Macerich Co (MAC) 2008 Q2 法說會逐字稿

Welcome to the Macerich Company second quarter 2008 earnings conference call.

Today's call is being recorded.

(OPERATOR INSTRUCTIONS) I'd like to remind everyone again that this conference is being recorded.

And now I'd like to turn the conference over to your host, Mr.

Tom O'Hern, Vice President of Investor Relations.

Please go ahead.

Thanks, Darryl.

Actually, this is Tom O'Hern, EVP and CFO, but I'm here to welcome you and also to introduce Jean Wood.

Jean is our new Vice President of Investor Relations.

Jean is a CPA by background, a Stanford grad, and a 14-year veteran of the Macerich financial team.

I'm sure Jean will do a good job for us as well and with that, I'm going to turn it over to Jean.

Thank you, Tom, and thank you everyone for joining us today on our second quarter 2008 earnings call.

During the course of this call, Management will be making forward-looking statements which are subject to uncertainties and risk associated with our business and industry.

For a more detailed description of these risks, please refer to the company's press release and SEC filing.

As this call will be webcast for some time to come, we believe it is important to note that time can render information stale and you should not rely on the continued accuracy of this material.

During this call we will discuss certain non-GAAP financial measures as defined by the SEC's Regulation G.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is included in the press release and the supplemental 8-K filings for the quarter which are posted in the investor section of the company's website at www.macerich.com.

Joining Tom and I today are Art Coppola, President and CEO, and Tony Grossi, Executive VP and COO.

With that, I would like to turn the call over to Tom.

Thanks Jean.

Today I'll be discussing the second quarter results, recent financing activity, status of our redevelopments, upcoming opportunities and our outlook for the balance of 2008.

Focusing first on operating metrics, the operating metrics remain strong in the second quarter with continued high occupancy levels and strong releasing spreads.

Total mall sales per square foot for the trailing 12 months were 468, that's up 2% from the 458 reported a year ago.

In fact, our top 25 properties are now averaging over $625 per square foot.

Occupancy remains strong with the occupancy coming in just slightly below 93%.

We came in at 92.9% at June 30, down slightly from 93.2% a year ago.

Leasing activity continued to be robust, both in terms of volumes and spreads.

We signed 370,000 square feet of mall store leases in the second quarter.

That was up 8% from a year ago.

The spread was very strong with new rent starting at 45.51 per square foot.

We had a positive releasing spread of 26.5% in the quarter.

Our average rent per square foot in the portfolio was up almost 7% to 41.13 a foot compared to $38.44 a year ago.

FFO per diluted share was up almost 12% compared to the second quarter of last year.

FFO per share was $1.16 for the quarter and that compared to $1.04 for the quarter ended June 30, 2007.

The mid point of our guidance was $1.12 and the street consensus was $1.15, so the quarter exceeded both.

Earnings per share for the quarter were $0.25 and that compared to $0.15 for the first quarter, excuse me the second quarter of last year.

Impacting the quarter we had same center NOI excluding lease termination revenue and SFAS 141 were up approximately 3.35% compared to the second quarter of last year.

Lease termination revenue, including JVs or prorata, was 2.3 million for the quarter.

That was down about 900,000 compared to 3.2 million in the second quarter of of last year.

Expense recovery rate was 93.4%.

That was down from 94.7% in the second quarter of last year.

DPI rent increases were 1.7 million higher than in the second quarter of last year.

Straight line rents were at 2.6 million and that was down from 3.1 million in the second quarter of 2007.

SFAS 141 income was 3.9 million, up from 3.5 million in the second quarter of last year.

The gain on sale of undepreciated assets during the quarter of approximately 2 million and that compared to $200,000 loss in the second quarter of last year.

Looking now at the balance sheet, we've had a tremendous amount of financing activity in the past 90 days.

I'll be discussing some of those transactions in more detail in a few moments.

Our average interest rate is 5.31 and the average interest rate on our fixed rate debt is 5.95 and average remaining maturity on the fixed rate debt of 4.25 years.

Our debt to market cap at quarter end was 59% and the interest coverage ratio was a very healthy 2.15 times.

At quarter end we had a total of 7.8 billion of debt outstanding includes JVs and prorata.

As of today, we have only three loans totaling 88 million that are remaining 2008 maturities and two of those loans have already received take-out commitments.

We'll be closing on those later this year.

Taking a look now at the transactions we've completed since the last earnings call.

We closed on six separate financings in the past 90 days, generally these loans were done with lenders where we have a long relationship.

The deal terms ranged on the short side from three years with an extension to five years, up to seven years.

The total amount of the financings were 1.045 billion and the excess proceeds above the old loan amounts came in at 600 million.

The details of the individual deals are in the press release, so I'm not going to repeat them here.

Suffice it to say, it was a very busy quarter.

Generated a significant amount of liquidity so we now have a substantial amount of capacity available under our line of credit and that line of credit, by the way, is scheduled for maturity of 2010 is extendable to 2011.

If you look at the 2009 maturities in the supplement, we have an extension option beyond 2009 on six of those loans totaling 258 million.

That leaves us with a very manageable maturity schedule of 689 million for 2009.

Those loans are some of our very best malls such as Queens Center, North Bridge Mall, Biltmore Fashion Square, Village of Corte Madera and Washington Square.

The average sales per square foot in those centers with maturities next year were $586 per foot.

All of the centers where we have maturing loans, the average sales per foot is nearly $600 a foot.

The average leverage level on those loans is approximately 35%.

What we have are loans maturing in 2009, very high quality malls, very low leverage.

We are currently in discussions with lenders for many of those 2009 maturities and we feel confident that we will generate a significant amount of excess proceeds just as we have recently done with the 2008 maturities.

Looking now at guidance.

We are reaffirming our previous FFO range for the year of $5 to $5.15 which at the mid point reflects a 9.85% increase from 2007.

Reminding you all we do have seasonality in our earnings and we allocate approximately 24% of the annual earnings to the third quarter and in the balance of what is remaining would fall through in the fourth quarter.

That guidance is based on our current view of the current market conditions in our business.

At this point, I will turn it over to Art.

Thank you, Tom.

I think that we've already put a lot of the information that we need to put out there.

I'm very, very optimistic in terms of where I see our business going, and I'd like to open it up for questions.

Thank you.

(OPERATOR INSTRUCTIONS) We'll take our first question from Christy McElroy with Banc of America Securities.

Please go ahead.

Good afternoon, guys.

Can you comment on what you're anticipating in terms of Mervyn's store closing and the portfolio going forward and I know that you you had planned to sell some of the boxes that weren't in your centers.

How have your plans changed at this point, if at all?

They really haven't changed.

Our Mervyn's investment was purely a real estate investment and at this point in time we feel very comfortable with that, and we'll see how things go with them but we don't anticipate any major changes there.

Christy, at this point in time we have no knowledge of any closures of the stores we own and it will be easier to assess at that point.

We do have a letter of credit that backs up those leases, those leases are also cross defaulted so it's too early to tell whether there's any economic impact as a result of their filing, but as we mentioned in the last call, we're very comfortable with the quality of the real estate and that's why we entered that transaction at the end of last year.

Had you anticipated a potential bankruptcy when you were underwriting the purchase of the portfolio?

I wouldn't say we anticipated it but we certainly raised that question, and we considered that as a possibility and factored that into our decision.

From a standpoint, there's not, what we've done for years is create value by recapturing big boxes.

Those rents on those spaces are between $8 and $9 a foot and historically we've done much better than that on our big box space.

Tony Grossi is here and Tony and his crew have gone through each and every space and consider what we would do to get that space back and we're very optimistic about our ability to create value there, Christy.

That's what we do.

One of our goals, Christy, was to control this real estate.

We have a million square feet of space that presents an opportunity for us to redeploy that FAR in 13 very, very important assets for us and we've looked at each and every one of the alternatives.

We have multiple scenarios where we can can redevelop the boxes, redemise the boxes or replace it with anchor tenants so we're comfortable we have a contingency plan to get back any of this real estate and as well as when you look at our track record, in the 11 federated boxes that we've redeployed and a lot of them are coming into fruition this year, we have proven confidence whereby we can recycle this FAR and these boxes and see increased value.

Okay, and then can you break out how tenant sales growth and same-store NOI growth has trended specifically in Phoenix?

From a qualitative perspective, you look across our five regions, Christy, we're finding in the northeast we're central and on the Pacific coast we're holding our own and in terms of our softening of sales we're feeling it primarily in Arizona.

Can you quantify that at all?

We don't have a break down at this point.

Okay.

And then my last went for Tom, last quarter you provided a forecast of 3.5% to 4%, maybe I missed it, same-store NOI growth for the year.

Given you've averaged a little bit below that in the first half would you say we're still on track for that average for the full year?

Well, Christy, if you look at that, we're maybe 25 basis points below that 3.5, if you take the average for the year and we think that we're going to be somewhere near that 3.5 for the full year but if we were to miss by even 50 basis points that's only 3 million of NOI, so that's less than $0.03 a share and it's well within our range and there's other things that have come along better than expected and so we don't think that's going to be an issue.

We do consider 3.35% same-center NOI growth to be pretty solid the way we calculate it, which is probably more conservative than most, so we're pretty happy with that and obviously we would not have reaffirmed the guidance if it were comfortable with where we're headed.

Great.

Thank you so much.

Thank you.

Thank you.

We'll take our next question with Christeen Kim with Deutsche Bank.

Please go ahead.

Good morning guys.

Good morning.

Just going back to Tom what you mentioned about some other positive things offsetting maybe hitting the low end of your same-store NOI growth target, what are some of the positive offsets?

Well we had in this quarter you may have noticed in the JV income there was other revenues noted and we forecast some sale commissions on land sales on some properties that were adjacent to SanTan Village and they came in at $0.06 or so a share for the quarter and we forecast $0.04, so there's $0.02 as one example.

There are a lot of little things.

I'd say most of our global assumptions, such as lease termination revenues, are coming in pretty much as expected.

We've forecast 10 million for the year and year-to-date I think we're 5.5 million so all of the assumptions are holding up pretty well in a variety of places.

Great.

Interest rates as well, Christy, are down from our forecast.

And just in terms of your leasing could you update us on where you stand on your 08 and 09 renewals and maybe a little commentary on how spreads are holding up?

Certainly.

This is Tony here.

We're finished for 2008.

We're well into 2009 and 2010 and what we're finding as a general rule that retailers are looking for quality.

They're securing space in the best malls and the traction that we are have in our renewable leasing and our new leasing is very, very good and really it's testimony to the quality of our portfolio.

In terms of deal specifics, deal terms, they're holding up as we expected.

There has been no erosion in rent or increases in TA.

The only measurable or noticeable difference between last year and this year is that retailers are taking a little bit longer to decide, a little bit longer to do due diligence in each of the markets and the administrative side of the leasing maybe taking a little longer.

Other than that, the terms of each specific deal are holding up.

Great.

That's helpful, thanks.

We'll take our next question with Michael Mueller with JP Morgan.

Please go ahead.

Hi.

I was wondering if you could share either metrics in terms of pre leasing for the '08-'09 redevelopment or at least some commentary about how the leasing is progressing relative to your expectations heading into this year.

Absolutely.

When you look at our development pipeline for '08 and '09, the one theme that comes across is the quality, is the market, the constrained markets that we're building in and the dense markets that we're building in.

These markets are fully developed.

They're proven assets and we're taking fortress malls and just making them better.

To start off with Santa Monica place, Santa Monica Place for us will be a luxury flagship, we're 60% committed.

We have just announced a Nordstrom to be the second anchor in Santa Monica Place and we will be making further announcements on retailers of a global luxury base that are very much aligned with Nordstrom and exceed the price points that Nordstrom presently offers, as well as we've got tremendous momentum on the restaurant side.

We have a collection of seven restaurants going on to the third level.

Each one specifically addressing a certain cuisine and two of them are run by celebrity chefs, so we are hugely confidence in terms of how Santa Monica Place is rolling out.

Secondly, Scottsdale Fashion Square in our expansion 160,000 square foot expansion with Barneys, we're 60% committed there and, as well, Scottsdale Fashion Center is a fortress asset for all of Arizona and adding 160,000 square feet of luxury and aspirational retail to an already successful center is going to bolster the future for Scottsdale Fashion and, as well, the level of confidence that retailers have specifically in this asset has been tremendous.

And opening this fall on a phase basis, starting in September actually, at the Oaks we have Nordstrom that will open its first store in Ventura County on September 5.

We're very excited about that, a first to market Nordstrom for the Thousand Oaks community, and that will be followed later in October by the unveiling of our interior renovation as well as our exterior retail expansion and we have many first to market retailers there as well that are catering to the junior fashion area which is an underserved component of the Oaks merchandising plant.

And following into Spring, December and into Spring, we'll have a Muvico which opens first of market, an upscale movie theatre, first location in the west that will open late December or early January, and then a restaurant campus featuring Ruth's Chris, Lazy Dog and Devon Seafood that will open in pads outside the Muvico theatre in the Spring so we're hugely excited about our work and about the quality of the inventory that we've introduced to the house Oaks community.

Okay, and as you move away from say the three big redevelopments there, is progress equally as good at the balance of the projects?

Yes.

We have, further out we have Estrella Falls that is scheduled to open in 2010 and we've improved the quality of that ground up development in addition to Harkins, in addition to Dillard's, we've also announced the Macy's deal.

Now, what we cautiously did, I think we reported in our last earnings call that we shifted the opening a year to allow the market to mature just one additional year and as well as align the anchor openings together because Macy's was opening in 2010, and that gives us a better package, a better opening statement if you will, to lease into and the leasing is going very well into Australia.

I'd like just to clarify, the vast majority of the development, redevelopment dollars we're spending in '08 and '09 are on Santa Monica Place and Scottsdale Fashion.

Absolutely, understood and last question, Tony when you were talking about the contingency plan for the Mervyn's locations, were you primarily talking about the 13 that are in Macerich Centers and, if so, what's the contingency plan for the other two buckets?

We've looked at each, and we've looked at several alternatives.

We continue to talk to the landlords and they've shown interest in repatriating their space, of course, but the plans are to redevelop, fall into three categories really.

One is redemise the space, one is to replace it with another equal size box, and where we control the 13 stores, there are opportunities to turn that into small shops.

As well as what I'd like to point out is that in addition to buying the 41 Mervyn's stores we also negotiated additional rights in the Mervin leases to recall that we bought not only leases but the tracks of land and we control the tracks of land and this is five, six, seven acres of land where we can have additional development opportunities to exploit as they present themselves, so we're looking at those alternatives as well.

Okay, great.

Thank you.

Thanks.

Thank you.

We'll take our next question with Craig Schmidt with Merrill Lynch.

Please go ahead, sir.

Most of my questions have been asked, but it sounds like Santa Monica Place might have surprised you on the upside or had you always intended to take it as luxury as it's going?

When we look at the Santa Monica market, you look at all of LA first thing, you look at how luxury is distributed and how the income and demographics are distributed, the west west side of LA is tremendously underserved at a demographic that earns over $100,000 per household.

It was always our intent to market this and to lease it up to aspirational and luxury retailers.

Third Street presents an offering that is perhaps more entertainment based, perhaps a little more junior and it was always our view to be complimentary with Third Street, not competitive with, and that positioning really is in the luxury segment.

Would you say that you might have the most premium pricing then at Santa Monica once you get opened?

Well our pricing at Santa Monica Place, we push for rent.

We are very aware of what Third Street rents are and we are aligned with Third Street rents in many, many cases (inaudible).

Great.

Thanks a lot.

Thanks, Craig.

We'll take our next question with Rich Moore with RBC Capital.

Please go ahead.

Rich?

Mr.

Moore, your line is open.

Sorry, am I in now?

You're in.

Good morning, guys, sorry.

I don't know how to work my phone I guess.

Tom, do you think you might need equity at some point here with everything you guys have going in the development pipeline?

No, Rich.

You might have missed this part of the commentary, but obviously we generate a lot of liquidity with the last round of financings and looking at 2009 I think we have the same opportunity there because the assets that are maturing, high quality, very underleveraged and I think there's going to be a significant amount of excess proceeds generated this next round of financing, so I would say we're not even remotely considering equity.

Okay, so even if Tom, even if you add 700 or 800 hundred million more of expenditures on the development pipeline over the next couple years you still don't think it's, you still don't see any need to sell assets or issue common or preferred or anything like that?

No.

No need whatsoever, Rich.

Keep in mind when we develop these things, just for illustration sake if you build them in a 10% return, the values got a cap rate substantially less than that so you've almost created enough equity right there not to budge your leverage level.

It's far different than needing capital to go out and do acquisitions at a 5% or 6% cap rate, developing at a 10.

You really don't stretch the leverage level at all so we're extremely comfortable with the balance sheet and where we are and see absolutely no need to go out for equity, Rich.

Okay, good.

Fair enough.

And then, Tony, on your existing spaces, on your existing centers, are you running into tenants looking for concessions or I'm sure they're looking for them but are you having to offer more concessions than usual to get tenants into spaces?

In the quality assets, and we look at our top 50 doing $550 per square foot.

We really haven't had to offer concessions.

Now we have in the lower tier of assets, good markets and bad markets we're always doing creative deals in those so those would be hard to measure because the creativity has always been high but for the balance of the portfolio, that represents a majority of our EBITDA, we haven't found ourselves at this time having to sacrifice our deal terms.

Okay, and then on the development front, I mean, one of the big issues with retailers over the past quarter, let's say, has been they're kind of cautioned toward developments.

Are you seeing of that or are you seeing maybe a lessening of interest in some of the developments?

We're not, and I think we may have a skewed perspective because of the quality that we're introducing to the market.

These are fully developed proven assets that we're making better.

Retailers see this quality.

There's very little risk in a retailer taking a position in the Oaks, Santa Monica Place or Scottsdale Fashion so the demand is there.

Our pricing is being achieved so I can't say that retailers are pulling back from those quality assets.

Okay, very good.

And then, Tom, last thing, on those land sale gains in the joint venture, is there more of that to come or was that kind of the -- ?

Well, we have other land sales, Rich, but this is kind of a unique situation, we're based on our partnership structure we get commissions on land sales.

Okay, so that won't carry forward into the next several quarters into

I wouldn't factor that into your model every quarter.

Very good.

Thanks guys.

Thanks Rich.

We'll take our next question with Michael Bilerman with Citigroup.

Tom just on that JV, so the commissions are in the other, in that $10 million that's being booked?

Right.

And then the 1.4 million represents the net gain on land sales?

Correct.

Okay.

On the Mervyn's boxes held for sale, the 284 million, you haven't been actively marketing those at all, right?

Well there's a subset of those, Michael, that are in malls owned by some of the other public companies and with we have had some conversations there presumably those companies are better capitalized than some of the other smaller private owners, but we're just advancing those discussions as well as considering marketing a few of the other properties.

And how much is your letter of credit that you have from them?

Letter of credit is approximately 8 million.

And you haven't taken any, and I guess not in your guidance, no write-offs or anything regarding the rent until you get more clarity?

They're current at this point.

Okay.

In terms of debt, Tom, you completed a billion dollars of financings which I know you've been working very hard the last six months on.

How was the discussions or terms changed on the upcoming refinancings?

I think you talked about how they're under leveraged in some of the best malls in your portfolio and so generally I'm trying to get a sense of whether the terms have changed at all, rates, in terms of thinking about next year.

Yes.

I think again, keep in mind, we're relationship borrowing, we always have been, we've got lot of banks in our line of credit and we do a lot of business with those guys, we're very tight with a fair number of life insurance companies that we've been doing business with for many, many years so we have, I think we have these transactions fairly successfully done and structured.

I think the toughest times out there were probably March and April, in my view, that's when it was toughest to do a deal and the yields were very wide and bouncing around quite a bit, excuse me, the spreads.

I think they've come in quite a bit and just to give you our most current information, we recently came to terms on a couple of power center financings that have maturities later this year and they were about 60% LTV deals.

They're in the Phoenix market and those spreads were 250 over the treasury.

I'd say in March that probably would have been 325 to 350 over the treasury.

So I think things have stabilized a little bit and we've had some very positive discussions actually with the '09 maturities, some of them are locked to prepayment or frankly we would have done them already.

None of these have recourse, right?

In one case in April we gave recourse but we gave it to get better pricing.

It was not an asset we were even the slightest bit worried about.

It was partial recourse.

20% recourse but in exchange for that we got a 25 basis point improvement in the interest rate.

Which loan was that?

That was Westside.

Okay, and for Tony, you finding where is the pushback coming from retailers and sort of maybe you put them into categories that you're having ease of transactions versus those retailers that are becoming more difficult, and you don't have to talk specific retailers maybe just categories of how those negotiations are occurring.

Sure.

The retailer today pulls back in terms of they're open to buy and because of that scarcity of open to buy, they're looking for the best opportunities, and they want to be assured of that, so there's a constant dialogue, and they see the quality.

They may take a little bit more time, deals at their end because of the scarcity of the open to buy, they're taking a little bit more time because their real estate committees are asking more questions.

They can't afford to wait for store contribution.

They need it immediately.

Those are the reasons why there's a flight to quality and we're not really seeing at all a deterioration in our deal terms and our deal expectations.

It's getting tougher to get the deal signed, no doubt about that, but the terms are holding.

Okay.

And then just Tom, just a request, I know you're going to be filing the Q shortly, but if it's possible to get a balance sheet or even some summary information with the earnings release that would be helpful in just updating models and seeing where things stand.

Yes, we'll factor that into the supplemental next time.

The 10-Q will be filed tomorrow, by the way, but we'll get that in next supplemental.

That's helpful.

Thank you.

We'll take our next question with Jay Habermann with Goldman Sachs.

Please go ahead.

Hi, guys, it's actually [Tom Baldwin] here with Jay.

On the 689 million in mortgages that are rolling next year, what are you guys targeting in terms of duration?

I know on the billion or so you did over the course of the last 90 days you had a good mix of 3, 5, and 7 year stuff.

Just curious what the break out might look like next year.

Well that depends, Tom.

I mean part of whether we go 7 or 10 depends on what our maturity schedule looks like.

You'll notice we don't have a huge amount of maturities in any given year and that's by design, so we'll take a look at what makes sense so we don't overload one year on a mature asset where we're not planning to do a redevelopment any time soon, we tend to go longer on the yield curve.

Also, what we pick may depend on the sharpness of the yield curve.

At the time we did those seven-year deals there was about a 30 or 40 basis point differential between a 7 and a 10 year deal so it made sense to go seven and that's why we went seven.

On a center such as the Oaks we're going to go shorter because we just expanded it, we just brought in Nordstrom.

We want to give ourselves a little bit of time for that asset to mature because when you take it out for financing after you've added an anchor and you got a little bit of sales history you end up getting far better results so there's a strategy with each and every asset so you'll see us continue to pick our spots depending on the asset and what we plan to do with it near term.

And as a follow-up, looking out at those refinancings next year, would you guys say you're more bias towards fixed or floating rate?

Our preference generally, and again it depends on the asset and what we plan to do, because obviously you have prepay considerations if you go fixed rate, floating you've got a more flexibility but generally we like to do longer term financing.

These are long-term assets and we've historically used long-term fixed rate financing.

You guys have any commitments in place for the debt you're looking to refinance next year?

Well, we don't because most of it isn't prepayable yet, Tom, but I will tell you for example, Washington Square, we've been approached by the existing lender who really doesn't want to lose that loan.

They love the asset, they like the quality of the asset and it's a real high quality situation to be in.

Okay.

One final question.

I know you guys don't have a regional break out for sales growth, but have trends changed much from what we saw last quarter when they were pretty significant declines in the sales growth in Southern California and in Phoenix particularly?

I think the trend, it's holding.

It's holding.

It's a similar trend.

All right, guys thanks a lot.

Thanks Tom.

We'll take our next question with Paul Morgan with FBR Capital Markets.

Please go ahead, sir.

Good morning.

On the 35% LTV you provided for the 2009 refinancings, what cap rate did you use for that?

Well I didn't use just one cap rate.

I looked at each asset and there are a variety of different qualities.

I understand, but like on a blended basis?

I don't know what the blended cap rate was.

We did it asset by asset.

It was conservative.

So in the six's?

I don't know what the blended rate was.

Could you, there's been a lot of discussion about visibility towards the holiday, seasonal and specialty leasing.

Maybe you could talk about what you're seeing in your malls for that component, whether you expect sort of any growth or consistent growth this year or whether to what extent is there less visibility than you normally have at this point of the year for the holiday?

I mean we're not in a position nor are we experts in getting into the retailers minds as to what do they expect coming this holiday season.

No, what do you expect for leasing, not what do they expect for sales.

I'm sorry, I thought you meant sales.

No.

I was talking about the kiosks, the temporary tenants that normally run higher in the fourth quarter, whether you have, what your expectations are for that component which ramps up and even though it's on shorter term leases --

I understand the question better now, thank you.

On the special leasing front we don't see any material change on trend.

It was a growth business for us over the last two years.

You saw double digit growth in specialty leasing.

It the slowed a bit to single digit growth and that's our expectation for the balance of the year.

We also have and are introducing some new initiatives on the specialty leasing, business development in terms of mall media, a new gift card launch, we announced a new partnership with American Express, those deals are more lucrative for us and the financial impact of those new deals will be appearing in the fourth quarter.

Okay.

Thanks and last question on the sales, is it just that you got, I know it's in your supplemental you mentioned you only had the sales through May.

Is that why you're not providing it or are you reconsidering providing sales on a retail basis in the macro?

Well, Paul, we're still rolling up our sales numbers for June.

Okay, so we'll get that later?

Well, we don't plan on filing another supplemental.

I mean I think what we put out there will hold until next quarter.

It's not providing, it's just that they're late this time around?

Right.

Okay, thanks.

At this time, there are no further questions.

I'd like to turn it back over to Management for any additional or closing remarks.

Thank you, everyone.

Appreciate you being on the call with us today.

We look forward to continued positive results going forward in the next few quarters.

Thanks.

Thank you.

Once again, ladies and gentlemen, this will conclude today's conference.

We thank you for your participation.

You may now disconnect.