Tanger Inc (SKT) 2008 Q4 法說會逐字稿

Good morning, and welcome to the Tanger Factory Outlet Centers' fourth quarter 2009 conference call.

Please note that during this conference call, some of management's comments may be forward-looking statements regarding the Company's property operations, leasing, tenant sales, trends, development, acquisition, expansion, and disposition activities, as well as their comments regarding the Company's funds from operations, funds available for distribution and dividends.

These forward-looking statements are subject to numerous risks and uncertainties, and actual results could differ materially from those projected due to factors including, but not limited to, changes in economic and real estate conditions; the availability and cost of capital; the Company's ongoing ability to lease, develop and acquire properties; as well as potential tenant bankruptcies and competition.

We direct you to the Company's filings with the Securities and Exchange Commission for a detailed discussion of the risks and uncertainties.

This call is being recorded for rebroadcast for a period of time in the future.

As such, it is important to note that management's comments include time-sensitive information that may be accurate only as of today's date, February 18, 2009.

At this time, all participants are in a listen-only mode.

Following management's prepared comments, the call will be opened up for your questions.

On the call will be Steven Tanger, the Company's President and Chief Executive Officer, and Frank Marchisello, Executive Vice President and Chief Financial Officer.

I will now turn the call over to Steven Tanger.

Please go ahead, sir.

Thank you, and good morning, everyone.

Also on the call is Stanley Tanger, our Chairman.

2008 was a very challenging and interesting year for the REIT industry, our Company, and our country.

Financial losses in all sectors of the economy were huge.

Through it all, Tanger was able to show a positive total return to its shareholders of almost 4%.

In fact, for publicly traded REITs, with market capitalizations in excess of $1.4 billion, our Company ranked number two in total return to its shareholders for 2008.

As of the end of last year, Tanger also ranked number one in three-year, five-year, and 10-year total return to shareholders.

We have a consistent, long-term track record of outperforming the market and creating value for our stakeholders.

In this economic climate, consumers continue to want value when they buy brand-name products.

The old adage that in good times, people like a bargain and in tough times like these, they need a bargain, remains true today.

I'm going to turn the call over to Frank, who will take you through our financial results for the year, and then I will follow with a summary of our operating performance, our future developments, and our expectations for 2009.

Thank you, Steve, and good morning, everyone.

Since our last conference call in October, the turmoil in the financial markets has continued and there is still no clear vision of what lies ahead.

Based upon our 28 years of successfully managing this business, we know that a strong balance sheet with low leverage and access to liquidity is a must, particularly in market conditions like these.

Let me just take a minute to summarize some of the financial transactions we successfully completed during 2008.

Early in the year, we increased our unsecured line of credit capacity from $200 million to $325 million, providing us with $125 million in additional liquidity.

Five of our lines of credit totaling $300 million do not mature until June of 2011 or later, and the remaining $25 million line of credit is with Wachovia Bank, and matures in June of 2009.

As most of you know, Wachovia was recently purchased by Wells Fargo.

Fortunately, we have a long-standing relationship with the team at Wells Fargo, and are already in early discussions with them about absorbing the Wachovia line and extending its maturity.

In June 2008, we closed on a $235 million unsecured three-year term loan.

The loan bears a floating interest rate at 160 basis points spread over LIBOR.

Then in July and September, we completed two three-year swap transactions, which fix the rate on the entire $235 million term loan at an average rate of approximately 5.25% through April 1, 2011.

In October 2008, we received an upgrade from Standard & Poor's rating agencies from BBB minus to BBB, making Tanger one of only two REITs to receive a ratings upgrade during 2008.

We have also maintained our investment grade rating of Baa3 with Moody's investor services.

On a consolidated basis, our total market capitalization at December 31, 2008 was approximately $2.3 billion, and our debt to total market capitalization at the end of the year was approximately 34.7%.

We also maintain a strong interest coverage ratio of 3.67 times for the year.

As of year-end 2008, approximately 80% of our debt was at fixed rates; our wholly-owned portfolio of properties was 100% unencumbered; and we had no outstanding maturities until June of 2011.

We also had $161.5 million outstanding on our $325 million in unsecured lines of credit, which have an interest rate ranging from 60 to 85 basis points over LIBOR.

Our balance sheet strategy has always been conservative.

As for our results, funds from operations for the fourth quarter of 2008 were $0.74 per share compared to $0.70 per share the previous year, and funds from operations for the year was $2.46 per share compared to $2.48 per share last year.

Our reported FFO for 2008 was impacted by a number of unusual items, including a $2.2 million increase in lease termination fees over the prior year, offset by a $3.3 million increase in abandoned due diligence costs, an $8.9 million charge relating to the settlement of two US treasury locks, and a $406,000 pre-payment premium associated with the early extinguishment of debt.

FFO as adjusted for these items would have been approximately $2.73 per share for 2008, representing a 10.1% increase over the prior year.

This year-over-year increase in adjusted FFO was driven by our ability to increase rental rates on renewals and released space, as well as incremental FFO from our four expansion projects was opened during the fourth quarter of 2007, and our new center in Washington, Pennsylvania, which opened at the end of August 2008.

Our FFO payout ratio for the year was approximately 61% and our FAD payout ratio was 94%.

We substantially completed all of our planned capital improvements during 2008, including the reconfiguration project at our center located on Highway 501 in Myrtle Beach, South Carolina.

Excluding this reconfiguration project, our FAD payout ratio would have been 73% for the year.

In addition, we will continue our ongoing efforts to increase occupancies at select centers and attract new high-volume tenants to the outlet industry.

We have been committed to achieving high-quality long-term earnings by consistently investing in our business.

We have been planning for the future by making over $60 million in capital improvements throughout 11 properties over the last five years.

All of our large capital improvement projects are now complete.

We are currently budgeting to spend less than $8 million in capital projects in 2009, compared to $30.8 million that we spent in 2008.

This will bring our FAD payout ratio down substantially, most likely in the mid-60% range.

At these levels, our dividend is well covered, and we will generate incremental cash flow over our dividend, which we planning using to reduce our outstanding debt.

I'll now turn the call back over to Steve.

Thank you, Frank.

During 2008, we were able to deliver strong earnings growth, driven in part by healthy increases in rents and the execution of our strategic plan by the entire Tanger team.

For the year, same-center NOI growth was 4.1% on top of growing 5.3% in 2007; 3.1% in 2006; and 3.8% in 2005.

I am pleased to report that the positive rent spreads we achieved the last few years continued in 2008.

Through year-end, we have executed or in process approximately 83% of the 1.3 million square feet of leases that came up for renewal throughout our wholly-owned portfolio during the year, with an average increase on the executed renewals of 17.5% compared to an increase of 13.9% in 2007.

Approximately 137,000 square feet of space not renewed with the existing tenants was at our option, so that we could upgrade our co-tenancy or expand existing successful tenant stores at a number of locations.

Excluding this space, we actually renewed 92% of the stores that came up for renewal during 2008.

We also re-tenanted over 490,000 square feet during the year at an increase in average base rent of 44.1% over the rent that was being paid by the previous tenant prior to their vacating the space, compared to an increase of 39.7% in 2007.

This year, we have executed and welcome to our portfolio 33 new tenants, including Stuart Weitzman, True Religion, Neiman Marcus Last Call, Restoration Hardware, Victoria's Secret, Talbots, Ann Taylor LOFT, Williams-Sonoma Home, Betsey Johnson, Optical Shops of Aspen, and Wolford.

We have already made great progress on our 2009 renewals throughout our wholly-owned portfolio.

As of the end of January, we have executed renewals and renewals in-process for 834,000 square feet or about 56% of the space coming up for renewal during 2009, with an increase in average space rental rates on the executed renewals of 16.4%.

This compares to 859,000 square feet, representing 61% of the total square feet up for renewal at this time last year, with an increase last year in average base rents on executed renewals of 17.5%.

In addition, during January 2009, we re-tenanted approximately 127,000 square feet, with an increase in average base rental rates of 57.3%.

This increase compares favorably to last year at this time when we had re-leased 191,000 square feet, with an increase in average base rental rates of 29.3%.

The overall occupancy rate for our wholly-owned, stabilized properties was 96.6% at the end of the year, marking the 28th consecutive year that we have achieved a year-end occupancy level of at least 95%.

During 2008, we recaptured 70 stores that were occupied by nine tenants, representing approximately 330,000 square feet or 3.7% of our wholly-owned portfolio.

Sales for these tenants averaged only $176 per square foot with an average base rental rate of $16.65 per square foot.

Approximately 52% of this space has now been re-leased at base rental rates averaging 61% higher than the average rent being paid by the previous tenants.

As a result of the current economic conditions, we subsequently received notice from six tenants of their plans to close stores this year.

The combined space, which is now vacant, represents 41 stores totaling approximately 171,000 square feet, which represents about 2% of our wholly-owned portfolio.

Reported tenant comparable sales within our wholly-owned portfolio, excluding centers going through major renovations, decreased 1.6% for the rolling twelve months ended December 2008 to $336 per square foot.

Our portfolio does not have many luxury stores, which have been suffering the steepest decline in sales.

Most moderate stores did not have the robust sales increases in 2007, so they'd planned more modest inventory levels in 2008.

Our average cost of occupancy for 2008 was 8.2% of average tenant sales compared to 7.7% in 2007; 7.4% in 2006; and 7.5% in 2005, which means stores in Tanger centers are still very profitable for our tenants.

Our low occupancy cost to our tenants still provides us with the opportunity to raise rental rates on the re-leasing and renewal of space.

Percentage rents, which are paid by tenants once their total sales exceed certain levels, only represents 2.9% of our total revenues during 2008.

Approximately 91.5% of our total revenues were derived from contractual-based rent rates and tenant expense reimbursements.

In addition, no tenant, no single tenant, accounts for more than 8.4% of our gross leasable area or 5.3% of our base and percentage rent.

Most of our tenants have very strong balance sheets.

They are not encumbered by the excess debt layered on by leveraged buyouts, which have caused most of the high-profile bankruptcies.

Our wholly-owned center located in Washington County, south of Pittsburgh, Pennsylvania, opened to tremendous crowds, where we held a very successful grand opening celebration over Labor Day weekend last year.

On October 23, 2008, we held the grand opening of our center in Deer Park, which is on Long Island, New York.

Our Deer Park property is owned by a joint venture in which and our two partners each own a one-third interest.

The property opened to huge crowds and parking lots filled beyond their capacity.

Based upon the successful openings at both these properties, we believe that there will continue to be tenant interest in the remaining space, and additional signed leases will be completed over the next 12 months at both locations.

On January 5, 2009, we acquired the remaining 50% interest in the joint venture, which owns the Tanger outlet center located on Highway 17 in Myrtle Beach, South Carolina, for a purchase price of $32 million, which was funded from the amounts available under our lines of credit.

The property is currently subject to a $35.8 million mortgage, which matures on April 7, 2012, assuming we exercise the two-year extension.

There is an interest rate swap on the loan that fixes the rate on the $35 million at 5.99%, and the remainder of the loan is at a floating rate of LIBOR plus 140 basis points.

The current loan to value is about 36%.

This is an A property, which we obviously know very well.

The acquisition was at an 8.3% to 8.5% cap rate on an estimated 2009 NOI, and will be immediately accretive.

We continue to have signed purchase options for new development sites in Mebane, North Carolina and Irvine, Texas.

Initial reaction to these sites from our Magnet tenants has been positive.

However, we are still in the due diligence study periods on both of these sites.

We have a long-standing policy of only buying property and starting construction when at least 50% of the first phase is leased, and when we have all non-appealable permits in place.

We will not build on speculation.

In that regard, we announced in our third quarter earnings release that we have decided to terminate our purchase options with respect to potential sites in Port St.

Lucie, Florida and Phoenix, Arizona.

Given current market conditions, we felt it was in our best interest to terminate these options and focus our leasing efforts on the other development sites, as well as filling vacant space within our existing portfolio.

The fourth quarter of 2008 was a tough quarter for virtually all companies in all sectors of the economy.

We are responding by taking immediate action to proactively reduce certain costs in 2009.

We plan to increase our liquidity by maximizing the cash flows in every part of our business.

Based on our view of the current market conditions, we currently believe our estimated diluted net income per share for 2009 will be between $0.87 and $0.97, and our FFO per share for 2009 will be between $2.73 and $2.83.

In our earnings guidance, we have lowered our expectations and are assuming that same-center NOI growth is in the range of 1% to 2%.

The growth in NOI will be driven by continued increases in renewal and re-leasing spreads during 2009.

Rental rate increases, however, will be offset somewhat by what we expect will be slightly lower average occupancy rates over the next 12 months relative to last year, as we continue to fill vacancies within our portfolio.

In our guidance, we also assume our tenants will be challenged to maintain sales, as increased discounting and price deflation will most likely continue into 2009.

We are projecting percentage rental revenue to decrease, which is a direct result of lower sales.

Our guidance range also reflects the accounting change relating to the recording of additional non-cash interest expense associated with our $149.5 million of outstanding convertible debt, which will have a negative impact on earnings of approximately $0.07 per share.

There is currently a lively debate within the REIT industry with regard to many REITs shift in their dividend policies.

Historically, we have announced our dividend plans, which are set by the Board of Directors in mid-April of each year.

We will be using the next two months to watch the market, and use all available information to determine the best course of action for our Company and our shareholders with respect to our dividend policy.

Our budget for 2009 currently anticipates, at year-end, funds available for distribution, or FAD, in the mid-60% range.

This means our existing cash dividend is 150% covered from operating cash flow.

We do not use our lines of credit to fund our dividend.

In addition, we are very proud of the fact that we have raised our dividend in each of the 15 years that we have been a public company.

One of the reasons we believe investors buy REITs, REIT stocks and Tanger is the expectation of a total return, including a cash dividend.

We plan to continue to thoughtfully use our resources and to maintain a conservative financial position.

These are unprecedented times, but our Company is positioned well to get through the headwinds.

Our solid balance sheet, with no upcoming debt maturities in the next two years, puts us in a very strong position going into 2009.

Our management team is ready and able to execute our strategy to maximize the profitability of every one of our assets in 2009.

Before I close, I'd like to take a moment and give special thanks to our entire management team and our Board of Directors for their valuable assistance in making 2008 another profitable year for our Company.

With that, we'd be happy to answer any questions that you may have.

(Operator Instructions).

Michael Bilerman, Citi.

Hi, it's Quentin Velleley here.

I'm with Michael.

Just first question in relation to Deer Park, I notice there are a lot of operating expenses this quarter.

I'm just wondering if you could explain what drove that?

And also what the outlook is for that asset in terms of net income throughout 2009?

The fourth quarter Deer Park NOI was negatively impacted by the fact that there was a lot of start-up costs that hit the expense line, as well as grand opening fees at that property were quite a bit higher than might typically be expected, due to the market, and the fact that the Partnership wanted to get the property off to a very good start.

So, what you see in the fourth quarter will obviously not be recurring in nature.

It was the one-time event to get the property open and get it off to a great start.

So, if you assume that you just had the comp [weighting] at 79%, what's the cash flow yield on the asset at the moment?

We don't get into cash flow yields on digital assets in our portfolio.

I think we've stated that the return on costs on a stabilized basis would be between 8.5% and 9%.

And then that's when stabilized?

Right.

And just in terms of your Myrtle Beach acquisition, I'm just wondering if you could explain how the process went, who initiated the transaction and who set the price and so forth?

It was a negotiated sale amongst partners.

This was a -- it contained a buy/sell provision, right?

It was a buy/sell provision.

Neither party executed the buy/sell provision.

And so you -- who came through to buy it out?

This was something you wanted to do or that they wanted to sell?

We've wanted to buy it for quite some time.

And over the past several years, we've had discussions.

Last summer, they finally agreed to sell.

And you had offered a price, I guess?

Yes.

Which they accepted.

After some negotiations.

Can you talk a little -- I mean, it's an 8 cap on '08 results.

And you talked about an 8.3% to 8.5% on '09.

That would sort of imply about a 5% to an 8% increase in NOI on 100% leased asset.

Can you sort of bridge that gap relative to -- I think you talked about the total portfolio being up 1% to 2%.

I don't understand your question.

Sorry?

Are you asking --?

Well, I'm just -- Steve, you talked about the asset, the purchase being at an 8.3 to 8.5 cap rate on 2009 results.

That's correct.

Right.

-- based on actual 2008 results.

In the sub, it's about an 8 cap.

So that would imply growth in NOI for this asset of 5% to 8%.

It's an A-plus asset, a high occupancy, and renewals that we're aware that are coming up and we realize that those renewals are going to get bumps in rents.

So we're comfortable that that particular asset will have approximately 4% to 5% increase in NOI.

I'm just trying to compare that relative to the overall portfolio being up 1% to 2%, and sort of how things are moving within the portfolio.

Michael, it's relative to the entire portfolio.

It's a relatively small asset.

And we've given you guidance on the entire portfolio, which we're comfortable with.

Okay.

I just -- last question.

In terms of the tenants that haven't renewed for this year, just wondering what type of tenants they are and how that relates relative to history.

Again, I'm having trouble understanding you, but the leases -- we've announced the amount of leases that have been renewed at this point in time, which is consistent with the previous years.

Leases expire throughout the year.

And we're in discussions with our tenants for leases that are expiring throughout the balance of the year.

Yes, I mean, I was just asking, in terms of the closures that you mentioned -- six tenants, 41 stores -- what type of tenant is that?

It's a broad range of tenants.

Some are tabletop.

The largest tenant in that is KB Toys with 21 stores, which announced bankruptcy.

They're trying, I guess, to sell their assets.

But it's 21 of the 41 stores comes from that particular tenant.

The rest of them -- a couple of them are tabletop, a couple of them are apparel.

And that's less than the amount that had closed last year and some are probably in line with what your historical closure rate has been in the first quarter?

So far.

Jeff Spector, UBS.

Hi, this is Lindsay Schroll with UBS.

Can you discuss any impact you saw from malls heavily discounting this holiday season?

Was traffic down or --?

The traffic was down, consistent with other retail.

But I believe our traffic still performed better than other retail distribution channels.

Okay.

And then can you comment on what the holdup is at Mebane and when you expect that project to move forward?

As we announced during our remarks, we have a long-standing, non-negotiable policy of not breaking ground and buying any land until we have at least 50% of the leases signed and all non-appealable permits.

We have not met that threshold yet.

Okay.

I think last quarter you had mentioned that it was -- you were expecting it to come online at the end of '09.

Does that still stand or has it been pushed back to '10?

Undoubtedly it will be pushed back to 2010.

Okay.

And one final question.

What does their guidance system for occupancy decrease, given the same-store -- or NOI came down from 4% to 1% to 2%?

Our goal is to end the year at 95% or more for the 28th consecutive year.

Jay Habermann, Goldman Sachs.

A question on the tenants.

You mentioned the six tenants closing in the 2% of space.

At the same time, you mentioned obviously CapEx is coming down significantly.

I know a lot of that's due, obviously, to the developments.

But can you talk a bit about just the capital that's going to be needed in the coming 12 to 24 months to either maintain occupancy or attract new tenants -- obviously, in this more challenging environment?

Jay, we're expecting about $7.5 million to $8 million in capital improvements.

And right now we're budgeting around $10 million to $15 million in second generation tenant allowance.

I think that's the number you're looking for, correct?

That's right.

But that is directly associated with what we consider to be value-added, high-volume tenants.

And how is that number changing versus the prior year?

The $10 million to $15 million?

Because I'm thinking back to the late '90s, early 2000's, when you went through a pretty substantial re-tenanting process and that incurred a bunch of capital at that time.

This past year, we were at about 13 and the year before, we were at 19; so we're still kind of within the same range.

Okay.

And then you also mentioned using the free cash flow to delever.

Any target there in terms of goal to delever?

I mean, 2011 as shaping up is probably a more difficult year?

Kay, that's two years in the future.

We will continue to use the positive cash flow generated in excess of our cash dividend to pay down our lines of credit.

Okay.

And then just -- can you comment a bit on the percentage rents?

I know it dipped for the year.

Any specific tenants?

And can you give us any sense there of what drove that specifically?

It was not a particular tenant or two.

Mainly, it was attributable to the fact that when we renew leases and get a higher base rent, we often reset the breakpoint at a higher level.

And since tenant sales were flat to down, we obviously lost the percentage rent that we had gotten the year before.

So, it's really a reclassification, if you will, and we would prefer it to be a fixed rental rate as opposed to a variable rate through percentage rent.

So that was really the main factor in that decrease.

Okay.

And then I think Jehan has a question.

Just turning to same-store sales for a second, it looks like sales were down about 1.6% for the year.

Could you give us a breakdown for what that number was for the quarter?

And then just as a follow-up, maybe also what you've been seeing in January and then (inaudible) as well?

We are reporting consistent with the other folks in our industry on the trailing 12-month sales.

January sales, we don't have yet.

We get sales the 20th of the month following.

Ben Yang, Green Street Advisors.

Going back to the Myrtle Beach acquisition, you commented earlier that neither partner executed the buy/sell agreements.

Were there any other bidders for that property?

Or was it just you at the table?

The reason we did a negotiated, friendly transaction was to preempt other bidders from coming in.

Is it fair to say that an 8.5% cap rate for an A plus property is reflective of what the outlet center valuations might look like today?

Ben, you can draw whatever conclusions you want.

The deal was made last summer and the world looked a lot different then.

Okay.

And then can you comment on the slow lease-up at Deer Park in Pittsburgh?

It looks like the leasing there hasn't moved since your last call three months ago.

I wouldn't considered a slow lease-up when we're between 75% and 80% occupied in both assets.

Pittsburgh is 85% occupied and Deer Park is about 78%.

And then what's your expectation heading into the holiday season later this year?

We're going to lease up the remaining space as rapidly as we can with the best quality tenants.

Deer Park is an asset that's not replaceable.

As you probably know from following other REITs, it's very difficult to develop assets on Long Island.

To our knowledge, we're told that our Deer Park property is the equivalent in size of a regional mall, at total build-out around 800,000 square feet, and that this is the first regional mall built on the Island in 35 years.

So, we are managing and leasing this property with a long-term view.

These are long-term assets.

And we're just not going to fill space unless we're satisfied that the tenant can add value.

Okay.

And then just last question.

You said you are negotiating -- negotiations extending the credit facility with Wells Fargo at this point.

Is it your expectation that the size of the facility will be downsized and that it will be priced here?

And if so, can you comment on where you think things might fall out?

We've been -- initial indications are that the Wells Fargo line will be expanded to accommodate the $25 million Wells [Fargo] line.

And we are in discussions now about the rate.

Michael Mueller, JPMorgan.

A couple of questions.

First, going back to Deer Park and Washington County -- I think the prior expectations were at about a year after opening, you would hit a stabilization run rate.

Do you still think that that's an achievable target at this point?

Or does it feel like it's going to take a little bit longer?

In this environment, your guess is as good as mine.

My guess is it's going to take a little longer.

Again, these are cash flow positive properties right now, and we are not going to just fill space with tenants that we don't feel long-term can add value to these assets.

Okay.

On the occupancy side, looking at guidance, it seems like you're looking forward down about 100, 150 basis points year-over-year.

On the re-leasing spreads, you mentioned about 16%.

I think it was the number for the renewals for January.

Is the expectation on a full year basis to still have double-digit positive spreads on the renewals?

I think we will see double-digit positive spreads on renewals, and the re-leasing spreads will still be very positive.

What's going to pull down on that is, obviously, the lower occupancy levels throughout the year.

Okay.

And speaking of lower occupancies -- can you comment on, I guess, the announcement from -- I think it was probably a month or two ago at this point, about Phillips-Van Heusen and store closures, and just how you think that could impact the assumptions going forward?

Sure.

I just want to refer you to page seven in our supplement.

We have 97 stores with Phillips-Van Heusen, which is about 5% of our portfolio in square footage.

This is at least the second, if not the third time, in the past 20 years that Phillips-Van Heusen has announced a downsizing of their portfolio, or a pruning of their portfolio.

They announced on January 14 that they intend to close 175 stores in addition to other cost-savings initiatives, and took a large reserve.

As of this date -- and we are very close with the folks at PVH -- we have completed the negotiation of all 13 of our renewals for 2009, and have been given no indication of their intention to close any stores in our portfolio.

(Operator Instructions).

Michael Bilerman, Citi.

Yes, I just had a few others.

The $1.7 million lease term fee, can you just discuss what drove that and whether the occupancy had already vacated beginning or end of the quarter?

The tenants that paid termination fees were closed by the end of the quarter.

It was mainly -- came from three tenants in total that had quite a few leases with some term left on them.

Obviously, the longer the remaining term, the more termination fee that is appropriate.

But those stores have all closed.

How much square footage did it represent?

About 75,000 feet.

And that was primarily rent paying for the full quarter?

Yes.

And was any of that in the 171,000 square feet of closures in Steve's commentary?

Yes, it is.

The 75,000 is part of the 171,000?

Yes -- I'm sorry -- in the fourth quarter, it was 35,000 feet of the 171,000.

We had had termination fees in Q3 as well, which amounted to the other remaining square footage.

So 35,000 related to the $1.7 million?

And the 35,000 is included in the 171,000?

Correct.

On the abandoned pursuit, you guys talked about $1.8 million last quarter.

It came in at $3.3 million.

Was there just additional costs to shut those down?

There was additional costs and some other things that we decided we were not going to pursue.

You're saying other projects?

Yes.

Is there anything outside of the two active projects?

Do you have anything else that you have committed capital to?

No.

Not at this time, no.

Okay.

And then, Frank, can you just go through just a couple more guidance items?

G&A, recovery rates and any other sort of one-time items.

You talked about the $0.07 on the convert, but I didn't know if there was a certain amount of lease term fees or anything one-time that would be in the numbers.

Typically, we do not, and we have not, budgeted any lease termination fees in '09.

So that's typical for our budgeting process.

We've also estimated G&A to be roughly $6 million a quarter.

Some of our cost-savings measures may reduce that to a certain degree, but for now, that's where we are.

And recovery rates should be similar to what it was in 2008, including reducing it slightly from the fourth quarter because some of our termination fee income gets put into additionals to the recovery income line.

And then was there something particular in G&A this quarter?

It came in at $5.1 million versus the $6 million run rate.

The fourth quarter, we had to make an adjustment to some salary and bonus accruals.

We have a cash bonus plan in place and some of the targets that it appeared we would hit in Q3 during Q4 that ended up not occurring.

We had to reduce that accrual.

And then there's other than the $0.07 for the non-cash for the convert, there's nothing else one-time or charges or gains at all in that --?

That's correct.

There is nothing else one-time.

And then just finally, just on the debt -- and Steve, I do appreciate the fact that you're going to take the free cash flow and repay the line of credit between now and 2011, but that's really only $20 million a year.

And you just put out $30 million for the Myrtle Beach asset.

And while 2011 seems like a long ways away, it is almost 70% of the debt when you include the preferred.

And it's also all at relatively low rates.

So while I know it's further out, I just want to understand how you're thinking about staggering the debt maturity schedule or other forms of capital, in order to not make 2011, which every quarter that goes by, a bigger risk.

I think the first thing that we're focused on, and we will be having meetings with all of our commercial lenders, is part of that maturity is our unsecured lines of credit.

And to the extent we can go ahead and have discussions with them about the extension of those lines, that will take a chunk of that maturity off the table.

That's $325 million, which is the lines of credit, and with banks that we have done business with for the better part of 20 years.

Right.

Another chunk of that is obviously the unsecured term loan, which is also with those similar banks.

So while we're having our discussions with them, we'll get their indication as to whether that's a market that they believe would still be available as time goes by.

Just as additional color on that, as you may recall, last summer, we went out to raise $200 million in an unsecured term loan.

The demand was such that we were over-subscribed, and increased it from $200 million to $235 million.

As part of the syndicate -- we added six additional new banks, several of whom we have not done business with.

And we are now in conversations with them to broaden our relationship.

Okay.

And then on the line of credit, the --

Michael, just one second -- and the third component is $149.5 million in the convert, which has a put feature, but there's no requirement to put.

But assuming that, given where the converts are trading, the likelihood --?

Well, you can assume whatever you'd like, but two years out in this type of market, you can make whatever assumption you like.

Right.

And the piece that expires on the line of credit in June '09, that's a $25 million piece?

That's correct.

That's right.

[Dennis Anchor], private investor.

You mentioned that as far as paying out dividends, your cash flow is 150% of what you pay in dividends?

Or is it the other way around?

The cash flow is over 150% of the dividend.

So, in other words, you actually have safe coverage when you do this?

That's correct.

That's correct.

Okay.

That's all I need to ask.

Thank you very much for your time.

And at this time, there are no more questions in the queue.

I want to take this opportunity to thank all of you for participating today and for your interest in our Company.

In these uncertain times, we are very proud of our performance in 2008.

We plan to continue growing our Company and increasing our stakeholders' value in 2009.

We're always available to answer any questions you may have.

And again, thank you, and have a wonderful day.

This concludes today's conference call.

You may now disconnect your lines.