西蒙地產 (SPG) 2005 Q1 法說會逐字稿

Ladies and gentleman, thank you for standing by and welcome to the first quarter 2005 earnings conference call. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded Friday, May 6, 2005.

I would now like to turn the conference over to Noam Saxonhouse, Vice President of Investor Relations. Please go ahead sir.

Welcome to the Mills Corporation first quarter 2005 earnings conference call.

Please be aware that statements that are made during this call that are not historical may be deemed forward-looking statements. Although the Company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, they can give no assurance that it's expectations will be obtained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.

Those risks and uncertainties include, but are not limited to, the national, regional, and local economic climate, competitive market forces, changes in market rental rates. trends in the retail industry, inability to collect rent due to bankruptcy or insolvency of tenants or otherwise, and changes in market rates of interest. We direct you to the Company's various filings with the Securities and Exchange Commission, including form 10-K and form 10-Q for a detailed discussion of risks and uncertainties.

Acknowledging the fact that this call may be webcast for some time, we believe it is important to note that today's call includes time-sensitive information that maybe accurate only as of today's date, May 6, 2005.

This call will include statements and presentations of certain financial measures that have not been calculated in accordance with generally accepted accounting principles, which are commonly referred to as non-GAAP financial measures. Such non-GAAP financial measures include, but are not limited to, funds from operation and EBITDA.

Additional information regarding such non-GAAP financial measures, including definition of such non-GAAP terms, presentation of the most directly comparable financial measures calculated in accordance with GAAP, and a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures required by regulation G, is set forth in our supplementary information in the Company's current report on form 8-K as furnished to the SEC March 31, 2005.

The supplementary information is also available on our website at www.themills.com under the heading Investor Relations and Financial and SEC Filings.

Participating in today's call will be Larry Siegel, Chairman and Chief Executive Officer, Mark Ettenger, President, Jim Napoli, President of the Operating Division, Jim Dausch, President of Development Division, Ken Parent, Chief Operating Officer, Greg Neeb, Chief Investment Officer, and M.J. Morrow, Chief Financial Officer.

And now, I'll turn the call over to Larry.

Good morning, and welcome to the first quarter 2005 earnings call.

This morning, we reported that funds from operations per diluted share in the quarter increased 4.5% to $0.92 from $0.88 for the same period in 2004.

FFO was impacted by one-time restatement costs of approximately $0.03 per diluted share and another approximately $0.03 associated with timing issues related to our accounting for joint ventures that we expect will reverse by year-end. While FFO was below analysts' consensus, I believe that our underlying strengths will enable us to achieve the 2005 guidance of $4.35 to $4.45 of FFO per share.

Our core fundamentals are strong. Our assets are performing well. Our development projects are progressing, and in our view, the opportunities that lie ahead and our ability to achieve them, remain bullish.

Comparable property [indiscernible] growth for the quarter was 3.4% over last year's first quarter and greater than 5% excluding termination fees. Comparable same center sales increased 6.5%, and gross sales per foot across the portfolio increased by more than 10%.

Additionally, occupancy for the quarter is up more than a percentage point over last year and [indiscernible] spreads are up to14.7%. Ken Parent will walk you through our results in a moment.

We are seeing robust sales across the portfolio, which, from top to bottom, is comprised of consistently high-quality assets. In fact, off of two of our comparable centers exceed sales of $300 a square foot. Gross inline sales are up more than 13% at Sawgrass Mills, a $500 center with more than 800,000 square feet of inline GLA and where the average store size is more than 4,000 square feet. With the opening of the Colonnade outlets later this year, Sawgrass Mills is positioned to continue to dominate the South Florida retail.

We are making solid progress in the redevelopment of the Del Amo Fashion Center. Even with construction of the new lifestyle wing that will open next year well under way, gross inline sales are up nearly 7% to over $400 a square foot. We expect to announce a high-end fashion department store deal around the time of the ICSC show later this month and have just received a commitment for a flagship store from Crate and Barrel which will join AMC as a lifestyle-wing anchors. Interest in Del Amo has been very high, and I believe these deals will drive additional activity in the coming weeks.

Already, we have deals with the likes of Anthropology, Urban Outfitter, Aveda, and restaurants, Left Bank and Raw Sushi.

Expansion and redevelopment plans for our other regional mall properties are moving forward. We plan to invest in excess of $800 million on expansions of 14 operating properties for delivery in 2005 to 2008. Jim Dausch will update you on these efforts, as well as progress, on new development projects and those under construction. We are now providing more details about our development plans in our 8-K.

Our ground-up developments are springing to life. Meadowland Xanadu is on its second month of construction, and we expect to open in fall of 2007. The Giants new stadium deal with the New Jersey Sports and Exposition Authority is conditioned on the Giants reaching a mutually acceptable agreement with us on Meadowland Xanadu by early June, and we have a constructive dialogue underway with them.

Meanwhile, candid interest remains very high, and we plan to announce the next round of signing shortly. In addition to generating what I believe will be tremendous rental revenue, Meadowland Xanadu will offer sponsors and advertisers an unprecedented new medium to which they can reach their targeted audiences. At Meadowland Xanadu and across our portfolio, we plan to fully tap potential, ancillary profit, property revenues.

In addition to previously announced content partners, Now magazine, Entertainment Weekly, and Viking, which will create a uniquely interactive 3-dimensional platforms to reach their customers in the country's largest markets. We are in negotiations with leading global brands to serve as content partners. Each deal represents the potential for multi-million dollar fees.

Let me mention, generically, a few of the exciting deals we are working on a leading electronics manufacturer that will connect with consumers and businesses in an open, 360-degree interactive product showcase experience, unlike anything in the United States. It will showcase throughout the property's complete product inventory, including huge LED walls and video monitors.

A big three auto maker to serve as a naming partner for one of our districts. A leading technology manufacturer to serve as a project-wide sponsor that will provide Meadowland Xanadu communication's backbone for voice, data, security, smart-building management, and other back-of-the-house infrastructure.

A national network operator to serve as the content provider, providing focused and engaging programming in each of our districts. A software provider to develop and exciting guest-activated experience, and a global pharmaceutical manufacturer to underwrite a children's health and education program.

We're also making big strides in Chicago, where we anticipate receiving city council approval next week for our One Away North States Street Development Plan. That will clear the way for conveyance of the land parcel and construction for the urban mixed-use retail, office, and residential project to begin this fall.

Last month, we announced that CBS's local broadcasting studios and midwest regional offices will occupy 100,000 square feet of office space. This week, we announced the first day commitments for the retail and entertainment component of the project. They represent an array of international and new-to-downtown retailers and new entertainment and dining concepts. This project is gaining momentum, and we look forward to opening the office tower in late 2007, and the retail, dining, and entertainment component in early 2008.

We are moving forward at Pittsburgh Mills too, which will open July 14. Interest remains high upon inline big box and and anchors.

We are also achieving progress internationally and continue to lead U.S. developers in expanding into Europe. We continue to pursue expansion plans at Madrid Xanadu and Saint Enoch Center and new developments in U.K., Spain, and Italy.

We have built a growth engine that is fueled by our innovative ground-up developments in the U.S. and abroad, and the strategic redevelopment and expansion of our existing high value assets. I am confident that our team will drive dramatic, sustained, NOI growth for years. We are in the cusp of what I believe will be very exciting and, for investors, very rewarding times.

I will turn the microphone over to Ken

I would like to bring you up to date on our operating and ancillary results.

On a restated basis, fully diluted EP share increased by 5% to $0.92 in the first quarter of 2005 from a restated $0.88 in the first quarter of 2004. The increase was due to the following items -- same project NOI grew by 3.4%, generating incremental FFO of $3.8 million. This growth was negatively impacted by a decline of $2.2 million in total termination fees from the first quarter of 2004. NOI was further reduced by a $500,000 decline in straight-line rents due to the SEC's February 7 letter. Excluding the impact of both of these items, NOI grew by almost 6%.

EFICA from acquisitions it was $12.4 million, offset by sales to joint-venture partners to $10 million, generating a net increase of $2.4 million. FFO from FAS 141 adjustments was 1.8 million in the first quarter of '05, which was $400 less than the first quarter of last year. FFO from our share of land sales was 5.4 million in the first quarter, an increase of over $4 million.

Net fees, income including management fees, increased $3.9 million in the quarter. As we explain on the last call, this figure is the sum of the management fee, other fee income, and the attribution to Mills of the elimination of interest and fees line item less the cost of fee income. Reducing FFO in the first quarter of 2005 was approximately 2 million of additional expenses related to the restatement due to loan fees, registration penalties, accounting costs, legal fees, and board expenses. These expenses had a variety of line items.

Our first quarter results were negatively impacted by our new J.V. accounting method -- HLBD. In the first quarter of 2004, we experienced high distribution, which generated a FFO to us. This increase largely reversed itself during the last 3 quarters of 2004. As a result of this, we estimate that FFO was negatively impacted by approximately $2 million in the first quarter of '05. Further reducing this quarter's FFO, G&A was up $3.7 million by the prior year -- from the prior period, and preferred dividends increased 5.7 million over the first quarter of 2004, which was issued in August of last year.

Although our first quarter FFO percentage growth was lower than what we anticipated for a year, it is clear the results impact by one-time items and that our core fundamentals are strong. If we adjust the earnings for the one-time items -- namely $0.03 for restatement cost, $0.03 for HLBD timing, and $0.02 for our share of the decline in termination fees, our adjusted FFO growth was very strong and inline with our annual guidance, which we reaffirmed at $4.35 to $4.45 per diluted share. At the property level, our results are continue to be very encouraging as we continue to reap the benefits of our efforts to remerchandise and acquire our acquired centers and expand the appeal of the landmark Mills assets with the addition of new anchor boxes. As Larry explained, these programs have dramatically increased sales at our centers. With our sales rising rapidly, it was not surprising that our occupancy was up 1.5% as tenants reap the benefits of moving into our centers. These increases in occupancy combined with our rents the 7.4% drove our property on a wide road, 3.4% during the quarter.

I would like to now spend a minute discussing the two schedules we added to the 8-K. We now include an income statement for the consolidated J.V. we present the income from our joint ventures, and show our share of an income and FFO. Since we already provide an income statement for unconsolidated J.V.'s, investors now have an income statement for all of our J.V.'s. In fact, we now disclose more information than before the restatement because analysts can track the performance on consolidated and unconsolidated J.V.'s separately.

Additionally, to help analysts understand our development and redevelopment opportunities, we have included a schedule, which outlines the estimated total cost timing in our share of the number of projects. This schedule is not a comprehensive list of our development projects. We do not feel comfortable disclosing development or redevelopment budgets for projects where we have not finalized our plans with local municipalities or our partners. It is important to note that the percentages listed on the schedule reflect our required capital contributions and not adjusted for HLBD or eventual promotes we may earn on the projects.

On to the balance sheet, in the month since our last conference call, we have completed a couple of transactions. We refinanced the Mezzanine mortgage loan at Sawgrass in March. Although we have drawn only $40 million on this loan, basically it will be the amount of the old debt, and we will have a total commitment of almost $74 million.

Additionally, as we promised on the last call, we have reduced the debt. We have already swapped the majority the debt on Madrid Xanadu to fixed, and in a week, we will complete the swaps for the debt on Cincinnati and new loan at Sawgrass. Additionally, we have reached an agreement to refinance three of the GM assets that had floating-rate mortgages. Mills' share of the incremental proceeds from this transaction will be close to $50 million. We have already locked rates for new mortgages and expect to complete the refinancing by mid-June. All told, nearly 70% of the debt will be fixed or [inaudible]in when we complete the refinancing.

Given how much our capital structure has changed over the past year, I would like to take a moment to review our financial ratios at March 31, 2005, as adjusted for the acquisitions of St. Enoch, Southdale, and Southridge as if they had occurred on March 31, 2004. After removing the impact of the foreign currency gains and the one-time benefit our accumulative adjustment for fem 46 from our 2004 interest-coverage ratio, and adding the interest expense and NOI associated with our recent acquisitions our adjusted coverage for ratio ended March 31, 2005, would be 3.18 times versus 3.16 times in the twelve months ended March 31, 2004. Adjusting our fixed-charge coverage ratio using the same method, yields a coverage ratio of 2.26 times versus 2.30 times for the 12 months ended December 31, 2005 and 2004 respectively. Our debt-to-market capitalization, using yesterday's closing stock price, stands at 51.3% versus 46.6% March 31, 2004.

Our current capital structure will protect us from rising interest rates, but also should provide us with the financial muscle to execute on our development and redevelopment opportunities.

That conclude our discussion of operating financial results. I would like to turn the call over to Jim

Thanks, Ken.

There have been several interesting developments effecting our development pipeline since our last call in March. First, with respect to our next Mills project, Pittsburgh Mills, construction work continues looking towards the opening with Kauffmans and J.C. Penney on July 14. Larry mentioned the progress in the lease-up of the center, and indeed, we have a great line-up of full price, inline stores, together with a number of typical Mills' anchors including Sear grand, Borders books, Dick's, NASCAR Speed Park, Lucky Strike Lanes, Linen 'N Things, and 16-screen Cinnamark to complement the two department stores. Pittsburgh Mills also features a campus of value stores led by Walmart and Sam's, giving the consumer a full range of value, full-price retail, and entertainment offerings in one great location.

Construction and leasing also continue on the Colonnade at Sawgrass Mills. A 100,010 square foot collection of high-end shops and restaurants, which will open in late fall of this year. The mix here includes Barneys, Faragoma, Escada, St. Johns, Coach, Colhahn, David Yearmin, Maxima, and the Grand Lux Restaurant. This expansion follows the completion at the ends of last year of our complete renovation of this center We are betting on a proven winner here as the sales performance at Sawgrass demonstrates. Another proven Mills' winner, Potomac Mills, the renovation is well under way and scheduled for completion this year, complementing the ongoing remerchandising of that in the Washington D.C. area.

Our 21st Century full-price entertainment and retail projects also continue to make strides. Following the issuance of the Army Corp. permit in mid-March, construction has proceeded full speed, and the fill activities are over 80% complete as of this date. In addition, we are installing foundations for the first parking deck at the project, and foundation work for the entertainment retail center will begin around the first of June.

Traffic and parking issues at the site during the Nets recent playoff games, have proved to be insignificant. We expect to open up Meadowlands Xanadu in the fall of 2007. In Chicago, there is equally heartening progress on our One Away North States' Streets Project as Larry described, and on the entitlement process at the San Francisco Piers.

On the traditional retail mall front, we are making solid progress on the redevelopment of the Del Amo Fashion Center. The new entertainment wing, anchored by a state-of-the-art AMC theater, is in construction and on time for the May, 2006 opening. The follow on mall redevelopment is already entitled and will begin construction next year around the type the entertainment wing is completed.

At the Shops at Riverside, we expect next week to receive department store approval for our planned expansion of the center, enabling us to add up to 150,000 square feet of new high-end specialty stores and restaurants, With anticipated public approvals in May, we could begin construction this summer, looking forward to a fall 2006 opening of the first batch of high-end tenants together with newly improved department anchor-store buildings.

In the meantime, retenanting at Riverside has continued. With the recent opening of the 12,000 square foot fountain space, the largest spa in an enclosed mall in this country, and the June scheduled opening of Barnes and Noble. According to a recent feature in the local media, our remerchandising efforts at Riverside have made the center the only county to be active on Sundays, notwithstanding, the blue laws. Predevelopment work also continues on the new lifestyle center at Woodbridge, Virginia, and redevelopment at Broward Mall, Meadowoods Mall in Reno, Stoneridge Mall in Pleasanton, California and others. On the international front, some positive developments in the last few weeks. First, a court in Rome on April 27, refused the request of a disappointed competitor to hold up the award of the concession to redevelop the Mercati Generali, and that concession will be formally awarded shortly by the city of Rome. This project should start construction this year and be open in 2008.

Speaking of law courts, a Scottish appeals court decided to challenge to the Ravens Craig entitlement, and I'll tell those entitlements. A further appeal by the unsuccessful complainant is theoretically possible to the British House of Lords. Like our Supreme Court, you can't appeal there by right, but any appeal there is considered unlikely to succeed by our local partners. The latest decision clears the way for us to finalize our arrangements with our local partners and develop a great retail and entertainment center on that well-located suburban site in Glasgow, the best retail market in the U.K. outside of London.

In the meantime, we also continue our redevelopment and retenanting planning for St. Enoch center in downtown Glasgow, and recently concluded a successful series of meetings on this subject with the local government authorities.

We celebrate this month, the second anniversary of the opening of Madrid Xanadu, which is still going strong. And we're hard at work on the further development of that site, both for a 150,000 square foot power center on out-parcel land adjacent to the mall on the west, and for entitled retail, leisure, office, and hotel acreage that we own adjacent to the mall on the east. We continue to pursue future international opportunities in Italy, in Milan, and in the Rome suburbs, and in Spain -- in Valencia, Civia, and Barcelona.

That concludes my remarks, and I will turn the mic back to Larry

We would like to now open it up for questions and answers please.

[OPERATOR INSTRUCTIONS]

Your first question comes from the line of Michael Bilerman from Smith Barney.

Jon Litt is on the phone with me as well. Had a question on the sale gain -- you said 5.4 million was your share -- how much shows up in the consolidated J.V.'s and how much for majority -- minority interest for the gain?

The total was around 11 million, I think that is, which is the consolidated J.V. piece, and the difference between that and the 5.4 is basically the minority interest fee.

So most of the gain -- all of the land sale gain -- was effectively in the consolidated J.V.'s?

Yes.

In terms of Rome, the cost that is in here is 370 million, that just appears large relative to some of the numbers you've talked about previously. Is the scope of the project changed, and help us understand what is going to happen there?

No, Michael, the scope of the project really hasn't changed at all. It is going to be about an 800 to 850,000 square foot cultural, entertainment, and retail center in Rome, And the cost has always been in this range. It is going to be one of the first retail experiences of this time opened downtown in decades. And the rents that we are getting still show that we are going to get a nice return on that investment.

In terms of Chicago and San Francisco, you commented previously that you were working with KANDam on bringing them in as 50% partners. The development schedule, which I think the disclosure is definitely helpful to have and we certainly appreciate that, it has both of those projects at 100%. Can you just comment where those negotiations stand?

We are nearing the end of discussions with them. There is a few points that are still left open. We expect to be able to fully -- successfully negotiate the agreements within the next couple of weeks. We just weren't there yet, so we couldn't change the 100% capital contribution numbers that we put in the schedule. But we are getting very close, and we expect to be successful.

And, they have reiterated their interest just in the last couple of days there, and actually have a lot of demand in Germany to raise money for both of these.

If you can help me understand the -- you talked a little on how you fell short in this quarter, he $0.03 of the one-time fee and the $0.03 from the HLBD -- you said you would make that up, or maybe they were unexpected, in your guidance. I was wondering how you make that up through the rest of the year?

I don't think they were unexpected. We actually anticipated that -- it was a matter of the first quarter last year with respect to HLBV being very high because of the distributions, and that was turned around. HLBV can cause some quarterly fluctuations. I think this year's run rate, what we experienced in the first quarter, was more normalized, but in the first quarter of last year, we had a higher amount. In the last year, as it reversed, it got negative. That $2 million increase in the first quarter of '04, went away, in the last nine months, we don't have the same reversing trend in the first quarter of this year. So I expect that to turn around.

The other items -- the termination fees we lost. We'll make some termination fees back up for the last nine months. Don't forget, we had 3.4% NOI growth on comp properties. We had over 5% in minimum rent for the first quarter, so that was very strong. It was obviously reduced by items below the minimum-ramp line item, and we actually expect NOI growth for the year to be 5% plus on the comp properties. So, you are going to have a lot of improvement, and a lot of growth in the NOI for the last nine months, so we do expect to overcome all these things

Okay. Thank you very much

Michael, before we finish with you, Jim, do you just want to comment on the demand at mark catty. [inaudible] That -- Mercati.

We have been spending a lot of time in Europe talking to retailers from all of the various countries that have interest in expanding, and of course, a project like this is of such consequence on the continent because -- I mean -- it's in the center of Rome, and you just can't get better demographics. So if there is a retailer out there, they are interested. And so, we have had tremendous, tremendous excitement about it

Larry, thank you for that

All right. You're welcome

Thank you. Our next question comes from the line of Ross Nussbaum from Banc of America Securities.

Good morning. Larry, first, can you comment on the status what is going on in Valencia? I thought your partner was moving dirt there a couple of quarters ago.

No, there is more than just plans for retail there. It is actually a site that is going to accommodate mixed use. Our partner is building a lot of residential around that site right now. That is probably some of the dirt you are seeing being moved. We are in the process now -- we were just -- Jim Napoli and I -- were in Europe a couple of weeks ago. We were with a department store -- you can guess who it is since there is only one in Spain -- we are in the process of working with them on committing to the project now.

Okay.

Turning to the Meadowlands on Mack Caley's call yesterday, Mitch Hirsch threw out a number of 1.3 to 1.5 billion for the first phase. How does that relate to the number you have on the supplemental?

With the number we have in, doesn't it include enhancements that we will decide to make or not make based on the revenue they produce? I am glad Mitch is talking about the Meadowlands' numbers, but we are in the process of working through that right now, deciding what we are going to spend and not going to spend. Depending on interest we have from the less-conventional revenue sources, and also that is not net of the tip bond.

Since we haven't finalized a number with them. The gross number are obviously higher than the net numbers, and there are tip bonds and some other land recoveries, which will bring the agreement number down.

If I try to normalize that number that Mitch through out, how much incremental dollars could be spent on the Meadowlands above what you have in the supplementary -- are we talking hundreds of millions?

We are in the process of evaluating that now. Again, it depends on the deals that we make. I just talked about, in my script, a whole bunch of things we are working on, and it depends on how much of that comes to fruition as to how much we will spend

How do you go forward with those? Didn't you have a plan that was approved previously with the local authorities? Do you have to amend that plan?

This is Jim Dausch. The plan with the sports authority is flexible enough to allow those enhancements to occur. Most of the enhancements occur within the envelope of the plan that is approved by the sports authority.

Final question is on Cali's equity distribution here -- it's capped at a certain level, so if you go forward and expand the scope of the project, How does that work in that they are capped on their equity contribution?

The capital structure is a bit complicated, Ross. They have -- are subordinate with respect to the priority that come up with the properties, and the fees are also negotiated in contemplation of the capital structures.

When you look at the whole thing -- Their $32.5 million is not going to increase if the project scope goes up, but the total equity returns remain pretty fair between the partners, and when you look at the complicated capital structure of the various others that are subordinated, particularly the preference and how the fees work into the equation. You have higher project costs, you have higher fees too.

Theoretically, they are going to getting a disproportionate share of profits on -- if the scope of the project goes up above what it is now

It is possible, but it as very possible capital structure. Residual, at that they brought it, that would be a matter of over simply fiction. How the it works through the and understand the fee structure to really understand the total deal and the economics of each partners. It is very, very complicated.

Last question for me. In the development schedule, the contribution percentages that you have there -- how different would those be from the HLBV percentages that are actually going to show up on your P&L?

The percentages we believe are consistent with the economic percentages. We said that in the past. Obviously, those are impacted. So, the HLBV percentages will be higher than the capital contribution percentages. I mean -- how much higher depends on the project, I can't say off the top of my head. In aggregate, they will be higher.

Thanks.

Thank you.

Our next question comes from the line of Craig Schmidt from Merrill Lynch.

Please proceed.

Thank you.

I don't know if this is a Ken question -- but the footnote on page 12, referring to the 3.6 million of amortization expense to Mills investment value in excess of book value -- could you explain that? It seems to be a change from the restatement we had gotten a couple of weeks earlier.

I think we reclassified amortization of the outside basis of the joint ventures was previously recorded in depreciation -- and what we had and what we did -- we decided it was more appropriate to reclass that in the prior statements against the equity pick up itself. Now, there is a difference, and we disclosed it here so you could track it.

What it is, primarily, is the difference in the historic -- primarily, the historic basis -- of the General Motors portfolio versus what we paid for it.

Okay. For modeling purposes, what would I be assuming is the amortization for the next quarter or so?

I think the run right here is probably fair.

Great.

Then the second question -- the '06 development deliveries -- from a broader prospective -- seem to be a little lighter. Would that suggest that '06 or '07 might not have a stronger growth as the two or three years before and after it?

You have to remember, we are delivering next year a $170 million lifestyle wing.

At 50%, right?

Right.

At the Del Amo, we are delivering $115 million -- for the most part -- a little bit that will be in 2007, but the majority, we hope to open up in 2006 at Riverside. We are making significant anchor ads to the great mall in Mopedus, and then we have other sundry things we are going to be doing like expansions at the Falls and some other places.

The Colonnade was originally scheduled in 2006, we accelerated to get it into the Christmas season of 2005.

Right.

So, we still have a pretty active year next year.

What I am hearing you is really, we shouldn't expect a dip in your overall level of growth in those years?

It is hard to say until we get down to the end and actually do our budgeting. There are lots of reasons that our growth should be fairly strong. It will be as strong as it is this year -- don't know -- but it should definitely be strong.

Obviously with the project NOI is increasing, the other thing that is not on the schedule that your graph's reviewing, in the 8-K, is $1.00 for spending. Some of the dollars that we spend on individual tenant deals that are existing centers, which are yielding very, very strong results, so we expect high NOI growth to continue from that. And, obviously, on a lever-basis -- that high NOI growth results in high FFO growth. It is really hard to say what the growth number will be next year, but we should -- we still should experience -- I would assume -- above-year group growth. There is definitely the opportunity for that.

Thanks for the extra detail on the redevelopment expansion activity. It is helpful.

Great.

Thank you, our next question come from the line of Matt Ostrower from Morgan Stanley.

I would like the new disclosure, but without looking a gift horse in at mouth -- is there any possibility we going to get pro rata income statements, much as some of your competitors produce or peers produce -- I should say -- for the J.V.'s?

Matt, it is certainly possible. Are you are talking about break down of individual line items?

Yes. Just to give your pro rata share of each -- particularly, I believe it is on a consolidated -- where there are more complicated deal structures and some of the line items like gains, can sometimes be different for the average for the whole. Makes it much more difficult to model your NOI from those assets?

Yes, fair enough. We might continue to look to do that and migrate it. Also, what we were able to do in this quarter, is put it back to the level of disclosure we have always had.

Right. Then, I guess on the same topic, a huge swing factor on our model is the projection for your proportionate share of NOI from some of these projects, particularly the consolidated ones, going forward. We have it set up so you have to put those percentages in, but we're still guessing at this point and using history. Is there any reason to believe -- it seems to jump around from quarter to quarter -- do you have any insight, looking forward into the year, about things that would change those economic percentages?

I think the HLBV percentages will increase obviously, as there is more cash flow. The distributions will got up somewhat. Last year, again, as I said, was a bit, hopefully a bit of an anomaly in terms of the quarterly fluctuation. We think this first quarter run rate is probably as good as anything for the next couple of quarters, and may be increasing in the fourth quarter, and perhaps increase a little in the third quarter too, but in the fourth quarter. We'd be happy to expect HLBV will behave just given the increasing cash flows generated from the properties, with the seasonality of the income.

I guess just a few, smaller items -- did you give guidance or refresh your guidance on G&A, which is obviously higher in this quarter than you had originally guided? That was part of what you discussed in your opening comments. Is there reason to believe things may continue at a higher pace than you originally indicated last quarter?

I think our G&A is going to be up a 1 million, 1.5 million from last year in total. Hopefully, that's consistent with what we are said last quarter. That's where we expect it to be. I can't remember the exact number, but I know it is up about 1.5 million.

That would include any sort of the impact from these restatement charges you were talking about?

Right.

Okay.

And then, the recovery ratio also seemed a little bit different?

Just, also, Matt, remember that some of those restatement we talked about aren't all sitting in G&A.

As far as the recovery percentages, I think they are fairly consistent if you looked on it as an apples-to-apples basis, if you just try to form off of the income statements, remember there are a lot of restatement, there has been some changes in the composition of the projects. But overall, I believe our recovery percentages are fairly consistent. At least on an annual basis, I know what we're budgeting for the year. The net recoveries -- income minus the expenses -- are for the whole portfolio is, basically, about flat.

Okay. Finally, it seems like you were very clear in your comments that a lot that what came through in the quarter wasn't a surprise to you, it was obviously surprise to some of us, at least parts of it any way. We are sitting here right now on my screen, consensus for the second quarter seems to be $1.02. I know you don't normally given out the quarterly guidance, but given all the noise and all the newness of the accounting for you guys, is there any comment you can make on that quarterly number? And, if not, I would just comment that it might be helpful for you to -- this year anyway, given all of the changes -- to maybe keep an eye on consensus and let us know if there's something in your numbers that's materially different.

I think that's a fair comment. I am not prepared right now to give quarterly guidance. We didn't focus on it for the call. We will look at it and see if we can give some guidance, and if we can -- if we feel comfortable with that, we will do it as soon as we can, but for right now, I just can't comment on it.

Okay. Thank you

Hey, Matt, in the 10K -- 10-Q, we do detail the other net line item, which has the landfill, so maybe we can think about pushing that into the 8-K in the future.

Is that increment disclosure that you have been doing before?

It is.

Okay. Great.

Thank you.

[OPERATOR INSTRUCTIONS]

Our next question comes from the line of Michael Muller from J.P. Morgan.

Hi, guys.

A few questions -- first of all, the $0.03 restatement, just wondering where else you mentioned it wasn't all in G&A. Can you mention the line items where it did show up?

Some of it would show up in loan cost amortization -- interest and fees relating to some bridge financing. Some of it --

Shows up in our preferred dividend charge --

preferred dividend charge, and then about 0.5 million in G&A.

Okay.

Then, Larry, I think you mentioned a $0.03 hit to Q1 FFO, that was related to the J.V. accounting. Was that a year-over-year comment, or something that comes out of the Q1 as you head into Q2?

It is a Q1 comment, and again, we believe the Q1 of '04 was higher from HLBV and that tends to reverse itself in the last five months of the year. We didn't have the same kind of anomaly in the first quarter of this year, we had high distributions, and therefore, high allocations. That's why we had a $2 million decline quarter-over-quarter, as as a result of last year, more so than a result of what happened this year.

Were there any dead-deal costs embedded in other?

Half a million dollars.

And last question for me -- the projects that you are detailing as redevelopment and expansion -- it is pretty expansive -- how does that tie into your same-store guidance on a go-forward basis. For example, a project in there is listed, it comes on line -- what is the lag into what impacts your same-store number deal? Does it hit immediately? Is there a year gap? Just to understand what is baked into the guidance there.

It is a full calendar year gap.

Okay. Thank you.

Thank you.

Our next question comes from the line of David Fick from Legg Mason.

Please go ahead.

Good morning.

You commented on the leasing at Pittsburgh. Can you talk about where the inline is right now?

I went through this yesterday. We expect -- we are opening, David, like literally in seventy-five days or something like that, and you are going to open the project somewhere in the upper-70's inline. By Labor Day, we expect to be in the low-80's -- 82, 83. And the projection that we have for the end of the year, gets us to somewhere around 87 or 88%.

Where are you stronger on the traditional Mills' side or the fashion side?

Stronger in terms of interest?

Yes. Demand, tenant interest.

No. The fashion has been very strong obviously for us because with the addition of Kauffman's in here, it has been a tremendous help to us.

Also, we have had a great deal of interest from the traditional retailers that we do a lot of business with or non-fashion. It is actually generated quite a bit of interest. Obviously it is well positioned in the marketplace, and it as area that growth area inside the marketplace that people have been waiting for a long time.

I think there is a pretty consistent interest across the board.

I think you will see an interesting combination. I think Jim and his team have done a good job of doing conventional leasing, which you'll see a lot of those tenants open between now and the end of the year, but also, you're going to see an interesting juxtaposition to some interesting off-pricer in the center too.

Jim, while you are commenting on that, can you give us a sense of Cincinnati Mills now that it has been about a year, sales, sales trends, tenant satisfaction?

We continue to add interesting tenants in there. As a matter of fact, we are working with a tenant right now -- a very well-known one who will be able to announce shortly -- but I think it continues to lease we have, not a tremendous amount of turnover. It continues to create a lot of excitement in the marketplace , and we are watching the individual sales of each of the stores. Those that are not performing quite as well, we are doing our best to try to replace. Actually, we haven't had a lot to do yet, but we are still watching it very closely.

Okay.

Our last questions -- two part question -- is for Jim Dausch.

Is it fair now to say all of the legal hurdles and obstructions of Meadowlands are completely behind you, number one, and number two, have you ordered steel and what point will we start to see steel coming out the ground?

Let's take the last one first because that will a little bit shorter. The first of the steel bids are in -- or will be in in the next week or so -- and following that, we will order steel. I think the first of the building things that you will see come out is the pre-cast concrete for the parking garage, which we ordered months ago, and it is basically sitting in storage right now in anticipation of us getting started.

Okay.

So, the second part is, are all the legal obstacles out of the way? Certainly regulatory wise, that's the case. We have all the permits and construction has started. There is still some litigation pending by people who would like to see us stop, and those have been pending for the last year and none of them has been successful so far.

We expect that none of them will be successful, but they are still out there, and we would anticipate that a lot of that would be disposed of this year in one way or the other. Either because the efforts to stop the project preliminarily do not work and, therefore, the plaintiff folds their tents, or because the cases have been basically disposed of on the merits as we would expect to happen, and that is the end of it.

Did the Giants' stadium deal put to bed any of that issue?

The Giants' stadium deal certainly has advanced the ball. The Giant's, which are a class franchise, all has viewed Xanadu as a real opportunity to -- essentially -- to force through a new stadium deal with the State of New Jersey. Fortunately, they were able to deal with Governor Cody who recognized the importance of keeping the Giants on the campus and in a new facility, and were able, through a very serious, tough series of negotiations, to work out a deal for a new stadium.

The deal that the Giants have, which is in memorandum-of-understanding form, required that the Giants and ourselves come to a mutually acceptable agreement on several issues that relate to the integration of their activities with ours. In 45 days from the date when their deal was approved -- effectively it is June the ninth -- we are in active discussion with the Giants right now, which are constructive, and I expect to see both of sides reach an agreement the approved date. That will take care of any legal issues that the Giants have with the State over the awarding of the right to develop Xanadu across from the stadium.

One presumes that there is absolutely no chance that you would concede Sunday operations during holiday season.

None what ever.

You understand, David, that's because it is Bergan County, the retail is closed Sunday any way, not all retail, but a lot of the retail. But, still, because a large majority the project is entertainment focused, there will be a large percentage of the project still open on Sundays.

Thank you.

Thank you. We have a follow-up question from the line of Matt Ostrower from Morgan Stanley.

Sorry, just a follow-up. Did you guys disclose what straight-line rents in the quarter were your pro rata share, I guess?

We are looking at each other. I guess we --

Okay. Do you want me to follow up?

We will follow up.

Thank you.

Thank you, we have another follow-up question from the line of Michael Bilerman from Smith Barney.

You guys still expecting 10 to $15 million for year?

Yes

And on land sales, 15 to 20, your share?

Yes

Do you have a sense if there's anything coming in the second quarter? You had a big one in the first quarter. Do you have sense of how that's going to be spread out over the rest of the year?

The first quarter, by the way, was a few individual sales. I don't believe we have anything significant in the second quarter. We may have something in the third, and probably a lot in the fourth.

Are those are going to be within the J.V.'s or, you think in the consolidated?

I think most of them are within the J.V.'s, if not all of them -- consolidated J.V.'s.

All right. Thank you.

Mr. Siegel there are no further questions at this time. I will now turn the conference back over to you. Please continue with your presentation or closing remarks.

Thank you all for joining us. We will talk to you again next quarter.