Rithm Property Trust Inc (RPT) 2009 Q3 法說會逐字稿

Greetings and welcome to the Ramco-Gershenson Properties Trust third quarter 2009 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, you may begin.

Good afternoon and thank you for joining us for Ramco-Gershenson Properties Trust third quarter 2009 conference call.

I'm hopeful that everyone received our press release and supplemental financial package, which are available on our website.

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 obtained.

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

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

Listeners to any replay should understand that the passage of time by itself 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, and Richard Smith, Chief Financial Officer, both of whom will be presenting prepared remarks this afternoon.

Also with -- also with us are Thomas Litzler, Executive Vice President of Development, Michael Sullivan, Senior Vice President of Asset Management, and Catherine Clark, Senior Vice President of Acquisitions.

At this time, I would like to turn the call over to Dennis for his opening remarks.

Thank you, Dawn.

Good afternoon, ladies and gentlemen.

The third quarter was a very busy period for Ramco-Gershenson.

It was event filled and we like to think we consider it transformative.

The most significant act -- activities that we undertook in the quarter included the completion of our strategic review, a commitment to de-lever the Company and strengthen the balance sheet, actions by the board of trustees to demonstrate a commitment to best practices by adopting a number of corporate governance changes, and the achievement by our management team of a number of significant leases, demonstrating their substantial efforts to ensure that our core portfolio remains best in class.

I would like to take a couple of minutes, if I could, to touch on each of these themes.

First, the Company announced a completion of our strategic review with unanimous board approval.

The board concluded that the greatest value for our shareholders would be achieved by remaining an independent Company.

Included amongst the reasons were that our portfolio consisted of a high quality shopping centers in superior trade areas.

We had a substantial number of value-add redevelopments underway, which would not really impact our numbers until into 2010 and then ultimately with a full year affect in 2011.

Also, we were in the process of negotiating a significant number of leases to fill our mid-box vacancies.

And the board also saw that we were signing an accelerating number of small tenant leases.

That said, we all knew that the key to a future as a standalone Company would be a strong balance sheet.

To that end, in the quarter we sold three net leases and issued 12 million new shares of common stock.

These two actions raised $125 million, which we used to paydown debt.

We want you to understand that these are just the first steps in de-levering the Company, in reducing our refinancing risk and limiting our exposure to floating rate debt.

Our commitment to strengthening the balance sheet includes setting a number of measurable debt metric goals.

We will then, over the next quarters, give you a progress report on how we are doing to achieve these objectives.

If I could I would like to take a moment to explain our decision making process in issuing the 12 million shares.

We were committed to an offering size that would have a significant impact on our ability to begin to de-lever the Company, as well as produce sufficient funds for the execution of our business plan through 2012.

Balanced against this need was a desire to keep the dilution to our existing shareholders to a minimum.

Although we were very pleased with the execution of the offering, the sale in the third quarter of the three net leases shows that we are able to access other forms of capital.

As a matter of fact, in our portfolio at the present time we have 38 net land lease -- land leases for out-lots.

And we have 11 net-net anchor land leases.

When we value all of those on a conservative cap rate, we produce a value in excess of $110 million.

Thus, with a ready market for this type of asset, we have an immediate source of capital to further paydown debt and fund our business opportunities as we move through 2010.

In completing our strategic review and preparing for the equity offering, our board took a bold step by eliminating a number of corporate defenses.

The board of trustees chose to adopt best practices in corporate governance.

I use the word bold because they chose transparency and accountability even as several of our peers held substantial positions in our stock.

We believe this was the right action to take, which was validated by the success of our offering.

And as a by product, the overhang issue of our peers ownership has now gone away.

The last theme is the demonstration by our management team that asset management will lead the way forward as the primary driver of our earnings growth in 2010 through their leasing efforts and cost control.

While the last 12 months have been challenging times for shopping center owners, we are now beginning to see a degree of optimism among both national and local retailers as they contemplate taking new spaces.

Throughout the year, we redoubled our efforts in response to the difficult environment and have been rewarded with leasing successes and tenant retention.

This last quarter we announced three new mid-boxes, filling our Linens N' Things and Circuit City vacancies.

Best Buy will occupy the Circuit City space in our West Oak center in Novi, Michigan, TJ Max has leased space in our Crossroads Centre in Ohio, and Ross Dress for Less has committed to our Delray shopping center in Delray Beach, Florida.

Further, we have renewed the majority of our expiring tenant leases, achieving a 6% increase over prior rental rates.

And we have signed more tenant leases in this quarter than in comparable periods in 2008 and in 2007.

If you have attended our prior calls, you know that this has been a consistent theme for both the first, second and now the third quarters, where we exceeded leases signing not only in 2008, but 2007.

Balancing this good news, I need to inform you that each of the new mid-box users have rental structures that have historically been less than what Linens N' -- Linens N' Things and Circuit City were previously paying.

Also, at our Cross Roads center in Ohio, TJ Max will be taking 25,000 square feet of the 35,000 square foot linens store.

An important operating statistic that you will note in our supplement is the same center analysis, which shows for the quarter a year-over-year drop of 5.1%.

We projected a full year decline of 3% to 4%.

Rich Smith is going to provide details for this figure.

However, I think it's important that I try and give you some perspective on this very important comparison.

I think as you would expect the largest component of this number is the bankruptcies of Linens N' Things and Circuit City.

After that, the most significant element of the number is the rent relief we've given to a number of existing tenants.

Our approach to rent relief had two elements.

First was our desire to maintain our shopping center occupancy.

But occupancy should not be viewed as the sole criteria.

Because any tenant that we wanted to help had to have provided to us first, the fact that they were a viable retail concept, secondly, that they had a valid and solid business plan, and thirdly, that their sales issues were indeed a direct result of this economic downturn.

As we reviewed the list of those tenants seeking rent relief, they fell into two types of requests.

The first were the smaller tenants whose occupancy costs were just too high to survive these times.

For those tenants, we insisted that they share their sales history to indeed prove that the dip was recent.

In the majority of the cases, we agreed to provide relief for only a short period of time.

And we also insisted that the tenants agree to either an extension of their term, an exercise of their option, or that they sign an option to terminate.

The other type of request involved national tenants of size.

With them, their sales level to their rent and overall cost ratios did not justify their remaining open for business, although the retailers would remain lease obligated.

We concluded that it was better to have an operating major retailer than a dark store, although their income would have continued for a period of time.

Thus we made rent relief decisions to first preserve the maximum number of tenants remaining open for business.

And we were committed to retaining the integrity of our tenant mix.

And as I've mentioned, we limited our cooperation for a finite period of time.

It's important, however, that you understand that our third quarter number does not become an indicator for rent relief that will impact 2010.

We estimate that the full year 2010 rent relief number will proximate $500,000 to $550,000.

This number is based on the assumption that we at least have a modest Christmas this year.

We concluded that this proactive approach to our tenant issues best positions our shopping centers for the future.

We retain our tenants as a draw, we remain the dominant center in our trade area and a well occupied center promotes additional new leasing activity as it is viewed as a viable asset.

A primary Company goal is to stay close to our customers.

One of our most important customers is our tenants.

Without being taken advantage of, we must be an understanding partner.

Moving forward, we've outlined in the supplement our capital expenditures for the balance of 2009 and 2010.

Cash flow from operations will more than cover annual expenditures for capital repairs, tenant improvements, and tenant allowances as we sign new leases over the next year.

Our cash flow will also fund our contractual loan amortizations, while leaving sufficient funds to help cover next year's capital expenditures.

Our 2010 plans include very limited expenditures to preserve our development opportunities and we will limit any near-term acquisition joint venture discussions to our existing portfolio of assets.

It's the progress we've made on our value-add redevelopments, the signing of leases with replacement national mid-box retailers to fill the voids left by Linens N' Things and Circuit City, and our small tenant leasing velocity that will drive our earnings over the next 12 months.

The raising of $125 million, the reduction of our dividend to the taxable minimum, and the availability of a substantial number of net lease assets for potential sale will ensure an improving balance sheet.

All of these activities are directed towards two things.

First, guaranteeing a healthy shopping center portfolio, with stable cash flows as our economy emerges from a turbulent year.

And secondly, demonstrating our commitment to create a flexible capital structure which will include a conservative balance sheet and the ability to pursue growth opportunities as they present themselves.

I would now like to turn this call over to Rich Smith.

Thank you, Dennis, and good afternoon, everyone.

Our quarter and year-to-date earnings and portfolio performance were in-line with our expectations in the previous guidance provided.

Our diluted FFO per share for the quarter was $0.53, which exceeded First Call estimates by $0.04.

This compares to the $0.62 reported in 2008.

Given the state of the economy and the retail environment, we feel we had a good quarter and held our own.

Some of the events that had an affect on our quarter-to-quarter comparisons included a $259,000 reduction in income net of interest savings related to the contribution of the Plaza del Ray Shopping Center to a joint venture last year, $156,000 reduction in income after interest savings for the sale of three assets, and a $290,000 decrease related to the bankruptcies of Linens N' Things and Circuit City.

Our strategic review cost for the quarter were $335,000 and we gave an additional $223,000 in rent relief.

On the positive side, we recognize $335,000 of percentage rent in the quarter, all of which related to prior periods.

It's important to note that the increase in percentage rent was from a tenant exceeding performance goals, not because they went into a percentage rent due to co-tenancy or other issues.

For the nine months ended September 30th our diluted FFO per share was $1.60.

This compares to the $1.86 reported in 2008.

The major changes for the nine months were $1.2 million net reduction in income due to assets contributed to joint ventures, $848,000 loss in revenues due to tenant bankruptcies, $253,000 of lost revenue due to rent concessions granted year-to-date and the nine month comparison also included $1 million decrease in fee income, primarily related to reduced development activity and cost amounting to $1.2 million related to our strategic review and proxy contest.

We still expect these costs to total between $1.3 million and $1.7 million.

As we previously indicated, we expect our same center income to be down between 3% and 4% in 2009.

For the quarter our same center operating income decreased 5.1% or approximately $1 million.

Significant reductions included $190,000 in rent relief, $300,000 related to the bankruptcy of Linens N' Things and Circuit City, $200,000 in reduced expense recovery margin due to rent relief and [10] bankruptcies.

The balance was in connection with additional legal costs for collections and tenant slippage.

During the quarter we had two major de-leveraging capital events, our equity offering and the sale of three assets.

We are pleased with the execution of our equity offering.

Demand allowed us to up size the transaction almost 17%.

Additionally, the underwriters executed -- exercised the full over-allotment.

Some other benefits of the offering included an expanded institutional shareholder base and additional sell side coverage.

Lastly, the offering generated over $96 million of net proceeds, which was used to de-lever the Company.

Our single tenant asset sales generated $27 million in net proceeds, which were also used to paydown our revolving credit facility, further reducing our leverage.

We believe, based on the execution of these sales, there currently is a market for the sale of net leased assets.

At the end of the second quarter our debt to EBITDA was approximately 9.2 times.

And after our offering and asset sales, our debt to EBITDA was 7.7 times.

We've established a long-term goal to reach a debt to EBITDA of between 6 and 7 times and a fixed charge covered ratio of 2.5 times.

We plan to achieve these goals by growing EBITDA through improved occupancy and higher rental rates and by reducing our leverage by conserving capital, retaining cash flow from operations, and selling additional assets to fund our business plan.

Since our last call we've made significant progress in renewing our $250 million revolving credit facility and expect to close on the loans by year-end.

This will go a long way in reducing our future refinancing risk.

We've received commitments for the full balance of the new secured facility and are currently negotiating documents, addition to the banks are in the process of reviewing third party reports.

The new facilities are expected to be priced at libor plus 350, with a libor floor of 200 basis points.

Our new $150 million revolving credit facility will mature in December of 2012 and our $100 million term loan will be fully amortized by June 2011 assisting our goal to de-lever the Company.

We feel our ed -- our other debt maturities are manageable.

We plan on paying off the Travelers loan and adding either one or both West Oaks Two and Spring Meadows to the asset pool securing our new credit facilities.

It's anticipated our [acquire] loan will be renewed at $20 million with similar pricing to the new credit facilities and we are actively pursuing extensions or refinancings for other on and off balance sheet debt that's maturing in the near future.

And lastly, we have adjusted our FFO per share guidance for 2009 to between $1.76 and $1.82.

We feel this guidance is conservative and it factors in the affects of additional shares issued in connection with our offering, the timing of our line refinancing and fourth quarter rent concessions.

Jen, can we open the call up for questions?

(Operator Instructions) Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets.

Please proceed with your question.

Hi, good afternoon.

Jordan Sadler's on the line with me as well.

I just wanted to go to the guidance right away.

The new guidance it basically implies $0.19 per share or so at the midpoint and I understand that the share count is one of the main factors, but you just mentioned rent concessions and I just wanted to see if you could provide a little more detail and reconcile that a little bit.

The rent concessions that we granted in the third quarter I think we -- we would expect to see some of those in the fourth quarter.

Right now I think that -- that we are a little bit, albeit we think we're at the trough there.

We are trying to be a little conservative and trying to -- trying to guard for some, maybe some additional ones coming in.

Okay.

Regarding the rent relief that you've already granted, what's the formula like for figuring out what is right.

Maybe you could tell us what the degree of rent relief on a percentage basis to the tenants rents typically are.

Todd, Mike Sullivan.

We -- we found, at least with the nationals, that we are looking for concessions based on their occupancy costs that they are looking currently anywhere to be between 12 and 15 and we've obviously partner with these nationals.

They -- most of them are free giving of their sales information and their P&L's per store.

Because they see this really as a short-term situation, they're in most cases willing to give us upside with percentage rent when the business comes back.

The local mom and pops 12 to 15 may be a little high, we ratchet that down probably to 8 to 12 or 8 to 13.

We are more concerned really with the payment history, the stability in the business plan of the mom and pops.

We want to see that they have been historically running a good business.

That they paid us.

That they are continuing to pay something, there are just looking for a short-term relief.

There is -- there is a whole process where we -- we require income statements and P&Ls and tax statements, business plans or merchandising plans, and we also look for other vendors to be participating with concessions to help keep the locals afloat.

And it's important to -- it is important to note that in all of these discussions, in addition to trying to maintain these businesses in occupancy for a long-term growth, we are also looking to get rid of certain lease language that we typically don't enjoy, particularly kickouts.

We like to get OTAs and relocation rights with these.

We've been very successful, at least with the mom and pops, in doing that.

We do like to add percentage rent to the situation, so that we can share in the upside when it happens and we have been pretty successful thus far.

I think, Todd, just to amplify that, we may see an uptick in the same -- the same center figure relative to rent relief in Q4, because there is a number of people that we are talking to relative to that understanding, but again it will still fall within the 3% to 4%.

I would like to think we have just chosen to be very conservative in that guidance so that there is -- there's no possibility that we don't under-promise and over-perform.

Okay.

That's helpful.

Thank you.

And then also can you provide an update on your efforts with selling assets and sort of how you plan to fit them into your capital rising initiatives going forward..

Are you marketing anything right now?

We -- we have nothing that we are marketing at the moment only because, based on our history and if you'd like Cathy Clark to address just how -- the speed at which we are able to market these assets.

We want to time those much better in 2010 so that either for our capital needs or as we see trying to achieve certain metrics next year relative to our debt, several things.

One is that we have found that these assets go relatively quickly.

And secondly is with an improving economy we are beginning to see some tightening of the spreads so that we may be able to achieve even better cap rates in the new year.

Okay.

The objective here then is much more to match because there is obviously a push-pull kind of a thing where when we sell an asset then that asset we've taken a hit to FFO, so we'd like to time the sales as perfectly as possible.

Okay.

That's good.

And then regarding joint ventures, do you have an update on your efforts to source anything with Aquia or any of the other development deals and maybe also forming a joint venture to just sell operating assets into.

Well, as far as Aquia is concerned we are -- we are moving well through documentation with our residential partner, who will, and when I say partner who will basically build the apartments at Aquia.

We are in preliminary conversation, as a matter of fact, with that party for the potential of becoming a partner on the retail as well.

They have experience with mixed use in that general area and have other projects.

So based upon the progress that we are making on the leasing in the retail, we've peaked their interest there as well.

As far as JV's on anything else is concerned, as I mentioned in my remarks, will at least initially for the immediate future curtail those conversations to only involve those assets that we already own.

But, Cathy Clark is very involved in speaking to lenders, as well as shopping center owners about their status and the ability potentially down the road to get involved in the acquisition of some more opportunistic purchases.

Okay.

What about on the disposition side though, would you look to do anything with -- in a joint venture on that front.

We, and again, I -- typically when you say we are in preliminary conversations that's always held against me.

It certainly would make a great deal of sense, assuming the cap rates were appropriate, to see the venture with some of our assets and thus raise capital.

Okay.

Thank you.

Thank you.

Our next question comes from the line of Nathan Isbee with Stifel Nicolaus, please proceed with your question.

Hi, good afternoon.

Just getting back to this rent relief issue.

You's men -- you, I think Rich, you said that you think you've reached a trough here.

I'm just a little curious, I mean this seems to be the first quarter where rent relief played any significant role in your earnings.

I'm just curious why -- .

I think -- I think it was based on what we are seeing, Nate.

And again, I'm -- I'm really tempering this a little bit assuming that we have a reasonable Christmas season, right?

Right now I think that -- that the request for rent relief have slowed down a little bit, but I think that almost on a weekly basis we are going through those looking at the impact on earnings and -- and again they seem to have slowed down, but I think that you'd really expect that going into the Christmas season.

If we have a good Christmas season, I think that -- that you've troughed.

If not other things could happen in the first quarter.

Well, if I could add something, Rich, to that, is that, and Michael can speak to this as well, this isn't something that arose in the third quarter.

We began speaking to a number of these retailers in the first and second quarters.

But because we had the type of criteria that we did, we were only able to reach these understandings after a significant amount of time.

That's correct, Nathan.

Mike Sullivan here.

We had a -- a large portion of this rent relief hit in the third quarter, but Rich is right, we are seeing the velocity of these requests slowing dramatically.

We are seeing the or at least we are anticipating that the fourth quarter the impact in concession dollars will be less.

We see even -- even -- even in the first quarter of 2010, I think you will see the last bit of this -- this current negotiation strain that's really been going on since the first quarter really start to bottom out and -- and, again, Rich's thought about tempering these forecasts based on the holiday season, all things being equal, it does in fact look like this-- this impact is going to be tailing off in to mid 2010.

Okay.

And I guess the related question that you had to been expecting is was there any geographical trends as it related to this rent relief.

Well, I could tell you that the majority of the current concessions that were approved originate in what we call our Midwest region.

It's interesting to note though that Michigan is not the worst culprit in that.

It is in second place, but it is not the worst culprit and we -- we anticipate that the concessions from Michigan will be less than a third of the total for the Company.

Surprisingly enough some of our peers have fingered the southeast and particular Florida as a trouble spot, that hasn't been as problematic for us there.

But again it's Midwest for us and up in Midwest of the three or four that comprise chiefly our Midwest portfolio, Michigan is only in second place.

Okay, good.

And on the same store NOI number, you are showing the same store NO -- same store occupancy was flat.

That is a lease number not physical occupancy, is that correct.

I think it is a occupied number, but I think we had a couple tenants, big tenants take occupancy real late in the third quarter.

So it's really not an average occupancy number, it's as of a particular point in time.

And the Linen and Circuit leases, Dennis, you had mentioned they decline but you didn't give any sort of figure in terms of how much the rents rolled down.

You mean -- you mean the result of their bankruptcies.

On the new leases that you signed how far -- how far -- how far below.

We are experiencing -- it's about 25% less.

However, one of the three new leases that we signed we are -- we are putting no money into the store.

And at the other two, we have worked very hard to limit the amount of money that we have had to contribute in order for the retailer to get up and running.

Okay.

How many vacant spaces -- junior and mid-box spaces do you have left?

I can tell you that, Nate, although -- although we break it down into -- into several categories, we have a total and we define mid-box really as 19,000 and above.

I can give you the square footage or the number of spaces.

The square footage off the top of my head is 780,000, but that's all in.

We have about 180,000 of that is in redevelopment.

We have about 230,000 of that is vacant, but lease obligated.

About 100,000 of it is vacant, but currently leased, not yet occupied.

And of the remaining, which are really pure vacancies for us, it's about 270,000 square feet and about two-thirds of those individual spaces we have leasing activity currently happening, anywhere from negotiating LOI to negotiating a lease.

Okay.

All right, thanks.

And just turning -- just turning to the development pipeline, how much NOI today is Aquia kicking off?

Nate, this is Tom, we are getting close to $2 million from the office building and another $200,000 from residual tenants that are there, RiteAid and the like.

Okay.

And what is the status of the theater lease.

The theater is -- is lease obligated under the old lease arrangement under their [eight] screen.

They are open for business.

Okay.

And just turning to those power centers that you have expected delivery dates in 2013, if you could just give us some detail on why you are still comfortable that these will -- will get done given they that they're 3.5 years out.

Well, we are working our way through the entitlement phase in most of those projects right now and we are still talking to all the anchors and the anchors have given us an indication that they are -- they are looking for 12 deliveries or late 12 deliveries.

Just to amplify what Tom said, in our negotiations with the anchors they have been very specific about when they want to take their stores.

Earlier on they were talking about a late 11, early 12.

And now they've moved back -- those back to late 12.

But it shows that they are focused enough on these sites that they are indeed giving us opening dates.

But those are -- I mean, those are -- those are only understandings, those are not signed leases.

Correct?

That's correct.

Okay, thank you.

Thank you, our next question comes from the line of David Fick with Stifel Nicolaus.

Please proceed with your question.

Yes, hi.

Double teaming you a little bit with Nate.

A very broad question, now you have gone through this process and, by the way congratulations on your success in both the board's efforts and management's efforts to complete your process, I think it was very healthy for everyone involved.

At the end of the day you're in the capital allocation business and, Dennis, if you could sort of now that you've gotten through this, give us a picture of how you see Ramco long-term?

Where does the Company go.

What are its sources and uses of capital away from just operating cash flow, operating the portfolio, dealing with what you know you have in your development pipeline today, what does -- what does this Company look like three, five years out.

Well, as I -- as I said in my remarks in part, David, number -- front and center is an interest in getting our balance sheet in a very conservative shape.

So that is going to be part of any plan that we have going forward.

I believe that we have been able to demonstrate, at least in the past, that we were very good at acquiring and particularly good at acquiring assets to which we could add value and then on the reasonably conservative basis to be a developer.

So we really have three prongs that we can move forward on relative to producing increasing profitability, vis-a-vis asset management and adding value to our assets, acquisitions and development.

It would be a, certainly a mid-term plan and a long-term plan that we will once again be active participants on the acquisition side.

Lots of -- lots of us have been talking about when these opportunities to -- to truly make advantageous acquisitions will arise and we see that maybe in the latter part of 2010.

So we are building in a direction to be in a position to take advantage of those things and then a balance between on balance sheet acquisitions and off balance sheet acquisitions in a joint venture format so that we -- we have a -- a conservative balance sheet and a, at least, a mid single-digits FFO growth going forward.

And would you see yourselves then coming back to the equity market to prepare for and build a bit of a war chest for opportunities those opportunities that might come next year.

I'm not saying that we wouldn't come back to the marketplace, but again, the $110 million that I referenced for what you would ultimately be able to call noncore, because these truly are net land leases, both with the anchors and the out-lots, and that does not include about another 15 out-lot net land leases that we are in the process of negotiating right now.

So we have a steady stream of potential assets to sell where we could raise capital and indeed selling these assets at 7.5% to 8% certainly would be more accretive if we then turn around and redeploy that money at anywhere from 10% to 15%.

What would you say today about your new board?

Your revised board structure and then where do you think it will be going forward.

I know it's very sensitive and you can't telegraph changes, but do you have more people in total than you need with the addition of two?

And what have you learned as you went through that process?

Well, number one, I think we have a very nice mix of the board members who truly have a -- a very good perspective for the amount of time that they've been on the board.

And I am pleased to tell you that our two board members or two new board members have been incredibly active as far as being supportive, not only in making suggestions on a whole series of things, including our approach to the investment community, but have volunteered and come in to brainstorm about our future and they are an absolute delight to have been added to our board, so we are very pleased with the addition.

And I think we have very good chemistry between our existing board and the new board members.

Whether or not we could even potentially expand that group is something that we will certainly be discussing before we get to the next proxy season.

But nine members, certainly, seems to be a good number.

Okay, great.

Again, congratulations, thank you.

Thank you very much, David.

(Operator Instructions) Our next question comes from the line of Richard Moore with RBC Capital Markets.

Please proceed with your question.

Hi, good afternoon, guys.

Tom, I think you were saying that you had the number of empty big box/junior anchor type boxes, as well as the -- as a square footage.

What is the number, again.

I'm sorry, Rich, this is Mike Sullivan, question again.

For Mike, sorry.

Yes, it was how many -- how many of the junior anchor type boxes you actually had empty.

You mentioned the square footage, you broke that out nicely.

There are -- there are a total -- off that list that I read, there are 21 mid-boxes, 19 to 35 and then one anchor.

Now we did -- we did break -- we did breakdown some as being vacant but leased and vacant but lease obligated.

A purely -- purely vacant that we are actually out in the market leasing is nine.

Got it.

Does that include that one anchor.

Does not.

We are redeveloping that shopping center.

So as you know, we -- we have the redevelopment piece carved out.

In redevelopment there is the anchor and then two traditional mid-boxes, but just a pure standalone leasing vacant boxes, although of course everything vacant in this market, but the ones that we are focusing on there are nine comprising of approximately 270,000.

Okay.

And then -- then on the -- on the redevelopments that you guys have, the eight redevelopments, what would you say the tenant interest, you seem pretty positive on how those are coming along.

What -- what is the tenant interest for that size of box in the -- in the stuff you're redeveloping.

This is Tom.

We don't undertake a redevelopment unless we've got the mid-box or we've got the anchor lined up in advance.

So for all of these eight, we've -- we've got them lined up.

One is not named because the lease isn't signed yet, but the interest has has been very positive.

In some instances we've turned the spaces over and they are opening and we are getting a halo affect with some shop leasing around it.

So, it's solid.

Okay.

And so -- so those guys are -- those guys are pretty fixed.

Yes.

Again, they're all committed.

These are signed leases.

Okay, all right.

Great, thanks, Dennis.

And then -- and then on the -- on the percentage rent thing, I was thinking that -- that those percentage rents were probably more indicative of -- of some sort of co-tenancy situation, but you are saying -- that's a pretty hefty amount of percentage rents in an environment where sales aren't all that great.

How exactly did that occur for the third quarter?.

Basically, Rich, I talked -- really it was a tenant that had a June reporting period.

When we looked at June sales this year, we went back and looked at prior years and basically they exceeded -- they exceeded the break point.

They owed us rent for really a couple of years.

So that's -- that's a couple of years we recognized all in this -- in this quarter.

Okay.

So that's sort of -- that's not something that would carry on beyond this onetime sort of thing, Rich.

I'm hoping their sales continue on and we get a next year as well.

But it would be a one (multiple speakers).

The last reported period was June, 09, and probably a little bit less than half a percentage rent related to June, 09 year-end.

So June and -- .

Okay, I got you.

So -- okay.

I'm with you.

And that would -- so that would occur again possibly next year.

Hopefully.

June time frame.

Yes, I got you.

And then you guys have a couple -- couple maturing loans in the -- in the JV portfolio, what is the plan there and how are the discussions.

There's two that I can think off the top of my head, on is Cyprus.

We are out to the lender trying to get an extension with them.

If not we'd pay it down.

Our share is a pretty -- pretty small amount, it's in -- in the supplement.

And the other is West Acres.

We are out to the market right now trying to get a loan on that property.

And again, we will probably go back to the lender and look for an extension there.

The third one I can think of is -- is Beacon, which is really of a more of a construction loan that where you plan on -- on going through and really crossing with gains.

And I guess there is one more, Heartland is the last but not least.

I think we are in talking to the bank to extend that as well for a couple of years.

Okay.

And you feel comfortable, Rich, that your partners would -- would come up with their share if you have to take any action other than extension.

I think Cyprus is a relatively small loan, so I feel confident that they would.

Okay, all right, I got you.

And then on the -- on the $33 million or so that you have to paydown each year on the term loan, is the idea to do that primarily with these -- with the -- with the sale of -- of noncore type assets that you talked about.

I think you could do asset sales.

Again, remember we cut our dividend, as Dennis talked about.

to the -- to the taxable minimum or something approximated taxable minimum that created about $20 million in itself of free cash flow as well.

So a combination of -- of a variety of things.

The two logical are -- are obviously retain cash and asset sales.

Just to amplify that, Rich, there is also -- there will be a number of assets that will not be collateralized in the revolver and those, obviously, are available to be financed if we just wanted to replace debt with debt.

So there are a number alternatives.

Obviously, the most desirable would be to paydown the term loan and not create other debt.

But certainly that is an option for us.

Okay, great.

Thanks, guys.

Thank you.

Ladies and gentlemen, at this time there are no further questions.

I would like to turn the floor back to management for closing comments.

Once again we would just like to thank you all for your interest and your attention.

We are especially thrilled to see that some of our new shareholders were on the conference call.

We have our sleeves rolled up, we continue to work on filling the vacancies that presently exist in the portfolio, and we look forward to a very successful fourth quarter.

And we look forward to you joining us then.

Thank you.

Thank you.

Ladies and gentlemen, this concludes today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation