Rithm Property Trust Inc.
Q2 2009 Earnings Call Transcript

Published: 23 Jul 2009

[Operator:]

Welcome to the Ramco-Gershenson Properties Trust second quarter 2009 Earnings 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) It is now my pleasure to introduce your host, Dawn Hendershot, Director of Investor Relations for Ramco-Gershenson. Thank you, Ms. Hendershot. You may begin.

[Dawn Hendershot:]

Good morning and thank you for joining us for Ramco-Gershenson Properties Trust second quarter 2009 conference call. I’m hopeful that everyone received our press release and supplemental financial package, which are available on our website at www.rgpt.com. At this time, management would like me to inform you that certain statements made during this conference call, which are not historical, may 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 statement are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ from expectations are detailed in the press release and from time-to-time in the company’s filings with the SEC. Additionally, we want to let everyone know that the information and statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made. Also the contents of the call are the property of the company and any replay or transmission of the call maybe done only with the consent of Ramco-Gershenson Properties Trust. I would now like to introduce Dennis Gershenson, Chairman, President and Chief Executive Officer and Richard Smith, Chief Financial Officer, both of whom who will be presenting prepared remarks this morning. 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 the Acquisition. At this time I would like to turn the call over to Dennis, for his opening remarks.

[Dennis Gershenson:]

Thank you, Dawn. Good morning. Today we like to share with you the highlights from our second quarter and the first six months of 2009. My comments will address our leasing achievements, our corporate body performance and update on our balance sheet and liquidity, the strategic review process and guidance for the year. We are very pleased with our performance for this quarter, in light of both the current economic difficulties facing our industry and the distress the American home owner, worker and consumer are experiencing. Together these issues have had a profound effect on the retail community, including both the public and private shopping centre owners. In the second quarter, Ramco-Gershenson faced a number of challenges, including confronting and resolving a proxy contest. We expanded our Board of Trustees by two members adding Mathew Ostrower and David Nettina, who have attended several Board meetings to-date and are already making a positive and constructive contribution. The cost of the proxy contest coupled with the third party expenses, associated with our strategic alternative study resulted in an extraordinary charge of $0.04 per share. Excluding these extraordinary items, our FFO for the second quarter would have been $0.56 per diluted share exceeding first call estimates. One of the most significant challenges to be met by our management team in 2009 is replacing vacancies in our tenant roster created by the bankruptcies of Linens ‘n Things and Circuit City as well as a number of other mid-box locations. Our leasing progress since the start of 2009 has been substantial. We have executed leases with or opened seven anchor stores accounting for approximately 200,000 square feet and we have signed leases with more small-format retailer year-to-date, than in the same period in 2008 and 2007. Balancing the increase in leasing velocity is the reality that the newly signed mid-box retailers will not be paying rental rates comparable to the tenancies they are replacing, due to a number of factors including the significant availability of large format spaces, the type of goods sold by the replacement tenants, and expectations for a slower pace of consumer spending. Because Ramco-Gershenson is having success signing leases with national, regional and local retail tenants, we are not supplementing our leasing program with creative alternative uses. Our experience this year-to-date includes an increase in interest from local tenants with strong customer loyalties who are relocating to our centers to take advantage of the vacancies created in stronger shopping’s centers. We feel that our recent success is due to the fact that our shopping’s centers are best in class as they are tenanted with the right mix of retailers, are located at the most heavily traffic intersections in their trade areas and provide the most desirable shopping experience for the customer. We have also had success in the first six months of 2009. We are tenanting the Linen space in our Troy, Michigan center with the opening of Golfsmith and the signing of two new leases with Ross Dress For Less for shopping centers Florida. one to replace a vacant Linens’ at our Plaza at Delray shopping center in Delray Beach, Florida. As I have mentioned in past calls there are several sets of leasing statistics, which determine the direction and success of our leasing efforts. The first two sets of numbers are presented in our supplement and include both new retailers who have taken occupancy of their primacies in the first and second quarter of the year and those tenants we have retained at the expiration of their leases. An equally important statistic and one which we track internally is, for leases actually being signed during these periods with tenants who will open later in 2009, or in the case of anchor tenants, possibly in 2010. Concerning those new tenants who opened in the second quarter of 2009, one of the thirteen smaller-format retailers exceeded 10,000 sq. ft. in size, and is paying a single-digit rent. Excluding this one retailer, our rental average for the remaining twelve new tenancies would have been $18.95, comfortably above our non-anchor tenant average. Please note as well, that of the 67 leases that expired during the second quarter, we retained over 83%, and year-to-date, over 77%, which exceeds our historical average of 73 to 75%. This emphasis on tenant retention pays dividends as we avoid downtime, legal cost, and capital expenditures, if we had to refill those spaces with new tenants. Even with this higher retention rate for renewals, we are achieving rental increases for both the quarter and year-to-date of 5.7%, and 3.7% respectively. Potentially and even a more important indicator of our leasing direction, the tenants who have opened in the quarter is the number of retailers we have committed to new lease agreements in the last 90 days and the first six months. For the quarter, we signed 25 new non-anchor leases at an average rental rate of $16.50, slightly above our portfolio average for all non-anchor tenants. To date this year, we have executed 50 non-anchor new leases, compared to 37 for the same period last year and 35 in 2007. All of our leasing activity has translated into an improving occupancy rate of 91.3% for Q2, which is 40 basis points higher than our occupancy rate of 90.9% at the end of the first quarter. Coupling our leasing success in the first half of the year is the impact of Circuit City and Linens’ closings. These bankruptcies have negatively affected one of our more important operating metrics, the same-center NOI comparison for the quarter in year-to-date. Our same-center numbers for the quarter in the first six month were down 3% for the quarter and 1.2% year-to-date. Excluding the impact of Linens ‘n Things and Circuit City, our same-center NOI would have been a negative 0.3% for the quarter and a slightly positive figure of 0.8% for the first six months. An additional reason for the income reduction in the second quarter is the rental relief we have given to a limited number of mid-box retailers. Although this rental reduction is not significant relative to any one lease, we have worked with a few anchors to insure their continued tenancy in our center as they contemplate their strategy of reducing store counts in a number of metropolitan markets. Our understanding with these merchants also includes the extension of their lease term by the early exercise of an auction giving us a longer, secured, rental stream. We feel that this trade-off is a win-win for both the tenant and landlord. Other operating statistics of include our ability to maintain an operating expense recovery ratio above 100% on the same-center basis. Even with this superior ratio, the financial health of our tenant leases is crucial and thus, year-to-date, we have been successful in reducing CAM cost we pass on to our tenants by over $1.6 million portfolio wide. We believe that our large multi-anchor shopping centers, averaging over 220,000 square have always created a major leasing advantage. In light of the current market conditions, we feel this advantage is magnified. Our multi-anchor approach insulates our assets from the loss of any one major tenant and our larger centers with several major anchor retailers and a variety of smaller tenants, complimenting the anchor mix, promotes a greater opportunity for cross shopping as compared to the single anchored supermarket center where historically there is little cross shopping. I know that you are interested in an update on our strategic alternative study. The Board and Management Team have been focused on evaluating our future over the past several months. The Board has met on a number of occasions, including as late as two week ago. This is an ongoing process but let me assure you that the Board and the Management Team during this period have taken positive, definitive step to move this company forward in order to maximize the value of all shareholders and to ensure that Ramco remains a strong, healthy, ongoing concern. Thus good stewardship requires us to take a number of actions, including the extension of our line of credit to 2012 and the sale of a number of non-core assets. These transactions will strengthen our balance sheet and improve liquidity. Rich Smith will discuss the elements of our capital plan in more detail. I will merely say that we continue to work with our bank group and feel that we are on the one-yard line in securing all the approvals necessary to extend the full $200 million credit facility. The pace of the refinancing is meeting our expectations. As for our asset sales, because of the uncertainty in the investment sales market for shopping centers be they stable or opportunistic, wee chose to pursue the disposition of a number of national credit quality net land leases for which there is presently a vibrant stable of buyers. As I shared with you on our last call, we are in contract to sell three of these properties and due diligence is drawing to a close. All three properties are unencumbered and we expect to raise approximately $30 million, which will initially be used to pay down our line. Our revolving line of credit and term loan refinancing, our asset sales, as well as the cost of the proxy contest and our strategic review will all impact our 2009 FFO guidance. As the timing of some of these changes are not yet exactly determined, we are not in a position today to give explicit revised FFO guidance for 2009. This number should be clarified in the third quarter as we complete each of these processes. It is important to note however, that we do not plan to reduce our 2009 FFO guidance, as a result of any change in the performance of our shopping centers. I would now like to turn this call over to Rick Smith for his brief remarks.

[Richard Smith:]

Thank you Dennis, and good morning everyone. For the quarter, our diluted FFO per share was $0.52. Without the cost related to our recent proxy contest and our strategic review, we would have exceeded the first quarter estimates by $0.01, and our diluted FFO per share would have been $0.56. This compares to the $0.52 reported in 2008. Some significant changes quarter-to-quarter included reductions in property level income and expenses, due mostly from the effects of contributing assets to off balance sheet joint ventures in 2008; from taking income off-line for plan redevelopment;, and lost revenues due to the closings of Circuit City and Linens ‘n Things. Other decreases in asset in FFO included the decrease in our fee income, resulting from reductions in development and acquisition fees, and an increase in our G&A expense, resulting from the cost of our proxy contest, and our ongoing strategic review. Excluding those costs, our G&A would have decreased by approximately $250,000 from the same period last year. These reductions in FFO were offset by increases in lease termination and interest income, and a decrease in interest expense, due to reduced borrowings at lower average interest rate, offset by a reduction in capitalized interest on development projects. For the six months ended June 30, our diluted FFO per share decreased 12.2%, or $0.15. We went from $1.23 in 2008 to $1.08 in 2009. Again without the extraordinary charges associated with our proxy contest and strategic review, we would have been at $1.12 per share. For the six months, significant changes included reductions in property level income and expenses due mostly from contributing assets to off-balance sheet joint ventures, redevelopment activity, and the closing of Linens ‘n Things and Circuit City. The changes is also included a decrease in our fee income resulting from a reduction in development, leasing and acquisition fees. As I have previously mentioned, G&A increased due to the cost associated with the proxy contest and our strategic review. The decreases in FFO were offset by an increase in other income, which was due to higher interest and lease termination income, as well as additional income from our retail maintaining services. FFO was positively impacted by a decrease in interest expense, which as in the quarter with the result of reduced borrowings at a lower average interest rates, again offset by a reduction in capitalized interest on redevelopment projects. Since our last call we have made significant progress in replacing our two unsecured credit facilities and our credit facilities secured by Aquia. Currently these faculties assuming when we exercised our extension options are scheduled to material in December 2010. We have agreed in principal on the material terms for a new $150 million revolving credit facility, a $100 million term loan both of which are expected to be secured by 33 assets, which are currently on encumbered and a new $40 million revolving credit facilities secured by our Aquia project. The material terms for all the facilities have been agreed too by KeyBank, which will act the lead arranger and administrative agent. We are well into this process and have received commitments from approximately three quarters of the required capital and are actively collecting the remaining commitments from the bank group. We expect to close on the new facilities subject to documentation, due diligence and customary conditions by late third quarter or early fourth quarter. After the credit facilities are refinanced, we do not have any significant maturities over the next few years. Our total debt at quarter end was $662.2 million at an average rate of 4.8% and an average term remaining of 4.3 years. 72.5% of the debt was fixed at an average rate of 5.8% and 27.5% of our debt was floating at an average rate of 2.3%. The availability till quarter end on our credit facilities was $21 million; our EBITDA interest coverage for the six months was 2.2 times; our fixed charge coverage was approximately 1.9 times and our FFO payout ratio was only 43%. We feel that between asset sales which were under contract, our line availability and cash retained from operations, we have ample liquidity to satisfy our capital needs beyond 2010. As Dennis discussed, the company will provide revised guidance once it has completed the strategic review, the refinancing on this credit facilities planned asset sales and again as Dennis mentioned, it is our expectation these will resolve during the third quarter of 2009. We expect the same-center NOI for the year to be down to approximately to 3%, as the result of the closures of Circuit City and Linens ‘n Things and we anticipate this number to improve as the space comes back online. At this time, I would like to turn the call back over to Dennis for his closing comments.

[Dennis Gershenson:]

I think it is important before we take your questions that you understand our two near-term business objectives. First, we will continue to maximize the value of our assets and second we will increase the strength of our balance sheet, improving our liquidity and financial flexibility. Although it has always been a primary focus of Ramco-Gershenson, we will continue to analyze all aspects of our portfolio in order to maximize the value of all of our assets. This process includes assuring that our centers are the dominant players in their trade areas; that they are well tenanted with a diverse mix of retailers who reflect current trends; and that the credit quality and net operating income growth assures us of the very valuable portfolio of assets. Second, we will build the balance sheet that reflects a conservative debt ratio and provides sufficient liquidity to overcome the challenges, the entire economy is facing, in order to be positioned to seize opportunities as they arise. Finally, while having a strong portfolio of assets and a good balance sheet are prerequisites for future growth, the next chapter of the shopping center industry will be profoundly affected by the consequences of this recession. Thus the management teams that will produce superior results in the future are those that can demonstrate flexibility and creativity. Ramco’s team of professionals with their long history of tackling the challenges associated with our numerous successful re-developments will be ideally positioned to overcome the countless complexities that will impend the forthcoming shopping center opportunities and in turn our efforts will create value for our shareholders. We would now be pleased to take your questions.

[Operator:]

(Operator Instructions) Your first question comes from the line of Nathan Isbee - Stifel Nicolaus.

[Nathan Isbee:]

Dennis, just to clarify, you said that you did not expect guidance to change due to any changes in your core real estate fundamentals. Your updated same-store guidance is negative two to negative three. Previously you had mentioned or communicated in meetings that the guidance assumed like, a flat to slightly up. So I’m just trying to understand how your guidance could stay the same, given that change in the same-store NOI guidance.

[Dennis Gershenson:]

Again, a lot of it has to do with the Circuit City and then Linens ‘n Things departure, and then I think when we looked at that before, and think that was not totally included in that and all the impact that was not included in there. That’s the basic difference, and I would expect that, its done so as these tenants come back on line they turn positive, and again the hope is, sometime next year that that happens.

[Richard Smith:]

Well, I understand your question Nathan. What I mean to say by my comments is that a number of our peers have been talking about deteriorating fundamentals relative to rentals across the board, occupancy, receivables, etc. So, to clarify what I really mean is that going forward, we do not see a deterioration, in any of those for the balance of the year. When we really take into full account the Linens and Circuit City they had a bigger impact and the complexities of the new deals that we are making with the replacement tenants and then working with the communities are taking somewhat longer than we expected.

[Nathan Isbee:]

Okay. That’s helpful. So, I guess it’s part of my call up. I mean your peers has had attributed a guidance revision due to specific mom-and-pop retailer weakness. You are not seeing that. I understand that you do have less [impacts] than that of your period that you are not seeing that in what you have?

[Dennis Gershenson:]

As a matter of fact what we are seeing is that and we have not provided this statistic here that we have just relative to the new leases we are signing, we are probably signing more mom-and-pop leases. We are a national tenant leasers and I would resort to my prepared remarks, what we are really seeing is that we are making deals with retailers who have been in business for a long time, but they are coming from shopping centers that have suffered some issues, is either with the overall tenancy in the center or their anchors and they are moving to our centers. That being the large part is due to our canvassing program, etcetera.

[Nathan Isbee:]

Okay. And, then how about the mom-and-pop that you have, I mean not the new ones I mean, are you seeing any uptick in bad debt?

[Dennis Gershenson:]

I would ask Mike Sullivan to address that. Michael, do you want to make a comment on bad debt and receivables?

[Michael Sullivan:]

Actually, yes. And, Mike Sullivan here. We are not seeing an increase in other tenant age receivables, most of that debt allowance is due to delinquency or collection actions with local mom-and-pop and its effects. Note that in those cases we are flat from Q1 into Q2 in both of segments.

[Operator:]

Your next question comes from the line of David Schick - Stifel Nicolaus.

[David Schick:]

Hey, we’re double teaming with you today. Dennis, the market proceeds as -- as the investment market proceeds with two of the toughest economic environments in the US Detroit and Florida. I know you spend the last three years sort of addressing that but are you seeing any differences now and specifically, I think everybody is focused on Florida today because of some of the peer action. Can you talk about the relative strength or weakness in those two markets as it relates to sort of the rest of the country?

[Dennis Gershenson:]

Well, let me say this David, I continue to bang the drum more often than that. I kind of get the feeling that people are not necessarily listening but the mid boxes we signed, the Linens’ and Circuit City have both been in the Michigan. When we rebuilt the spaces, they’ve been in Michigan in Florida. I had some comments and I am just talking of the cuff here but in the third quarter we will announce at least two more signings of Circuit City and Linens’ boxes because the leases are out now, one is in Michigan and one is in Ohio. So those retailers who operate in our space and I am including Florida, know that there is good business to be done in those states, as long as they are located in the right centers. Our occupancy has either stayed stable or is increasing in Michigan in Florida and our rental statistics specifically with Michigan and Florida have been reasonably strong, compared to our overall averages.

[David Schick:]

Okay what is your current forward development commitment capital that you are going to need for further success?

[Richard Smith:]

If I look at that, we are just some 10,000 feet. I am now looking at that development needs, which is in our supplement. We are looking at a roughly development -redevelopment roughly about $30 million through the end of next year and a property level CapEx that between now and next year again about $28 million. So, I am looking at 58 in total, I am looking for resources.

[Dennis Gershenson:]

Wait a minute Rich. I don’t want to give the wrong impression. Of the $50 million almost exclusively all of the vast majority of that money has to do with redevelopment, it has to do with redevelopment where we have commitment. In the supplement that we provided, are the numbers relative to the redevelopment and as far as development and any development numbers that we have in there. I will reiterate my comment, which is we are in the midst of acquisition relative to capital expenditures for development that nothing will spent without a signed lease, without a joint venture partner and without a construction loan. So, over the next two years through the end of 2010 our expenditures for development are extremely modest.

[David Schick:]

Okay. Can you give us an update on dividend policy and what you are thinking right now going forward?

[Dennis Gershenson:]

Well as we have said in the past, this is totally within the province of our Board. We have cut our dividend to approximately the income that we are required to distribute in the last Board meeting. There was no discussion specifically as to the direction of the dividend, but I think at least at this moment you can rely on the fact that the dividend policy will stay as we stated at the beginning of the year.

[David Schick:]

Great. Well, congratulations on your hard work in getting your financings moving forward, and on pretty good quarter results.

[Operator:]

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

[Richard Moore:]

When you think about your strategic alternatives process, how much should we factor in, I guess, for the rest of the year, maybe just for the third quarter in terms of additional G&A related to that program?

[Richard Smith:]

Yeah, Rich, I think for the quarter, we probably had about $840,000 in there, and we’d expect maybe on the low end through the end of the year to have a total of about $1.4 million or somewhere in that range. That assumes that a lot of things continue on. Again, biggest thing obviously are the underwriter’s fees and legal that we are paying. Everything else is kind of diminished.

[Richard Moore:]

So that $1.4 million Rich, is for the full year or for the rest of the year?

[Richard Smith:]

Full year.

[Richard Moore:]

Full year, okay.

[Richard Smith:]

Then the $1.4 million to $1.7 million I think is what we have in our plan right now in our forecast through the end of the year in that range.

[Richard Moore:]

Okay, Dennis, why does this strategic alternatives process go on so long? I mean, it would seem to me to be more of a - something you do and you get an answer, and then you execute and then the alternatives process is sort of done?

[Dennis Gershenson:]

Well, I think it’s important Rich. I think people, when they hear a buzz word like strategic alternatives, are focused only on, are you selling or are you not selling. I would assume everybody, at least in the REIT world is looking at their strategic alternative because we are going to be coming out of a very difficult economic time and the rules of the game going forward will not be the same as the rules for the last 24 months. Because of that our strategic review involves more than saying, well, would you sell the company or would you continue to operate. What we are looking at, when we talk about moving forward would be, what will this company look like, what would our capital requirements be, how do we want to structure the balance sheet, etcetera. So, there are whole host of variables that we have been working on, but I think you can gather from my comments that there will be clarity in the third quarter.

[Richard Moore:]

Okay. So should we put some of the same kind of G&A expense in next year as well, I mean, it just kind of continues to another million or so?

[Dennis Gershenson:]

No. Absolutely, no.

[Richard Moore:]

No, no. Okay. All right. So, then yeah I want to get for the third quarter thing. Do I understand from your comments that the line of credit, the term loan, asset sales, and possibly JVs will all be, we can all pretty much count on those having been concluded to some extent, I realize they are always ongoing but to some extent by the third quarter call, is that right?

[Dennis Gershenson:]

All other things being equal, I would agree with the first two or three I mentioned. I am not sure. If, you are referencing joint ventures for development deal that may take a bit longer although at Aquia relative to the residential, we have made significant progress but that residential construction with our partner would not commence until 2010.

[Richard Moore:]

Okay and you think you have the whole $250 million term loan and line of credit combination in that capacity or you think will be the capacity going forward to 2012?

[Dennis Gershenson:]

Again, we’ll give you more details on that, I am hopeful within a very short period of time as Rich has referenced we are approximately 75% home with commitments from the vast majority of our banks. We just have, what I like to think is a small hurdle to get over to get the rest committed. There will be some amortization in that, that we have agreed to and is in our business plan.

[Richard Moore:]

Then I was little surprised that actually development fees went up from the first quarter. They definitely went down from the year ago quarter but they went up in the first quarter, I mean, I would have thought development was slowing and I am trying to figure out exactly what was put in for fee income as we look at the rest of the year.

[Dennis Gershenson:]

Yes, I think most of that Rich is our Hartland project and most of that is probably the SAD work that is going on there that we are getting fees on that.

[Richard Moore:]

Okay, did that continue for a while Rich?

[Richard Smith:]

Yes, Tom will help with that. .

[Thomas Litzler:]

Rich this ]is Tom, we have got another three to four months of SAD work to do up there. Its road widening and other work for Meijer’s.

[Dennis Gershenson:]

Keep in mind I know you had a question relative to payables. Yes, I think that some of that is impacting us, and I have got a receivable payable, we are doing the work and getting reimbursed from the SAD. So its neutral to us from the cash perspective but again we are earning fees on the service we are providing there.

[Richard Moore:]

Okay, well, that was a question I had Rich, so that $5 million increase in payables is related to Hartland?

[Richard Smith:]

About two probably less than the half of Hartland and the rest of it is a billed up in the real estate tax accrual that we have this time of the year. The Michigan real estates taxes are due next quarter. So, you are billed and its probably because it’s a peak now from that perspective, we would pay those next quarter and go down by year end, pretty traditional.

[Richard Moore:]

Okay. Yes I got you. Then on concessions, you guys talked about concessions and is that something that has already happened and by that I mean we are already seeing the impact of that in the NOI or should we see the impact of that going forward do you think, I mean a new impact not just a continued impact?

[Michael Sullivan:]

Rich, Michael here. It is really already happening we do not expect any new impacts or really for the reminder of the year any adverse impact from what we are trying to do.

[Richard Moore:]

Okay good thanks. Then I have been thinking that at some point acquisitions are going to look interesting and I realize that acquisitions aren’t necessarily foremost in your mind at this point but with Catherine there I was curious maybe what you guys are thinking or what you are seeing in the market place out there in terms of either distressed assets or just assets in general. Do you think that might be interesting sometime down the road?

[Catherine Clark:]

Yes, we are working with banks and looking at some distressed assets and we have seen some opportunities but none that have really hit the mark yet.

[Richard Moore:]

Was that most significant from a pricing standpoint that its not exciting or just not high quality assets that are interesting?

[Catherine Clark:]

Well, some are in levels of distress for a reason and yes, pricing still is the most [elusive].

[Dennis Gershenson:]

Let me just add to that Rich. I think that everybody is talking about all of these incredible opportunities that are going to be forthcoming. Financing is obviously a significant issue as far as those acquisitions are concerned, and unlike the experiences that we have had in the past because of a number of bankruptcies and major tenants pulling back, you can’t count on the speed of major tenants responding to you to fill either vacancies, or for you to feel reasonably comfortable that you are going to be able to execute a plan that will make that asset more valuable. So, pursuant to my closing remarks relative to Ramco’s background, I think that all of these growth opportunities that are going to come down the line because of inability to repay debt is going to be more difficult than some people are contemplating to get done.

[Richard Moore:]

Okay, great. Thank you, Dennis. Last thing here, I forgot one thing on G&A. The second quarter G&A seems to be high naturally each year. Do we -- is that right Rich? I mean, it seemed to be high last year, and then it was high this year, of course you had the extra $0.04. But then by the third quarter, do we see the usual seasonal drop in G&A unrelated of course to the strategic alternatives?

[Dennis Gershenson:]

Rich, you might look at our plans that our G&A is maybe on the high end of the guidance or within the guidance we gave last quarter, which is roughly the $14.5 million to $15 million. Again, that does not include the strategic alternatives.

[Operator:]

Your next question comes from the line of Nathan Isbee - Stifel Nicolaus.

[Nathan Isbee:]

Yeah, just a quick follow-up. In your discussion, the few lenders on the line in the term loan, what are the new terms as regards the new rates that you think you are going to be paying on this line?

[Dennis Gershenson:]

Again, I think it’s going to be pretty much market and again, I hate to say anything that’s overdone and change the deal, but what I am seeing in the market is somewhere between 350 and 400, I would expect to be within that range 350 to 400 over…

[Nathan Isbee:]

With the floor?

[Richard Smith:]

Yeah. There will be a floor, as well and we have done it before unsecured. But, again I think the floor, I have seen it anywhere from below, 150 to 200 as what I am seeing in the floor right now. And, I think again, we would be within that range.

[Operator:]

Thank you, ladies and gentlemen. We have no further questions at this time. I’d like to turn the floor back to management.

[Dennis Gershenson:]

We thank you all again for your attention and your interest. If you have any follow-up questions, we would be even more than happy to deal them, and we will talk to you in about 90 days.

[Operator:]

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.