable improvement potential correlated with the performance of the Schlitterbahn water park portfolio and/or the further development of our remaining land inventory at that site of approximately 300 acres.

Number two, our Toronto Life Square investment has been taken completely out of our guidance for about three quarters of the year despite the fact that it is completed, about 90% occupied and generating cash flow in excess of the first mortgage requirements. The reason for this is we've put this investment on a cash recognition basis and expect operating results that are due to us to be held away from us during the Canadian court supervised receivership process we have begun. We expect the result of this process to be positive with either our investment amount or the asset delivered to us, either result desirable.

Importantly, please note this asset was reappraised during the quarter and although its value fell, it is still well in excess of our investment exposure.

Third, our Concord development project investment continues to progress but just as it was of our three major development projects in the earliest stages at the collapse of the credit markets, it is also the one taking the longest to reach a productive conclusion. Because of its uncertainties, we have removed any financial contribution from that investment from our guidance for the entire year. It is counted for zero. It has no earnings reporting downside.

Serious and substantial negotiations are underway regarding progress on this project that we cannot discuss in detail. But we can say that with the posture we have taken the results hold only the prospect of an upside impact on guidance as we have included it at a zero contribution.

Importantly we undertook a reappraisal of our underlying collateral during the quarter and received support for a value well in excess of our current investment position and thus have no write-down of our investment value.

Although land inventories at this time of severely constrained capital market, particularly development financing, are viewed skeptically as to their current value, you don't have to look very far to understand the value here. Many of you might be somewhat aware of a New York state budget problem and the aggressive moves being made by elected officials on many levels to advance the cause of casino gaming in that state and further how those efforts and initiatives are centered on the traditional entertainment areas of the Catskill Mountains, the site of our land investment interests.

These facts and movements coupled with our investment position in assembled and, importantly, fully development entitled land are supportive of significant value. We look forward to reporting more progress and resolution regarding this project and our resulting appropriate upward revisions in guidance.

I'll now turn it over to Mark and Greg for their comments and join you for your questions in a minute.

Thank you, David. Let me begin with a review of the numbers from our recently completed first quarter.

As you can see on the first slide, our net income available to common shareholders decreased 17% compared to last year from $21.5 million to $17.8 million. Our FFO also decreased 9% compared to last year from $31.8 million to $28.9 million. On a diluted per share basis, FFO was $0.84 compared to a $1.11 last year for a decrease of $0.27 or 24%.

As David mentioned, we are usually talking increases, not decreases, so I wanted to give you some upfront context as to what impacted the numbers this quarter. As you have probably read in our earnings release, this quarter's results were significantly impacted by our policy to record interest income from notes receivable on a cash basis rather than an accrual basis when the expected timing of receipts significantly differs from the contractual terms.

Although the underlying circumstances are different, we had the same accounting result for two of our significant mortgage notes related to Toronto Life Square and Concord with balances outstanding of approximately $101 million and $133 million respectively at March 31. From an accounting perspective, each of these loans has been impaired this quarter since payments have not come in according to the contractual terms and future payments are also not expected to come in according to the contractual terms.

However, it is important to not confuse loan impairment with loan loss. In each of these cases, management of the Company has determined that the fair value of the underlying collateral, taking into account a recent property appraisal, is in excess of the carrying value such that no loan loss reserve is necessary.

However, what this does mean to the Company is that beginning January 1, 2009, only interest actually collected in cash on these notes will be recorded as interest income. This is the accounting treatment even if the underlying collateral value could support a carrying value including accrued by uncollected interest.

We communicated our expectation of this accounting on the Toronto Life Square project during our last call. Because certain payments were not made to us when due in March and the property was subsequently placed into receivership, as Greg will discuss in his comments, we seized accruing interest income as of January 1. Thus CAD4.5 million or $3.8 million was not recorded in the financial statements for the quarter, and this reduced FFO per share by $0.11.

With respect to Concord, the facts and circumstances have changed since our last call. The developer ceased making income payments during the quarter on the Company's outstanding mortgage note receivable. As a result, the developer's interest obligation under the effective interest method of $4.6 million or $0.13 per diluted common share was not recognized in the Company's financial statements. Additionally, the developer both personally and through a related entity has $20 million of notes outstanding with the Company unrelated to the Concord project that were due and payable during the quarter. The Company did not extend the maturity of either note and the notes were not repaid per their contractual terms. Therefore, the Company also began recognizing the interest income related to these notes on a cash basis during the first quarter. $167,000 or approximately $0.01 per share of the borrower's interest obligation was not recorded in the financial statements.

I want to point out that when the first quarter dividend was determined, we chose to be conservative on Concord and the $20 million of other notes from parties related to the Concord developer and assumed that no cash interest income would be received during 2009. As I will describe later, we are formally updating our FFO guidance to be consistent with the assumptions related to these items underlying that dividend announcement.

This quarter's results were also impacted by a non-cash expense of $1.5 million or $0.04 per share related to a receivable at December 31, 2008 from Filene's Basement. Filene's declared bankruptcy on May 4, 2009 and such amount was fully reserved during the quarter.

Moving to the next slide, in summary, we had three main items that account for $0.29 of the year over year decline in FFO per share. $0.11 related to the Toronto Life Square mortgage, $0.14 related to the Concord mortgage and developer notes receivable, and $0.04 related to Filene's bad debt.

Now looking at the details of our first quarter performance, our total revenue increased 1% compared to the prior year to $66.7 million. The decrease in the Canadian dollar exchange rate reduced quarter over quarter total revenue by about 3%. Within the revenue category, rental revenue increased 3% to $50.4 million, an increase of $1.3 million versus last year.

Percentage rents included in rental revenue were $438,000 versus $576,000 in the prior year. Tenant reimbursements decreased 18% or $1.1 million. This decrease is primarily due to vacancies related to certain non-theater retail tenants and the decrease in the Canadian dollar exchange rate.

Other income increased $429,000 to $1.1 million. This decrease is due to approximately $500,000 in gains recognized on settlement of foreign currency forward contracts during the first quarter of 2009. Mortgage and other financing income was $10.5 million for the quarter for an increase of $0.2 million versus last year. This increase is due to our investment in a direct financing lease in the second quarter of 2008 related to charter schools, partially offset by less interest income recognized during the first quarter of 2009 due to the impairment of certain mortgage and notes receivable.

On the expense side, our property operating expense increased $1 million for the quarter. This increase is primarily due to an increase in bad debt expense versus the prior year of $2 million. $1.5 million of this increase is related to Filene's bad debt which I discussed earlier. Partially offsetting this increase was a decrease, again due to the change in the Canadian dollar exchange rate as well as a decrease in operating expenses for the first quarter of '09 versus the prior year at certain of our entertainment retail centers.

Other expense was approximately $618,000 compared to $936,000 last year. The decrease of $318,000 is primarily due to expense recognized upon settlement of foreign currency forward contracts during the first quarter of 2008. As I discussed earlier, during the first quarter of 2009, a gain was recognized.

G&A expense decreased $288,000 versus last year to approximately $4.1 million for the quarter. This decrease is due primarily to a decrease in costs associated with terminated transactions during the first quarter of 2009 versus the first quarter of 2008.

Equity and income from joint ventures decreased $1.1 million versus last year to $219,000. This decrease is the result of our acquisition in April of 2008 of the remaining 50% interest in a joint venture that owned 12 public charter schools.

Net loss attributable to non-controlling interests, formerly minority interests, was $1.2 million for the quarter and as in the prior year relates primarily to our White Plains investment which is excluded from reported FFO. The change in terminology on our income statement relates to the implementation of FAS160 titled Non-controlling Interests and Consolidated Financial Statements, but this new standard had no effect on the bottom line.

Finally, this quarter's per share results were negatively impacted by $0.01 due to the January 1, 2009 implementation of FASB statement position, EITF-0361 titled Determining Whether Instruments Granted in Share Based Payment Transactions are Participating Securities. Prior period per share data was adjusted retrospectively, was also reduced by $0.01 by the adoption of this standard.

Now turning to the ratios for the quarter, interest coverage was 3.1 times, fixed charge coverage was 2.2 times and debt service coverage was 2.3 times. All of these ratios remain very healthy.

Now turning to the next slide, I want to give you an update on our recent capital markets activities as well as update you on our liquidity position. As discussed in our last earnings call, we exercised our extension option on our line of credit to extend the maturity date to January 31, 2010 with all other terms remaining the same. This means we have no 2009 debt maturities. We've also recently launched a renewal process for this line that is expected to bring the maturity date to October of 2011 with a one year borrower option that would allow it to go out to October of 2012.

The disruption in the credit markets means that a new facility will have higher pricing and other more restrictive terms, but our guidance has always contemplated an increase in revolver borrowing costs for the latter half of 2009.

Though there can be no assurance regarding the ultimate outcome and the timing of our revolver renewal efforts, we have very strong support from the group of banks that provide the largest commitments in our current facility and we are seeing strong interest from new institutions. We look forward to communicating the closing of our new facility.

Moving to the next slide, we continued to deleverage our balance sheet during the quarter and we are down to 46% on a book basis at March 31. As we discussed on our last call, during January and February of 2009, we issued 1.9 (sic -- see press release) common shares through our DSPP, the Direct Share Purchase Plan, and used the proceeds to reduce the balance outstanding under our revolver. These shares were sold at an average price of $23.57 per share and total net proceeds after expenses were approximately $44.3 million.

Additionally, on February 25, 2009, we obtained a $4 million term loan under our winery and vineyard facility, leaving $63.3 million still available under this facility. This loan matures in December of 2017 and is secured by fixtures and equipment and bears interest at LIBOR plus 200 basis points.

At quarter end we had total outstanding debt of approximately $1.2 billion of which $1 billion was fixed rate long-term debt with a blended coupon of approximately 5.9%. We had $93 million outstanding under our unsecured revolving credit facility at quarter end.

Now certainly the focus in today's economic environment continues to be on liquidity and we continue to maintain a strong position in that regard. I'd like to reiterate that with the exercise of the extension option on our revolver, we do not have any debt maturities in 2009. Additionally, excluding our revolver, our only 2010 or 2011 maturity on a consolidated basis that does not have an extension option is the $56 million note related to our Concord investment.

It should also be noted that our annual operating cash flows have historically covered our dividends and recurring principal payments. We have once again demonstrated our commitment to this conservative practice in 2009 by setting the quarterly cash dividend at $0.65 per share.

As you can see on the next slide, we have a total of $164 million of liquidity available under our existing credit facilities and unrestricted cash. This total is comprised of $134 million of availability on our revolver, $14 million unrestricted cash, and $16 million of availability under our vineyard and winery debt facility.

When we consider our anticipated investment spending of $39 million for the remainder of 2009, we find ourselves with a cushion of almost $125 million. To be clear, this analysis excludes any spending or debt proceeds related to the Concord project. Additionally, this analysis excludes any spending or proceeds related to the resolution of the Toronto Life Square receivership process.

Greg will provide further details about both the Concord project and the Toronto Life Square receivership process during his remarks, but I will first provide some background information on the receivership process and explain the liquidity implications for 2009.

In April of 2009, the Company and the bank syndicate who provided the first mortgage construction loan, which has an outstanding balance of approximately CAD119 million, elected to pursue a receivership after the Company was unable to negotiate acceptable restructuring terms with its subordinate stakeholders. The receiver will oversee the sale of the property and we could become the owner of the property if we are the highest bidder or alternatively we could settle our note receivable with proceeds from the highest bidder.

As communicated on our last call, we have two different term sheets for new first mortgage financing, should we be the highest bidder. These facilities would provide approximately CAD100 million to CAD120 million and therefore we could possible have to make up the shortfall, if any, between the new first mortgage loan and the existing first mortgage loan; however, there can be no insurance regarding the ultimate success and timing of this refinancing.

If we are the purchaser of the property in the receiver's sale process, the project's financial results would be consolidated into the Company's financial results subsequent to the purchase. As David mentioned, we have reflected this outcome in our forecast beginning in the fourth quarter of 2009.

Turning to the next slide, we are formally updating our 2009 guidance for FFO per share to a range of $3.40 to $3.60. This guidance excludes any expenses related to the newly issued FAS141R associated with the potential acquisition of Toronto Life Square. We are also updating investment spending guidance to $60 million which focuses on funding our remaining commitments. This guidance excludes any spending related to the resolution of Toronto Life Square and the Concord project. The key drivers of the new FFO guidance include Concord for $0.53, the $20 million of notes for $0.04, the impact of the EITF-0361 for $0.04, and the Filene's Q1 bad debt for $0.04.

Finally, although we have a lot of disclosure in our 10Q that I encourage you to review, we have also provided a supplemental this quarter to give you additional information, and I encourage you to review it as well.

Now I will turn it over to Greg for his comments on operations and more detailed project updates.

Thank you, Mark. As you've heard this morning, our emphasis this quarter has been targeted at bringing clarity to our three large development projects. As you will note, we have significantly decreased our capital spending with only $21 million of investment in the first quarter. The largest portion of this was the continued funding of our Schlitterbahn development to the tune of approximately $10 million with the balance focused on smaller investments in existing projects or developments that were already underway.

I would like to focus a minute on the progress that we have made since our last earnings call on our three large development projects. With regard to Schlitterbahn, we discussed our plan on our last call and I am pleased to report to you that we've successfully executed the game plan that was laid out. I direct your attention to the slide presentation for additional color. Specifically, we have reduced our commitment from $175 million to $163.5 million. We have significantly increased the collateral and cash flow coverage on our mortgage investment by adding two highly successful water parks in Texas to the security. We have increased the existing interest rate from the existing terms and added participating features which created upside for the investment.

We have included features that provide for the annual escrowing of a full year's interest obligations, and the developer of the project has evidenced the necessary additional equity to allow the water park phase to open in the summer of 2009. Based upon last year's cash flows from the existing Texas water parks and the pro forma cash flows from the Kansas park, we anticipate a coverage ratio of approximately 1.7 on the fixed obligations.

Additionally, as we've indicated in the press release, the developer has also entered into an option agreement which, if exercised, could provide a significant pay down on the existing obligation. All in all, we're very satisfied with the restructuring and I believe it is substantially what we forecasted in our previous call.

With regard to Toronto Life Square, if you've followed our calls and filings, you will note that we've stated many times that this project would likely follow one of two routes. Either the existing partnership would be restructured or the project would go into receivership. It is important to know that when we discussed the restructuring of the partnership, it was always a negotiation with the subordinate debt and equity holders, not the construction loan syndicate. I've read several notes in which these negotiations have been characterized as a restructuring of the existing construction loan syndicate; however, this was never the case.

We pursued a restructuring with the institutional pension funds and the developer that are subordinate to the bank syndicate and ourselves as a means to expedite the process; however, when it became clear that these subordinate interests were unwilling to accept the economic terms under which we would proceed, it was the bank syndicate with the support of EPR that placed the asset into receivership.

Although we would've been very happy to have had the opportunity to acquire the assets on an expedited basis and enjoy the accounting treatment of an owned asset, we will simply let the process play itself out. We were heavily involved in the process of the appointment of the receiver and continue to work in concert with the bank syndicate, the receiver, and the court. We do not anticipate any significant disruption in the operation of the property as the entertainment, retail, and office portions of the property are significantly leased and the signage is performing in according with the plan we discussed in our last call.

With regard to the Concord project, the developer continues to seek the necessary capital to plug the gap caused by the dislocation of the credit markets and the resulting withdrawal of one of the lenders from the original construction loan commitment. As we stated in our filings, we have stopped funding any additional monies until certain conditions have been met by the developer, including evidence that full funding for the project has been secured and all past due amounts have been paid. We are in negotiations with the developer to bring about a resolution of this matter; however, given the confidential nature of these negotiations, I cannot discuss the possible outcomes at this time.

During the quarter we also took control of our Cosentino wine assets via court process. As we discussed on our last call, the controlling shareholder in the operating entity under our lease elected to replace the professional staff of the winery with certain close associates of the shareholder to the detriment of the winery. Based upon this performance, we elected to exercise our rights and take control of our assets rather than work through the issues with existing management. We believe this to be in the best interest of our investment and we are currently marketing the assets for sale or re-lease.

With regard to occupancy, we continue to have 100% occupancy of our theater assets and 89% occupancy on our non-theater retail assets, the same levels that existed from our year end call. I've read several notes expressing systematic concern over our non-theater retail assets; however, I think it is important to look at the history of these assets. If you look over the previous five years you will notice that our non-theater retail has consistently maintained an occupancy rate of approximately 95%. We now stand at 89%; however, this decrease is almost solely attributable to the large box vacancies at our White Plains City Center. Absent these vacancies, we are again at 95% occupancy.

It should also be noted that the White Plains City Center is substantially different than our normal entertainment retail centers with a reliance on large box retailers rather than the strength of the Megaplex Theater. This is not to say that we will not experience vacancies; however, I do think it is important to understand the differences in our properties.

With that, I'll turn it back over to David.

Thank you, Greg. Thank you, Mark. All of our presentations have been a little more extended and hopefully a little more illuminating than usual. At this time, with all that being said, I don't have an extended set of comments before we go to your questions, just to remind you that the headlines as I outlined to you to begin with, that we feel like really things are on track, consistent with what we've outlined to you before as expectations for the Company, that our fundamentals are in great shape, that our tenant base largely, in the development projects that have the points of challenges, we are in the process of clearing up and making progress. And importantly, those things we've reassessed our investment positions relative to the values of the properties and we're in good shape with no investment write-downs. So, with all that said, we'll open it up to questions. Tanya, are you there?

Yes. Thank you. (Operator Instructions) Your first question will come from the line of Jordan Sadler. Please, proceed.

Thank you. Good morning. First question just regarding investment opportunities and what you're seeing out there in terms of cap rates maybe as it relates to theater assets or other opportunities that you may see?

Jordan, it's Greg. I think there are two distinct groups. There's distressed sellers out there who are looking to raise capital and there's also our traditional theater level and theater operator opportunities. We're seeing opportunities in both areas. One of those, the distressed sellers, really prices in accordance with how desperate they are for the capital, really without relation to the asset. The other side prices in accordance with the performance of the asset and what the tenant can pay. There are significant opportunities in both. It's just with this capital constrained market we're not at this point exercising on those opportunities.

To follow up on what Greg said, I say those two camps, you probably have a great chasm of kind of cap rate depiction and that is with distressed sellers, we see things that -- 11 cap type things. What just crossed my desk, a couple of opportunities, a very high performance asset and people know in this market that these are well received assets. And these are non-distressed sellers that are asking seven caps. I don't know that those transactions will clear at seven, but there clearly is this chasm between -- because the assets are performing well. Distressed sellers are at high cap rates and non-distressed sellers are at cap rates we even saw a year ago.

What's your -- as it relates to the distressed group, I think a couple months ago you had said your bias is to wait until you see cap rates rise even further on some of those assets before maybe raising capital to execute or take advantage. Is that sort of still the view?

I think the story is still we want to get the numbers to where it makes sense for us on a capital raise. Right now, given our price, we're not there. But to the good point, the fact that we're known as the player in that arena in theater assets. So, we don't see -- we continue to see all those transactions yet everyone is waiting for us to start clearing those transactions.

Jordan, also some follow on to that. We felt like clearing up some of these issues that are kind of weighing down the stock. We know that. Some of these development issues are important. We'll get those clouds cleared. We have, then, clearer sailing and we probably get a better execution of raising capital to go after some of these more offensive than defensive opportunities. As we hopefully indicated to you, we're well in the process of doing that. We've got a little more ground to cover but hopefully we'll be there and off the defensive posture of fixing a few things and we'll be on to the offensive posture of taking advantage of good opportunities.

On that note, can you actually reconcile for me -- you seem to still have strong enthusiasm for the Concord project, given sort of the state of New York's budget woes. Can you reconcile that enthusiasm with the decision not to extend the same developers loan maturities?

I think we just decided not to extend because we're keeping all of our cards available to us to play. We don't -- we're at this point in a kind of negotiation on this. We are in negotiation on this and we wanted to keep all of our options available to us, and to extend those notes would've taken options away from us this time in negotiations. So we'll keep them in place.

Do you think New York state would push even further and maybe try to get the license upgraded to a Class 3?

It certainly is being talked about. You can go all through the press, not just from us. There are all kinds of discussions about Class 3 licenses in that area, New York succumbing to full casino gaming. New York has significant problems.

This is viewed -- New York has been long time exporting significant tax dollars to New Jersey and Connecticut. They know that. They want to reclaim those tax dollars and I think all options are on the table, are being discussed at the state and even at the federal level in naming further non-traditional tribal lands to be Indian gaming facilities as well. So, a lot is being talked about for that.

Where do you stand in the process of the negotiation with the developer? I know he's supposed to be raising additional financing. Is that sort of the status quo? He's going to come back to you when he can raise additional financing or when the markets open up?

That's the primary thing that's going on, yes. His efforts to reconstitute the original game plan after the dislocation of many of the committed parties on the financing stack.

My last question is just could you give us the appraisal values on the Concord land? Did you have an updated one? Actually on Schlitterbahn, including the additional assets you took possession of? What would be the new LTV?

I'm sorry, Jordan. Can you repeat that question? I apologize.

So, appraisal value on Concord, the 1,584 acre tract? And then the LTV on Schlitterbahn considering the new assets that were added to the collateral?

Okay. On the first one, on the appraisal value of Concord, I don't know whether we're in a position to disclose that. It is --

I'd say it was substantially --

It's substantially in excess. I guess it's just got -- it's --

Are you in a 50% LTV type range?

Essentially, yes. It's more than two times.

And Schlitterbahn?

Schlitterbahn, the LTV would be a similar number.

Thank you.

Your next question will come from the line of Anthony Paolone. Please, proceed.

Thank you. So, is the appraisal value on Concord contingent on the developer being there?

No. It's not contingent on the casino even being there.

Then I guess what I'm having a tough time understanding is why does the $20 million in those unrelated notes kind of play into Concord? Why not just go after the developer for your $20 million?

Well, Tony, I can't take you through everything, but it really is. We follow the string down with regard to a variety of courses of action. One of those courses of action is to go ahead and foreclose, and we don't think that's as favorable right now as to continue to negotiate to get this thing more in place. It would be more disruptive and extend the realization timeline of our investment. So, but that certainly is one of the options available.

What is the collateral for the $20 million? And then with respect to Concord, what's kind of first up to get your collateral out of there? Is it the developer's personal guarantee? What is it there?

In both situations you'd have foreclosure actions. They're both supported, both Concord and -- those notes are supported by collateral that you would pursue first, Tony. And to David's point, the problem, without going into too much detail, as you can imagine, is that if you can work out a negotiated deal, you're going to, as David says, realize on your collateral or realize on a solution much faster than if you're going to be involved in protracted litigation to foreclosure on an interest. It's very similar to what we saw in Toronto in the sense that, A, we pursue negotiated settlements for expediency where at all possible.

Okay. And during that process, I don't recall the rate that you were accruing interest at, but I assume that through this whole process, even though it's not coming through your income statement, you would still be due that money at some point in time?

Yes.

Correct. That's still accruing. We're just not recognizing it for purposes of income statement and FFO.

That's true for both the Concord note and the two other -- the $20 million in notes.

Do you have any legal obligations to fund the rest of Concord?

No. It is our feeling that the agreement we're operating under for the second phase of funding, that project as defined is no longer happening in place and so we're in a negotiated position of whether we fund anything more.

Okay. And Schlitterbahn, can you talk a little bit about the revenue split that I think you mentioned in the press release and how that works?

It's very similar, Tony, to what we do in theaters. We have a participating revenue above a threshold amount. If you look at where that number is set, we would anticipate if the Kansas park performs as it's pro forma'd at that we will see some participating rents in the first year.

And is that, as pro forma, does that mean under the reduced scope? Or the original plan?

Under this reduced scope.

Under the reduced scope, we think the threshold of - the participating rent threshold is very achievable and therefore there's the potential -- we're not including any of it but we think it's very achievable. There's the possibility for upside revision as that thing performs at a level that we get into the percentage rents.

And has that investment become purely mortgages on the parks or is there a Schlitterbahn corporate guarantee and personal guarantee there as well?

We have the parent entity on the parks. We have basically all of the parent entity's assets saving apart their Galveston park, which is in a joint venture which is not allowed to be pledge.

Okay.

There are no other entities to get.

I see. On Toronto Life Square, I didn't catch -- you mentioned, I think, the amount of the first mortgage that was being refinanced. I didn't catch that.

It's approximately CAD119 million.

That's what's outstanding now. Is there an amount that those mortgage holders were willing to refinance?

Our term seats -- Tony, this is Mark. Our term sheets are for anywhere from CAD100 million to CAD120 million. So, it could be all the way from really no money out to a slight outflow.

CAD20 million pay down. We have a couple of term sheets.

To the extent the thing's put out to bid and a buyer emerges beyond your basis, do you have any intention of talking to that bidder, trying to stay in? Or would you just take the money and move on?

Tony, we may have an opinion upon that, but I think our indications on that would - in fact, we've been instructed kind of by the receiver to not make perfectly clear our intentions, as that kind of may disrupt the marketing of the property.

But it's not a bad result.

Okay. What's the cash NOI on that? On the project right now?

About CAD15 million.

That's U.S. dollars?

No. Canadian.

Okay. And then just on Cosentino. What's your investment there?

About $20 million.

Cosentino? Yes. $20 million.

What's the earnings impact now? Do you have expenses and no revenues? What's sort of the hit?

Let's see. Obviously, we've removed the income on the lease and then we have budgeted some expenses of effectively owning the property.

But it's essentially like a TRS. It's operating. It's continued to operate under, really, our direction, albeit by contractor.

So we lose about $450,000 of rent per quarter is roughly what we're recording before. Plus we have baked into our guidance expenses that will be ours now. Not that significant. But there are expenses.

Okay. Just last question, I think you have some Muvico exposure. I think they've had some trouble lately. Are those rents current? Are those assets fine?

Yes. Those assets -- let me give you background on that, Tony, so you guys understand. The issue -- Muvico had exposure to a large financing REIT that did their -- basically their credit facility that came due; and as they had not paid that off, that triggered a provision in our lease. So, the lawsuits that you saw were actually our lawsuits to take back our properties. Subsequently they sold four properties, paid off their credit facility and have no outstanding debt. We are -- as a result, we dismissed the lawsuits.

We're settled and we're current.

Yes.

Okay. And thanks a lot for the supplemental package. Much appreciated.

Great.

Your next question will come from the line of Michael Bilerman. Please, proceed.

Good morning. [Greg Schweitzer] is here with me as well. Maybe just sticking with Toronto Life Square, you talked about the CAD15 million cash NOI. That it is in place today?

Correct.

What is that sort of based off in terms of where occupancy is at, how much of additional signage is leased versus -- go ahead.

That's based upon kind of where occupancy is at today and the signage contracts that we have in place.

So, we're really looking at about CAD11.5 million of real estate and CAD3.5 million of signage.

Then how does that -- I think you talked about potentially that coming back into guidance in the fourth quarter. What's your assumption that's baked into your guidance in terms of the contribution?

Effectively a quarter of that NOI, so a quarter of CAD15 million.

There's no expected --

Obviously, less first mortgage interest.

Yes, less the first mortgage service.

There's no growth in the NOI between now and the end of the year?

We're just forecasting the conservative --

Yes, we're keeping it, flat although the reasonable expectation is that, particularly, the advertising signage revenue grows. It has a lot of capacity to do so.

Where does that -- if it's at CAD15 million today, what is a reasonable stabilized number for the project?

We think over the stabilized version, it's closer to a CAD20 million number.

Right.

We're all talking Canadian dollars?

That's Canadian, yes.

Okay. And then maybe going back to Capelli, the $20 million, that is effectively the seller finance that you had in White Plains, correct?

No. There are three notes with Capelli. Two are the ones that we were talking about that are actually due and payable this quarter. One was secured by his interest in New Rock along with a personal guarantee. The other was secured by his personal guarantee and we have various options on certain projects. The third one, the White Plains note, was not due this quarter. It's not due until 2017. And that one is secured by his White Plains interest in addition to his personal guarantee.

And another borrower.

And another borrower.

And that note is current.

Yes.

And that note is how much?

They're all -- each of these notes, each of the three are $10 million each.

They each are $10 million each? Okay. And then how does -- the loan that's coming due on White Plains is subject to some NOI targets? This is for the 2010 maturity, the $114 million? Where are you today? Would you be able to extend that loan under the current NOI?

At this point, I think with the lease outstanding, technically we would not meet the hurdles, though we haven't been in discussion with the lenders and it's our expectation that note can be extended based on its current operating performance.

It can?

It can. Yes. Affirmatively. It can be extended based on its current operating performance.

Correct.

I think Greg has a question as well.

Just clarifying on the tenant weakness. The $0.14 that you had in guidance from last quarter, that's over and above the $0.04 on Filene's this quarter?

Yes. The $0.04 was not anticipated in that guidance. That's correct.

Okay. And just on the extension, on the renewal of the line, how far are discussions at the moment? Has any of the $235 million been committed from the lead lenders already?

No. Not formally committed. But we've had discussions and we have a good idea of what the commitments will be. But they're not technically committed at this point.

Okay. Thank you.

And your next question will come from the line of Paul Adornato. Please proceed.

Hi. Thanks. First of all, with respect to Toronto Life Square, you said from an accounting perspective equity ownership would not be a bad thing. Was wondering if you could talk about it from a strategic perspective as well? Are there any enhancements or ways to create value that you as the equity owner would be able to bring to that property?

We do think, Paul, that, A, we've got a premier asset and, as David alluded to earlier, the signage revenue that we're planning for this year is significantly lower than where we think the potential of that signage revenue is. And so there's clearly opportunity, we think, to grow that business. We have a premier theater asset in the downtown area. It's -- so we think we like -- we know we like the asset and we do think there is significant upside in the signage potential.

And from a customer perspective, is the property properly managed? Is the customer experience adequate?

It appears to be so in the sense that it doesn't appear to be -- the drivers of this were the refinancing, not necessarily operations. We don't have any known tenant issues. Everything seems to be fine. As we reported last year, I think at our last earnings call, the Future Shop that operates there is the number one Future Shop in the province of Toronto. We have the Adidas flagship -- what did I say?

You said Toronto.

Ontario. I apologize. We have the Adidas flagship store for the entire province. So, everything seems to be performing well.

Okay. With respect to the retail vacancies, first of all, on Filene's Basement, just to be clear, this is a Filene's Basement that is scheduled to close, is that right?

If you remember, we talked about Filene's in our last call that they had vacated their space. We were in -- yes. In White Plains. We had filed suit against them and had a substantial claim for their vacating of the space. They had reached - the reason we did not take this, and Mark can elaborate more on this, is they had entered into negotiations with us to settle that claim and then subsequently conversations went dead and they filed for bankruptcy.

Just to add to that, our claim was something close to $8 million because it extended through the remainder of their lease because they left early. The receivable that we left on the books at the end of the year was $1.5 million and, as Greg mentioned, they had entered into discussion with us. We felt good that we were going to collect the $1.5 million.

At least.

At least. We actually thought possibly it could be upside. What changed things was the bankruptcy literally two days ago that was announced.

We're still pursuing a claim. But for now we're going to write it off.

Right.

The other thing I want to point out is Filene's otherwise has no income in 2009. This was just something that was from 2008 that we thought was collectible that we've now reserved.

Okay. Could you talk about the leasing prospects for that space as well as other vacant retail?

We have LOIs that we're negotiating on both of those spaces. Filene's, I think what we've said, Paul, last time is anymore where we used to talk with confidence about LOIs, we don't anymore until they're actually signed deals because anymore it just seems to be deals are constantly moving. We talked about in our last call about our two Bennigan's. We have entered into a lease for one of those. We've got another one that we're finalizing the lease on. So, we'll have both of those back on line. And as I said earlier, our overall occupancy has remained relatively stable throughout all of this kind of disruption. I think mainly due to the success and the primary driver of the theater anchor element of most -- of all of our centers, but it's far more predominant in our other centers than it is in White Plains.

And on the LOIs, how fresh are they? Have they been outstanding for awhile?

In one of them we're swapping leases right now; however, it's -- you know, until it gets done, we just don't consider it done.

Okay. And finally, with respect to kind of overall operations, you guys now have quite a number of quote-unquote live situations, and was wondering how the current management team is able to handle all of the active situations that you have to be involved in?

I think, Paul, if you notice, we had an announcement, we filed an 8K in April talking about the addition of Jerry Earnest to our team. Jerry comes to us with an extensive background from the mortgage industry. He was with Capmark, before that what was GMAC. So, as we are working with some of these issues and they predominantly relate to our mortgage positions, we felt it important to add to that. Jerry was a board member of ours. So, he's familiar with the Company. He's familiar with the assets, familiar with the transactions, and he brings a wealth of experience of these negotiated settlements and working through these issues. So, we have in fact supplemented that bench strength.

Just as you say, we have more live situations and we've added to the capacity to handle the more live situations with, as Greg indicates, somebody that's depth of experience and also hits the ground running with full knowledge of the Company and all its investments.

Okay. Thank you.

Thank you, Paul.

Your next question will come from the line of Jay Hatfield. Please, proceed.

Good morning. With regard to the Schlitterbahn note, does that potential upside kick in as early as this summer?

Yes. It does.

I know you had one conversation but I didn't quite catch what is the potential upside? Should we think about that as getting potentially equity-like returns or just a little bit above the 7%?

No. I think the goal is to get our returns back to -- try to get it back to the 10% number that the original deal was structured in. I'll be totally candid with you. I don't think we will achieve that in the first year. But what we talked about is in conjunction with this participating feature and as we alluded in our press release, the ability to get pay downs for certain land parcels that we'd hope to sell off, we think we can migrate that project back to that 10% cash on cash return that we originally structured the project at.

It's a base return of 7% and upside to potentially 10%. It's got a 40% to 50% upside. As Greg says, we don't expect that to achieve all of its upside in the first year. But at the same time that is the structured potential.

I think it's important to note that we're building on about, what? 40 acres? And we've got over 360 acres. There's a lot of land there that has capacity to be sold and proceeds of which to pass down.

Exactly.

And we have indicated in the press release that we have entered or the developer has entered into an option on a 60 acre parcel that was submitted as a potential casino parcel for the casino award in Wyandotte County, Kansas, which would result in a substantial pay down to our outstanding obligation.

So, you actually don't just participate in the upside of the three water parks? Also with regard to anything else built on the vacant land?

Correct. To the extent that it pays us down and we can move our expected returns closer to the original 10% that we had structured the deal at.

Okay. And then you'd mentioned potentially making some opportunistic acquisitions that sellers are holding off for lower caps. Your own preferred have actually lagged both the rally in the common and also the rally in the credit market. Would you consider repurchasing any of the preferred? Actually particularly the convertible preferred seems to for seem reason trade worse than the straight preferred. I don't know if they're being traded by different pockets of investors but would you consider a repurchase?

I do think what we will do, when we get back to the point that we have capital that's available to us, that we will look at all of the investment options, whether they be new theaters, existing theaters, as you say, converts. And I think you just make a decision on what you think is the best investment for that new capital.

This is Mark. I also think most of the activity you're seeing with converts is convertible debt and a deleveraging process or a basically buying back in the convertible debt and showing a gain related. This is convertible preferred so we consider it equity. There's not maturity or bullet out there. And also I think secondly liquidity is king as I mentioned in my comments and so to go the other way and actually buy back convertible preferred is counter to retaining our liquidity. So those are the two things. But as Greg mentioned, we will look at that. We continue to look at that and have been approached on that.

Certainly relative to making an acquisition you would have to -- if the preferred are trading at, plus the cap rates are 15%. It would be challenging to make a real estate acquisition there would be superior to that.

Right. But when you're in the mode --

Here's how we look at those things, as you do.

Jay, this is David. It's a combination of guarding carefully liquidity, as Mark and Greg indicated. Also those are -- we also had thoughts and conversations with different capital market players about that. But they're thinly traded, they're hard to come by. I don't think -- it's certainly something we're aware of. It's at this point nothing we have any plans to tell you about.

Would you consider selling assets just given that dislocation?

Always.

I think the convert preferred actually trade pretty actively. You start going and bidding, there would be liquidity there.

Alright.

Great. Thank you very much.

Thank you.

Okay. Bye.

Your next question will come from the line of [Rob Heim]. Please, proceed.

All my questions have been answered. Thank you.

Thank you.

Your next question will come from the line of Eric Lee. Please, proceed.

Hi. This is actually Ambika Goel. Can you provide some color on your 2010 debt maturities? Specifically the White Plains asset? Where are you relatively to the NOI threshold in order to extend that loan and does that account for filing the bankruptcy?

I think, Ambika, the most definitive statement we can make is we have executed a term sheet for that extension.

So, as I said, we expected with its current prospects to be extendable and as Greg indicated, we're working over that with the lender right now.

And both the loans, the mortgages that are rolling in 2010. Are those non-recourse or is there recourse back to the Company?

No. The White Plains loan is non-recourse. The $56 million loan related to Concord is recourse.

Okay. And then turning to the wine business, can you give some color on the asset that you're releasing or trying to sell? Just some more color on what exactly occurred?

Like I said, without getting into personalities, Ambika, there was a management change that we thought was taking the property in the wrong direction and therefore thought in the best interest of the asset and in our interest, we should take those properties back and find a new tenant or sell those properties. It's three wineries, a vineyard, and some tasting rooms associated with those wineries. It's in predominantly in the vineyards area in Napa. We just think for the long-term value it was the right thing to do.

What specific -- which vineyard is this again?

This is the Cosentino property.

So, the acquisition value of that was how much?

Approximately $20 million.

Are there any contingencies on the wine facility related to taking back that asset and having to release it? Is there anything we should be keeping an eye on?

That one was not financed --

There's no debt on it.

So it has no debt on it.

Okay. Great. And then turning to Schlitterbahn, are you receiving percentage rents from your other parks or just from the development project?

It's all three. It's a cumulative --

It's cumulative -- it's aggregate participation on all three parks.

Okay. And then on Toronto Life Square, I was just looking back at last quarter's numbers, the guidance you had given on NOI related to what NOI would be on opening and also on stabilized. It looks like the numbers are coming in a bit lower. Is there anything specifically that's driving the lower NOI expectations?

We're all looking confused because we thought we gave $15 million last time. Did you see a number that different, Ambika?

I saw $17 million and then the $25 million for the stabilized.

$17 million is a full year operation. We're looking at -- that some of the tenancies came in -- we talked about $15 million being an '09 number.

$17 million on a run rate --

Annualized run rate number.

Frankly, it's somewhat speculation on the $20 million to $25 million. It's just a matter of what you think that signage will go for and then the occupancy. That is an estimate in either case.

We probably have tempered our estimates there a little bit but it does have beyond even 20 that we're indicating here this morning, it probably does have potential backup towards the $25 million. It's just how aggressive you want to be about those assumption.

Okay. Great. Thank you.

Thank you, Ambika.

Your next question will come from the line of [Bob Gaskin]. Please, proceed.

Thank you and first, thanks for the increased disclosure. I think it's really important and helpful. The Schlitterbahn transaction, congratulations on that. I think that's taking a bad situation and really improving upon it. So, good job with that. Questions on the Toronto. Not to beat a dead horse, did this project come in significantly over budget? Or what was the original pro forma NOI? Because it just seems incomprehensible that if CAD20 million or CAD25 million was the original pro forma NOI for this project on a CAD330 million cost that you would've gotten into a second position on it. It doesn't seem like there's enough return to have taken that risk.

I think part of it is a function of the kind of premier asset. You'll recall we entered into a purchase and sell agreement for this asset at CAD325 million in August of last year. So, there is a lot of perceived value as David indicated in the signage that the expectation level when the signage and the economy is responding to more advertising, that we think that NOI number will be closer to CAD25 million and at the time, we had several offers who believed in that and thought the property was significantly ahead of where our position and the construction loan position was.

Several offers at what time?

In August of last year.

Okay. At a very frothy part of the market. But when you originally underwrote the deal, CAD25 million on CAD330 million is what? A 7.6%? So, what was the interest in doing that? Whether it's premier or not, were you speculating that there would be a lowered interest cap rate compression so you might be able to get out? Or what was - ?

If you understand the structure of the deal the way it was originally entered into is we could buy the asset at a -- we could buy 50% of the asset at a stated cap rate. That cap rate, at the time, was 9%. So, we could buy our 50% of the asset. So, we would've been -- have got a 9% cash on cash return for our 50% interest and we would've been repaid back anything beyond that.

Yes. We would've gotten our balance of our money back and that would've occurred through a refinancing of the first which was very reasonably expected given the time we entered into the deal. Plus, we're not the developer. We're the lender. So, we're looking at the first and second and more from what can that support. And as Greg mentioned, combined with the option at 9%, we were comfortable with our position.

Okay. Fair enough. Well, we can disagree. But one last thing, David, you started off the call talking about how The Street, you had told The Street that your numbers were going to be X and this big decrease or miss on a headline basis was The Street's fault. From an investor's standpoint, I would say that the Company really should do a better job at guiding The Street strong. The numbers are out there. They don't change. You should help move the down.

Alright. That's just a fine line between you're not supposed to be guiding people around, but we're trying to be informative. I hear you. At the same time, a lot of these things change literally week to week as to what possibly the resolution and what do we have recognition of income. So, but I tried in the last call to communicate that this was out there. We clearly didn't pop down our dividend and that was the cue, essentially, as I indicated, for this revision. But I hear you. It is a different time in terms of particularly these assets in particular, their level of predictability, particularly quarter to quarter, month to month.

Just to add to that, on the Concord project, later this month there's still discussions ongoing about potential payment.

Yes. Just within weeks.

It's an ongoing process and there's uncertainty whether that was going to be recognized in the quarter or not. We decided to be conservative, to go with this cash basis as required by our policy, but that was one of the other things that played into it.

Well, we going argue whether the accounting was aggressive or conservative to begin with, but in any event, let's move forward. Hopefully you can have successes like improving the Schlitterbahn and we won't have to have another call of rationalization and apologies. Let's just improve.

Right.

And your next question will come from the line of Jordan Sadler. It's a follow-up question.

Sorry, just quickly, on the retail portfolio, I think, Greg, you went through historical occupancies around 95% and if you exclude the big box stuff that's vacant out, it's still there. Any additional watch list tenants? Anything we should anticipate? Anybody non-current? I know you have quite a few restaurants in there and some other more dicey looking tenants that may be smaller.

Right now we don't have anybody out there. We just had -- as an example, we just had an Outback in Canada vacate, but we're already signed the lease for the new tenant there. So, other than an -- kind of that natural turn as we see things, no, Jordan, we don't have a watch list of key tenants that we're watching. If you look at our overall perspective, we don't have exposure -- when you look at the Circuit City, that was our only Circuit City. We don't have that kind of concentration of retail tenant exposure across our platform.

Okay. Last question is just on the term loan related to the Concord that expires, matures in September of next year. Any initial talks there given what's happened with that project?

Yes. I guess that's the short answer. Yes. There are discussions with that lender about extending there as well.

Has the change in the plan of the -- at the Concord been an event of default there or - ?

No. It is not.

Thank you.

Okay. Thanks.

Your next question is a follow-up question coming from the line of Anthony Paolone. Please, proceed.

Thanks. I just wanted to confirm on the dividend policy, you reduced the dividend but I know since you reduced it, guidance came down and historically you've kind of run it on a pay out basis. Do you feel comfortable with the current dividend?

Yes. I think the dividend represents about our normal payout ratio, given the range that we address of $3.40 to $3.60.

Okay. And then just one follow-up on Schlitterbahn. Do they have the ability to repay early?

Yes.

Would it be just at par? I'm just thinking if their parks were to blow the doors off and suddenly you are earning a much higher rate of return, can they repay early and you may not actually recoup your originally underwritten kind of return?

Tony, that is a possibility although we're kind of looking at this as not the project we originally envisioned and therefore getting paid back is not a bad answer.

We'll take that.

Okay. Understood. I appreciate it.

Thank you.

And your final question is a follow-up question coming from the line of Michael Bilerman. Excuse me. Please, proceed.

Just going back to Toronto Life Square, the CAD11.5 million for the retail, what sort of occupancy is baked into that?

Existing occupancy.

Which is at what level?

87%.

87%, 88%.

And so if you were to pro forma that out at 95%, that CAD11.5 million goes to where?

Probably CAD12.5 million. CAD13 million.

And so it's all the upside is taking the signage effectively from CAD3.5 million up over - ?

Approaching CAD8 million to CAD10 million.

Okay. And then I just wanted -- you talked about last quarter being the $17 million run rate and you talked previously, including your guidance in the fourth quarter. So, are we not going to get from $15 million today to a $17 million run rate by the end of the year?

It's not that, Michael. Part of that is in some aspects of this year with some of the tenancies, you have some free rent periods that would on a run rate basis be different than what you're going to actually receive this year.

So, your $15 million is a cash - $17 million is in place as sort of a gap or after free rent?

Right.

And just going back to Bob's question, because my understanding is this project did come out significantly above what initial cost was. Was it planned as a CAD330 million project?

It was originally a CAD275 million project.

Yes.

That's the basis that you made your investment on?

That's correct.

And the NOI numbers didn't change when you underwrote it at CAD275 million, effectively getting to the high end that -- you envisioned a CAD25 million number at CAD275 million and 9% cap would get you that amount?

That's correct.

Okay.

Just one more on Schlitterbahn. I don't believe there was any mention on the previously disclosed $25 million to $30 million equity injection from the family. Where does that stand?

That's been done. It's a necessary part to open the park up. The family is also to, Greg, to preserve and make sure that the Star Bonds are going to be available on an ongoing basis. We'd need to break the Star Bond escrow and they are going to buy Star Bonds as a way of interjecting additional capital into the project and that should happen in the next 30 to 60 days.

Just going back the loans on Concord and Toronto Life Square, all that's been accrued interest? You didn't feel anything necessary to -- while you're not booking any cash income, to remove the accrued portion on Concord and Toronto Life Square?

In both cases, management estimated the value considering these appraisals that were done which were well in excess of the carrying value that included accrued interest. So, we have seized accruing interest on both those projects, so the balance won't grow because we'll receive the cash when it comes. So, they won't grow and the current appraisal, as I said, is higher than the carrying value that includes the to date interest.

Right. And then just finally, the supplemental is extraordinarily helpful. I appreciate you putting that out there. I just had one question. As you look at your investment dollar page, page seven, if we look at the retail theaters, I guess the CAD104 million is your Toronto Life Square investment? Is that correct? The mortgage notes and related receivable?

I'm sorry.

On page seven?

One second. I'm sorry. Okay. Page seven. I'm on page seven. Sorry. I was on a different page.

Those mortgage notes and related receivable in retail theaters, is that CAD104 million Toronto Life Square?

Yes.

And then the accounts and notes receivable, that's where your effective, the Capelli loans are sitting?

Yes. On the accounts receivable. Right.

With normal accounts receivables, but his $30 million of notes are imbedded into that number?

Right.

Okay. And if you were break out this $1.9 billion between theaters and retail, what would that split be?

I think that slide that David showed what -- can you pull that back up?

It's possible.

Is the slideshow available as a download other than just clicking on the link? If it's not, if you could make that available prior to calls?

50% is a little over - of total assets, a little over 50% is theaters.

52%.

Under 20% - a little under 20% is other retail.

Theater related.

And theater located retail.

To your point, Michael, it will be available after our call, probably in a few hours on our website.

Okay. It's just helpful because it's hard to follow. If you make it available as a PDF just when the call starts, that way we can follow along and print it. It would be easier. So 80% of that $1.9 billion is direct theater?

When I comment on -- I'm talking about overall assets. I'm talking really off the base of $2.7 billion. Of that number 50% plus is theaters and about a little under 20% is non-theater retail. That's a little different than taking 20% of that number. It's 20% of the total gross assets.

So effectively $540 million of the $1.9 billion?

Yes. That's 20%.

That seems a little bit high. Okay. Thank you.

And there are no further questions at this time.

Alright. I appreciate everybody tuning in, the chance to talk to you. And of course we're always available further if you'd like to give us a call, if you think of something more. We look forward to, as I said in my closing comments, improved results. We're getting some things cleared up. We expect to improve on that further and we look forward to joining you next quarter. Thank you.

Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.