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Operator
Greetings and welcome to the Ramco-Gershenson Properties Trust fourth-quarter 2008 year-end conference call.
At this time, all participants are in a listen-only mode.
A brief question-and-answer session will follow the formal presentation.
(Operator Instructions) As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Ms.
Dawn Hendershot, Director of Investor Relations.
Thank you.
Ms.
Hendershot.
You may now begin.
Dawn Hendershot - IR
Good morning and thank you for joining us for Ramco-Gershenson Properties Trust's fourth-quarter year-end conference call.
I am hopeful that everyone received our press release and supplemental financial package, which are available on our website at.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 be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
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 attained.
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 will 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.
I would now like to introduce Dennis Gershenson, President and Chief Executive Officer; Richard Smith, Chief Financial Officer; Thomas Litzler, Executive Vice President of Development; and Michael Sullivan, Senior Vice President of Asset Management.
At this time I would like to turn the call over to Dennis for his opening remarks.
Dennis Gershenson - Chairman, President, CEO
Thank you, Dawn.
Good morning and welcome.
No matter what amplifying adjectives you choose to describe the state of our economy and its various sectors, 2008 was a very difficult year.
Further, no one is terribly sanguine about the prospects for recovery in 2009.
With that in mind, I believe that this morning you are most interested in having us address two topics.
First, what is our plan to remain a successful public REIT in these challenging times?
And what are our catalysts for growth once the skies begin to clear?
Although it has been many years since our industry experienced such a confluence of negative circumstances, those of us who have been in the shopping center business for a long time are no strangers to an environment where the consumers are hesitant to spend, significant retailers are going out of business or postponing their expansion plans, and the credit markets are stubbornly uncooperative.
Now as then, the key to surviving these problems and ultimately growing one's business in the future is the ownership of a portfolio of shopping centers that is well located, well tenanted, and the destination of choice for the consumer.
Ramco-Gershenson's portfolio of shopping centers meets these criteria.
Our centers are predominantly located in metropolitan areas with significant barriers to entry.
Our properties' demographic profile includes large trade areas with population bases averaging over 190,000 persons, with average household incomes of $77,000, well above the national average.
In addition to these solid trade area statistics, our shopping center characteristics promote stability in these troubled times.
Our centers are anchored by the dominant supermarkets in the area, the most successful discount department stores, and the most recognized national, destination-oriented, popularly priced mid-box retailers.
Our average shopping center is 225,000 square feet, well above the average size of our peers.
The Ramco portfolio boasts an average of over two anchors per center, insulating our properties from the catastrophic results of losing a landlord's one and only anchor, especially if that draw is a supermarket.
Thus, the location as well as the destination-oriented everyday goods and service tenant mix of our shopping centers positions our properties to weather this economic storm.
An additional indicator of the strength of our shopping center portfolio is the number of anchor tenants who are either expanding their existing stores or joining our tenant lineup.
At the beginning of 2008, we commenced major value-add redevelopments at 13 of our shopping centers.
As of today, four have been completed and nine are still underway.
The anchors who will be added or expanded as part of these projects will come online over the next 18 months.
Even with a portfolio of dominant shopping centers, we are not immune to the closing of retailers such as Linens 'n Things and Circuit City.
However, in addition to the one Michigan Linens 'n Things location which we have already re-leased and opened as a 34,800 square foot Golfsmith store, we are currently negotiating letters of understanding with replacement tenants at almost every center where a vacancy has occurred.
At a number of our locations, we are discussing terms with two or three national retail anchors for the same vacant space.
Further, our 2008 leasing statistics show steady, positive momentum both in tenant renewals -- where we extended over 70% of our lease expirations at an average rental increase of 11.6% -- and with new tenancies.
We opened 25 new stores in the fourth quarter alone at a rental rate 4.4% about our portfolio average.
Our supplement counts only those retailers who opened during last year.
As telling an indicator of our leasing progress is the number of new leases we signed in the fourth quarter of 2008 and the first two months of 2009.
In Q4 of last year, we signed 20 new leases, compared to 23 in the last quarter of 2007.
And in the first 45 days of 2009, we have signed 16 new lease agreements with an additional 21 leases out and under final negotiation.
Mr.
Michael Sullivan, our Senior Vice President of Asset Management will expand on these statistics and provide some color on our plans for the year and the leasing environment for 2009.
He will also provide insight into how our Michigan and Florida assets are performing.
2008 occupancy for our wholly-owned and joint venture properties, excluding centers in redevelopment, was 93.7% at year-end.
Occupancy for the entire portfolio, including planned vacancies we created to facilitate the outstanding nine major redevelopments, stood at 91.3% at year-end.
This number includes the impact of all but one Linens 'n Things vacancy, but does not include any of the Circuit City closures.
The major impact to our 2009 occupancy number will be the one additional Linens store; all four of the Circuit City locations; plus the Wal-Mart at our Ridgeview Center, where we took an impairment charge.
These vacancies will be offset in part by those anchor tenancies that will come online this year as part of our redevelopments.
That said, we are projecting occupancy in 2009 at between 50 and 100 basis points below the 2008 level.
Understand, however, that to be conservative we have not included in our 2009 occupancy projection any retenanting of the six remaining Linens stores or the four Circuit City locations, even though we're making substantial progress on letters of intent for many of these vacancies.
Based upon the schedule of openings of the new anchors in our redevelopments, plus the retenanting of the Linens and Circuit City stores, we anticipate a significant increase in our occupancy number in 2010.
The ongoing viability of our Company, as I stated at the outset of this call, relies primarily on the strength of our portfolio of shopping centers.
Additionally, the management of our debt maturities and the promotion of our Company's liquidity are also vital components in maintaining Ramco-Gershenson's stability as well as key factors in planning for our future growth.
Rich Smith, our CFO, will address in some detail our comfort level in handling a modest debt expiration schedule over the next two years.
He will also address our sources of cash to meet our capital requirements for the foreseeable future and to pay down our credit facility to a level which will enable us to pursue opportunities as they arise in all three of our profit centers.
I would like to preface his remarks, however, by assuring you that in anticipation of a December 2010 line of credit and term loan maturity, we are not only working to reinforce our current banking relationships, but we are already working with a number of new banks to expand the participant base of our lending group.
Rich will also outline the elements of our 2009 business plan, which will generate over $70 million of cash against a capital requirement this year of only $35 million.
Adding the amount currently assessable under our revolving line of credit, we should finish the year with approximately $60 million of availability.
Further, we believe that as a result of our development teams' dedicating 2009 and the first part of 2010 to securing the required entitlements and anchor tenant commitments for our prospective development projects, we will generate an additional $25 million in liquidity, as we take the land for these projects and the pre-development costs we have incurred to date off-balance sheet and into joint ventures.
This sum, when added to the cash generated just from operations in 2010, will produce in excess of $50 million of additional liquidity.
Maintaining a strong asset base, managing our debt maturities, and ensuring that we have the capital necessary to execute our business strategy for the next several years begs the question -- what are our plans for growth?
We pride ourselves on having three significant profit centers, each with a proven track record of success and all staffed with seasoned professionals.
In asset management, we will complete our nine scheduled value-add redevelopments throughout 2009 and the first part of 2010.
The new anchors we will bring onboard, coupled with the re-leasing of the Linens and Circuit City boxes, will not only generate additional revenue and strengthen our tenant mix, but will also serve as a catalyst for the leasing of smaller tenant spaces adjacent to the redevelopments and the retenanted vacancies created by Linens and Circuit City.
Further, as the economy recovers, based on our current occupancy level our centers with their strong anchor draws have embedded potential for significant lease-up of ancillary retail space.
Our development pipeline includes five potential projects of consequence.
Three of these opportunities are located adjacent to one of our existing shopping centers.
We optioned the land or acquired the property for these developments specifically because there were multiple anchors who desired to become a part of our existing centers but for whom there was no room.
In each instance, we have reconfirmed the anchors' interest, although almost without exception their planned new store openings will not occur before 2011.
Thus, our development team will use the next 12 to 18 months to achieve the entitlements and tenant commitments we need to finalize agreements with a development partner and to secure construction loans.
It should be remembered when reviewing our supplement and the unlevered returns these projects produce, what is not shown is the Company's profit from the sale of land to the anchors; the funds generated from the sale of outlots; and both the one-time fees generated by the development process as well as the ongoing annual management fees.
These sums combine to produce a levered mid-teens return.
We are also positioning ourselves on the acquisition front to be able to respond to opportunities as they arise.
We are presently discussing an off-balance sheet structure with several potential partners that will allow us to acquire both stable and more opportunistic assets.
We have a long history of creating significant value where others failed to see the opportunity or were unable to execute on the potential.
Although everyone is talking about positioning themselves to seize upon all those opportunities that are just beyond the horizon, those financial partners who are looking for oversized returns will ultimately seek out the companies that have proven, time and again, that it is actions -- not promises -- that produce results.
I would now like to turn the call over to Michael Sullivan, who will provide some detail on our 2008 asset management operations and plans for 2009.
Michael Sullivan - SVP Asset Management
Thank you, Dennis.
Good morning, everyone.
It is obvious that 2008 represented a sea change for the shopping center industry and 2009 clearly will be a year of challenges.
While we acknowledge that there will be strains on our tenancy and occupancy numbers in 2009, we believe that Ramco-Gershenson is prepared to not only ride out the storm, but is positioned for healthy rental and occupancy growth moving forward.
Ramco's asset management team is confident that the combination of our portfolio's core strengths and our management's discipline and expertise will mitigate many of the pressures of the current environment.
Our asset management team has been charged with maintaining and improving portfolio occupancy; achieving reasonably aggressive leasing goals; and reducing tenant variable costs in 2009.
We are encouraged by our leasing velocity to date.
As Dennis mentioned, we were successful in executing 20 new leases in the fourth quarter; and in the first two months of 2009, we have gotten off to a great start.
We have signed 16 new leases and have an additional 21 leases out to tenants and under negotiation.
One of our 2009 goals in an economy that is particularly difficult for local retailers is to increase the percentage of new leases signed with national tenants.
In the fourth quarter, we increased our percentage of new deals with national retailers to 45% from 40% in the prior quarter.
And so far this year we have increased that percentage to 50%.
Those national retailers who are still expanding our choosing the dominant centers for their new locations.
We have a substantial pipeline of these opportunities for 2009, although we do see a preference on the part of these users for later delivery dates.
Because capital conservation is an important Company initiative for 2009, our leasing team is focused on reducing tenant allowances and store improvement expenditures.
Thus, we are in some cases accepting lower rentals in lieu of providing dollars to our new tenants.
But typically the rental reduction is less than our required return on investment.
In order to predict the impacts to our occupancy in 2009, we looked at a number of factors.
First, we are constantly updating our tenant watch list.
We are especially sensitive to tenant occupancy costs.
We are reviewing our portfolio monthly on a space-by-space basis to identify risky tenancies.
We are reevaluating our lease retention strategy; and then we have revised our lease-up assumptions.
Asset management has set a new lease renewal retention rate of over 80%, a number significantly higher than our historical average in the 70% to 75% range.
With 250 expiring leases this year, this means we will renew 200-plus leases.
With this in mind, 2009 is off to a good start as we are on target with renewals through the middle of February.
We view the renewal of a healthy tenant at the same rent or a slightly higher rent eminently more desirable than lost income while we secure a new tenant and incur additional capital expenditures to put the new retailer in place.
As an offset to the potential for a smaller rental increase on lease renewals, we have been successful in negotiating shorter lease terms.
As for how Michigan and Florida are performing, we're happy to report that our assets in these two states continue to outperform the balance of the portfolio in many important metrics.
We achieved an occupancy rate of 91.3% in 2008 across the portfolio including re-developments.
Our Michigan centers maintained an occupancy rate of 92.4%.
Our Florida shopping centers achieved an occupancy rate of 93.2%.
Although Michigan and Florida combined for only 68% of our total GLA, new rent starts in these states represented approximately 80% of new base rents and accounted for 82% of newly occupied GLA.
Portfolio-wide renewal retention for 2008 was 71%, while Michigan and Florida each saw leases renewed at 74%.
For all leases renewed in 2008, rent increases averaged 9.9%.
Our Michigan centers equaled that average, while our Florida assets generated renewal increases of over 11.3%.
Another goal of Ramco's asset management team is to achieve meaningful reductions in our common area maintenance expenses portfolio-wide.
Reductions in these expenses have an immediate positive impact on tenants' occupancy costs.
We will also redouble our efforts to contest real estate tax assessments, arguing that market conditions have affected the value of our centers and thus a reduction is warranted.
A reduction in taxes is also a real savings for tenants.
We have all seen an increase in requests for rent relief from every retail sector.
Ramco's process in evaluating these requests is comprehensive and rigorous.
Our approach involves an extensive evaluation of the tenant's sales; a merchandise mix income statement analysis; and finally, which tenants are likely to survive if help is given.
If we are inclined to provide a assistance, it will be in the form of short-term relief in order to get the retailer through the current cycle.
The number of relief requests made which comply with our process is a relative small percentage of our tenant base and helps to eliminate those tenants who are merely trying to exploit market conditions.
Approved requests offer only rent deferral, not rent forgiveness.
Additionally, Ramco will often take these opportunities to improve our position relative to the tenant's lease terms.
This may include removing options; adding landlord termination or relocation rights; and deleting exclusives for use restrictions.
In the fall of 2008, asset management reviewed and improved its collection process, which is bearing fruit in helping to decrease our outstanding tenant aged receivables balance.
In addition to fine-tuning the Company's internal triggers for delinquency actions, we have modified the timing, format, and content of our internal aging reports to provide lease administration and asset management with detailed information, which facilitates more aggressive collection actions and tenant competency reviews.
While this has resulted in an increase in the number of payment plans in place, it has also afforded us the opportunity to identify tenancy issues earlier and then to work towards helping the retailer resolve its problems or to commence re-tenanting the space.
Whichever approach is chosen, our preemptive actions help mitigate larger receivable balances.
In conclusion, our asset management team is energized and enthusiastic about the opportunity to not only hold our ground in 2009 but to make headway.
We believe we can achieve our leasing goals in new leases signed, the stabilization of rents with existing tenants, and the achievement of a higher percentage in retention of expiring leases.
We are confident we can reduce costs to our tenants and to partner with those healthy tenants who need help riding out the storm.
We will strive to do our part in conserving capital, and we will employ more effective collection efforts which will contribute to the Company's liquidity.
Viewed in this light, we see 2009 as being a very productive year for Ramco.
I would now like to turn the call over to Rich Smith, our CFO.
Rich?
Richard Smith - CFO
Thank you, Michael and good morning, everyone.
For the quarter, our dilated FFO per share was $0.35, which was a $0.29 decrease from the $0.64 reported in 2007.
Without one-time charges our FFO per share for the quarter would have been $0.65, exceeding First Call estimates by $0.04.
The one-time charges for the quarter were a $5.1 million impairment charge taken on our Ridgeview shopping center, which was written down to what we feel is its approximate land value; a $500,000 writeoff of dead deal costs at our proposed Northpointe development; and a $750,000 writeoff of receivables related to Circuit City, most of which was the result of straight-line rent recognized in prior periods.
Some other significant changes quarter-to-quarter included reductions in property level income and expenses due mostly from the effects of contributing assets to off-balance-sheet joint ventures, taking income off-line for planned redevelopments, and a decrease in temporary tenant and interest income.
These reductions were offset $650,000, which was our share of a TIF surplus earned at our River City development.
Under an agreement with the city we expect to receive a total of $12 million over 20 years and would expect to earn between $100,000 and $200,000 in 2009.
Other changes included a decrease in fee income as a result of decreased acquisition fees; an increase of G&A expense resulting mostly from the previously discussed write off at our Northpointe development; and a decrease in interest expense due to reduced borrowings at a lower rate offset by decreased capitalized interest on development projects.
For the year, our diluted FFO per share was $2.21, which was a $0.35 decrease from the $2.56 reported last year.
Again, as I previously discussed, our results were affected by the Ridgeview impairment charge; the writeoff at Northpointe; as well as a $1.1 million writeoff of receivables related to Circuit City and Linens 'n Things, most of which pertain to straight-line rent.
Without these charges, our diluted FFO per share would have been $2.52.
For the 12 months ended, significant changes included reductions in property-level income and expenses again mostly due from contributing assets to off-balance sheet joint ventures and from taking income off-line for planned redevelopments.
These reductions were offset by bringing River City back on balance sheet.
A decrease in other income related primarily to reductions in termination fee and interest income.
An increase in other operating expense was due to increases in legal fees and reserves for bad debts.
A decrease in interest expense for the 12 months ended was due to lower borrowings and lower average interest rates; an increase in capitalized interest on development and redevelopment projects; a decrease in loan amortization costs; and a decrease in unfavorable amortization of the fair market value of debt taken off-balance sheet.
Our G&A for the year was $15.8 million.
This was $1.5 million to $2 million less than our previous guidance.
Included in the $15.8 million was the $500,000 write off for Northpointe.
The majority of decrease in G&A from plan was a result of reductions in compensation and other employee expenses.
Based on additional across-the-board cuts, we expect our G&A to be between $14 million and $14.5 million in 2009.
We feel our debt maturities over the next 12 months are very manageable even in this challenging environment.
Upon refinancing the $23.6 million Travelers loan secured by West Oaks II and Spring Meadows, we would expect to generate an additional $20 million of proceeds, since the current leverage is approximately 30%.
We are currently working with Huntington Bank on a two-year extension for our Gaines marketplace loan.
Our $40 million secured facility with KeyBanc has two built-in six-month extensions; and our $150 million unsecured credit facility can be expanded or extended at our option until December 2010.
Availability year-end on our credit facility was $23 million.
Our EBITDA interest coverage for the 12 months was 2.1 times, and our fixed charge coverage was approximately 1.8 times.
Our FFO payout ratio was 73.2%.
Our capital plan for 2009 should provide us with approximately $58 million of availability to start 2010.
Our 2009 capital sources are expected to exceed $93 million and include $25 million of free cash flow from operations, $23 million of line availability, and $45 million from refinancings.
Assuming we do not form additional joint ventures and are not able to secure additional construction financing, our total capital requirements for 2009 is expected to be approximately $35 million.
Additionally, we expect to generate approximately $25 million of additional capital when we take Aquia, Gateway Commons, and Parkway off-balance sheet in the future.
Lastly, due to anticipated reductions in fee income, land sales, the effects of lost revenue due to closings of Circuit City and Linens 'n Things, as well as contributions of assets to off-balance sheet joint ventures, we expect our diluted FFO per share to be between $2.21 and $2.34, with a slight bias toward the second half of the year.
Dennis?
Dennis Gershenson - Chairman, President, CEO
Before we take your questions, I would like to quickly summarize Ramco-Gershenson's state of the nation and our view of the future.
As we all arrive at the beginning of 2009, we face the year with the benefits and issues of our own making.
Ramco-Gershenson did not pursue an acquisition plan that included buying anything that wasn't tacked down.
Instead, we acquired shopping centers through joint ventures in metro markets that were Class A assets yet still lent themselves to value-added improvements.
We didn't undertake a business plan that generated significant short-term debt; and we commenced and completed a limited number of new developments which have been extremely successful, such as our River City Marketplace in Jacksonville, Florida.
Lastly, we consistently focused our attention on our existing centers, reworking and constantly upgrading our tenant mix and producing double-digit returns on new dollars invested.
Thus our prospects for 2009 do not include a mountain of debt to be refinanced.
We will increase our liquidity over the next 10 months through a limited number of transactions.
And the tenant interest in our newly created mid-box vacancies validates the underlying value of our shopping centers.
Going forward, our redevelopments presently underway, our development pipeline that will be activated when substantial leasing is achieved, and our ability to attract acquisition joint venture capital based on our track record of past successful shopping center purchases, all combine to be catalysts for growth.
These factors coupled with our safe, high-yield dividend make Ramco-Gershenson an excellent investment.
We would now be pleased to take your questions.
Operator
(Operator Instructions) Nathan Isbee, Stifel Nicolaus & Company.
Nathan Isbee - Analyst
Good morning.
I am here with David Fick as well.
You talked about the solidifying and expanding your bank group as a step in addressing the late '10 maturities.
Clearly there is a lot of uncertainty surrounding the whole bank industry.
Can you talk about alternative plans to delever possibly?
Is it too early to start marketing a larger portfolio for sale?
Richard Smith - CFO
Nathan, clearly we are focused on the credit facility, as Dennis talked about.
But I think we have been talking to a number of banks to increase the facility.
We also would like to pay the line down.
I think that clearly is a goal in the next two years, to get that paid down.
I think one of the reasons we cut the dividend was to free up roughly $25 million of cash each year, this year and next, that would help us do that.
But when I look at the line, right now we are somewhere between 50% 55% levered on the assets that are really backing that line.
So if we have got to downsize that, I think that one option may be a secure line.
Another option may be taking part of it and securing part of it.
I think we're out to a couple people as we speak, looking at the assets supporting that line and seeing what options we might have right now.
Nathan Isbee - Analyst
But there are no plans right now to start marketing a portfolio for sale?
Dennis Gershenson - Chairman, President, CEO
David, the only comment I would make relative to that -- because obviously we are all -- I'm sorry, Nate.
Nathan Isbee - Analyst
I didn't take that personally.
David Fick - Analyst
I did.
Dennis Gershenson - Chairman, President, CEO
You know what it is, Nate?
I know David put you up to that question.
As part of the prospective joint venture for acquisitions, we are discussing the potential contribution of one or a number of shopping centers to seed the venture as we have done in the past.
We raised almost $25 million in 2008 when we did that.
So that would be another source of funds.
As we are all aware, these times dictate that the people with the money are pushing for very, very tough transactions.
We just met with a broker who was up from Atlanta yesterday talking about high-quality assets selling in the high 8s.
And that is merely because if you've got the money and you're a seller who really wants to move the asset, those are the types of cap rates they are using.
So our alternatives, as Rich mentioned, would be first to refinance or to finance a number of the unsecured assets we have.
And then secondly, to contribute a number of assets to off-balance sheet joint ventures.
Because in those our prospective partner is much more focused on an IRR return than the initial cap rate.
If we can show them growth either through redevelopment or just lease-up, then the initial cap rate isn't half as important to them.
Michael Sullivan - SVP Asset Management
Nate, that also includes -- an in my prepared speech I talked about the development that we have not taken off-balance sheet.
Most of the -- all of the dollars that we spent on development to date that is shown in the supplement have really been drawn on our line.
So I think when we do that, that frees up capital as well.
Dennis Gershenson - Chairman, President, CEO
I think at the end of this discussion, our focus is to pay down our revolver to a point where -- although we don't expect it to happen -- if indeed the bank group when they are all done divvying up how much they are willing to take, our line is going to be cut and on a conservative basis, that is the approach we're going to take.
We will still have a significant difference between our outstanding borrowings and our new revolving line of credit.
Nathan Isbee - Analyst
Okay.
Can you remind me?
How many unencumbered properties do you have?
Michael Sullivan - SVP Asset Management
Right now we have freed up three, and I think we have got three others.
Dennis Gershenson - Chairman, President, CEO
No, no, we have 33 shopping centers unencumbered.
Michael Sullivan - SVP Asset Management
I'm sorry.
I'm sorry.
I am thinking of the ones that they support -- I think there's three or four of them that don't support the line.
The rest of them support the line.
Nathan Isbee - Analyst
Okay.
One more question for myself.
There was a published report a few weeks back about Hartland Square and Meijer possibly pulling out of that project.
Can you address that?
Thomas Litzler - EVP Development & New Business Initiatives
Yes, Nate; this is Tom.
I think it was Menards that published a report that you (multiple speakers)
Nathan Isbee - Analyst
I'm sorry, Menards, correct.
Thomas Litzler - EVP Development & New Business Initiatives
The situation is that Meijer is well under construction.
They are going to open September 1 of this year.
Menards has a contract to purchase the acreage from us.
The contract required them to get site plan approval by the end of January.
They had not yet secured a site plan approval.
The crux of that situation relates to just the building, building materials, and some issues between Menards and the township.
Right now, the deal is temporarily sidelined.
We have had officials from Menards in our office as recently as two weeks ago.
They still want to proceed with the deal there; at this point in time kind of waiting for the township to cool off and the situation to settle down, so that they can come up with a building that everybody can be happy with.
Nathan Isbee - Analyst
Does your guidance assume any sale takes place?
Dennis Gershenson - Chairman, President, CEO
It does not.
Nathan Isbee - Analyst
Does not?
Okay.
So the gain there would be potential upside?
Dennis Gershenson - Chairman, President, CEO
Yes.
Nathan Isbee - Analyst
Okay, thank you.
David Fick - Analyst
I also have a question.
Can you talk a little bit about -- you hit a lot of the junior box vacancies, the mid-boxes.
The tenants that are currently 30 days or more in arrears in the in-line, the small shops, you address some of how you are dealing with their requests for rent concessions.
But what are you seeing in terms of category?
Is it focused more in restaurants?
Is it more in other types of services?
And how about geography?
Michael Sullivan - SVP Asset Management
David, this is Michael.
You know, we have been watching 30-, 60-day delinquencies obviously very closely.
We have been taking, as I mentioned in my remarks, pretty aggressive preemptive action to contact the tenants.
And if in fact they have made a rent relief that complies with some of the date-certain milestones and they have completed the process, we work very closely with them and try to decide internally on our end whether or not this is somebody trying to take a bite at the apple, or whether we can really sustain their healthy tenancy with a deferral and some short-term relief.
We do see, quite frankly, a trend in decreasing aged receivable balances, especially the 30- to 60-mark, based on these preemptive actions.
If you want to talk about categories, I think the thing that stands out most if you look at our portfolio is Florida.
We have a larger than normal percentage of local shop operators in our portfolio.
We are spending a lot more time visiting the assets and speaking with the tenants so that we can make some decisions, some observations about their merchandising, their staffing, their operating hours.
We are not witnessing really any increase in Florida in our aged receivables or really even our lost rent or writeoff rent.
But what we are -- we are seeing some categories that are suffering.
In general, the bigger picture -- clearly office supply and furniture is extremely challenged.
Women's apparel, video rental, very dicey.
If you drill down to the local shop operator level, we are seeing some tenuous activity in those local shop operators offering nonessential goods and services.
We are seeing nail salons being challenged, hair salons.
There are some sandwich concept operators that are not doing well.
Clearly, family casual dining and upscale dining restaurants are suffering tremendously.
Fast food or discount are doing well.
Boutique shop operators who are undercapitalized or who don't really have their finger on the pulse of the local trade area in terms of what people are looking for, they are struggling as well.
But again, we are getting to these tenants earlier.
We are getting -- if there intent and real about their rent relief process or the request, they're giving us information that is meaningful so that we can work together, decide what if anything we can do in a short-term way to help them get through.
David Fick - Analyst
Okay.
My last question is we are seeing obviously some massively dilutive equity offerings here as well as alternative equity-raising strategies through dividend retention and so forth.
What might cause you to go in that direction, Dennis, if you aren't able to achieve financings?
Dennis Gershenson - Chairman, President, CEO
Well, I'm not sure that -- personally, that would be the lowest option on my scoreboard.
We are in discussion -- Rich always hates when I do these things.
But we are in discussion at the moment with a specific lender on the two Wal-Marts that were freed up.
And when I say discussions, we have an application in hand.
We are just waiting for the appraisal to be completed.
So that -- and these are not presently unlevered.
So that is absolutely a source of capital.
With the dividend reduction, we are going to generate at least an additional $20 million to $25 million there.
So we are in a position, based upon our plans for 2009 and 2010, just from the cash we will generate from those sources to see the two years through.
We obviously will be discussing with the Board our dividend policy each quarter.
But as you have seen, we have cut the dividend to a point where we certainly will cover the taxable portion of it on a total basis.
And we do not necessarily see at this point in time any benefit in any type of change to our dividend policy on the negative side.
So if your question truly is, do I see us raising equity in the short term, personally I do not.
David Fick - Analyst
Okay, thanks.
Operator
Alex Barron, Agency Trading Group, Inc.
Alex Barron - Analyst
Yes, thank you.
I was just wondering, can you give us an update on Aquia, and what you guys will be doing there over the next year or two?
Thomas Litzler - EVP Development & New Business Initiatives
Sure.
This is Tom again.
First of all, [OVA], the first office building we have there is fully leased and occupied.
Floors two through five are all committed to a host of new tenants.
So that is the update on that.
Going forward, we are in serious discussions with a multifamily apartment developer to do a joint venture with for that portion of the project.
We are also in discussions with office developers to JV that portion of the project.
We have re-worked the site plan so that we have just one parking deck, and that satisfies our new anchor, Regal Theater.
We will be using this year to basically solidify those JV relationships, pre-lease Main Street, so that we can commence construction hopefully 12 months from now.
Dennis Gershenson - Chairman, President, CEO
Just to build on Tom's comments, as he said, we reconfigured the site.
Part of that reconfiguration is that we have moved one and potentially several of the mid-rise office buildings that are five- and six-story office buildings just based upon the demand.
We have had a number of governmental agencies come to us and ask us to put in requests for proposals just based upon the relationship we've established with the US Navy, who took space in our first office building.
So we are generating significant interest in a second office building and we are using that interest to commence negotiations with several companies who are in, quote, the office building business.
The potential joint venture Tom talked about on the residential portion is with a partner who intends to build about 287 apartments.
The upshot of all of this is that we have scaled back the commercial portion of this development to a point where we are probably, over and above the movie theater, talking about to no more than 70,000 to 90,000 square feet total in retail space, some of that being on the first floor of these office buildings that we'll build.
Alex Barron - Analyst
I was wondering if there was any detail, occupants at this point, in the older part of the center?
Michael Sullivan - SVP Asset Management
Well, let me answer the question this way.
We have retail occupants in the first floor of the first office building that are open and operating.
We have demolished the site for the most part so that we can go forward with it.
We do still have one mid-box drugstore operating; and we have got some restaurants operating on the perimeter of the site.
And the Regal Theater is operating in the older facility, so there is still activity on site.
Dennis Gershenson - Chairman, President, CEO
But as far as small tenant space, there is none left.
We have torn everything else down.
Thomas Litzler - EVP Development & New Business Initiatives
We have one 9,000 square-foot pre-lease signed for Main Street, and we've got other activity in the pipeline that we are negotiating with.
Alex Barron - Analyst
As far as dollars involved, can you remind me again how much is involved in this project?
Dennis Gershenson - Chairman, President, CEO
Well, in the supplement we show a number of $140 million.
But that really come in part involves a number of the other elements that we will merely be joint venture partners in.
I think that if you really took a look at what is Ramco -- what will Ramco be responsible for even with a joint venture partner, you are talking probably more in the $50 million to $60 million range.
Alex Barron - Analyst
Okay, great.
As far as the occupancy numbers you guys reported, is that based on leases or is that based on physical occupancy?
Michael Sullivan - SVP Asset Management
Physical.
Alex Barron - Analyst
Okay, great.
Thank you.
Dennis Gershenson - Chairman, President, CEO
Yes, as a matter of fact, just as a follow up on that question, I wish that we could report it as lease, because there a number of leases that are indeed executed, especially in our redevelopments, where the tenant is either under construction or we are finishing the entitlements that would have a significant impact on that number.
Alex Barron - Analyst
Got it.
Okay, thanks.
Operator
(Operator Instructions) Rich Moore, RBC Capital Markets.
Rich Moore - Analyst
Good morning, guys.
I want to go back to Dave's question if I could, Dennis.
I think there is, it seems to me, a very real possibility that when this line comes due next year it could be cut dramatically.
And I'm curious.
Can you give us some thoughts on what the lenders are saying to you about keeping this sort of level, the $250 million level, as opposed to, say, something like half of that?
Dennis Gershenson - Chairman, President, CEO
Well, let's start off by saying, David, if you remember, the $250 million is divided into two parts.
There is a $100 million term loan, which is secured by assets that really would weigh in at about $175 million to $200 million even at a cap rate that exceeds 8%.
So what you are talking about is we could either take the position on the term loan -- and obviously, we will continue to work with our lending group and continue to take their temperature.
But we could put permanent financing well in excess of that $100 million on -- to take care of that $100 million.
That leaves a $150 million revolver.
As far as that is concerned, again, we are going to take the position that we need to structure the outstanding obligations by the end of 2010 so that we have between $50 million and $75 million of availability whether that loan stays at $150 million, drops to $125 million, or even might drop to $100 million.
That is our objective.
Rich Moore - Analyst
Yes, I hear you.
I am just curious, how far you are getting with the lenders.
Because I mean, one of your big competitors come, as you know, last night hit his last resort as well and sold 25% of his company for $3.75.
So finding debt is apparently extremely difficult.
I think most of us knew that.
Richard Smith - CFO
Rich, I think we are working probably harder than we ever have to find debt.
Rich Moore - Analyst
I mean are you getting any positive signs from these guys, Rich?
That indeed you could go out and take the $100 million term loan and take all those assets and put reasonable financing on those?
Or get $100 million to $125 million on the revolver?
Are those discussions coming to some sort of fruition, I guess (multiple speakers) ?
Richard Smith - CFO
Again, keep in mind, Rich, it is two years out.
Right?
Rich Moore - Analyst
Yes, well theirs were, too.
Richard Smith - CFO
You've got to understand that.
I think we have had discussions with the bank, with several of the bank group members talking about it.
Like Dennis pointed out, the likelihood of it being reduced in size, I think is probably there in today's market.
But to the extent that overall the $250 million is probably somewhere in the 50% to 55% leveraged, even if I had to pay the whole thing off I think I could find debt for that, to do that.
Because it is would be a lot of work, a lot of small assets, but I think it is doable in today's market.
Dennis Gershenson - Chairman, President, CEO
Let me add, something else there is, as you know, Rich, at the end of the year we did a transaction with KeyBanc where we financed $40 million secured by the Aquia asset.
So they are in a sense reconfirming their confidence in us.
They easily could have turned us down and said -- no, in this kind of an environment, the safe thing to do is not lend you any more money.
So many of our banking relationships go back 20 years with these financial institutions.
And during those times, we have been through some very difficult circumstances as far as the industry is concerned.
You obviously have a situation with DDR, I think, where the amount of debt that they were really talking about and the time frames that they were talking about potentially are different than the ones that we are dealing with.
But, bite my tongue, but I have historically seen the glass as half full.
On this size of an obligation we obviously are very focused.
And there is approximately 22 months before we ultimately have to fact that.
So we will be well prepared, whether it is refinancings of existing assets -- and I had mentioned to you we have an application already for well in excess of $20 million on these two shopping centers.
There is debt out there.
The nice thing about our debt is that you can find the lenders who want to lend $10 million, $15 million, and $20 million a lot easier than you can the people if you are talking about $50 million, $60 million, and $100 million.
Rich Moore - Analyst
Yes.
And kudos to you guys, Dennis, for the work you have done.
But I mean it seems to me the sooner the better on this.
Because everybody seems awfully concerned about where you're going to find even '10 money.
Now the second thing is you guys have had a lot of talks with potential joint venture partners over the years for -- and you have a number of joint ventures.
But recently it seems that money is just not to be found.
Where are you in these talks?
You have brought up partners again.
Are these just kind of hunting around and you're having some preliminary conversations?
Or is there something maybe more substantial?
Dennis Gershenson - Chairman, President, CEO
We have been in conversation with an investor, an institutional investor, who has several hundred million dollars sitting in the bank, who are looking --
Rich Moore - Analyst
Well, he is a great guy.
That is the guy we like to talk to.
Right?
Dennis Gershenson - Chairman, President, CEO
To do develop joint ventures.
But the bottom line is, that they are not interested in talking to us until the entitlements have been secured; and we have yet to negotiate what percentage of the anchor space needs to be committed, but it is not insignificant.
So we are not going to waste their time and ours.
And this is only one of three people that we have spoken to who have the cash.
Rich Moore - Analyst
This is to do development?
Dennis Gershenson - Chairman, President, CEO
To do development deals.
We have also spoken to people who will do joint venture acquisitions.
Again, their internal rates of return are in the high teens.
So, you have to scrape pretty hard to find the kinds of assets that will show those returns.
But Cathy Clark is working with a number of banks, a number of life companies, and a number of developers where we may come in and assist them because they have some difficult situations.
And this is not on developments, but on existing assets, where we can come in and in essence postpone the pain of having to turn around and give those assets back.
So we're trying to be as creative as possible on the acquisition front.
And if we can deliver assets, good assets that show that kind of yield, we have at least one company who we are in constant contact with who are looking for acquisitions.
Rich Moore - Analyst
Okay, but pricing is a bit high at this point?
In terms of what their returns (multiple speakers)
Dennis Gershenson - Chairman, President, CEO
There is going to be no stealing of assets over the next 24 months, in my book.
It is going to be that you truly get in on an asset-by-asset basis; and you investigate that asset and see where you can add value.
We bought a shopping center in Rolling Meadows, Illinois.
We paid a fair price for it last year.
During due diligence -- and we had underwritten a land lease on an outlot for about $60,000.
We were well in excess of $100,000 in the land lease when we found our user during the due diligence period.
So this is one of our fortes.
But you can't do it by buying a portfolio of 10 or 15 or 20 properties and expect to have done the appropriate amount of due diligence to really give you insight into where the value can be added.
Rich Moore - Analyst
Okay, thank you.
Remind me what happened at Ridgeview, would you?
And I am curious if there is anything else in the portfolio that might feel to you like that sort of situation, so we might see another impairment at some time down the road?
Richard Smith - CFO
Rich, Ridgeview is a tertiary market asset.
We were working on a redevelopment plan.
When we got together and talked about it, it didn't make a lot of sense to put capital in a tertiary market asset at this point in time.
So again, we may be doing that in the future, but not right at this moment.
So it made sense just to write that asset down.
We spent a lot of time as you can expect, and [Rauter] spent a lot of time looking at all the assets that we had, and challenged us quite a bit on what would be impaired, what isn't impaired.
Really we got down to the two assets, and one was really Ridgeview and the other was Northpointe, that really -- we had a couple sales going there and they fell apart at Northpointe.
And we wrote off costs associated with those sales.
So really when I look at it, knock on wood, but they are the only two assets at this point in time I see issues with going down the road.
Rich Moore - Analyst
Okay, good.
The last thing for me, guys, is Rich, where is the straight-line rent receivable written off?
Is that in base rents?
Is that where you put that?
Richard Smith - CFO
Not in base rent.
I think that, the straight-line rent receivable, was in G&A.
Rich Moore - Analyst
It was in G&A?
So is that also where the --?
Richard Smith - CFO
I'm sorry, other operating.
I'm sorry, Rich.
Rich Moore - Analyst
Other operating?
Okay.
Then the predevelopment writedown for Northpointe was in G&A?
Is that what you are saying?
Richard Smith - CFO
That was in G&A, correct.
Rich Moore - Analyst
That was in G&A?
Okay, great.
Thank you, guys.
Operator
(Operator Instructions) Thank you.
There are no further questions at this time.
I would like to hand the floor back over to management for any closing comments.
Dennis Gershenson - Chairman, President, CEO
Ladies and gentlemen, thank you again for both your interest and your attention.
We look forward to receiving any phone calls for follow-up questions that you may have and talking with you approximately 90 days from now.
Bye.
Operator
This concludes today's teleconference.
You may disconnect your lines at this time.
Thank you for your participation.