Rithm Property Trust Inc (RPT) 2004 Q2 法說會逐字稿

Good morning.

My name is

and I will be your conference facilitator today.

At this time, we welcome everyone to the Ramco-Gershenson Properties Trust second quarter earnings conference call.

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

After the speaker's remarks, there will be a question and answer period.

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

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Thank you.

Ms. Hendershot, you may begin your conference.

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

I'm hopeful that everyone received the press release and supplemental financial package, which are available on our Web site at www.rgpt.com.

At this time, management would like me to inform you that certain statements made during this conference call, which are not historical may contain forward-looking statement within the meaning of the Private Securities Litigation Reform Act of 1995.

Although, Ramco-Gershenson released the expectations reflected in any forward-looking statements are based on reasonable assumption, we can give no assurance that the expectations will be obtained.

Factors realistic could cause the 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 at 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 maybe 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, I would like to turn the call over to Dennis for his opening remark.

Thank you, Dawn.

Good morning, and thank you all for joining us.

We're pleased to report that our diluted funds from operations of $0.56 per share net first

estimate.

In the quarter, we raised $52m through the completion of a 1.9m share convertible preferred offering.

The conversion price is $28.50.

As with our past capital raises, we've an accretive use for the proceeds.

We expect to complete a number of acquisitions in the third quarter using substantially all of the dollars rates.

Even though, we've only used the proceeds from the offering to pay down debt this quarter, we were still able to show modest growth in FFO of approximately 2%.

We're excited about the progress Ramco-Gershenson continues to make in each of our profit centers.

The second quarter was a period of significant commencements.

On the development front, our team has begun construction on its second new shopping center project this year, gains market place.

A 400,000-square-foot center that will be located on the south side of Grand Rapids, Michigan, immediately adjacent to the Kalamazoo Avenue exit off of the M-6 Expressway, which is the beltway around Grand Rapids.

We've worked on this development for over a year; timing the commencement of construction to allow us to open the center when the new Expressway interchange is complete.

We expect the center to be opened in the summer of 2005.

Our 124,000-square-foot Target store and 208,000-square-foot Meijer Superstore are testaments to the desirability of our location and the potential draw of the shopping center.

We're also finalizing for this center and understanding with a mid-box, office supply, destination retailers, and we're very pleased with the interest we're generating in the balance of the retail space.

I have mentioned in previous calls that we're making significant progress on a major shopping center development in Florida.

We hope to be able to identify this specific sight and our anchors in the fourth quarter.

It has anticipated the construction will commence in early 2005 with store openings in the spring of 2006.

In the second quarter, we announced the commencement of three more redevelopment projects.

This brings to seven, the number of centers that are presently undergoing a major change in credit quality, tenant mix, center size, or regional draw.

You should know that several of these redevelopments, specifically Livonia Plaza's Kroger expansion and Cox Creek's expansion to include Home Depot, will not require significant expenditures by the Company and thus are not listed in the supplement.

Yet, each change helped solidify the center's position and draw in its marketplace.

In the case of the 12,000 square foot Kroger expansion, we have a new extended lease term with our anchor, as well as an increase in their rental.

Our program of shopping redevelopments, which we have repeated year-after-year, demonstrates a commitment on the part of Ramco's management team to ensure that our assets are constantly reviewed, and where appropriate, their values enhanced.

We are not just property managers.

We are not just trying to lease vacant space.

And we are not satisfied to leave well enough alone.

When one of our centers happens to be 100% leased, its change would improved the property.

One aspect of our present redevelopment program where we take special pride is the change underway in our Northwest Crossing center in Knoxville, Tennessee.

The expansion of Wal-Mart's existing 139,000 square foot unit to a 208,000 square foot Superstore is our second Wal-Mart Superstore expansion announced this year, and our third in 18 months.

This ability to convince Wal-Mart to stay in our centers and expand rather than abandon the location and go across the street, separates us from many of our peers.

Our leasing department continues to report healthy interest in our centers by small tenants as well as mid-box retailers.

You will note that we opened 23 new non-anchor stores this quarter, at an average rental rate of $11.39.

This statistic can be found in the supplement.

This number, when compared to our portfolio average shows a 12% decrease.

What becomes apparent, however, when reviewing the new occupied spaces is that of the 93,700 square feet of tenants who opened, approximately 44,000 square feet, or 47% of the total is represented by four tenants, each of whose premises is over 10,000 square feet.

Thus these larger retailers distort the numbers, as significant space users tend to pay lower rentals.

Further, three of the four 10,000 plus square feet users agreed to take their locations in an as-is condition, eliminating our need to invest in tenant improvements.

Therefore, further reducing the need and justification for higher rental rates for these spaces.

If these four tenants were excluded from the computation, the new rentals would be 9% above portfolio average.

I draw your attention to this number merely to explain what might have appeared as a change in rental trends.

Overall, we are very pleased with the rental rates we are achieving for our anchors, mid-box users and small tenants.

Just a quick comment on the acquisition front, as there where no purchases that occurred during the second quarter.

We have four centers under contract.

Basically, due diligence is complete and we are awaiting a staples from tenants and lender approval for the loans in place, a process that unfortunately has taken more time than we had hoped.

We reasonably expect to close all the four of these acquisitions in the third quarter.

The total purchase price for the four is approximately $163m.

We had anticipated closing at least two of these purchases before quarter's end.

The delay are technical and do not strike at the heart of the transactions.

We planned to utilize the capital we raised in early June for these purchases.

Thus, we will not put these sums to use as quickly as we thought.

We would like to think, however, that the effect of the delay will not significantly impact our 2004's numbers.

Looking at the balance of 2004, and 2005, we are optimistic about our ability to grow the company.

We are still seeing a steady stream of acquisition candidates, although the pace has slowed substantially over the last few months.

Our review process still includes the search for centers to which we can add value over time.

As per redevelopments, we have several additional projects that involve shopping center expansions, yet to be announced this year, and we are already planning for a number of exciting announcements for 2005.

Lastly, the announcement of two new center developments so far this year with the potential for a third before year-end indicates that we are ramping up our development program, which should show superior returns as the centers are completed and contribute to our bottom line.

We will pursue all of these activities while remaining cognizant of those markers that distinguish superior performing companies including a strong balance sheet, a secured dividend, and a focused growth plan.

I would now like to turn this call over to Rich Smith who will illuminate the fine points of our financial statement.

Thank you Dennis and good morning everyone.

For the first quarter, our diluted FFO per share was $0.56, which met First Call estimates.

This represented a 55.6% increase from the $0.36 reported in 2003.

Taking consideration of the short-term dilutive effect of the convertible preferred offering we completed during the quarter and excluding the one-time non-cash charge we took last year for the Kmart straight line rent receivable at Tel-Twelve, our FFO increased approximately 2%.

The primary reasons for the increase resulted from redevelopment properties coming back on line, the positive benefits of our acquisitions over the same quarter last year, and the effect of Kmart straight line rent write-off, and the net changes in the gain on sale of properties.

On a gross basis, our diluted FFO increased $5,441,000.

We went from $5,736,000 in 2003 to $11,177,000 in 2004.

The $5,441,000 increase was made up of a $2,988,000 write-off of the Kmart straight line rent receivable in 2003, a $2,020,000 contribution from property acquisitions, a $505,000 increase in income from core assets and operations, $260,000 increase in gains on property sales over last year.

The increases were offset by a $332,000 loss of FFO related to asset dispositions, which included the sale of our Ferndale Shopping Center, the Meijer Parcel at Auburn Mile, and a portion of shopping center to Home Depot.

For the six months ended June 30, our diluted FFO per share increased 23.1% or $0.21.

We went from $0.91 in 2003 to $1.12 in 2004.

In total, our diluted FFO increased $8,216,000.

We went from $14,183,000 in 2003 to $22,399,000 in 2004.

The $8,216,000 of our increase in FFO was a result of a $4,065,000 contribution from property acquisitions, the $2,988,000 write-off of the Kmart straight line rent receivable, a $1,291,000 increase in core assets and operations, and a $260,000 increase in the gain on property sales over last year.

The increases were offset by a $388,000 reduction in income pertaining to asset dispositions.

It's important to note that during the quarter, we formed a joint venture to develop our Gaines Marketplace Shopping Center in Grand Rapids, Michigan.

Given there is a diversity in practice in the accounting treatment under FIN 46, we are currently consulting with our independent auditors to determine if the venture should be consolidated.

For the purposes of this press release, we have taken the most conservative position and consolidated the joint venture.

Should we determine the joint venture should not be consolidated, our FFO for the quarter could be increased by as much as $0.04.

Our operating statistics for the second quarter included an increase in occupancy, which went from 89.6% in 2003 to 92.4% in 2004.

Excluding the effects of our Kmart straight line rent write-off, our same-center NOI increased 6.89%.

Our FFO payout ratio improved from 76.4% in 2003, down to 75% in 2004, and our FAD payout ratio remained constant at about 83%.

For the six months ended June 30, eliminating the one-time charge, our same-center NOI increased 4.5%, our FFO payout ratio improved from 76.4% in 2003 to 75% in 2004, and our FAD payout ratio for the six months improved from 84.8% in 2003 compared to 83.3% in 2004.

Our leasing for the quarter include the renewal of 11 non-anchor leases at an average rent of $16 per square foot, which is a 15% increase over the previous rental rates.

We also added 23 new non-anchor tenants at an average rental rate of $11.39 per foot.

The 12% increase to our portfolio leverage was discussed by Dennis previously.

We also added four new anchor stores at an average rent of $8.57 a foot, which was a 34.1% increase over our portfolio average.

For the six months, we renewed 66 non-anchor leases at an increase of 10.7% over prior rental rates.

We added 43 new non-anchor leases at a 1.3% increase over our portfolio average and added six new anchor tenants at a 21.5% increase over our portfolio average.

Our debt for the quarter was $476m with an average rate of 6.6% and an average term remaining of about 4.8 years, 98.8% of our debt was fixed with an average rate of 6.6%, and only 1.2% of our debt was floating with an average rate of 4.2%.

At quarter-end, we had funds available of approximately $118m, which included $50m under our secured revolver, $40m under our unsecured revolver, and $28m of short-term investments.

Our EBITDA interest coverage for the six months was 2.2 times in 2003 compared to 2.4 times in 2004.

For the quarter, our debt-to-market cap increased slightly from 43.7% at the year-end to 46.2% at quarter-end 2004.

However, what's most important to us is the success we've had in decreasing our debt-to-market cap to the 46% from over 64% at year-end 2001.

During the quarter, the company completed a $1.9m share of convertible preferred offering.

The offering rate is approximately $52.1m of new equity, the security was priced at 7.95%, and convertible -- the common stock at $28.50.

The proceeds were initially used to pay down the company's debt and invest in short terms investments.

The capital will be utilized to fund future acquisitions, and development projects.

Our capital expenditures for the quarter were $12.1m, $6.2m were spent on expansion, renovation projects; $4.5m on development projects; $600,000 on non-recoverable CapEx and $800,000 on recoverable

.

For the six month ended June 30, our capital expenditures totaled $56.8m, $37.5m were spend on acquisitions; $11.9m on expansion, renovations projects; $5.2m on development projects; $1.1m on recoverable

; and $1.1m on recoverable CapEx.

We expect to fund future growth by retaining cash from operations by 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, and utilizing our short-term investments.

In conclusion, we are comfortable with a low end of our previously announced 2004 guidance, which was between $2.30 and $2.33 per diluted share, and we are currently projecting our guidance for 2005 to be between $2.39 and $2.44 per diluted share.

I'd like to now open the call for questions operator.

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

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

Your first question comes from Andrew Rosivach of CSFB.

Hi.

Good morning, guys.

First Rich, I want to make sure I've got some math right, did I see that your FFO add back for losses was $1.4m, but the GAAP was 284 ?

Yes, now the difference is on the Home Depot center at the Cox Creek that we sold for the most of the biggest piece of it Andrew was that we sold in the vacant ( Phonetic) piece of properties that we acquired those never put into service, and we also sold them a portion of the center that was put in service.

So, the piece again under the FFO white papers -- the piece -- the gain then we reported on the sale of the

piece of property would good FFO, and the portion on the -- center that was put into service would not be.

So, just to make sure that I've got this right, you had about $0.055 of land sales in your second quarter FFO?

Yes.

And, we also had the Mayer

at Auburn Hills was sold as well.

That's it for now?

What's that number on a full-year basis Rich for '04, and where do you see it going for '05?

For land sales -- and again is somewhat Andrew -- some of our anchors as you know have options to buy their parcels and it's really the two anchors at -- no, I guess Crossroads thanks -- and I think, we still have two left at Auburn Mile.

No one has exercised that option yet.

So, if they do, it's one

if they don't it's another.

So, I really can't give you a precise number at this point for that.

Is it fungible between getting the land sale and the rent that you would loose?

Yes.

I think that deal would be slightly dilutive.

Generally, they've got the right

with these deals to buy their properties at roughly a 10 cap depending where cap rates are and where we can reinvest the money, if it's on a development deal would be accretive, is it's on an acquisition deal, it will be probably slightly dilutive.

I guess all my questions are going to lead into one which is that, if you guys are sitting on cash now, you've asked to do a big acquisition that is accretive to earnings relative to the money that you have just raised.

Why isn't there much of a pop in your '05 guidance relative to '04 and I am wondering if that's one of the pieces of it?

See, I think one of the pieces certainly is -- yes I think in our modeling maybe we've assumed the worst case, the worst possible scenario relative to some of these rights that some of these anchors have.

Okay.

Okay.

Another thing, I tried that this may be for Rich or Dennis.

What to talk with you guys is that you are constantly in rehab mode and it's very difficult to figure out what is really is a stabilized and why -- what really is enough of stabilized FFO?

Should we be looking at this year's number or should there be some kind of adjustments we should be making?

Is there any way you can walk at -- you mentioned seven redevelopments, which you have going on now.

In '05, what your number would have been if you just had to stabilize portfolio?

How much are you losing and how much will come back when those redevelopments have done?

It's a good question, Andrew.

First of all, good morning.

Just one comment although it may not satisfy you as far as your enquiry is concerned.

Of the shopping centers that we have in redevelopment, only the Lakeland project, which is the one we had talked about over the last couple of years, we will have a significant impact on FFO, in that, it will be back on stream in 2005.

The majority of the others although, we will be investing a number of millions of dollars.

Typically the impact as far as

on an individual center will not be anywhere as near severe as it was with Southfield and Lakeland.

So, is there any impact on a annual basis?

Yes, but would it rise to the level of millions of dollars?

No.

You might be talking about hundreds of thousands of dollars and that would be in campus maybe two or three centers.

Andrew, I guess if you are looking for run rate, again there is a thing that's variable here is probably the land sales.

As you know, we don't bank a lot of land, on occasion if we absolutely positively want a tenant and the only way

is by buying more often than now we will sell to him.

So, you've got some gain there.

Mostly, outlets, I think these are Home Depot transaction, never say never, but I think that was a fairly unique transaction relative to the sale there.

Yes, the other variable you have with which the variable seems to be pretty consistent, with the repositionings we are doing are the lease termination fees and that we have the development and/or leasing fees on our development projects for this quarter have been stripped up because we've consolidated that entity.

So, I think if you look at the

some leased up to a normalized say 94%, 95%.

If you strip out some of the gains on sales and I would say that the terminations are neutral.

Yes, I think you should get a pretty good run rate.

Okay.

And finally one more, I know you've got some percentage rents, I know you've got assets that are under contract but me and -- you're sitting on, snapshots

terrific balance sheet with the kind of cash, you've probably seen how the stocks perform relative to other strips this year.

It's been lagging.

If Ramco were to take another hit, would you just opine and would there be a share price or would you be inerested in doing a buyback?

Yes, I am not sure what that share price would be, but if you always look at it, included when we took the last hit before, but just concluded that, given what we had the pipeline, use our capital that did not make sense to buy it back just to reissue it again.

But, again there are certain circumstances that we had in the past where it clearly makes a lot of economic sense to us and our shareholders.

Great.

Thanks guys.

The next question comes from David

of ABC Capital Markets.

Good morning.

This is Jay Leupp here.

How are you guys?

Hi.

Rich, I was hoping you could go through those numbers again as far as the acquisition of the four centers, what was the total investment there?

And then as a follow-up to that, I know you indicated that two of the four, you had expected to close in the second quarter, what was the dollar investment of those two centers alone?

Basically, I think the total we had of the four centers, they gave us in a perspective, it's about $163m.

The ones we had expected to close in the second quarter were called about $35m, $36m, okay.

All of them have debt associated with them.

The last two are called at, $126m and I think, the debt on those, just adding up some numbers here, is in combined, probably about $83m and probably that average is, I would say some more about 4.9%, like one, 4.88% and the others above or maybe the 5% or ahead over 5%, yes, the interest rate on the debt.

So, again just, the two we had anticipated buying and I think still we'll close on are delayed a little bit and I think even the second two are maybe delayed a little bit, but I think we are still comfortable with the numbers that was issued.

So, just in round numbers, you are looking at a $163m total purchase prices for the four.

We had debt on those of about $103m and an equity required a robust $63m rounded.

Okay, just so unclear, I know you - - the two that were expected to close this quarter and then should close in the third quarter, the two you just indicated might close a little later than expected.

What would you call a worse case scenario on those, would you still expect them late third quarter or could they possibly slip into the fourth?

Yes, I think late third quarter is reasonable, they could flip into Q1or to the fourth quarter early.

But I still think we are on track to close these things before the quarter ends, but this could be late.

Okay.

I want to clarify one more thing.

Your original -- just to kind of go back to your original acquisition guidance for the year, I believe it was $75m to $80m, is that correct?

I think it is about right.

Okay.

Just wondered, I guess, I mean if you could give us any more color on the -- you talked about a major development of Florida commencing perhaps early 2005.

I'm sure the details are still being worked out, but wondered if you could give us any idea maybe what type of property that is, what the dollar investments yield, and do you think

would be like that, it sounds like it's going to be a major profit for you guys?

Well, we are going to develop it in phases.

The primary shopping center portion of it could be as much as a 125 acres when it is fully built out and the number of square feet could actually approximate 1m square feet.

Phase I, will probably be between 400,000 square feet and 500,000 square feet and we have one retailer already committed and signed for the project that is over 200,000 square feet.

I would assume for Phase I that we are probably talking about somewhere in the vicinity of maybe as much as a $15m to $20m in equity.

However, we are definitely planning to treat the shopping center development as and off- balance sheet entity.

Okay.

And then as a final question, kind of going back to my original question, now, you went through kind of a -- you said you had a bias towards the lower end of the range at this point in time.

Is that simply the result of the delayed timing of the acquisitions or are there some other factors that kind of contributed to that bias?

I think, probably the biggest thing is the delay in the acquisitions.

Okay, great.

Thank you.

Your next question comes from Louis Taylor of Deutsche Bank.

Yes, thanks.

Richard, Dennis, can you just expand a little bit about the reasons for the delays?

I mean, you guys have a pretty consistent pattern here now of having difficulty, investing your capital on a timely manner, and this, you know, dilution pattern has been going up for quite some time.

What were the reasons for the delays this time?

Well, I did -- Louis, you know, number one, we had intended to buy the two Georgia properties that we had under contract by the end of this month.

One of the things that happened is, we were moving through due diligence, was we became aware over the fact that a primary lease that had been executed and the tenant had opened, had not even really been reviewed and approved by the lender.

So, what we had to do was kind of take our seller by the hand and move him through the approval process of the lease, even before we could get to the approval of us as a perspective buyer.

That process is now done, and again we would expect to -- we have a reasonable expectation that we will close now before the end of this month.

For better or worse Louis, you know, the timing of rising that equity and the timing of closing our transactions is never a perfect dart.

And although we like to think that we can have those two things timed as closely as possible, there are always a lot of moving parts in your acquisitions; in your developments; in your redevelopments.

In this particular instance, when we looked at when we would close on the first two purchases and when we would close on the second two, and our projection is a close on the second two assets in the middle of August, which is obviously and rightfully so taking a conservative approach, so that we don't get done for having been too aggressive in coming up with our dates.

But we raised our convertible preferred when we knew -- when we believed the market was open to us to do that, and said if we know we can raise the money and we know we can raise the money at a reasonable interest rate, and with a very reasonable conversion price, we should move now.

Who knows what the marketplace is going to hold 30, 60, 90 days, especially with, you know, the rough waters that we saw in the market at that particular point in time.

In a perfect world again, what we would have done is probably raise the money at the end of July or in the middle of August.

Okay.

Again, any difficult -- you've consistently had now in terms of reinvesting your capital, and the dilution that it has caused and the amount of dilution that really takes away from your value-add at the redevelopment.

Aren't you better off just not buying anything anymore, and just let your earnings grow rather than, you know, this consistent pattern of dilution?

You know, again I guess sometimes if you are looking at the short-term or long-term, and I think in the short run, you know, I can't argue your point, but in the long-term, I think that these are four great assets that markets rarely operate in; we'd like to own, and what we are trying to figure the way to two of those assets.

And, I think in the long-term it'll be a good buy and it will be priced or matched with very good capital, both on the debt side and the equity side, and be accretive to our shareholders' long run.

Okay.

Can you define long-term, because this is three years now of this very consistent dilution.

I mean, we thought 250 next year was going to be a layout.

And so, how much better off are you really from buying these assets?

Again, with my definition for long run, I guess, you know, once the asset

stabilizes on an annual basis.

And I think that -- you know, a lot of the issues we've had relative to earnings have been one of the non-cash charge we took last year, which again I think was a very conservative position in running up the Kmart's pretty

and receivable.

And in prior years, as you know, was taking

offline to redevelop, which again long run, will not only create

for our investors, but really NAV for our investors in it when we are done.

We think that the NAV calculation on those properties will be greatly improved.

Louis, let me just add one more thing here.

We cannot lose sight of the fact that - you know, especially when we talk to you as well as the other analysts on the phone here, you know, part of that dilution that you are talking about is not necessarily, and it has taken us more time than we had hoped or expected to get our funds out for acquisitions.

But as Richard, eluded to, just before we had our first equity raise two years ago, not necessarily three years ago, but two years ago, you know our debt-to-market cap was in the 60% range.

So a portion of the funds that we are raising, the capital that we are raising has gone to reduce our debt which just by definition is going to be somewhat diluted.

So you know we have a lot of masters to serve here and we'd like to think that we are atleaset doing a reasonable job in balncing those proirities.

Hey you guys have consistently proven over the last two or three years that you have a problem getting the deals closed, when you say you are going to close them.

What steps have you taken internally all right, to fix that problem?

Sure the problem will remain in the one case in the four aspects we are looking at right now ok, it was coming from two separate sellers, both of them tied together as a one property, then its indicated that there was a problem that the seller had, and they did not seek approval and no longer had issues, thats the way we to get that approved for him, so we could get approved for the loans so that we could move forward.

At the other property there was some environmental issues on one property now on both, that we have to work till we are in the process of working during equal days on that.

What we would say is 2000 for our much sure view that there is a problem in closing our deal there since_ and one that's soluble frankly that it is one that I think that shows province on our viewed elegance when we are buying properties.

you come into the market for money before you even have your do diligence you

really you suppose you just had as well defined as you have indicated during your capitalizing process?

You know since we have introduced the process we have always been very well defined, again there is a chick in the egg, would you rather have us increase our debt trend aligned to the max and then come back to the equity market to pay us down, I think could be done for that as well.

And really what we are trying to do is run a business, and when you are out raising money or debt that's the best time to do is when really you don't need it, but you know for those market dues he was not needing it so he will got to plan in from your back pocket had argues that consistently I think that we have always come to the market when we have an increase the use of bonds we've always had in our back pocket, we just have been held in to this

plan was specifically, because the deal isn't done.

Hey and again we are spending a lot of time on this but you know I don't want anybody on this call to walk away thinking that they -- laid a message, that they announced that there's going to be a shopping center acquisition and its six months later.

If you really look at it and again I think which really makes the most critical point is, we do outstanding due diligence and invariably you find issues with shopping centers, and if that closing was delayed 30 may be a maximum of 45 days that's it.

This does not seem to go on for months and months.

OK

Reasonable people can differ little on you know is the glass half full or half empty.

Hi I'll give it to the next questioner.

Thank you.

Thanks Louis.

The next question comes from Philip Martin of Steifel,Nicholaus .

Good morning gentlemen.

A couple of things here, most of the questions have been answered and dealt with, but when would you expect to reasonably be back to kind of a pre tell 12 pre gross roads of one rate in your as of how on an annual basis, which was about a 260 number?

I got to probably say from our previous calls we've stopped doing everything.

And I think that logistically you would expect us to be there at the end of next year at least on a stabilized basis.

On a stabilized basis?

Yes, but again other things are going on as well and again as Dennis pointed out that, your depths can pay down to a point that were comfortable with our depth to market gaps, and again much of the market has come through our depth to our market gaps in the low 40% range or mid 40% range.

I'll just say that you look at what we are sensitive to and you have been asked that specific question .As we review and it is also telling with new competitions we reveal what is in the best interest of our share holders.

We are constantly taking a look at, - all of those markets is that what indicates were company capable of growing, and to the extent that capable

has been growing at a slower pace, then certainly you are indicating and Lou is indicating and some of our share holders are indicating that they would like to see it.

We've been very focused on increasing value and really making sure that we count the portfolio where appropriated center, and so we continue to look at exactly what approach we should have on a mid term and a long term basis.

To make sure, on the one hand, that we are showing that we are a company capable of growing, and on the other hand, that we are intelligent about our balance sheet issues as well as the quality of quarter assets.

Well, and that then and you hit the nail on the head, it's being able to demonstrate that value creation and I think what I'm here is, this is a value creation story and I think a pretty good one but that does get lost and the delusion that continues to plague the company quarter-after-quarter and that's what's frustrating.

So, you know being able to demonstrate that value add and doing it that's the time that, again I don't want to beat another dead horse here, but again the value creation story certainly is getting lost in the delusion aspect related to the process on that issue.

A couple of big picture things -- in terms of retail sales what kind of anecdotal, what kind of stories are you hearing from specifically your smaller retailers in terms of their sales, sales volume, I know, from an economic standpoint, our retail sales standpoint we've been hearing that the retail -- the consumer is slowing down a bit, are you seeing any evidence of that with any of your retailer's etcetera?

Well, as we are moving ahead here with new leases and more and more tenants are objecting to paying percentage rent.

Although we get year-end information, there are much more hesitant to provide us with monthly sales, but the one thing we can tell you is that we have definitely seen an acceleration in the number of smaller tenants who are enquiring after our redevelopments and our new development projects so that basically we are going to bring our new development projects on line.

We should be you know basically 100% leased.

So there certainly is an acceleration in the tenant interest.

Bill, let me add one more point to that.

I think maybe the best indication of that is the tenants want us to pay a higher rent and

if you remember the stat for the six months ended, again what we -- it's probably high for the six months ended.

Like historically we look at renewals, of being kind of in the mid-single digit to a quote six to eight percent increases and then last month a new rent, for the quarter is up to a 10.7% for six months.

For six months?

For six months, yes.

Okay and the last question.

G&A, a bit high this quarter relative to past quarters, a function of the deal or due diligence related with the acquisitions and what do you see for the run-rate there and that's it?

A couple of things and really both of those costs would be capitalized in one form or another.

Probably the biggest reason quarter-to-quarter increase has been, this year we will be a single business tax-payer, so increase in state and local taxes and the other is, just, increases in salaries and benefits and may be disproportional increase in benefits with healthcare benefits --

Okay, and the run-rate, is this a good run-rate here?

I would say it's probably it's a good run-rate.

Okay, thank you.

Once again, if you would like to ask a question, please press star, then the number one on your telephone keypad.

And the next question comes from Rich Moore of KeyBanc Capital Markets.

Hi, good morning guys.

Now that you are sort of in the enviable position of being essentially a 100% fixed-rate debt, should we think, Rich, that going forward you would have more variable rate debt brought into the portfolio as you make acquisitions, etcetera?

Yes, I think that now that you are sure you make acquisition although we could I think as somebody development deals come on line, your variable rate.

Okay.

I mean, that kind of thing is obviously accretive, it's accretive in sort of an interesting way.

But I also note that, you are doing $163m of acquisitions, which was well above the number that I would have anticipated for the year, and you're doing with only $63m of equity, which also -- you are on about 5% debt which strikes me as also accretive.

Is there any chance that this guidance you've given for next year even though, my number, there was really nothing new there fell into that range, and I am wondering if may be you are being conservative for next year given these acquisitions and given the variable rate, the fixed rate debt picture?

I think we are always trying to be on one hand conservative, on the other hand I think that's the plan we have for the rest of this year.

Even the plan that we put together for next year, it isn't a walk in the park, there is a lot of things that need to get down.

You have both to hit the number this year and next year.

So to kind of balance that -- I wouldn't say it's overly conservative nor overly aggressive, I think it's good middle of the road for us.

Okay, and what do you use for the additional $20m of equity aside from the $42m of cash that you have?

I'd say, basically we'll have this, I think your variable rate debt will go up there and you will use your line.

Okay.

Surely in some way.

Okay, and then what have you guys baked into next year in terms of both acquisitions and dispositions?

I mean how are you looking at next year given your guidance?

I'd say still we have got the acquisitions next year probably the $75m range.

The dispositions were at one center and one center we are selling.

Is that this year or next year?

That will be next year, but again Rich nothing identified, nothing out to market, I just think that in our plan we have said that someone is going to come along and want to pay a price we'll learn to accept for one of our properties.

Okay, and then Dennis I think you made the comment or Rich maybe that the acquisition market, you are seeing fewer things and I have sort of thought that as interest rates crept up a bit, of course they kind of crept back down again, that we might see more things come to market as sellers rush to sort of hit the exits.

Are you not seeing that?

You know something, what I am really trying to portray Rich is that there was a number of centers and even groups of assets that were put out in the marketplace in response to what had happened and those have been out for a little while, may be 90 days.

I think what I am trying to say is, we continue to see some assets, but certainly not the flood that we were exposed to probably six months ago.

Okay, and then by the way I forgot to ask you, the cap rate on the $163m, did you give that or did you give us some thought on what that might be?

You have not, and generally you know Rich we don't talk about cap rates.

Okay, fair enough Rich.

Given the number of ways to calculate the cap rates, frankly.

Okay.

Your occupancy target was 95%, kudos to you guys, you got to 92.5% roughly for the quarter.

Is 95% sort of still the year-end occupancy target?

I think we'll be short, it's my guess right now, for 95 at the end of the year.

So 93, 94 something like that.

I'd say.

Yes, maybe the lower end there.

Okay.

And then the GV on gains, how does that work?

Basically, FIN46 (R), we have been trying to work through that, but basically what we have done is consolidated, in the consolidation eliminated all fee income that we would have generated.

So, at the end of the day Rich, when the cash settles, there's going to be a great project for us, and sooner or later those, the cash we earn on that project is going to impact our FFO.

But right now, until we work through the consultation with our auditors, we are dealing with other firms as well as the people that drafted the pronouncement to try to find some attempt there.

I feel I'd rather give you a good surprise than a bad surprise, so we have consolidated, made all the adjustments that are necessary.

I think that's a good idea.

So, you're roughly 50/50, Rich on that venture.

Yes, on the definitive talk to Dennis or me.

Okay?

All right, okay.

You know.

I'd say 50/50 Rich, but if you are going the way FIN46 (R), any time you have a major event like if you put Mezzanine financing on it that we don't hold, you have to revisit, when your construction loan expires, you put permanent financing on it, you revisit it.

So, it's not as straightforward as you would like it to be.

Okay thank you.

Did you give the same store NOI with and without redevelopments?

I think you have done that in the past, either I missed it, which I probably did, or it wasn't in there.

Did not.

I'd get that to you of line Rich.

Okay, thank you and then --

I don't think, it's going to be that significant with changes that was before.

Okay, great.

And then, the last thing for me is that the C shares were not dilutive this quarter as we calculated.

That's correct, isn't it, Rich?

I'm sorry.

Those preferred

we had in the C shares were not.

Okay, but it looks like they are very close to being dilutive like, maybe next quarter, the following quarter they become dilutive.

Is that right?

That would depend where your stock prices at.

So, who knows?

Okay.

Is there an article about the 28.50 to become dilutive?

Yes.

It does.

That's my understanding.

Okay.

We are hoping to talk about that too.

Great.

Thank you guys.

Your next question comes from Philip Martin of PFone

.

I'm back.

One last question.

Occupancy of your same-store portfolio, year-over-year 88.6 to 91.4 currently.

Where do you see that going by year end?

For the same center, so,

for the properties that are stabilized.

I think we have given stabilization of about 95% to 97% than it's for the ones that aren't, and we have to blend, but it truly depends upon what stage they are at.

As we talked about last quarter, there are again West Oaks, the one was a good example.

The way we look at it is - it is truly occupancy, as we had

at Gander Mountains.

That was in possession of the space, just not open.

So, we haven't picked it up or didn't take it up, even though they opened within a week.

So, here again, I think we need to go back and look at than in.

If you look at the truly stable outlook, they'll be 95% to 97%, and some of the other was depending on what we are doing, could be as low as 30% to 40% occupied.

Okay.

Are there any in terms of negotiations going on right now that is nothing at some of the less well-occupied centers, that's, in terms of negotiations right now that is occurring, that might make you feel you get to 93% by year end on that?

Well, the way, Rich and I discussed this allocation, but the way we approach it is, if we are in contract with a tenant, we haven't actually returned the space over to them, then it's counted as vacant.

Okay.

So, there are a number of tenants basically that we are either finalizing agreements with -- and would be a very good example in the numbers for this quarter, you would not see Ross Dress for Less at Northwest Crossing.

And yet the ease is done, we are well under construction with that tenant, and we hope to expect them open in the fall.

So, that would impact the numbers.

The flip side of that is that we are working with a number of tenants who we had recently expected that they would open in the fourth quarter and just based upon the number of stores that they are attempting to get open, some of them may slip, or at least one, I think up may slip to the first quarter of '05 just because of the scheduling issues.

Okay.

And if they don't open, even though the lease is executed and everything is set to go, they have that right to slip it if they -- if they weren't an occupancy by a certain date.

Okay.

Okay, so trends are reasonably positive.

It goes to my earlier question, kind of bigger picture retailing trends generally.

Is the trend in your opinion is still pretty positive there with the retailers in your negotiations etcetera?

Absolutely.

Okay, thank you.

At this time there are no further questions.

Are there any closing remarks?

Once again, we would merrily like to thank all of you, and Andrew, David, Luepp, Philip, and Rich for your questions.

We take all of your comments and your

seriously, and we continue to reflect on your past comments, as well those from this morning.

So, thank you for your attention all, and look forward to communicating with you again next quarter.

This concludes today's conference call.

You may now disconnect.