Rithm Property Trust Inc (RPT) 2003 Q3 法說會逐字稿

Good morning.

My name is Brook and I will be your conference facilitator today.

At this time, I’d like to welcome everyone to the Ramco-Gershenson Properties Trust third quarter 2003 earnings release conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks there will be a question-and-answer period.

If you would like to ask a question during this time simply press *, then the number 1, on your telephone keypad.

If you would like to withdraw your question, press the # key.

I would now like to introduce Ms. [Dawn Hindershott], Manager of Investor Relations.

Thank you, Ms. [Hindershott], you may begin the conference.

Good morning and thank you for joining us for Ramco-Gershenson Properties Trust third quarter conference call.

At this time management would like me to inform you that certain statements made during this conference call, which are not historical, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1985.

Although Ramco-Gershenson believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be obtained.

Factors and risks that could cause actual results to differ from expectations are detailed in the press release, and from time to time in the Company’s filings with the SEC.

Additionally, we want to let everyone know that the information and statements made during the call are made as of the date of this call.

Listeners to any replay should understand that the passage of time by itself would diminish the quality of the statements made.

Also, the contents of the call are the property of the Company and any replay or transmission of the call may be done only with the consent of Ramco-Gershenson Properties Trust.

Having said that, I would now like to introduce Dennis Gershenson, President and Chief Executive Officer, and Richard Smith, Chief Financial Officer, and at this time would like to turn the call over to Dennis for his opening remarks.

Thank you [Dawn].

Good morning and thank you all for joining us.

I am especially pleased with our achievements during this last quarter.

It certainly is a pleasure to be able to report that we exceeded First Call estimates.

However, I am more excited about the number of projects we have commenced in the last three months, especially in the area of shopping center redevelopment.

For those of you who know the shopping center industry, these improvements to core assets do not happen overnight.

Instead, anchor expansions, new retailer additions, and the overall redevelopment of a shopping center is the culmination of months, and, in a number of cases, over a year of hard work.

The importance of these improvements to you, our shareholders, is significant.

They are an indication that your Company is focused on the long-term health of its core assets as well as growing FFO.

In a number of cases, our actions are preemptive, — expanding or bringing retailers to our centers who might have found another competitive home, or who are representative of shopping categories not presently in our center.

On a number of occasions we have made dramatic changes to an asset that was 100 percent leased, a sign that we’re not afraid to tinker with success.

Many of this quarter’s announcements have focused on the signing or opening of anchor stores that have replaced bankrupt or struggling retailers.

All of these actions are intended to ensure the long-term viability of our shopping centers.

Several examples of these actions include the replacement of a 128,000 square foot K-Mart vacancy by a 195,000 square feet Myer Superstore at the Tel-Twelve Shopping Center in Southfield, Michigan; and, the relocation and expansion of the Marshall’s premises, growing from 26,000 square feet to their new 50,000 square foot Megastore at our Roseville Towne Center in Roseville, Michigan.

Also, in those centers where K-Mart, Service Merchandise, Jacobson’s, and others have impacted net operating income by their departure, the addition of new and exciting retail anchors assures us growth in rental revenues as these new tenancies come online.

Examples include, the signing of a lease with the sportings good chain, Gander Mountain, for a new 90,000 square foot prototype to replace the K-Mart in our West Oaks Shopping Center in Novi, Michigan; and, the inclusion of a 32,000 square foot Beall’s Coastal Home, a new concept for them, replacing the Jacobson Department Store vacancy in our Southbay Center in Sarasota, Florida.

A number of our redevelopment projects include the expansion of existing anchors.

As an example, Wal-Mart’s expansion from 134,000 square feet to its Superstore format in 207,000 square feet at our Taylor Square Center in Greenville, South Carolina, not only removes the cloud of what would eventually happen to an undersized store, but is a springboard for higher rentals from our smaller tenants who appreciate the volume of customers a Wal-Mart Superstore brings to the center.

And lastly, the significant expansion of our anchors and the inclusion of new anchors in our centers indicates both the viability of the retailers and the desirability of our locations.

These additions have occurred during the period of time when the prognosticators for retail sales were questioning the health and outlook of our tenants and our shopping centers.

An example of this is the addition of a 125,000 square foot Target Department Store to anchor our Lakeland, Florida center, kicking off the redevelopment of this asset, which was followed almost immediately by the signing of a lease with Ashley Furniture in 73,000 square feet, replacing the former Builder’s Square store.

All of these new and expanded tenancies will add up to a significant increase in our occupancy, the inclusion of new, substantial draws to our center, and a demonstration of the “can-do” attitude of our management team.

This drive to succeed is also reflected in the small shop leasing progress achieved during the quarter and year to date.

For the quarter, rental rates for new leases, excluding anchors, increased over 13 percent above portfolio average.

And year to date, we were 11 percent ahead of portfolio average.

The drop in the average rental rates reflected in our Supplement for anchor lease activity is a result of our negotiating land leases as opposed to traditional “build-to-suit” agreements for our significant anchors.

This ensures for us an improved rental stream without a significant investment in the anchors’ brick-and-mortar for which they are loathe to provide a superior rate of return.

On the acquisition front, we purchased three centers during the quarter.

All three are located in Michigan.

Two are in metropolitan Detroit and are anchored by a Target Department Store.

Each provides a value-added opportunity.

As an example, we purchased the Lakeshore Marketplace Shopping Center in Norton Shores, Michigan.

This 360,000 square foot asset has seven anchors, including TJ Maxx and Barnes & Noble.

Included in the price but not in our computations for the acquisition is a fully improved pad for an additional anchor or additional retail space, as well as four out lots that line our primary traffic artery.

So, what are our plans for the balance of the year?

We are presently finalizing agreements for the acquisition of two additional centers, both in the Midwest.

Due diligence is underway and we anticipate closing on these purchases no later than the first quarter of 2004, assuming our research validates our assumptions.

We are also excited about the forthcoming redevelopment of at least two additional centers that will commence in the fourth quarter.

Each involves the expansion of an existing anchor.

Our understanding with our tenants has been documented and we are merely awaiting final governmental approval.

The equity for the acquisitions to date, several of our center expansions and our new Grand Haven development was funded by the $50 million we raised in June.

The funding for our two anticipated acquisitions and our redevelopments underway have been assured by our latest equity offering when we raised $57.5 million, completed on October 15th.

We are extremely gratified by the confidence the investment community has shown in us.

We are well on our way to a record year of acquisitions that lend themselves to value-added opportunities.

We will, in 2003, have more major redevelopments underway than any year since we went public.

And we are researching a number of new development potentials.

In summary, we are well positioned to take advantage of opportunities as they arise.

We are focused on preserving and enhancing our core portfolio and our actions in 2003 in the area of acquisitions and redevelopment should ensure steady growth in funds from operations for the next several years.

I would now like to turn this call over to Rich Smith, our CFO, who will discuss our financial details.

Thank you Dennis and good morning everyone.

For the third quarter our diluted FFO per share was 57 cents, which exceeded First Call estimates by one cent.

This represented an 11.8 percent increase from the 51 cents reported in 2002.

The primary reasons for the increase resulted from redevelopment properties coming back online, the positive benefit of our acquisitions, and fees earned and gain realized on the sale of our North Lakeland property to Target.

On a gross basis, our FFO increased $2.254 million.

We went from $7.776 million in 2002 to $10.030 million in 2003.

The $2.254 million increase was made up of a $563,000 increase in income from core assets and operations, and $691,000 contribution from property acquisitions.

For the nine months ended September 30th, based on our past offerings and the writeoff of the K-Mart straightline rent receivable, our diluted FFO per share decreased 7.5 percent, or 12 cents.

We went from $1.61 in 2002 to $1.49 in 2003.

In total our diluted FFO increased $1.639 million, or 7.3 percent.

We went from $22.574 million in 2002 to $24.213 million in 2003.

The $1.639 million increase in FFO was, for the most part, the result of a $6.457 million positive contribution from property acquisitions; an $840,000 gain on the sale of property at Grand Haven and Auburn Mile; and a $342,000 gain on the sale of our North Lakeland property.

These increases were offset by a $2.7 million decrease in core assets, primarily due to redevelopments that are underway or had been done in the past, a $3 million one-time non-cash writeoff of our K-Mart straightline rent receivable; and a $293,000 reduction in income pertaining to the sale of our Hickory Corner Shopping Center.

Our operating statistics for the third quarter included a reduction in occupancy, which went from 91 percent in 2002 to 89.4 percent in 2003.

This reduction related to several big-box users, which went vacant and as Dennis discussed, we’re in the process of filling.

For the quarter, our same-center [indiscernible] increased 7.2 percent.

The increase was a result of Tel-Twelve coming back online and termination fees recognized in the quarter.

For the three months ended September 30th our FFO pay-out ratio went from 82.4 percent in 2002 to 73.7 percent in 2003.

On an FAD basis, the Company’s pay-out ratio went from 102.4 percent in 2002 down to 80.8 percent in 2003.

For the nine months ended, our same-center [indiscernible] decreased 7.4 percent.

If we look more at a more normalized statistic, which excludes centers under redevelopment and the effects of our K-Mart straightline rent write-off, our same-center growth was 4.1 percent.

Our FFO pay-out ratio went from 78.3 percent in 2002 to 84.6 percent in 2003.

Again excluding the $3 million K-Mart write-off, our FFO pay-out ratio was 75.4 percent.

And our FAD pay-out ratio for the nine months was 94.3 percent in 2002, compared to 83.3 percent in 2003.

For 2003, we expect our FFO pay-out ratio to be in the low to mid-80 percent range, and our FAD pay-out ratio to be in the mid-80 percent range.

Our leasing for the quarter included the renewal of 10 non-anchor leases at an average rent of $7.97 per foot, which was a 4.4 percent increase over the previous rental rates.

We also added 17 non-anchor stores at an average rent of $14.12 per foot, which was a 13.3 percent increase over our portfolio average.

Additionally, we added three new anchors at an average rent of $4.96, which was 19.6 percent below our portfolio average.

As Dennis discussed, two of the leases were ground leases, which generated less rent per foot but required little, if any, capital from the Company.

This generally improves our overall return while reducing our risk.

For the nine months ended, we renewed 72 non-anchor leases at an average rent of $10.36 per foot, which was a 5.9 increase over the previous rental rates.

We also added 52 new non-anchor stores at an average rent of $13.85 a foot, which was an 11.1 percent increase over the portfolio average.

We renewed two anchor leases at a 31-percent increase over prior rents, and added seven new anchors, which, for the reasons discussed before, were 11.1 percent below our portfolio average for anchors.

Our debt at quarterend was $463.5 million at an average rate of 6.5 percent, and an average term remaining of 3.9 years.

Only 17.9 percent of our debt was floating with an average rate of 3.4 percent, and 82.1 percent was fixed at an average rate of 7.2 percent.

The availability at quarterend under a secure revolver was $31.8 million and $27.3 million on our unsecured revolver.

Excluding the K-Mart write-off, our EBIT interest coverage increased for the nine months from 2.18 times in 2002 to 2.27 times in 2003.

And for the quarter our debt-to-market cap improved from 56.5 percent at yearend to 49.6 percent at quarterend.

The improvement was a result of our stock offering and an increase in our stock price, which went from $19.75 to $25.45.

During the quarter we refinanced the Lantana Plaza in Lantana, Florida;

Easttown Plaza in Madison, Wisconsin; and in early October we refinanced Chestersprings Shopping Center in Chester, New Jersey.

All the loans were for 10 years.

Lantana was financed at $11 million with an interest of 4.76 percent;

Easttown Plaza, $12.1 million at a rate of 5.45 percent; and Chestersprings was for $25 million at 5.51 percent.

During the quarter, our Company also purchased three shopping centers.

In July we acquired Clinton Point, a Target anchor center in Clinton Township, Michigan, for $11.6 million.

In August we acquired Lakeshore Marketplace, a 360,000 square foot center in Norton Shores, Michigan for $22.5 million.

As part of this transaction we assumed a $15.7 million mortgage with a rate of 7.65 percent.

And in September we closed on Fairlane Meadows, a 313,000 square foot center located in Dearborn, Michigan, for $19.4 million.

On this purchase we also assumed debt of approximately $12 million at a rate of 8.1 percent.

Our capital expenditures for the quarter totaled $69.9 million: $55 million was spent on acquisitions; $13.7 million on expansion renovation projects; $600,000 on recoverable [indiscernible]; and approximately $600,000 on non-recoverable Cap ex.

For the nine months ended September 30th, our capital expenditures totaled $105.6 million: $75.4 million has been spent on acquisitions; $26.3 million on expansion renovation projects; $1.8 million on development projects; $1.2 million on non-recoverable Cap ex; and $900,000 on recoverable [indiscernible].

We expect to fund our future growth by: retaining cash from operations; continuing to sell non-core assets and selected assets with limited upside potential; by refinancing assets, which have been expanded or renovated in prior periods; and by drawing on our credit facilities.

Lastly, we expect our 2003 diluted FFO per share to be at the low end of our previous estimates of between $2.03 and $2.05.

And as a result of our most recent stock offering, we’re tightening our 2004 guidance to between $2.35 and $2.40.

Brook, I’d like to open up the call now for questions.

At this time I would like to remind everyone, in order to ask a question please press *, then the number 1, on your telephone keypad.

We’ll pause for just a moment to compile the Q&A roster.

Your first question comes from Jay Leupp of RBC Capital Markets.

Good morning.

Jay Leupp here with David Ronco.

Dennis and Rich, thanks for the update on the redevelopments.

Could you walk us through also the financial mechanics in terms of the hurdle rates you’re looking at when you decide whether or not redevelopment makes sense over new development or acquisitions, and maybe talk a little bit about the returns on the redevelopment projects that you discussed earlier on the call.

Jay, this is Rich.

A couple of things we look for: 1) out of a [indiscernible] I think we’d like to see a return of 12 percent or more of that.

But, you know, we not only look at that, we look at the impact on the NAV of the asset as well.

And I think that the money we have spent, if you just think of an undersized Wal-Mart in a secondary town that’s considering moving, what kind of cap rate do you have on that asset versus a brand new super Wal-Mart store with a brand new lease.

Again being their revitalized center I think the cap rate that that would justify, you would probably be 150–200 basis points difference.

So, we kind of look at both, so the improvement of the property and improvement in the cash flows.

Can you add anything to that, Dennis?

Well, Jay, I would merely add that we have been fortunate over our history as a public company to have consistently averaged double-digit returns on the capital expenditures we’re making when we reinvest in the asset and put in new tenants and we expand tenants, et cetera.

But one of our key focuses is indeed to retain the vitality of the asset, to keep our center as the focal point of the trade area, as well as to ensure its long-term health.

So, one of the reasons that all of our returns are at 15 percent or above is that with a number of, let’s say expansions, particularly in the area of Wal-Mart, we may accept a lower return because we know it’s the right move for the asset.

But an interesting aspect of that, and I alluded to it at least in my comments, was that by expanding a Wal-Mart, and the Tailor Square Shopping Center is a very good example of it, we are now achieving from our ancillary tenants the highest rental rates in that entire trade area because of the number of customers that will be brought to the shopping center and the appreciation by those smaller tenants of exactly what Wal-Mart will do for them.

OK.

And then, for 2004, the $2.35–$2.40 guidance that you gave us, Rich, does that fully include the dilution you anticipate from — the near-term dilution from some of these redevelopment projects that you’re starting?

And then secondly, what is your target fixed charge coverage ratio for 2004?

Yes, it did include the — does include the expansion and renovations we’re talking about, plus some others we have done the planning for but not necessarily announced at this point in time.

Our fixed charge coverage has been a little bit below two percent.

And I think for next year it will probably be about the same price.

So, a little bit below two times?

Yes.

OK.

You know, 1.8, you know, 1.8, around there.

OK.

And then one last thing, could you walk us through just a little bit more detailed discussion of leasing activity at the Tel-Twelve recently?

Well, we’re pleased to say that we have executed leases on every single space available at Tel-Twelve.

Some of them, we’ve just completed an 11,000 square foot building.

The leases are signed; we have four tenants going into that building.

It just didn’t rise to a level where we would have a press release on it, you know, just for that, although I think it was covered in the release concerning the quarterend.

But, with the signing of those leases and with the commencement of construction in the next couple of months for the Myer, we’re all done with the leasing phase of Tel-Twelve and now it’s just moving in the several additional retailers.

Please remember that in the last three to four months we signed leases with Michael’s Crafts there in 24,000 square feet;

Pier 1 in 12,000 square feet; as well as the Myer store in the 11,000 square feet.

So, we’re done with Tel-Twelve.

All we have to do now is finish getting our retailers in place.

Wonderful!

Thank you.

Your next question comes from David Ronco of Royal Bank of Canada.

Hi guys.

I’m here with a quick follow-up to Jay’s question.

In terms of the acquisitions, both recently completed and in due diligence, are these assets that have been kind of marketed traditionally, or would you characterize them as opportunistic?

I’d characterize them as both.

We have found, with several of the acquisitions that we made, that they may have been owned by individuals or groups of individuals that knew us and were prepared to deal with us for a variety of reasons maybe because we were hometown boys.

Others, interestingly enough, we had been in a bidding process on several of them.

We were not the highest bidder, but the highest bidder, some who were either in contract negotiations or due diligence were not able to perform, and so through the brokers these sellers came back to us and we quickly entered into a contract at our price and went ahead with the acquisitions.

But we traditionally source them, if this is part of your question, David, through the normal brokerage community, but at least one of the centers that we will be announcing of these two that we were talking about did come to us directly and not through a broker.

Great!

I guess a quick follow-up to that is, given that you are buying traditionally marketed assets, has the — you know, it’s been such a hot access class, has it cooled off at all, or is the pricing just as firm as it has been over the last year?

We find pricing still extremely aggressive when you’re buying an asset that for all intents and purposes is fully leased, a significant amount of credit in the shopping center.

Although we like the latter, which is the credit of the anchor, and knowing that that anchor is one of the primary draws in the trade area where it’s located, we prefer opportunities where we can add value.

So, some of the more aggressive buyers who were only interested in fully leased, stabilized centers, are not part of the bidding process in the some of the assets that we were acquiring and we’re pleased that they aren’t.

Great!

Thanks guys.

Your next question comes from Andrew [Rosevach] of Piper Jaffray.

Good morning, guys.

I figured, since nobody has asked it yet, I’d do the ceremonial update question on the IRS tax issue.

Well, I think that we said that we were on the two-yard line during our last conference call.

Again, we believe we have moved the ball to within the shadow of the goal post, and I’d love to be able to tell you it’s done.

I think it’s much more just getting through the bureaucracy that is left in resolving this.

But I believe we’re there.

Gotcha!

And then I just wanted to ask a couple of questions on your guidance.

You’re relying very little on floating rate debt right now.

When you do your acquisitions on a forward basis, are you going to do any of this off of a floating rate line?

Or are you going to do what you typically do where you have a lot of secured debt that you’ll be assuming?

Well, let me first say that, for better or worse, the majority of the acquisitions that we have made to date have had existing financing on them.

We would much prefer that they didn’t have existing financing.

I think our philosophy is that as long as interest rates are at these lows, our preference, on a consistent basis, although there are always exceptions, would be to place long-term debt on any acquisition that we can.

We’ve been around in this business for a very long time and we know where historical rates have been and we expect rates to move north.

Therefore, if we can secure what we believe are advantageous long-term interest rates, we’re going to take them.

Gotcha!

OK.

And just a couple of other questions on the guidance.

What are the — are there any gains on un-depreciated property that are included in ’03 and ’04 FFO, above and beyond what you’ve already had this year?

In ’03, we clearly had North Lakeland property, which I talked about, which is beyond depreciated.

I think that we’ve had at least one out lot that we sold the same way.

For the balance of ’03 I think we’ve got a couple others tee’d up.

But again, still in due diligence, a long way from being done, but for ’04 I don’t believe in our guidance we have anything in there.

But again, if you look at where we’ve sold, it’s been as part of a redevelopment to Target and part of planning or finishing off of a development where you’ve got a couple left and the only way the tenant will take it is to own the property.

So our preference is not to sell, but on occasion we will sell if we want the tenant bad enough.

Gotcha!

And finally, in ’04, what do you think your rollover performance is going to be versus in-place rents?

In the mid-single digit growth rates.

Gotcha!

Thanks a lot guys.

Your next question comes from Lou Taylor of Deutsche Banc.

Thanks.

Along the same lines, Rich, we figured you had about six cents of land sale gains in the third quarter.

So what’s your expectation of those gains in the fourth quarter of this year and for next year?

You know, the timing is everything on that, Lou.

I think that we still have tee’d up, I think three deals that we’re working on to sell, and whether they happen this year or not, I think we’re planning on them this year.

They could rollover to next year, but I’d say you’re looking at — what would you say — maybe four to five cents.

OK.

That could fall in either this year or next?

Yes.

Alright.

In terms of your ’04 guidance, how much do you have in the way of land sale gains in that guidance?

Nothing.

Nothing?

Right.

OK.

And then just…

Again, I won’t say nothing, but something may come up out of it.

Who knows?

But right now we have no planned land sales, but if you had asked me that at the beginning of this year I would have told you the same thing, but for a Target at Lakeland.

OK.

Second question just for Rich, with regards to some of the anchor leasing you’ve done recently you noticed there were about three of the new tenants were new formats for companies.

And my question is: a) How did you get comfortable with the format? and, b) How did you get comfortable with the credit and what kind of parent or corporate guarantees are you getting on these leases?

Well, first of all, the Marshall’s Megastore, Marshall’s is TJX, and what really the Megastore is, is a combination of the Home Goods concept and the soft-line retail concept.

So all they’ve decided to do, in a number of cases, instead of having them as two adjacent stores — and obviously Marshall’s has been around a long time — is to combine them both into one facility as opposed to what they’ve done previously where they will have them either side-by-side or as close as they can get to the other unit.

So, really though, there is no brain damage involved in that at all.

With Gander Mountain, there, Gander grew from their traditional size of maybe — somewhere in the vicinity of 35–50,000 square feet up to 90–100,000 square feet.

They’ve done this in a number of locations now.

We’re the first in Michigan, but they have already built a number of these, more along the line of the success that’s been experienced by Gallions and a couple of the other larger formatted sporting goods operations, you know, so that they can have significantly more drama.

The last is the Beall’s Coastal Home where — this again is a somewhat of a new format for Beall’s Department Store, with about 150 stores is a regional operator in Florida and basically the southeast.

We’re very familiar with the organization and very comfortable with them as a long-term player.

How about their furniture store?

Let me just jump in and Dennis can address the furniture store, but as far as checking credits, we do everything — we’ve got a group that gets all the usual third-party reports.

We check those.

We may check bank references; we may talk to their CFO, a whole host; we may talk to other landlords.

There’s a whole host of things we do to get comfortable with the credit.

If we have them in another location, obviously it’s pretty easy with their payment history.

But I’m not sure it’s an exact science, as much as we try to make it one.

Some of it is again dealing with third parties and having discussions.

Obviously, you know, we review financials and everything that you’d expect us to do.

Relative to Ashley’s, Lou, Ashley’s is a company that has been in business for over 70 years.

They have been a supplier to a significant number of regional chains throughout the country.

They began opening retail outlets for their own furniture under their own brand name just in the last couple of years.

And we do have the corporate guarantee on that.

OK.

And do you have the corporate guarantees on Gander and Beall’s as well?

Yes.

Alright, thank you.

Your next question comes from Rich Moore of McDonald Investments.

Hi, good morning guys.

Congratulations on the quarter!

First thing, on the ceremonial issue that Andrew asked about, do you have a number, Dennis, that you can share with us on the amount or the rough amount of that IRS settlement?

I know the amount.

I wish I could share it with you.

Let me merely say it is a fraction of the number that both we and Atlantic Realty have put out in our financial statements as a maximum exposure.

That’s probably more than I should have said, but that’s about as far as I can go.

And Rich, again, if you remember the indemnity, based on what Dennis is just saying, there is no exposure loss.

I mean, our dollar one comes after about $63 million of Atlantic’s net worth, or liquidation value.

Yes right, Rich, I was going to — one I wanted to follow-up with, and I think you may have answered it, is that can we assume then that the $63–$64 million value of Atlantic is enough to cover what you anticipate the settlement being?

More than.

More than.

OK.

That answers the question.

Thank you.

The jump in interest and other income in the quarter, I assume that’s lease term fees, is that right?

Yes, for the most part.

Have you got a number on that, Rich, that you could give us for how much extra that was?

For the nine months I think there was probably two significant ones.

One was A&P at Holcomb.

You know, we’re working on the grocer to take that location.

And the other was the Troy Town Center.

We had a market in there that we replaced with a Cole’s.

And you were looking at that pretty close for the nine months ended, you know, about a million bucks.

Again, a whole bunch of smaller ones in addition to that, but pretty close to a million bucks, which is frankly about what we’ve done for the last four years is about $1 million in termination fees, maybe a little bit more for that.

OK, OK, good, thanks.

You know, looking at the expense recovery ratio in the fourth quarter, that usually jumps up, but it’s been very stable here for the second and third quarter.

I mean, should we look again for a fourth quarter jump in expense recoveries, do you think?

I think there are expense recoveries I’d expect to be in the mid-90s and I think when you’re going to see that jump is probably next year as some of these big boxes come back online.

OK, OK.

Good!

And also, given the amount of fourth quarter leasing that you seem to have done early in the quarter, where do you think occupancy goes for this year?

Again, what we reported is not necessarily leased but we’ll report occupied.

So yes, I think as the Myers comes on and as some of these other stores come on, I think it will go up, but we don’t show leased; we showed occupied.

So I think that may be a little big of a lag as we have leases executed but they’re not open.

OK.

So you think maybe into next year to see those?

I think it will be north of — I believe it will be north of 90 because several of the retailers that we’ve mentioned in this conference call will be an occupancy before the end of the year.

But the significant amount of square footage that we’ve dealt with, just quickly to give you a feel for it, we are more than filling 450,000 square feet of vacant anchor space, which included the Builder’s Square at Lakeland, Service Merchandise at Roseville, the K-Mart at Tel-Twelve, the K-Mart — well, really — yes, the K-Mart replaced by Beall’s, and Jacobson’s replaced by Beall’s in Sarasota, Florida.

And then you’ve got Gander Mountain replacing K-Mart at West Oaks One.

So, we’re going to wind up with 515,000 square feet of retailers replacing 452,000 square feet of existing space.

Between now and ’04, Rich.

OK, OK.

Good!

And then, have you guys got any more thoughts on redevelopments to where you take the property completely offline like you’ve done in a couple of cases?

Yes, I don’t think anything to the magnitude of Tel-Twelve or Lakeland.

I think that even the Wal-Mart expansions, for example, they’re still in place.

You may relocate or you may demolish some of the small shop space, but again, nothing to the magnitude of Lakeland or Tel-Twelve where you physically take everything offline for all practical purposes.

Exactly.

And also, anchors, looking at — you’ve leased up, I think, three vacant anchors that you mentioned in the Supplement.

How much more of that kind of leasing do you think you have?

I would say by the end of ’04 we will have in occupancy — we have several more, the K-Mart at Telegraph in Goddard in Metropolitan Detroit, is one of those.

We purchased in ’03 the Service Merchandise store at our shopping center in Sterling Heights, Michigan, which is directly across the street from [Toddman’s] Lakeside Mall.

So we have two — at least one of those two hopefully we’ll be able to announce an anchor in the fourth quarter.

So I would say by the end of ’04 we should have no significant anchor vacancies at all.

OK, OK.

Great!

Last thing for me is, I noticed that the Novi loan comes due.

You talked a little bit about that center.

I think it comes due in June of next year, Rich.

Is that a significant issue?

It seems like a big loan, $64 million.

I don’t think Novi comes due next year.

Novi is part of a pool.

Maybe I looked at that wrong.

Yes, hold on.

Oh, you’re talking about investments in a joint venture and that’s the PLC note.

And that’s just a construction loan and I’m assuming we’ll continue on.

OK, so no real maturity there.

That’s correct.

OK.

Great!

Thanks guys.

Again, I’d like to remind everyone in order to ask a question, please press *, then the number 1, on your telephone keypad.

Your next question comes from [Nim] [Indiscernible] of [Indiscernible] Securities.

Good morning gentlemen, how are you?

Just a couple of quick questions.

First, a follow-on to Rich’s question on other income.

The majority of that was lease termination fees.

What else is in there?

I think to a lesser degree I think you’ve got — you know, we have one mall in Jackson, so you’re going to have temporary tenant income there.

I think we’ve got some reserve accounts set up with some of the loans, the CMVS loans that we have.

I think you’ve got some interest income in there.

The biggest part of that clearly is lease termination fees, and probably the most volatile as well.

But again, as I told Rich, for the last four years I think we’ve exceeded $1 million there, so assuming that as long as we’re redeveloping assets you’re going to continue to have lease termination fees.

[Nim], let me just add to that.

You’ll see that number again, hopefully being reasonably significant in the fourth quarter because as Rich alluded to, the one mall that we have in Jackson, Michigan, as well as in our other centers, if you have vacant space we are very aggressive in attempting to lease to a temporary tenant, especially at Christmas time.

A number of types of retailers like to come in, whether it’s the cheese operation or Christmas décor, or things like that, that are impulse items as we do a very good job of raising some nice temporary rental income during the fourth quarter.

I see.

So, more normalized run rate for 2004 with respect — as Rich noted, $1 million for lease termination fees on average and probably another…

Again, the numbers that we have been running consistently over the last few years, I do not see any significant blips one way or the other in ’04.

I see.

And lastly, what volume of acquisitions do you have built into your guidance?

For ’04?

For ’04.

Roughly about $75 million.

Thanks guys.

At this time there are no further questions.

Gentlemen, do you have any closing remarks?

Once again, we would merely thank everybody for their interest and their attention.

We’re very focused on what we do here and look forward to having you all join us at the end of the fourth quarter.

Thank you again.

Thank you.

This concludes the Ramco-Gershenson Properties Trust third quarter 2003 earnings release conference call.

You may now disconnect.