Pennsylvania Real Estate Investment Trust (PEI) 2007 Q2 法說會逐字稿

Ladies and gentlemen, this is the operator. Today's Pennsylvania Real Estate Investment Trust second quarter 2007 earnings conference call will begin now. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) Thank you.

It is now my pleasure to turn the floor over to your host, Garth Russell with KCSA. Sir, you may begin your conference.

Good morning, everybody. And before we turn the call over to management, I'm going to read the forward-looking statements. This conference call will contain forward-looking statements within the meaning of federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect PREIT's current views about future events and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by forward-looking statements. PREIT's business might be affected by uncertainties affecting real estate business--businesses generally as well as specific factors discussed in documents PREIT has filed with the Securities and Exchange Commission and in particular PREIT's annual report on form 10-K for the year ended December 31, 2006. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

It is now my pleasure to turn the call over to your Chairman and CEO, Ron Rubin. Ron, the floor is yours.

Thank you very much. Welcome to Pennsylvania REIT second quarter 2007 investor conference call. Joining me on the call today are Ed Glickman, President, Bob McCadden, CFO, and Joe Coradino, Executive Vice President and Head of our Retail Operations. Also in the room with me today are George Rubin, Vice Chairman of the company, and Bruce Goldman, our General Counsel. We will discuss our results for the second quarter of 2007 and some of our plans for the future. After we conclude our remarks, the call will be open for your questions.

As I have said previously, the company continues to benefit from our redevelopment program. As you will hear from Ed, Joe and Bob, our completed redevelopment projects, as expected, are generating improved occupancy and sales. And we expect the same with the current projects that are underway. These projects are elevating the quality of our portfolio, as shown by our continued increase in sales-per-square-foot, and the introduction of some first-of-the-market tenants at many of our assets. Today, you will hear about these accomplishments and about the status of projects in our active pipeline. There are many ground-up projects that we're also going to discuss with you in addition to the redevelopments. We continue to be pleased with the improvements we're making to our portfolio and with the response by retailers to the opportunities being created. As you can see, by our accomplishments, our progress and our plans, we are clearly focused on maximizing long-term returns for our shareholders.

And with that, I'll turn the call over to Ed Glickman.

Thanks, Ron. We had another good quarter. SFO for the second quarter was $0.82 per diluted share, a 1.2% increase from $0.81 for the first quarter of '06, and above the First Call consensus estimate. FFO for the first six months was $1.62 per diluted share, a 2.5% increase from $1.58 for the first six months of '06. Total NOI for the portfolio for the quarter was $72.9 million, approximately the same as the first quarter of '06. For the first six months, NOI was $146.4 million, a 1.3% decrease compared to the first six months of '06. Retail same-store NOI for the quarter was up $0.7 million, an increase of 0.9%. Year-to-date same-store was down by $0.7 million, a decrease of 0.5%. Where NOI improvement shows (inaudible) is the NOI of the A-properties where redevelopment and renovations were substantially completed last year, grew by 13%, over the second quarter in '06.

At the same time, our property operating statistics continued to improve. Sales productivity was up to $364 a foot, a 3.5% increase over last year. In fact, we now have 17 properties performing above $350 per square foot compared to 13 a year ago. The entire performing assets now represent 65% of this quarter's NOI compared to 53% a year ago. Non-anchor occupancy for the mall portfolio was also up 50 basis points to 86.5%, from 86% a year ago. At the eight properties under redevelopment, where renovations were substantially completed last year, non-anchor occupancy increased to 92.6%, at June 30 of '07, from 89.8% a year ago. Average base rent for the retail portfolio was up to $27.06, a 1.9% rise from $26.55 a year ago. During the quarter, we executed 184 non-anchor leases for approximately 470,000 square feet. 73,000 square feet of previously-leased space was re-leased at a new average base rent of $30.94, an increase of 20.8%. 224,000 square feet of renewals were completed at new base rents averaging $29.45 a foot, an increase of 9.4%. 170,000 square feet of previously vacant space was leased at $26.05 a foot.

In 2007, the company has committed approximately $97 million to its development and redevelopment work. Included in this amount are our expenditures on the following development projects. First, during early 2007, we substantially completed our Plaza at Magnolia Power Center and closed the sale of the Kohl's parcel this quarter. Our Home Depot at Lacey Township, New Jersey will open in the fourth quarter of this year. Our New River Power Center will be substantially complete by the end of this year. We will be breaking ground at Monroe Township Pennsylvania next week for a Target Anchor Tower Center. Lastly, we have received Board of Supervisors' initial approval for a New Garden Pennsylvania Town Center and expect to break ground in the middle of 2008. To continue our work, we expect to commit up to $200 million during the balance of the year. In addition, today, we are redeeming our 11% preferred shares, at an aggregate price of $131.8 million. To finance these capital requirements, we recently issued 287.5 million of convertible bonds, and completed an exceptional $150 million refinancing of our Mall at Prince Georges Plaza. On an interim basis, proceeds from these financings were used to reduce our line of credit balances, and we are now redrawing the line to fund our capital requirements. In his presentation, Bob will give you additional details on these transactions.

And now, Joe Coradino will provide you with detailed information on our redevelopment properties. Joe?

Thanks, Ed. We're pleased to share with you today the results of our completed redevelopments. The realization of our redevelopment vision is positively impacting the quality of our portfolio. It's noteworthy that net operating income at the eight projects that were completed in 2006 has increased by more than 13% over the second quarter of last year. At these properties, we generate a leasing spreads of 30%, over previous rents, for transactions completed during the quarter. And in-line occupancy has eclipsed 92%, an increase of 280 basis points over last year and well in excess of the portfolio average of 87.6%. Our redevelopment program continues to be robust. Of the company's 38 malls, eight redevelopments were completed in 2006. We've completed one so far this year, expect to complete four more by year-end, with seven slated for completion in 2008 and 2009. This will result in us having redeveloped over 50% of our malls, in the three-year period beginning with 2006.

We're also making significant progress at our five redevelopment properties in the Philadelphia metro market. At Cherry Hill Mall, where comp sales continue to increase despite a vacant anchor, the building facades are clearly evident for Crate and Barrel and The Container Store, both of which will be open for the 2007 holiday season. Demolition of the former Strawbridge's building to make way for Nordstrom has begun, and construction of the new food court will begin in late fall of this year. We're pleased to announce that we signed a lease with Maggiano's for a premiere location fronting Route 38. The transformation of Voorhees Town Center is taking shape with demolition complete, the new Macy's facade underway and the mall renovation on schedule, for completion in advance of this year's holiday season. Site work is underway for the residential and street retail components of the project, for initial occupancy, in the summer of 2008. During the quarter, we executed a lease with Crazy City, a 19,000 square foot indoor theme park, featuring interactive games, rides, and food targeted towards pre-teens, as well as with The Learning Center, a child care facility.

At Plymouth Meeting Mall, pads have been turned over to P.F. Changs, California Pizza Kitchen, Citibank and Red Stone Grill for first half 2008 openings. The lifestyle wing and Whole Foods addition is under construction and expected to open in the spring of 2008. We've recently executed a lease with Chipotle, a casual Mexican restaurant, for a mall location, further enhancing the dining options at the property. At Willow Grove Park, we're pleased to announce that we've executed a lease with the Cheesecake Factory for a location on the third level of the former Strawbridge's box. Both the Cheesecake Factory and Boscov's are under construction. Cheesecake Factory is expected to open in the fall of this year, and Boscov's is expected to open in the spring of 2008. We are negotiating with several national restaurants for the remainder of the third floor. And during the quarter, we opened a two-level H & M, White House Black Market and Back Rack, and excused a key lease with Sephora in our continuing mall remerchandising efforts. At Moorestown Mall, construction is underway for a 16,000 square foot [Maine Furniture], which is scheduled to open next month, a 15,000 square foot Eastern Mountain Sports and a 3,000 square foot Chipotle, both of which are expected to open during the fourth quarter. We're also adding 6,000 square feet of new restaurant outparcels, including a Pei Wei Asian diner.

Our redevelopment focuses portfolio wide and transcends the Philadelphia market. The progress has been substantial in our geographically diverse market dominant properties where we have focused on the completion of six key redevelopments. At Francis Scott Key, we completed the addition of Barnes and Noble, which opened in April. This has generated consumer interest, increasing traffic and sales productivity at the property. Comp sales at the property are up to 356 per square foot, an increase of 10.9% over last year. At Magnolia Mall, Dick's Sporting Goods has been open and operating since April, construction is underway for Barnes and Noble, which is on schedule to open in a few weeks, and the mall renovation is in progress to be completed in advance of the holiday season. At New River Valley Mall, where Dick's Sporting Goods opened last year, and the renovation was completed earlier this year, the new 58,000 square foot Regal Cinema opened for business during the first week of May. Landlord work is complete for the New River Community College which will open in the third quarter and the new food court is under construction, and on track, for a fourth quarter opening. At North Hanover Mall, construction is underway on Boscov's and Dick's Sporting Goods. Dick's will open for holiday 2007, and Boscov's is expected to open in the summer of 2008. At Jacksonville Mall, a 28,000 square foot Barnes and Noble store is under construction in the belt wing of the center for a spring '08 opening. At Beaver Valley Mall, construction is progressing on Dick's Sporting Goods, expected to open in the third quarter of this year.

We continue to transform our properties. We're responding to changing consumer demands, through our redevelopment efforts by enhancing the shopping experience, creating a more compelling environment for retailers and forging relationships with new retailers that are first to their respective markets. In fact, sales at our mall properties have already grown by 3.5% over last year, and future development and value creation opportunities continue to materialize.

With that, I'd like to turn it over to Bob McCadden.

Thanks, Joe. For the next few minutes, I will cover our second quarter GAAP earnings, current capital spending plans and recent capital market transactions. I will also reaffirm our FFO guidance for the balance of 2007. In the second quarter of 2006, net income available to common shareholders was approximately the same at $0.5 million, or $0.01 per diluted share. Net income for the second quarter of 2007 includes a $1.5 million gain on the sale of the Kohl's parcel at our Plaza Magnolia Power Center development in Florence, South Carolina. This gain was included in FFO for the quarter. We expect to sell the remaining parcel at this project sometime in mid 2008. Net income also includes a $0.6 million gain on the sale of an outparcel at New River Valley Mall, which was subject to a ground lease with Red Robin Restaurant. This gain was not included in FFO as the restaurant opened more than a year ago in March 2006. As discussed in prior conference calls, we expect that periodic land sales will be part of our ongoing business model. The amount and timing of future sales will depend on a number of factors and vary from period to period.

Our expense recovery rate which we calculate as expense reimbursements as a percentage of our CAM, real estate taxes and utilities expenses on our same store properties was 90.6% in the second quarter which was in line with the first quarter's ratio. While we were able to maintain the ratio this quarter, we continue to see pressure on recoveries, particularly in properties under development. Last year's comp-over ratio was 91.9%. We are aggressively managing our CAM expenses in light of the erosion we have seen in our recovery rates to mitigate the bottom line impact of this erosion. Through June 30 of this year, capital spending related to our redevelopment projects totaled approximately $69 million, and an additional $28 million was spent on ground-up developments. In the second half of the year, we expect our spending to ramp up as the number of our larger projects including Cherry Hill Mall, Voorhees Town Center and Plymouth Meeting Mall are now under construction. Second half spending is expected to be between $160 million and $190 million.

During the second quarter, we completed two significant financing transactions. First, in early May, we issued through our operating partnership, $287.5 million of 4% senior notes, due in 2012. In connection with this offering, we also entered into a Cap-call transaction, effectively raising the conversion premium on the notes to $63.74, which represented a 40% premium to the then current price of our shares. In mid May, we entered into a $150 million mortgage loan secured by the Mall at Prince Georges in Hyattsville, Maryland. This loan has a 10-year term and requires interest-only payments at a rate of 5.513%. After getting it back to the $4.1 million value of the forward starting swaps that were settled in the first quarter of this year in anticipation of this financing, the effect of interest rate on the mortgage loan was reduced by an additional 27 basis points to 5.24%. As of June 30, 2007, we had $2.2 billion of debt outstanding, which represented approximately 53% for a total market capitalization, including the $35 million drawn against our $500 million line of credit. As a result of the second quarter financings, our exposure to floating rate debt has been reduced significantly. Fixed rate debt now comprises 93% of the company's indebtedness, including our proportionate share of debt held by our partnerships, compared to 75% as of March 31 of this year. Our fixed rate debt had an average coupon rate of 5.94%, which represents a 49 basis points reduction in our average fixed rate debt, of 6.43%, as of June 30, 2006. After funding the redemption of the preferred stock today, we now have approximately $190 million outstanding under our credit facility. After giving effect to amounts required to support letters of credit, we have approximately $295 million of available borrowing capacity. We believe that we have sufficient liquidity and access to capital to continue to pursue our development and redevelopment goals. As a reminder, during 2005 and 2006, we entered into a total of $400 million of forward-starting swap agreements, to hedge the interest rate risk associated with new debt that we anticipate issuing to repay the 7.43% (inaudible) property, plus collateralized [REMIC], when it comes due next year. As of June 30 of this year, these swaps had an end of money value of approximately $20 million.

A little color on the REMIC properties. Eight of the 15 assets in the REMIC are under redevelopment or have redevelopments completed. The 15 properties generated NOI of approximately $90 million. They have an estimated value of somewhere between $1.2 billion to $1.4 billion. The repayment of the REMIC should provide for the additional flexibility to manage our balance sheet.

Turning to earnings guidance, we are reaffirming the 2007 guidance provided at our annual shareholders meeting in May. FFO per diluted share is estimated to be between $3.76 and $3.84, and our net income per share is expected to be between $0.66 and $0.74. Our G&A expenses for the full year are expected to be in the $41 million to $42 million range. The second quarter is usually our highest spending quarter, as we have the ICSC Convention and some other corporate events during the quarter. Our guidance includes the effect of lower interest rates on the exchangeable notes. Since we capitalized interest on qualified expenditures related to our development and redevelopment projects, a portion of the benefit of these lower interest rates will be reflected on our balance sheet. The remaining portion will reduce interest expense and result in increased net income and FFO. As a reminder, our 2007 guidance includes $0.32 per diluted share of FFO related to our preferred stock redemption. The excess of the carrying amount of preferred stock over the redemption price net of expenses of $13.3 million will be added to net income to arrive at net income available to common shareholders and FFO. Further, our guidance is based on steady safe business assumption, assuming no acquisitions or dispositions in the second half of the year. With that, we'll open it up for questions.

(OPERATOR INSTRUCTIONS) We'll pause for just a moment to compile the Q & A roster. Your first question comes from Matt Ostrower of Morgan Stanley.

Afternoon. I just wanted to--to ask the requisite question on--on Cap rates. I know you guys are in those markets. And more importantly, I gather, there's not a lot of evidence yet of changes, but if they were to change, it seems like the mall or productivity malls would be a decent candidate for that. And given all of your redevelopment spending, can you sort of talk about if we're sort of in a weak stock market but you did see some acquisition opportunities, how would you--how would you think about that from a balance sheet perspective?

We have a sufficient amount of liquidity available under our line of credit. It would definitely take some refocusing of our efforts, because over the next few years, we are fairly committed to a robust development and redevelopment program. And obviously, at some point, we would need to think about de-levering the company, either by repositioning assets or at some point, way down the line, we would need additional equity. Were we to go and move into acquisition mode.

Okay. And you how would you--I mean would you guys think about doing JV's in the event the equity markets sort of remain more volatile or closed?

Well, we're are always looking at the opportunity of doing joint ventures as something that we've done historically, and we feel that we're pretty skilled in operating that way, if that becomes the best way of financing the company.

And in terms of the Cap rate part of the question, are you also seeing no change yet? But in addition, are you seeing any deals sort of fall out of bed, so you don't have a new price, but a deal that might have closed six months ago is now not closing? Any evidence of that?

Well, we have intuition but not evidence.

Okay. Thanks very much.

Your next question comes from Jeffrey Spector of UBS.

Good afternoon. Just wanted to ask, at this point in time, if you're any more concerned today about the U.S. consumer than have you been in previous years?

I mean obviously--this is Joe Coradino. Obviously, gas prices are a factor, interest rates are a factor, but we're really responding to the U.S. consumer, to the shopper, at our properties, through our redevelopment, repositioning and remerchandising efforts. And I think our sales increases, at those properties, speak to that. We're seeing some real success in generating both traffic and sales within those assets.

Any slowdown on tenant expansion plans?

Actually, again, it's a redevelopment issue. I mean one of the things that we think is a great--is a great barometer for us is the number of new tenants that we're doing business with, that we haven't done in the past. We mentioned a number of them on the call, tenants like Maggiano's PF Chang's, California Pizza Kitchen, in the restaurant genre. We're also doing some soft good retailers for the first time, [Airy], [Zoomie], etcetera. So we're seeing actually real interest in our portfolio, driven by success of our redevelopments.

Okay. And then a specific question about the leasing spreads in the supplemental. I believe that it's saying the new leases signed were at approximately 21% spreads. Is that--am I reading that correctly? And can you discuss that?

Sure. Just go to the appropriate page. We're looking at page 10. And you're talking about the top of the page, previously leased space, second quarter?

Correct.

Yes. So it's 20.8%. On 72,929 feet. In 29 transactions. And you are looking at that correctly. That's not the net effect of economic, because you'll note that in the right-hand column is the annualized tenant improvement, but that's the delta in base rent.

Okay. And the number was strong for the quarter. Did this--was this attributed from the redevelopments that you mentioned, the eight properties?

If you look at the renewal spreads for the properties for the redevelopment properties completed in '06, for the quarter, that number was 30%. So that was certainly really driving up the results.

Okay. And then just a final question on the developments. It seemed like there was some improvements on a few of the projects, the expected yields. Can you comment on this? Is this--are there some efforts here that you think will continue--we'll continue to see some improvements on other projects?

Well, I think the yields, Jeff, we try to look at those each month, or each quarter, as we release our update. And in some cases, we're putting out estimates based on very preliminary conceptual plans for a project. And as we finalize the plans for the projects and actually replace assumptions with real transactions either on the cost side or the revenue side, those numbers will change. Sometimes, they go up, as they have in this quarter. Sometimes they go down, as they had in other quarters. But overall, I think our outlook for both the ground up development and redevelopment is pretty consistent with our view in prior quarters. I don't know if there has been any real fundamental changes in our outlook.

Okay. Thank you.

Your next question comes from Michael Mueller of J.P. Morgan.

Hi, a few questions. First of all, with respect to the 15, the REMIC properties you mentioned with a value of $1.2 billion to $1.4 billion, any initial thoughts at this point as to how many of those could be sold outright once they're freed up?

Well, I don't think we've made any decisions with respect to any--I mean, arguably, any of 15 could be sold once we're unencumbered from the REMIC. But we haven't made any decisions yet as to which properties, if any, would be sold a year from now.

Okay. I mean, when you get from 2008 to 2009, I guess in the heart of the spending for Cherry Hill, would there be a need to ramp up dispositions to fund that, or how do you stand without attacking any dispositions or taking any dispositions?

Yes. I think we always look at our portfolio, and we'll look to selectively call portions of the portfolio that don't meet our long term strategic objectives. So it's not something that we look at just based on episodic events. Rather we look at on an ongoing basis. So, yes, we will certainly consider. It gives us a [lower] flexibility to consider dispositions a year from now than we have today relative to those 15 properties. But this is something that we do as a matter of course on a fairly regular basis.

Okay. You talked earlier about land sale gains. And any changing guidance due to either call it the one-time items, if you want to call lease term, or land sale gains?

No. If our lease terms continue to be light this year compared to our historical average, we may have one more small gain less than probably a penny a share later in the year, depending upon where that transaction can close. But at this point, we're waiting to take a look at how back to school sales look, and be prepared to provide some additional insights into the full year, after the end of the third quarter. And we're still holding tight to our guidance as it sits today.

Okay. One other operating question, where do you think occupancy could end of the year, and then if we look forward a year, from now, where do you see occupancy compared to where you finished this year? Finish this quarter?

Well, I think, one point to be mentioned is that when we quote occupancy, we do not include temporary tenants, and that would drive our occupancy number by about 250 to 300 basis points. So just a point to keep in mind. But we're seeing in line occupancy increasing by about 150 basis points by the end of the year, approximately 89%.

Okay. And if we're looking year-over-year, how much--you've had about a 50 basis points increase this quarter year-over-year? Where do you think that comes out next year?

Yes. We're really just beginning our 2008 budgeting process, but we're not prepared to give guidance on occupancy rates a year from now.

Okay. And last question, any update on Gainesville?

We're in litigation in Gainesville. And, we're structuring the litigation in the hopes that we can get back to the table with the Board of Supervisors in Alachua County to revisit their decision that they made in the face of our development plan.

Okay. And note any time frame?

No.

No. Okay. Thank you.

Your next question comes from Nate Isbee, of Stifel, Nicolaus.

Hi, good afternoon.

Hi, Nate.

You had mentioned the 13% same-store growth on the redeveloped properties. Is there any same-store data you could give us on the rest of the portfolio? Just trying to get a sense of how much the ongoing redevelopment is affecting the portfolio, still?

Yes. If you look at our quarterly performance and year-to-date performance, the progress that we've made in our redevelopment--completed redevelopment has been largely offset by properties that are really in the throes of redevelopment. Properties like Plymouth Meeting Mall, Voorhees Town Center in particular, have large year-end year negative compared to 2006, and those two as well as some others have been a drag on the overall portfolio.

Okay. Overall, how much would you say it's down?

In terms of percentages?

Yes.

Let me see if I can give you something more specific there. But it's a much bigger--probably down, those properties are probably down about 7% for the quarter.

Okay. So that 7% for all of the properties excluding the redeveloped? Or those--just those specific?

It's those specific properties.

Okay. All right. And just last question. If I remember correctly, the same store NOI growth that you're quoting, the 13% on the redeveloped properties, that includes incremental GLA, correct?

Right. That's correct.

Do you have any sense what that number would be, excluding the incremental GLA? Just trying to get a sense of what that--just the re-tenanting has accomplished.

No, we haven't broke than out.

Okay. All right. Thanks.

(OPERATOR INSTRUCTIONS) Your next question comes from Jim Sullivan of Green Street Advisors.

Thank you. Your current share price is at about 30 plus percent discount to our estimate of the company's NAV. Can you comment on share repurchases and where they fit on your capital allocation menu? Why not take a marginal dollar that would otherwise go into redevelopment and buy back the whole portfolio on the cheap?

Well, that's a question that we look at all the time. As I mentioned when I went through our capital plan for the balance of the year, we're fairly well committed against the liquidity that we have at the moment. But obviously, looking beyond that, should the stock price remain low, it is a compelling purchase opportunity.

And you have a plan in place, is that right?

We do--we do have a plan in place. The issue that we face as we commit--and we've committed earlier this year--to go forward on a fair amount of redevelopment work, which is--it's not a commitment we take lightly in one sense (inaudible). It's not one that can--that we can stop on a dime. But obviously, we're concerned about where the stock price is, and we also view it as a great opportunity.

Understood. Different topic. Foot Locker is your third biggest tenant. They announced that they're closing 250 stores, do you have any insight into how many of your stores will be impacted?

Not at this time, we do not.

Okay. And then final question. With respect to the CAM reimbursements weakening at our redevelopment properties, I assume that's because you're spreading costs across a smaller base of tenants. Is that right?

Yes. There's probably a couple of things. Obviously, number one being that we have lower occupancy typically as we--at least we're replacing permanent tenants the next time we can with temporary tenants who aren't making a CAM contribution. And the other thing that's happening is that even for the tenants who stay in place, often times there's an inducement to keep them in place as opposed to if they have the right to kickout. They might go from a lease with extras to a percentage of sales, or a gross lease, during the redevelopment phase. I mean our expectation is that begins to bottom out. And I knew we'd see it in the completed redevelopment, the kind of deals you had to do a year or two ago, to keep tenants in place, obviously you don't have to do today, and some of those deals that they burn off, we can actually see improvement in our recoveries.

That trend along the lines of your expectation, as you entered into the redevelopment or has it had a greater impact than you expected?

Well, I think it's probably--I think when we started the redevelopment, in some cases we didn't appreciate the degree of leverage that some tenants might have exerted over us. But as we've gotten a little bit smarter with this, I think we've anticipated that, for this type of later redevelopment that we're currently undertaking. But I don't think it will be a surprise in the future.

Thank you.

Your next question is a follow-up question from Matt Ost--Ostrower of Morgan Stanley.

Hi. When I asked you that original question, you said you had some intuition about where things were going. Could you share that?

No.

Okay. Fair enough.

There are no more questions at this time. I'll turn the floor back over to our host.

Okay. I want to thank you, as usual, for your spirited participation in our--in our earnings call. There--some of the issues that have been raised by these questions are issues that we are struggling with ourselves. And we'll continue to, as we view the entire market and view the way our company's stock is being shown in relationship to our entire sector. We expect to continue our strategy of redevelopment and development where possible, because from an overall strategic standpoint, it is our belief that these assets that we have perform much better after redevelopment takes place. And we'll keep you advised as our decision-making continues and look forward to speaking to you again next quarter. Thank you very much.

This concludes today's Pennsylvania Real Estate Investment Trust second quarter 2007 earnings conference call. You may now disconnect.