Regency Centers Corp (REG) 2009 Q2 法說會逐字稿

Good morning my name is Anola, and I will be your conference facilitator today. At this time I would like to welcome everyone to the Regency Centers Corporation second-quarter 2009 earnings conference call. (Operator Instructions). I would now like to turn the conference over to Lisa Palmer, Senior Vice President of Capital Markets. Please go ahead.

On the call this morning are Hap Stein, Chairman and CEO; Mary Lou Fiala, Vice Chairman and COO; Bruce Johnson, CFO; Brian Smith, President and Chief Investment Officer; Chris Leavitt, Senior Vice President and Treasurer; and Jamie Shelton, Vice President of Real Estate Accounting.

Before we start I would like to address forward-looking statements that may beat addressed on the call. Forward-looking statements involve risks, uncertainties and assumptions. Actual future performance, outcomes and results may differ materially from those expressed in these forward-looking statements. Please refer to the documents filed by Regency Centers Corporation with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in these forward-looking statements.

Good morning to everyone. As you all are likely aware, and as we reported a few weeks ago, Regency's operating and development portfolios have deteriorated from both our original plan and last quarter's revised guidance.

You may remember that last quarter's guidance included same property NOI being down by 3% to 5%. Given our track record of 11 consecutive years of NOI growth in excess of 2.5%, at that time the team and I felt that we were being pretty conservative. However, with the benefit of 20/20 hindsight, it is now obvious that we underestimated the scope of the adverse impacts from the severe economic conditions in which we were operating, and didn't adequately stress test our assumptions, particularly as it relates to collections.

Unfortunately, the downward revisions overshadowed what is a very positive important and beneficial transaction for Regency, the purchase of Macquarie CountryWide's interest in our MCW II partnership by CalPERS and First Washington. This is a bittersweet -- it is bittersweet given our special relationship with MCW.

At the same time, MCW's sale to GRI will have substantial benefits for Regency, including a new, well-capitalized partner, with a long-term perspective, and option to increase our ownership in high-quality portfolio shopping centers at extremely compelling pricing, maintaining the size of the portfolios current footprint and profitable ongoing fee income.

As I try to put our recent experiences into context for the future, there are a number of critical points that I think are worth noting, and I want to share with you. While it appears the difficult economic conditions are beginning to stabilize, I anticipate rents, occupancy, collections and returns for the in-process developments will remain below historical norms well into next year.

At the same time, even taking into consideration the remaining lease up risk and delays in returns that are significantly below our original underwriting, there is substantial upside from developments that will only require a modest additional investment.

In spite of the stress that the economy is placing on our platform, and except for a few notable challenged assets, particularly a handful of larger community center developments in green areas, and our first and last lifestyle center development, I still believe Regency's quality portfolio and industry-leading operating systems will stand the test of time. And over 2 million square feet of new leases and renewals have been signed so far this year.

I wouldn't trade the talent and dedication of Regency's management team for anything. I also want to note that even with the operating portfolio performing below our high expectations, Regency has already made significant progress toward accomplishing a number of our important objectives, including facilitating the closing of the MCW sale to GRI, which virtually eliminates any risk associated with our partner's ability to finance its share of maturing mortgages, enables us to recognize enormous benefits. Accessing our large reservoir of unsecured assets through the Alliance mortgage financing, which augments our liquidity position. Implementing meaningful cost savings through measures that have reduced the number of positions by over 140 during the last 12 months.

While we truly are humbled by performance that is well below Regency's high standards, we will take the steps that will enable Regency to preserve and build shareholder value.

The first and foremost priority is to achieve the updated projections for the remainder of the year by continuing to intensely focus on leasing and preserving NOI in the operating and development portfolios.

Although we will give overriding precedence to blocking and tackling on the assets which we already own, and aside from two commitments on infill grocery anchored developments, new vertical construction will only be started if, and when, there is significantly more visibility in leasing side shop space. And that means, we ain't going to be doing much of it at all.

Regency still plans to use our offensive playbook to create meaningful value from compelling investment opportunities. The purchase of two terrific centers in partnership with Publix and increasing their ownership in the MCW partnership are two excellent examples. And you should know that we have every intention of capitalizing on that option to increase our ownership when the time is appropriate.

We remain committed to a strong balance sheet and having access to reliable internal and external sources of capital. And to that end, adding CalPERS as a partner in closing a new co-investment partnership are key objectives on which we are making progress.

We will continue to focus on streamlining and enhancing the efficiency and effectiveness of the organization in light of the current environment and also for the future. Finally, we are committed to maintaining transparency with our investors. And that includes sharing with you that bad and the ugly, along with the good.

Again, I want to personally convey to you that management takes revisions to earnings guidance very seriously. We are more determined than ever to perform over time and realize Regency's potential as a premier shopping center company.

Now Bruce, Mary Lou and Brian will provide color regarding the results for the quarter and future outlook.

FFO per share for the second quarter of 2009 before impairments was $0.62 per share. This was below previous guidance due in large part to receiving the MCW II disposition fee in the third quarter versus this quarter, as well as a significant increase in bad debt expense.

In addition, during the quarter Regency recognized an impairment charge of $28.7 million for two wholly-owned Regency properties, two out parcels, and 13 centers in a partnership with GRI that are targeted for sale over the next three years. After these impairment charges FFO per share for the second quarter was $0.24.

As outlined in our press release on July 17, the main drivers behind our revised guidance for the remainder of the year are a decline in forecasted NOI growth. A large component of the decline is lost rent from tenants with past-due balances. And as a result, bad debt expense and allowance for doubtful accounts is expected to be $4.8 million to $7.2 million for the year.

In addition, the impact on straight-line rent receivables is approximately $2.2 million to $3.3 million for these same struggling tenants that most likely will not complete their lease term.

Given the slower leasing that occurred in the second quarter and expected to continue through the remainder of the year, together with the impacts of co-tenancy clauses, net operating income from in-process developments has been lowered $4.2 million to $5.1 million. We have further reduced our expected development starts for the year and postponed the start of vertical construction on [Marietta] Marketplace. As a result, we will recognize lower capitalized interest and real estate taxes of $2.4 million.

Partially offsetting these negative items are savings in G&A related to reductions in incentive compensation of $3.9 million to $5.2 million. Our quarterly run rate in the future we expect to be between $12.5 million to $13.5 million for G&A.

These factors result in updated FFO per share guidance for 2009 before impairments of $2.76 to $2.90.

I want to comment on the trends we have seen in the past 90 days regarding collection of tenant receivables. These trends are unlike any in the history of our Company. During the quarter we noticed that greater than 90 day receivables were increasing beyond our normal experience. We realized that collectibility ratios have deteriorated beyond normal quarterly fluctuations, and prompted a reevaluation of collectibility.

We reacted immediately and reviewed in-depth tenant by tenant who is going to pay and who is not. Ultimately we recognized an expense of $4.8 million related to doubtful accounts in our wholly-owned portfolio.

It is important to keep in mind that historically bad debt expense had been consistent and relatively small. For the three-year period ending 2008 the pro rata average bad debt expense write-off as a percentage of revenues was approximately 27 basis points. For 2008 this number was 31 basis points. During the same year period receivables greater than 90 days averaged 1% of total revenue.

Moving forward we are reserving approximately 3 times our historical amount. Our views on collectibility have become more conservative, resulting in a number of changed policies. And in order to improve the quality of the receivables, we will not recognize income after 90 days unless it is cash.

Historically receivables from rent relief and entities in bankruptcy have been fully reserved. While we overestimated collectibility of past due accounts, as soon as these unprecedented trends emerged we acted diligently and recorded the necessary provision and communicated it to you.

Thank you, Bruce, and good morning everyone. Now over the past several quarters I have reported to you that our operating portfolio was holding up pretty well, considering the severity of the economic challenges. And although NOL was down last quarter and rent growth was still positive, albeit almost flat, and occupancy was over 93%. This quarter rent growth was a negative 3.8%, resulting in a negative 1.6% year-to-date.

Same-store NOI on a pro rata basis declined 10.6%. If you exclude reserves for accounts receivable and write-offs taken, NOI declined 4.2% compared with a decline of 2% in the first quarter. Occupancy is 93%; however rent paying occupancy is 100 to 150 basis points lower.

As we have been saying, we have been concerned about local tenant move outs. In the second quarter the scope broadened when more big tenants just -- that we we expected -- just stopped paying rent. And perhaps it was the quality of our portfolio and locations and the retailers that enabled our merchants to weather this storm a bit longer.

We closely monitor move outs as a parameter of tenant health, which remained relatively normalized. And typically when tenants couldn't pay their rent they just moved out in the middle of the night. In the past when tenants started to be in trouble they could rely on access to credit to pull them through. Now it is much more difficult given the credit freeze and the challenges to small-business lending with creditors such as CIT.

Tenants aren't moving out as quickly and we are working through evictions, which you know is a timely process. So we talked with 10 of our franchisee, PCI small shop tenants, to gauge the impact of CIT's lending freeze. The feedback we receive from our customers is that their franchisees have adapted by signing other sources, such as home-equity lines and local bank loans, as CIT tightened lending standards and reduced commitments over the past 18 months. This is impacting the number of new store openings as well.

We continue looking even more closely at those tenants requesting rent relief. Year-to-date we have had over 900 requests for relief and have granted 87. Of those that we denied, we have only had 30 tenants that have bailed. And any tenant requesting rent relief is flagged and their balance is closely scrutinized for collectibility. And as Bruce said, we automatically reserve those requests we do grant.

We have exhaustively examined the pool of failed tenants, looking for a trend so that we can proactively monitor our future risk. 69% of our accounts receivable over 90 days are local, mostly mom-and-pop tenants in spaces less than 10,000 feet. By retail categories these tenants are restaurants, housewares, jewelry and shoes. And as you would expect, the higher rent spaces over $30 per foot are the majority of the AR issues.

Our analysis also supports the premise behind our PCI program. PCI retailers make up 56% of Regency's total base rent, but are only 20% of our aging AR.

Regionally Southeast Florida has the highest percentage of receivables over 90 days of a percent of revenue. California and Inland Empire in particular are second, followed by Maryland and Virginia.

It is interesting to note that the Midwest has the lowest level. And that is perhaps because their economy worsened first and the weakest tenants have already moved out, as you can see in the occupancy percent.

Given the geographic diversity though of our portfolio, none of these regions are large enough to weigh the numbers to be the problem.

Despite all our challenges in the second quarter, we leased 1.2 million square feet of space, which is 150,000 square feet more than the same quarter of 2008. And it was even more than what we leased in the first quarter. The majority continues to be small shops averaging about 1900 square feet. And even in this market of reduced availability of financing for mom-and-pop, we signed 121 deals. There were also two transactions of over 14,000 feet. And these trends are very similar to what we saw in the first quarter.

So the real focus is to continue backfilling small shop space while making headway on our larger boxes over 15,000 feet. And to that end we have LOIs released documents in various stage of negotiation for 11 of our 20 vacant boxes in the operating portfolio. Five of these are very near signature with tenants, such as T.J. Maxx, DSW, Dick's Sporting Goods and Walgreens.

As weaker retailers with AR balances are moved out, we are backfilling these spaces with stronger opportunities that don't need financing to grow.

We also think our GreenGenuity program is an important initiative to control expenses for our existing tenants and make our expenses in our centers more competitive on a can basis for future tenants.

In the 18 months since the programs launched, we have accomplished several initiatives that reduced operating costs for our tenants. We installed smart irrigation controllers at 36 operating centers, and year-over-year water consumption has been reduced by 35%.

Of the six reroofing projects this year we have reroofed with energy-efficient materials that will lower utility costs for tenants. We are also negotiating on a national basis with our trash haulers to increase the amount of recyclables to reduce trash expense, as removing recyclable material is cheaper than removing trash. To our retailers a dollar is a dollar. And the more money that we can save them it will protect our revenue stream.

In summary, as Hap said, we are intensely focused on preserving rent paying occupancy, and NOI in the operating and development portfolios. Our teams are engaged and they are thinking creatively to drive leasing and to reduce expenses.

Good morning. I would like to elaborate on Hap's comment about the considerable benefits to Regency from the Macquarie GRI transactions. As you well know, CalPERS is one of the largest institutional investors in the world and brings tremendous financial strength and long-term perspective to the table as our partner.

Not only does GRI's investment allow Regency to maintain and ultimately increase its existing ownership in an irreplaceable portfolio, it gives us a partner with whom we can invest in future opportunities.

In addition, Regency negotiated for two options to increase its ownership in the partnership from a 25% to 40% at a significant discount to GRI's purchase price. After factoring in this discount Regency's cap rate on the purchase will be approximately 10%. A unique opportunity to invest further in a very high-quality, infill portfolio with which we are very familiar, and to do so at a very attractive return.

As part of the transaction Regency received a disposition fee equal to 1% of the gross value of the interest sold to GRI, with the first $7.8 million received last week with the closing of the first phase. In the unlikely event that we decide not to exercise the options, we will receive $17 million in payment. Regency will continue to manage the partnership and will receive asset management, property management and leasing fees.

Let me give you a little context on the 9.1% pricing. First, this is billion dollar plus transaction that went to market at a time when there was no liquidity in the system, so there were very few parties capable of even bidding. As I've indicated, larger transactions are selling at lower prices than one-off asset sales.

Second, Macquarie CountryWide sold only a partnership interest, which always commands a discount. Finally, the buyer had to assume future obligations to fund its share of the equity needed to refinance a large amount of CMBS debt maturing in the next 36 months.

As for the performance of the in-process portfolio, I would like to elaborate on what we expect the returns to be at different points in time, which will hopefully give you a little more insight into the timing of our development returns.

For the 43 in-process projects, the in-place returns, defined as NOI from only those leases signed as of 6/30/09 and assuming 100% of them are rent paying, divided by the ultimate cost of at full project buildout is 5.83%.

We also look at the average return at completion. As with the in-place returns, the at completion measurement looks at fully built out cost, but measures NOI at the point at which a non-stabilized project moves out of development, which under our policy is three years from the final anchor tenant's opening, or if there is no anchor, then three years from the date the first nonanchor tenant opens.

As of 6/30 our estimate of at completion return on cost is 7.12%. This is 75 basis points lower than what we believe the return would be at the end of last year. This measure gives us a fixed point in time to measure performance, which is relevant as the projected lease up periods have been extended.

And finally, we currently expect that when the projects ultimately reach the 95% leased level the stabilize returns will be 7.89% or 32 basis points lower than our estimates of last December. It goes without saying that not only are the returns expected to be less, but the time to achieve 95% occupancy are much longer than the original underwriting.

All of these returns have been impacted by slower leasing, delayed openings, and lower rent. And there could be additional downside risk on some of the developments. One of the risks I want to address is co-tentancy. For Regency the lion's share of this issue is limited to five of the 43 in-process projects that caused a little over $1 million reduction in NOI.

Although it had relatively small impact on our 2009 NOI reduction, Highland Village, which Hap and I refer to as Regency's first and last lifestyle development, has the most exposure to co-tenancies and termination rights. Consequently some of the $4 million of NOI being generated today may be at risk.

Even after taking into consideration the pressure on returns from slower leasing, lower rents, and co-tenancy issues, there is substantial embedded growth in these 43 projects. We have already spent nearly all the money to develop these projects, so all the incremental NOI to get us from our 3% current net [pain] return at a stabilized return of nearly 8%, will come with very little outlay of dollars. Today's NOI will increase by $27 million once all the existing signed leases are fully rent paying. $9 million of this NOI will start paying rent in 2009.

When the cycle turns and leasing is even close to normalized, there will be significant and inexpensive value add as the incremental return on the $98 million of net costs less to spend is 45%, generating $44 million more NOI than is in-place today.

While in this environment our focus is mostly defensive, we are playing offense opportunistically. We are actively pursuing another co-investment partnership, and are cautiously optimistic that we are close to finalizing. This new partnership will provide a further source of capital to provide additional liquidity and fund new opportunities. When this venture is finalized we, of course, will share more details with you.

In addition, subsequent to quarter end we acquired two Publix anchored shopping centers, the Shoppes of Pebblebrooke in Naples, Florida and Lynn Haven Shopping Center in Lynn Haven, Florida. These are very high-quality properties that were purchased in a 50-50 co-investment partnership with Publix for $17.9 million, or at a blended cap rate of 9.3%, which again is great pricing for two outstanding properties with high volume producing grocers.

In closing, while we continue to work through a difficult environment, we are excited and optimistic about our co-investment partnership with GRI and the prospect of adding a new partnership. And, once again, even though the performance of the developments is well below our original expectations, and future risk remains, there is also significant upside with little additional investment.

Thanks, Brian. Thanks, Mary Lu. Thanks, Bruce. We have learned much from our experiences this year and the last few years, including the importance of sticking to our knitting, (inaudible) anchored shopping centers. That great markets can dull the senses of even the most experienced management team.

I always think about what can go wrong, because it can, and the critical importance of a strong balance sheet and access to multiple sources of capital. We do realize that the world has changed. New development will pay a much smaller role for the foreseeable future. At the same time, in spite of some of the recent setbacks and future risk, I do have confidence in the ultimate potential of Regency's portfolio.

More importantly, I believe in our management team's capabilities as the Company is well positioned to maximize the value of our existing assets and to find and execute on any compelling opportunity that make sense for Regency.

We are looking forward to meeting the magnitude of the challenges ahead of us, and continuing our journey of building a premier shopping center company. We do appreciate your time, and we will now answer any questions you may have.

(Operator Instructions). Michael Mueller, JPMorgan.

Two questions. First of all, Brian, you mentioned I think 7.1% return after three years -- stabilization or when they come out (inaudible) after three years. Is that three years from today or -- I am assuming this stuff is rolling when you look at the whole pipeline, so is that 7.1% bogey, is it a year from now or two years from now if we look at it on a rolling basis?

It is a rolling basis. It is based on three years after the anchor tenant -- the last anchor tenant in the project opens. So I don't know when that will translate to.

There are certain number of properties that reach that point in '09, '10, '11, '12, '13, 14.

Okay, okay. So it's not three years from now. This rolling, so before that.

Correct.

And then the second question, in terms of the potential to take your stake up in the new JV, what is the best estimate in terms of timing as to when that can play out? Do you think we could see part of that happen in 2009, or what are you waiting for to make it happen?

Number one, just to remind everybody, the 5% option essentially expires sometime around the end of March, end of the first quarter. And in the remaining 10% option we've got probably approximately -- just a little bit less than two years from today. So we are just going to continue to monitor the situation, monitor the capital markets, monitor our balance sheet, and pull the trigger when the timing is right.

Okay. That's it. Thank you.

[Clinton Beverly], Citi.

Morning everyone. I am here with Michael Bilerman. Given the MCW joint venture was effectively an instrument loss when it matures, the changes remain -- you know, either of you can trigger a distribution in kind I think in a year's time. Can you comment on the likelihood of that distribution in kind happening? And also the changes in the fees that you're getting from the joint venture?

Number one, it is -- from everything that we understand it is GRI's/First Washington and CalPERS intention, this is a long-term co-investment partnership. Their view of this thing is very long-term. I might note that our partnership, although our partnership with Oregon is infinite life, they can cancel at any time after 90 days. And that partnership has been in place now for -- since 2000. So that is -- I think we ought to look at -- we are looking at it as a long-term relationship and long-term partnership. And I think that their intention is to grow their allocation and exposure to retail. So we are really excited about it from that standpoint.

Secondly, regarding the fee income, the only essential change in the fee income is that our asset management fee has been reduced from 20 to 10 basis points, but effectively we were paid the restructuring fee to compensate us for that.

And that revised 20 -- sorry, 10 basis points, that is on the new lower property valuation (multiple speakers)?

It is based upon -- that's correct -- the fair market value.

And Michael has got one. Thanks.

Mary Lu, I am just curious, in you role of ICFE chair over the past year, I guess what have you been able to glean from other shopping center owners or other -- or from the industry perspective relative to Regency's experience here with bad debt and some of the tenant defaults, of how either the private or the other public landlords are dealing with it this issue? I am just trying to figure out -- clearly access information and people from that role have to give you some perspective.

I think that -- it is a good question. If you stand back -- in that we do talk a lot -- our peers do, and certainly ICFE Board. It was interesting throughout this year to see how the dynamics and the conversations changed. We also have a lot of retailers there. The operators certainly had the leverage, and rent growth was going high and double-digit increases for ourselves, and quite frankly, for most of our peers.

I think the retailers at the same time, they had to grow to please their shareholders, and they weren't as worried about cannibalization. They were willing to be more aggressive in space and go in space that was green. And then as retail sales and the whole housing crisis pulled back, that just stopped.

It makes retailers much better and much more rational on their decisions. And then what -- and then we lost leverage, quite frankly.

I think what happened is that you look at us, everybody -- I think that some of the portfolios of our peers, quite frankly, didn't quite have the quality that we have had, if you just look at pure demographics. And that they have had -- if you look at that, when you look at their AR issues, they actually experienced -- and just from talking to them, I think they experienced it sooner than we did. And it really hit us hard this quarter.

I think that we are going to -- it is going to be tough for a while. I think that one thing that was hard on everybody that none of us really foresaw was the impact of the lack of credit, and how that would affect both our mom and pops and our franchisees. So here they are hit with negative comps. They are hit with higher rents. And they have no flexibility to get through these difficult times. And just -- they felt that they were going to be able to pay rent and they can't. They just don't have the resources.

So this -- I think the credit crunch clearly affected all of us differently. I think the AR issues, the percent of revenues were frankly quite in line with our peers. And we got hit later and now we are catching up, and we got hit hard with it.

But I think -- I just kind of to give the retail and I think the real estate perspective, it has been a challenging year. And there were lots of discussions between retailers and developers during these meetings, really just saying, we need rent reductions. We need rent reductions. And a lot of discussions about, well, when sales were good we didn't necessarily get percentage rent, and we've somehow got to work together on this. And I think we are. I think we are working together now, quite well. But it took us -- everybody a while for reality to set in on what was really happening. Does that help, Michael?

That does. It sounds like there was -- I guess from your perspective the quality of the portfolio never brought this issue to a head, and then just all of a sudden there was a dramatic increase in tenants just not paying their rent.

It really was collectibility. That is what changed was the collectibility of that rent.

As Bruce indicated, our experience of over the last three years was 28 basis points of actual write-off, including 31 basis points in 2008. Once again, with the benefit of 20/20 hindsight, we should have been more attentive to that. But as Mary Lou also said, we were focused on the move outside of the risk. And as I indicated, taking our NOI growth down to minus 3% to minus 5% in the last quarter, we didn't feel like we were -- we had our head in the sand from that standpoint. But come anyway, we missed it.

Jay Habermann, Goldman Sachs.

It is [Jahad]. I am here with Jay as well. Just a couple of questions. First on leasing, can you speak maybe a little bit on just how your strategies? Shifted over the past quarter, obviously TI seems to be down a little bit, and terms shorter as well. Just curious as to what your thoughts and strategy look like going forward here over the next couple of quarters.

We have (inaudible) -- leasing is the one bright spot in this whole thing. We have been able to lease over 1 million square feet per quarter. And quite frankly we are very close to where we were last year. So leasing hasn't been a big issue.

We have not had a lot of requests in terms of TIs and haven't had to have a lot of that, because if you look at how our leasing is and renewals, there is virtually no TIs. And there is still -- they are higher in new leases, but we have been done more renewals than new leases, so it averages out to be a lower number.

In terms of our strategy, it has been to maintain occupancy and to keep that revenue coming in and work with our tenants to get the revenue, and to maintain occupancy. We have done a lot different in terms of strategy over the past six months in terms of doing a lot more cold calling, using Internet channels to be able to contact our customers. Going after different types of customers, more service with doctors and dentists. Then training classes for all of our leasing agents wo are out in the field to really understand what this new world and new age is.

We have also had to have a lot of time looking at market rents, understanding what the new market rents are, and are we being realistic with the rents today and going forward.

So we have done a lot differently. And the people are working extremely hard. And quite frankly I am very proud of our leasing team and what they have been able to accomplish the first two quarters of this year.

Thanks, that's helpful. Then just as a follow-up, could you remind us where you stand on your 2009 renewals and then also on 2010 at this point?

I am sorry I didn't understand -- I didn't hear your question.

How many of your expirations have you already handled for '09 and 2010.

24r% is what we did. If you look at our early renewals, if that is what you're asking, is renewal rates overall -- when you look at early renewals we have 24% of our renewals expire in 2010.

That we have signed this year.

Yes.

24% for 2010. And our run rate right now is we are renewing still over 70% of our expiring leases in 2009.

Thanks, that's helpful. Then just second question. This is slightly bigger picture. I know it is probably a little bit early, but just any type of read as yet on expectations for 2010 in terms of whether occupancy -- what you expect in terms of occupancy, further pressure on rents, etc?

You know we are looking at -- obviously everybody is looking at that. And I think it is too early to tell. I mean, quite honestly, I think it would be premature. We are looking at --

Starting the project budget process.

Yes, we are starting our budget. Bruce was just saying we started our budget process. We do a bottoms up budget process. One thing that we are going to do differently this year, even more so -- not that we haven't done it, but it's more focused -- is looking at the last couple of quarter trends, applying those trends, not only looking from the sales perspective, but also from the accounting perspective and the trends to make sure that we have really covered everything. So we have a bit of a different process, kind of an enhanced process, but honestly it is just too early and inappropriate for me to comment.

Jeff Donnelly, Wells Fargo.

A question, you break out the leasing spreads in your supplemental for new and renewal deals, but how and where do you account for situations where you have restructured existing leases by extending the lease, for example, and blending the rate? I guess going forward would you be open to breaking those out separately?

That is just really our rent relief and how we look at it.

This is Bruce. That is something I am looking at. If it is significant, we are going to do something, I think, in a breakout. We just have to figure out the best way to do it. We have talked about it -- it has not reached the level, I think, where we need to do it yet, but I think -- I am concerned that it may become that level.

As you recall, and Jamie may be able to add it to this, but in the first quarter of the 22 that we had done, 18 of them were already baked into our rent growth numbers because we basically redid the whole lease. So it showed up as a new lease. And so there has been a small number of them that actually aren't in the rental growth number. But we can -- I will follow up with you. It is pretty insignificant.

As it becomes more significant, I think it is something that we do need to disclose though.

Most of them are included in the rental growth spreads.

You said they are included?

They are included.

Yes, they are.

I guess the other question I had was on occupancy. Just looking at your -- I guess I will call them your Western and Midwestern states, several of them -- Colorado, Illinois, Michigan, Ohio, Nevada -- occupancy overall is in the low to mid 80s. I guess I'm curious if that is just sort of a coincidental circumstance, single properties that are a victim of certain vacancies, or is it a bigger issue with demand for those markets?

It is a little bit of both. But for the majority, if you look at the occupancy in Ohio and even in Illinois and in Colorado, it is centers -- like we have the center called Kingsdale, that was a redevelopment play in Ohio that was in the low 40s in terms of occupancy. It hasn't moved. We just sold it, but it was something that pulled our occupancy down.

Then we have another one in Ohio. It is Park Place, where we had a vacancy that we have had -- we have been able to lease part of it, but it is a tough center. So what we're finding is in the Midwest regions where we have these large vacancies, it is more difficult to release that space. But it is really tailored to some big boxes in a few centers and not indicative of the entire portfolio.

I would also add, as you look at our supplemental, we enhanced that real estate status report with a couple of columns that has percent leased of operating properties only to try to exclude the development from the percent leased. If you look at Colorado, the column for operating properties only, it is actually -- it is closer to 93% leased. So this is something to take a closer look at.

That's helpful. As a follow-up, and maybe I am building on Michael's earlier question but, Mary Lou, concerning your contacts in the retail world, I guess if you had to characterize them, clearly the current environment is difficult, but do you sense any -- I guess I will call it, optimism under the surface for them, maybe on their prospects -- maybe it is 2010, maybe it is 2011 -- either how they think about square footage growth or even just refocusing the square footage they have? Are they looking that at this environment thinking there will be good opportunities for them or are they still pretty skittish?

They are still skittish. I do think though, interesting there was a group of retailers that got together, and a friend of mine was there and shared some information. And in there, there are some companies that are starting to position themselves looking at the fact that when things open up a little bit that they are going to absorb it and look at how they can gain market share.

So there is absolutely some retailers who are today even strategically looking, even with these negative comps, of how they are going to be the big winner out of it.

But I tell you in the short term, the majority of them are still protecting their balance sheet, very worried about comps. As you know, comps for this past quarter were four. And July expects to be even worse -- not anniversaying the past three days made it extremely difficult for the retailers.

I think the challenge at the end of the year is the fact that the retailers on a positive note were up against very negative comps in November and December. But on the other hand, what they have done is that they have adjusted their inventories and pricing so low, I worry about the fact that where they could have some positive comps that they have -- the customers, the traffic may be there, but because of pricing and lack of inventory, they are driving their comps down even further, which scares me than for their future growth for 2010.

So the general statement I would say, still skittish. They're very careful. And the real smart guys are out there making sure their balance sheet is good, knowing that there is going to be opportunities for them to take over other companies and be the dominant player.

Ross Nussbaum, UBS.

A couple questions. I wanted to follow up on some of the commentary regarding the cap rate on the Macquarie deal. I understand the nuances around the size of the transaction and the joint venture interest. But when I then hear the acquisition cap rate on that public center down in Naples, and I looked at your guidance on the last page of your supplemental in terms of what you're thinking about in terms of (inaudible) acquisitions or dispositions, how are you thinking about -- when you look at what is on the market now, do you think the grocery anchored -- decent quality grocery anchored shopping centers are trading in the mid-to high 8s, or -- I mean, you just bought one over a 9. How do we all think about that?

Let me just (multiple speakers). Go ahead.

The thing you've got to look at when you talk about the two Publix acquisitions is again, similar to Macquarie transaction, you're talking about portfolio pricing. It was a $400 million portfolio that was priced. The second thing is that that portfolio (multiple speakers).

It was part of a portfolio. There was a right of refusal that was there -- there was a right of refusal in there. And because of that right of refusal is a portfolio of cap rate as Brian said, and we had a right of refusal there.

What happened is they were too -- previously Regency Macquarie owned properties that were part of the sale to Inland, where the sale to Inland -- so it was priced into that portfolio, but it triggered a right of first refusal in the Publix lease. Which Publix actually acted on with us as their partner, because we had 1031 proceeds sitting in the bank that we needed to put to work, and we used those 1031 proceeds from the sale of what we sold in the first quarter, Regency Village, we used those proceeds to acquire this. So Regency's cash outlay was $1.6 million for those centers and the pricing was based on the sales to Inland.

So again, it is a little bit of an exception, because it is very similar to all the characteristics that Brian described for the MCW II portfolio. It was somewhat of a [destructive] sale with a large portfolio.

That is helpful. Obviously I wouldn't have known that if I didn't ask. With respect to the development pipeline, what do you think the breakout is going forward in terms of what you end up holding out right versus joint venturing, versus selling out right, is that mix changing as a result of what is going on?

I don't think so. First of all, as Hap mentioned, there is just not going to be that much. In fact, it would be a pretty unique opportunity to be able to do it. I would say that the vast majority are likely to be in the next many years grocery anchored neighborhood centers. And therefore those kind of properties that we would want to hold long-term, and then it is just a question of do we own them out right or do we put them into a co-investment partnership.

How do you book that from an accounting standpoint? If you end up stabilizing these things, owning them for a year or two, how do you -- are you going to be booking gains into FFO in the future? How is that going to end up working?

We are only going to be booking gains into FFO in the future, or losses in the future, to the extent that we decide to buy or sell a property. And I think that there is probably going to be a lot less of that transaction activity related to development in the future for us.

Let me just clarify slightly. I think your question was basically will we recognize transaction profits from contributions specifically. Am I right?

Yes, I am just thinking if you end up holding an asset for a few years.

They meet our rules for recognizing profits in that. And basically beyond -- beyond -- I think you can go to the supplemental and look at that, but effectively what is it today -- Alisa?

Three. As long as we sell it within three years from when it is moved into the operating a portfolio. And Brian had discussed -- defined earlier when we do that. So it is not -- we don't wait until it is 95% leased and then three years from then. We will move it into the operating portfolio, which is at least three years from the last anchor opening basically, and then we have three years --.

Just from my perspective, I am not expecting a lot of that activity to occur going forward.

We would continue to book it if we were going to sell it, but there is this going to be a lot less of it.

If I could just have one final follow-up. I think Clinton asked a question before on the length of the management agreement with CalPERS, First Washington. I think, Hap, you answered the question that you expect it to be a long-term relationship. I don't know if I missed the answer in that. Is there an actual contractual length of the agreement, but there is a handshake that leads you to believe that it will be longer than that?

The partnership is infinite life, so the asset management piece of that falls into the partnership. And then the property management was just -- it has not changed. If you recall from our original Macquarie partnership, it was ten-year term with an additional ten-year extension option at Regency's sole option.

Got it. Okay.

I think we are five, six -- five years into that.

The one year really comes up with our rights to liquidate. Both of us have that right. And that is where -- that is what -- there may be some confusion in the market. Our view of this is this is a long-term relationship and that is what we are going to do to maintain that.

And we do have distribution in kind rights again.

Ian Weissman, ISI Group.

Maybe a question for Mary Lou. Mary Lou, you have talked a lot about, geographically where the issues for your portfolio has been, and even breaking out local versus national tenants. Is there a distinction between some of your newer centers where rents are certainly at market and the centers you have developed versus some of the older centers?

Yes, we have analyzed it, and the answer is yes, there is a difference. It is not huge, but there is definitely a difference between centers that are five years and newer and then our older centers. I think a lot of that has to do with quite frankly the infill nature of our centers and the leases where we are seeing upside. And where our newer centers we pushed market rents, and we are seeing that we are taking some hits on that. So there is a difference. Age of center has -- it does matter to some extent -- not huge, but some.

Any way to quantify that? Would you say the bulk of the issues are in the newer centers or it is hard to --?

You really can't. We try -- I tell you, we have sliced and diced this darn thing every way that we possibly can. We've looked geographic. We've looked by tenant. We have looked by category of business. We have looked by new centers, old centers. We have looked by quality of centers and densities and that.

And, yes, there are a minor changes based on what we would say it is an A center there is a difference. And definitely older centers with higher densities. But there is nothing that I can stand here and go, gosh, if we weren't in this market, or if we didn't have these new centers, that would have been significantly a big enough change to be able to look at it. And trust me, we have sliced and diced this everywhere we possibly could.

My final question. I now you have sort of addressed the question about big picture where we are today, and I know you're looking at your '10 budgets. But it seems like your comment with respect to the retail environment today are slightly more negative than a lot of your peers, who have said that rent relief requests have stopped and they are starting to see a pickup in demand. Can you just maybe address some of the differences between what you're seeing and maybe some of your peers?

I mean I can speak to everything that our peers said, but I can speak to us. We have seen -- I think what happened in the first quarter was that people in terms of rent relief were starting to ask. And quite frankly I think pressure in the national chains from the CEOs, you better darn well get some rent relief. You got it from the national chains and then the local mom and pops who know that their neighbor maybe got rent relief.

So [going for a week], we really have seen an escalation in requests. And then we have, as you know, our process in terms of going through that, which is reviewing three years of financials, looking at a payment plan with them, and trying to figure it. So we haven't in terms of numbers of rent relief, in terms of contractual ones we haven't seen a lot.

And I can't tell you if our peers are right or wrong in terms of being more optimistic. But I can tell you if you look at retail sales for the second quarter they were poor, the worse that they have been. For third quarter we are up against a tax rebate. And July is going to be -- prediction is going to be over -- or came in at over 9%. I think retail sales, and I sit on two retail boards, and talk to my friends all the time, and people are still very, very, very, very cautious about what is going on in retail and in the industry.

I would say one thing though, at the end of the day when you say, are you positive or negative, we signed 1.2 million square feet of leases. That was more than what we signed second quarter in 2008, and a little bit more than first quarter. So our leasing is really on par with historical levels. So I am more positive about -- I mean, leasing, but I still think there is some tenants out there that are going to have a hard time, and I think you are going to see some issues going [longer].

But is that pickup in leasing more just catch up from a period of time where tenants weren't doing anything and making decisions, or is that incremental new demand?

No, it is incremental. I mean, no, it is really not that they weren't catching up. It was -- it has been consistent, a million plus square feet every quarter. And if you talk to the guys, they certainly haven't [had not] retailers out there.

Surprisingly even some of the leasing that we have done are the mom-and-pops, who are well-capitalized, and who now see it as an opportunity to grow and take advantage of some of these centers that they wanted to get in, where they have not been able to because of new vacancy.

So I think you've got -- there is always winners and losers and -- but it is not a lot of pent-up demand in my view.

I think that is -- that is the key point. Everybody knows you can argue around the edges whether we are stabilized, whether we have hit bottom yet, whether we are coming out of the bottom. It is going to be tough conditions for a long period of time. I do think one of the encouraging signs, and Mary Lou mentioned this, is that retailers have -- one good thing about -- have reduced their inventories. They have reduced their G&A. And there is going to be winners and losers, and as a result of that, I think we are seeing some pickup in demand and in tenant activity.

Thank you very much.

Chris Lucas, Robert W. Baird.

Just trying to follow up on the Accounts Receivable question. I guess I'm just trying to reconcile the modest decrease in occupancy with the significant ramp up in the receivables. And what exactly is likely to occur as you guys think about those receivables, and whether or not those tenants are likely candidates for rent relief, whether we should be thinking about that as an ongoing sort of lower rent level for those, or are these guys just moving out at some point here in the third quarter, or they are gone already?

We are still trying to assess all of that in terms of how we are going to look at that. But let me -- in terms -- I think part of your question relates, where should we look at run rate. From our perspective in terms of our downside analysis, we said we have built into our guidance effectively 2% on a pro rata basis of total revenue for bad debt expenses. We intend effectively to build up our reserve on a monthly basis -- ratably on a monthly basis to that extent.

We will see at the end of the day how this shakes out with what tenants don't show -- or are going to make it or not going to make it. But Mary Lou gave some numbers that I think are relevant to your question. And she indicated between 1% -- I think 1.5%, I think is what she said, was effective -- was basically not -- you could take that from a non-rent paying perspective.

Of the 93% occupancy, you've got 100 to 150 basis points --

That is not [rent pay].

That you also would add to the reduction in occupancy from a year ago of about 140, 150 basis points.

Correct.

Okay.

Does that answer your question?

Yes. I guess, Bruce, I guess the question that -- the follow-up to me would be is there a change in your accounting policies then as it relates to your Accounts Receivable?

None whatsoever. What we really ended up changing is our collectibility view.

And then on the expense side, at this point in the cycle, particularly as it relates to operating expenses at the tenant level, do you feel like you have wrung out as much as you can at this point, or is there more opportunity?

I think there is more opportunity. We are doing -- if you look at our different line items and how -- there are some things that are uncontrollable. We had snow removal expenses. We had -- electricity has gone up double-digit. But we are really working very hard, as I mentioned, on the trash hauling, we are working on solar roofs. We've had success with water and the irrigation system of reducing costs by 35%. A lot of this stuff is we have been testing in maybe 35, 40 centers, but we have in plan another 50 centers to roll out, and we will continue to do so.

So I think many of the things that we're doing are going to help offset some of the increase in fixed costs.

And if I --.

Let me -- just one final point, because I think there is something out there on the horizon that is going to impact all of us, and that is municipalities and state governments looking for additional sources of revenues. Part of that could be in cap and trade issues, if we ended up having that. But real estate taxes in particular that are going to support local governments. And I am concerned that we are going to see increased millage rates that is going to be passed through directly. That is a big component of the expense -- the net expense the tenant pays to us.

David Wigginton, Macquarie.

A couple of quick questions with respect to the guidance. Your disposition guidance is $50 million to $100 million, and you have only closed on $9 million for the year. Can you talk maybe a little about where you are in this sale process currently, and what your expectations are for the second half of the year as far as timing?

Of that $150 million we are expecting that a good chunk of it, about two-thirds of that would come from this new partnership. And as Hap mentioned, we would like to close that before the end of the year, so we feel pretty good about a big portion of that.

If you look at the other $50 million or so, we were about two-thirds of the way through that already. We have already closed on $29 million. So we still have --

We closed after the end of the quarter.

We closed after the end of the quarter, right. But so we really have just a little ways to go. We've got a couple of projects that are on the market, and frankly I don't really know how to handicap it in this market. A lot of the buyers are looking for seller financing, and we'll just have to see how it goes. But so far we are right in the middle of our guidance.

Then with respect to the third-party JV acquisition guidance, does that reflect your expectation of increasing your stake in MCW or is that something else?

That would basically be other third-party acquisitions outside of our increasing our ownership in MCW.

The final question. Bruce, I think if I heard you right, you said your expectation for 2009 for uncollectible or bad debt expense was $4.8 million to $7.2 million. If that is the case, then your recorded $4.8 million in the quarter here, so is there a potential that you won't have to make any further allowances in the second half of the year?

What we intend, basically, as I indicated in my prior conversation, to effectively increase our reserves by approximately -- by the number I gave you on a ratable basis. So it is 2% pro rata of our total revenues, our pro rata to total revenue basis.

Great. Thank you.

Our reserves will go up by that amount. We will recognize the appropriate bad debt expense to write-off against that.

Jim Sullivan, Green Street Advisors.

It is Nick Vedder here. I just had a question on the grocery business. It looks like some of the large supermarket chains have recently reported declining same-store sales and thinner margins. I am just curious what your comments are and what you are hearing from the grocers in terms of the health of their business, and also in terms of the possibility or likelihood of additional store closings?

Kroger's business is very good. [Smith's] business is very good. It I think Publix is having a tougher time than they've had in a long period of time. In spite of that, I haven't heard anything out of them as far as store closings from them. So I would -- Safeway indicated that they were having a tougher time. And Mary Luke can --

I think the thing is what is happening with the grocery stores is that -- there is twofold. One is definitely, I think with consumer -- the moderate consumer is getting to be more, I guess I would say trendy and okay to go to Wal-Mart and save money. And I think Wal-Mart is really capitalizing on their campaign to bring people in, and trying to do a better job in the stores. So, one, I think there is a legitimate there.

But I think the big issue really is is that with these grocers it is really more of a price issue. They have had to go back and reduce prices to be more competitive than they had been historically. So it is not so much a traffic issue, it is a price issue.

To Hap's point, Kroger really was the most aggressive in the industry of doing that. During this whole thing when Wal-Mart expanded, they had the most exposure to it and did a very good job. And now they are used to operating that way, used to bringing that value consumer in, and they're benefiting in terms of sales during this difficult economic time.

Some of the other grocers are going through that process, as we think. I think in general the growth grocery business may remain stable. The comps aren't as strong as they were, but overall it remains stable. And that we've got pretty darn good grocers. And I haven't, like Hap, have heard of anybody who is standing back and really looking at store closures. But I think that is what is going on. It is a pricing issue more than anything.

They are slowing their growth and demand for new stores, but --

The good news is that though in some of those pricing issues the consumer is now willing to trade down to some of the private label. And overall I think it will help their margins, if they can get that consumer accustomed to that, and before the consumer can do it.

Okay. So it sounds like there is not a whole lot of concern there.

No, we are really not.

Nathan Isbee, Stifel Nicolaus.

Mary Lou, you had previously said that same store NOI guidance makes specific assumptions about additional national retailer bankruptcies. Can you just break out how much of your same story decline is related to such bankruptcies?

As a matter of fact, if you look at bankruptcies that took place in LA and what occurred in '09, it is about 44% of what we have lost has come from vacant spaces out of those bankruptcies. So we did -- I mean, Hap mentioned what we were focused on was moves out, and what we were focused on were national bankruptcies. What hit us as a surprise was the lack of collectibility of the tenants, especially on mom-and-pops. And, Brian, if you have more color on it --

I think you're right. We had measurements of 2008 into 2009 accounting for 44% of the $6 million of decreased NOI. There is, what, 29 bankruptcies in 2009, and seven of those bankruptcies where retailers who are reflected in our portfolio. And altogether they had 21 locations. 10 of those have closed. So not too bad if you look at it that way, although 44% is a big number.

But we still have some of the carryover from '08 with Linens 'n Things and Circuit City that is affecting this year's numbers.

But how about -- what are you assuming in terms of what is going to happen in the second part of '09?

That is -- it is hard to say. When we incorporated that into our beginning our minus 3% to 5%, we went over those assumptions of what we thought could happen. And then from there the biggest change, as you know, is our collectability in our AR and our bad debt expense.

So I think it is built in to the low end of our guidance, with the caveat that if something very large happened and occurred, it wouldn't be. So if a certain category went away, or one of our big grocers or something like that, that is not incorporated, but we do have some of it into the low end of our guidance.

Alex Barron, Agency Trading Group.

I wanted to ask you, how many square feet, or how many tenants moved out this quarter? And you guys track the reasons why they are moving out? Is it because their lease expired and they found a better deal across the street or are they just going out of business?

Let me comment on why they moved out. For the most part the reason that the tenants move out were that they -- these are going away. We have had very few tenants say that they are going across the street. Although I will tell you that the rent relief tenants are the ones who are saying, we are going to go across the street and the vacancy is affecting that.

In terms of move outs, we had for the quarter 408,000 square feet, which has been pretty typical over the last several quarters. If you look at last second quarter of '08, we had 417,000 square feet. So our move out square footage is fairly consistent. But most of them are going away, and they're not going across the street.

I think the quality of our centers with strong grocers and strong demos is they are going to be successful. They are going to be pretty successful there, and do you want to go across the street where usually people are giving away free rent or low rent or whatever because it is not quite as strong of a center. So we will have some, but but not that much.

That hasn't been an issue to date.

That is not an issue to date.

That's helpful. I guess given the problems collecting rent from some of these mom-and-pops, what would you say if you have some sort of range as what precent of their revenues does the rent represent?

What we said was 2% effectively in terms of our [down payment]. multiple speakers).

He is looking at really occupancy. (multiple speakers). I was going to say 13% to 14%, but that is typical in our sector -- is that range.

Obviously for the larger tenants it is a smaller percentage.

I don't know if I missed this, but did you guys answer -- of your occupancy rate how much of that accounts for dark tenants that maybe are still paying rent?

We did. That was -- we said that rent paying was 100 and 150 basis points less than was occupied.

That is the best rent paying occupancy. I think Alex was asking how many dark tenants are still paying rent?

Right.

(multiple speakers). Five tenants.

Oh, I am sorry. I misunderstood your question. I thought you wanted to know the difference between rent paying and occupied. Yes, we only --

No, I was asking -- how many tenants maybe moved out, but are still paying the rent relief?

Just five in the whole portfolio.

Okay. Thank you.

I will just add something else to that. I think that there is -- in that non-rent paying number, there is a component of that that is pre-leasing. And right now that is probably in the 30% to 40% range.

Okay. Thank you very much.

And that is basis points.

Or 20% to 30% of the total delta there.

Ryan Levenson, Privet Fund.

Thanks for taking my question. I'm sorry about the background nor noise, I am just on a plane. Of the -- in your development pipeline of the 86% that is leased and committed, how much of that has some sort of provision in the lease that regarding an occupancy threshold or a residential -- you know, surrounding development threshold?

We don't have anything that has anything to do with residential thresholds. If you look -- what we have in there is the co-tenancy provisions. And as we quantified earlier, that represents about $1 million hit to -- or a little bit more than $1 million hit to 2009. But none of it has to do with residential.

But there is no -- there is nothing in a lease that says if there aren't X number of occupied rooftops surrounding within Y number of miles around this strip center, than Publix doesn't need to occupy or Kroger doesn't need to occupy?

There was only one of them that I'm even aware of, and it goes back to our Rio Vista project, where they did not -- the grocer did not have (inaudible) until that happened, but that was satisfied a few years back. But there is no other one out there.

It is usually a commencement of construction issue. They don't have to commence construction until that point in time. So anything that is up and built is not going to be subject to that provision.

Great. Well, thanks a lot.

[Michael O'Dell], Met Life.

Thanks for taking the question. Mary Lou, you have touched on the credit freeze and how it is impacting your top tenants. I'm just curious if you have done any analysis specifically towards CIT and what percentage of your rental revenues come from tenants that are exposed to CIT lending?

You know, we did a sampling by talking to a dozen of our tenants. It is very difficult for us to be able to get hold of our 8,000 tenants and to be able to sit down and talk to them and find out how much of it is CIT. What I did find out though is that CIT really tighten their belts 18 months ago, and that many of these franchisees have found other ways to finance.

So as I mentioned, whether it is home-equity loans are going to their local bank, or quite frankly getting other investors who have gone in and helped them out. I know the International Franchise Association is very, very involved with it. I think they have done some research. You might be able to go on their website and look at how many retailers are affected, and what it means in an aggregate amount. And they have been on the Hill and trying to lobby to help support -- get through the CIT crisis.

It is a real issue. I think the issue probably affects inventories quite a bit. That is one thing that worries me again about retail sales in the fourth quarter. And it also is an issue in terms of future growth and their ability to expand. But I cannot today quantify in our portfolio what that means. It is somewhat of an impossible task.

For what it's worth, my sense is it relates a lot more to new leasing. That the financing may have allowed some of the tenants to hang on, but they probably weren't going to make it in this environment anyway. But it is really impacting the new leasing more. But we are still in spite of that still, just to reiterate, having a decent amount of success in that regard.

Then just a quick one on the Capital Markets front. Given the rally in unsecured spreads and the significant rally in the stock market, do you have any interest in coming to either one of those markets?

And then on the JV front, what are you able to, and too, do you have an interest in you utilizing TALF to meet some of your maturities in 2010 on the JV portfolio?

I'll start with the latter one on TALF. Is we have -- the quality grocery anchored shopping center still seems to be the sweet spot as far as mortgage financing. And TALF is not something that we have needed to go to. And I think we can get much better terms from the mortgage lenders than we can from TALF from a loan-to-value standpoint. So we would have to use a large amount of our unsecured pool, whether that would be on a joint venture standpoint or on a Company standpoint to do that. So the TALF is not something that we are actively pursuing. We are not pursuing at this point in time.

Obviously, we continue to monitor the capital markets, but have noted with interest what has happened with the spreads coming in on the debt side.

Okay. Thank you.

[Chris Summers], Green Light.

I was wondering if you could tell me what your 60 days delinquency statistic would be on the tenant receivables that you have on the balance sheet?

When you say statistics --

On what measurement?

60 days late.

What are you asking for, just the absolute dollar amount?

Yes.

I don't know that anybody has that in front of them here.

I guess a credit statistically to compare the allowance you took in the quarter versus what you would consider as delinquent.

We will get back with you on that. It is --.

Everything -- all the work that we have done on that has been looking at the 90 days, not the 60 days. We have it; we just don't have it in front of us.

And we are obviously actively monitoring that. And to the extent that we have tenants that we don't believe that after 60 days -- or after 30 days are not collectible, we are reserving against it. So we are very closely scrutinizing our accounts receivable -- any accounts receivable that we have.

Got it. What is the current allowance against $69 million?

$5.5 million.

Got it.

When you look at the $69 million, the $69 million receivables on our balance sheet is comprised of three buckets of numbers. You've got the exact tenant receivables. You've got straight-line rent balances. And then you have our accruals for future [hand] billings that won't take place until the first quarter of 2010.

Got it. Is it the policy to make an allowance when it is 90 days late or is it more subjective than that or ?

Our policy hasn't changed from the standpoint of we always evaluate it from two standpoints. Number one, we always specifically identify those past due amounts, but not necessarily just 90 days past due, but those tenants who are just not paying their rent, and we need to allow for those amounts.

And we always also allow for what we refer to as a general reserve, which is based on historical collection ratios. And that is really what has changed is a combination of more specific tenants that went into default in the second quarter of the year, and on top of that increasing the uncollectibility percentages based on what currently is happening versus what was historically happening on a quarter by quarter basis.

Got it. Then the reserves against the straight-line receivables, what mechanically causes those to happen versus -- I guess, if you rewrote a lease to where there is no longer escalators it would just be a straight write-off, I would guess.

Yes, I think if you look at a reserve -- when you put a reserve up on straight-line rent, what you are really evaluating is what is the remaining term of that lease. Because in the world of tenant receivables, even when a tenant goes dark and moves out, we still -- and probably our peers do -- still have a pretty high collection rate on those past due amounts, even after they're gone.

In the world of straight-line rent, there is nobody to theoretically collect from. So when that leaves effectively stops, or in the case of building reserve, and you have evaluated what the remaining term of that lease would be, then you effectively shorten that term. And the turnaround of that straight-line rent accelerates. Effectively that is what we did in the second quarter.

Got it. That would be like estimating that tenants might only be around through the end of '09 and won't be there in 2010, whereas before you thought they would be there through the end of their lease, which might have been 2011 or something?

Exactly.

Got it. Great. Thank you guys.

It appears we have no further questions. I would like to turn the call over to Mr. Stein, for any additional or closing remarks.

We appreciate your time and hope that you have a great rest of the day. Thank you very much.

Thank you, ladies and gentlemen. Once again, that does conclude today's conference. We thank you for your participation.