Rithm Property Trust Inc.
Q1 2010 Earnings Call Transcript

Published: 1 May 2010

[Operator:]

Greetings and welcome to the Ramco-Gershenson Properties Trust first quarter 2010 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ms. Dawn Hendershot, Director of Investor Relations. Thank you. Ms. Hendershot, you may begin.

[Dawn Hendershot:]

Good morning and thank you for joining us for Ramco-Gershenson Properties Trust first quarter conference call. At this time, management would like me to inform you that certain statements made during this conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Ramco-Gershenson believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectation will be obtained. Factors and risks that could cause actual results to differ from expectations are detailed in the press release and from time-to-time, in the company's filings with the SEC. Additionally, we want to let everyone know that the information and statements made during the call are made as of the date of this call. Listeners to any replays should understand that the passage of time by itself will diminish the quality of the statements made. I would now like to introduce Dennis Gershenson, President and Chief Executive Officer and Gregory Andrews, Chief Financial Officer both of whom 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 Acquisitions. At this time, I would like to turn the call over to Dennis for his opening remarks.

[Dennis Gershenson:]

Thank you, Dawn. Good morning and welcome. Greg and I planned to take the next 20 minutes to update you on the progress we’re making in core operations. The status of our efforts to improve the balance sheet and to explain the rationale for a number of accounting changes and charges. On the operating front, we had a good first quarter. Our numbers track and in several cases exceeded our projections. I'm also pleased to report that tenant interest in our centers is translating into an ever increasing number of a new lease signings. You’ll remember that we reported as part of our year end update depending departure of Wal-Mart from our Village Lake Center in Northern Tampa, Florida. And the loss of all time pottery as a result of their bankruptcy that promenade in Atlanta, Georgia. Also in Q1, we intentionally terminated the Albertsons lease at Mission Bay in Boca Raton, Florida a joint venture asset and received a sizable termination fees. The departure of these three tenants represent approximately 263,000 square feet for a majority of the states that accounts for the decrease in our occupancy rate to 89.5%. Offsetting this number with the opening of over 240,000 square feet of new tenancies and the signing of over a 156,000 square feet of new leases. These two statistics consisting of our newly opened retailers and the new lease signings improve our ratio of signed leases to 90.5%. Included in the new leased percentage our three mid-vast retailers each at least 20,000 square feet the progress we've made in the first quarter of 2010, as it relates to the leasing of larger format vacancies will continue into the second quarter. We planned to sign a minimum of three additional national credit and anchor tenants between April of 1 and June 30. You will note that our recent statistics presented in a supplement show a decrease in rental averages both for new leases signed and least renewals. You should recall that in our fourth quarter 2009 report, we indicated that these ratios would be down slightly in the single digit range for 2010. I would like to give you some color for the least renewal figures. In the anchor category, three retailers account for the line and share of the negative change orders at 100 square, Old Time Pottery at Sunshine Plaza, and Marshall’s at Southfield Plaza. Each of these lease extensions is falling short term as opposed to a normal five year renewal. We decided that it made more sense to keep these tenants and occupancy at reduced rentals as long as we didn’t burden ourselves with their lower rental rates for the long term. The extensions will allow us time to negotiate agreements with replacements for these three retailers. Each occupy a primary location in a highly successful shopping center. You should also note that we have completed and thus removed from the supplement three value add redevelopments, Rivertowne Square in Deerfield Beach where we added a Bealls Department Store. The market place of Delray in Delray to which we added Ross Dress for Less and Dollar Tree will downsizing Office Depot. And we reconfigured our South Bay shopping center in Sarasota, Florida, in order to add a free-standing CVS drug store. The remaining five value-add redevelopment projects listed in our supplement are proceeding apace and we expect to bring each online prior to end of 2010. All of our value-add redevelopments, including those completed in the first quarter and those still underway. We create an additional draw to our centers. They will increase net operating income and they'll serve as a catalyst to drive additional small tenant interest in those spaces closest to our newest anchor additions. The opening of these new retail anchors and the increasing velocity of tenant signings, we will drive both an increase in NOI and occupancy throughout 2010 and will be primary driver of our growth over the next 18 months. As to our development pipeline, although Greg will discuss the rationale for our change in accounting for our four perspective developments. This shift from capitalizing interest in real estate taxes should not be read as a loss of faith in our proposed projects. Instead, we believe that a conservative approach to our retail development opportunities is the prudent move. We will use 2010 as a period to achieve all necessary entitlements and to secure tenant commitments. Our proposed anchor line up at all of the projects have reaffirmed their interest and we are well into negotiating letters of intent. It is the timing of store openings and thus the commencements of the development process that has been pushed back. All of our development potentials remain viable, however, in order to maintain maximum flexibility relative to the future of these opportunities, we will only commit to each as our traditional criteria for project commencement has been met. That is sign banker leases, a solid economic return, and the securing of appropriate constructing financing. Our other external growth driver the acquisition group continues to review new opportunities. When we commence to make new acquisitions we will be very selective in those opportunities we pursue. We will focus on markets that present a solid demographic profile. We will choose opportunities that lend themselves to adding value and our purchases will promote geographic diversification. We will move to acquire appropriate accretive shopping center purchases at such time as our balance sheet has shown significant additional improvement. As we have stated in our last several quarterly calls. Our primary goals for the near-term include maximizing the value of our core portfolio and the improvement of our balance sheet. We are making significant progress in re-tenanting our anchor vacancies which will only increase ancillary tenant interest in joining our centers. We also remain vigilant in containing variable expenses which allow our tenants to benefit from lower occupancy cost. Relative to the balance sheet, we established debt metric goals at the end of last year which we remain confident can be achieved over the next eight months. Financing alternatives the number of institutions interested in loaning us money and the pricing on our new loans continue to improve. These factors will allow us to refinance some of our short-term debt were appropriated extending our average maturities. We are also seeing an ever increasing interest and growing competition for the purchase of well-leased, high quality stable shopping centers. This bulge well for the assets we’re considering itself. As a result of these factors, a more vibrant debt market and the renewed interest in acquiring quality shopping centers and aggressive cap rates, we are very conformable with our capital plans for this year. Even as we still see 2010 as a transition year, we are encouraged by the progress we are making in all fronts. Although, we will not take our eye of the ball as to our primary objectives for 2010, we are also positioning ourselves to take advantage of new and existing external growth opportunities. In closing, I would like to welcome Gregory Andrews as our new CFO. Greg has hit the ground running. He is brought to the company a high level of professionalism and I’m confident he will be an important and valuable addition to the team. I would now like to turn this call over to Greg.

[Gregory Andrews:]

Thank you, Dennis. Good morning everyone. As many of you know, my involvement in the shopping center business goes back many years. Given that this is my first earnings call as CFO of Ramco-Gershenson, I’d like to begin by briefly summarizing the reasons I found this opportunity both personally and professionally exciting. Then I will review our financial position and results for the quarter. There are three facts about Ramco-Gershenson that I found compelling. First, the company has interest in nearly $2 billion of shopping center real estate. This scale has led to the creation of a strong operating platform. Although, the company’s equity market capitalization is smaller than average, the true strength of the company’s platform shows through in the talent, experience and creativity of the people who work here and its evident across all disciplines. Second Ramco-Gershenson portfolio consists of high quality centers with strong market positions. In particular, I found the following features of our portfolio noteworthy. Approximately 90% of our properties are located in major metropolitan areas. Our typical center is larger than the industry average with over 170,000 square feet in an annual base rent of $1.7 million. Our portfolio has strong anchor tenants, for example our supermarkets generate average annual sales of $465 per square foot well above the industry average. Yet their average rent is only $7.46 per square foot which is well below market. Our portfolio also has a solid line up of shop tenants with 65% of our shop tenants being national or regional change. So although we continue to face our share challenges in the current market our portfolio is fundamentally sound and I believe it provides upside opportunities in the terms of Lisa potential, ancillary income growth and intensified land use. The third reason I joined Ramco-Gershenson is that the company is turning a new page after a thorough strategic review management and the board have set a new course focused on delivering maximum value for our shareholders. Net course includes changes in corporate governance, business strategy and financial leverage. Management is fully committed for this plan of action. It is worth emphasizing our long-term incentive plan is tied to our total returns relative to the shopping center peer group. In short I'm very pleased to join the company and I look forward to working closely with Dennis and the rest of the team at Ramco-Gershenson to create value for our shareholders. Now to summarize our financial position our balance sheet ended the quarter in better shape than a year. During the quarter we obtained a new 10 year CMBS loan for $31.3 million with an interest rate of 6.5%. The process for the CMBS loan were used to pay down borrowings under our revolving line of credit. The waited average term of our debt now exceeds five years and the weighted average interest rate is 6.1%. At quarter end, our availability under our line of credit was $82.5 million, this is sufficient to meet our remaining 2010 debt maturities although we do expect to finance or refinance selected assets, our goal of course is to strengthen our balance sheet during the remainder of the year. But its important to note that availability under our line of credit provides us with flexibility, asset demand and timing of achieving our balance sheet goals. Before I turn to our financial results a quick comment on the comparable prior period. In reviewing our per share FFO, for the first quarter of 2009, we determine that there was a small area in the computation of our rated average share equivalent count, correctly for this difference of less than $0.50 or FFO for that prior period rounded down to $0.55 instead up to $0.56 as previously reported. Now turning to our financial result, we recorded our non-cash charge of $2.7 million or $0.08 per share during the quarter, this charge relates to another than temporary impairments of our equity investments in unconsolidated joint fixtures. Under debt, an impairment charge for equity investments is required to reflect the difference between today’s fair value and our book value if that difference cannot be considered temporary. Some of our joint ventures acquired assets when market pricing was higher than today’s pricing, because we do not currently anticipate recovering these differences, we took this charge to this quarter. We also made a determination in the first quarter to seize capitalizing interest, costs and real estate taxes at our predevelopment projects. We concluded that it was prudent not to capitalize these cost until such time as our anchored pre-leasing in place and we’ve made a committed decision to proceed with developments. This conservative approach is expected to reduce our full year FFO or approximately $0.12 per share, effecting both our interest expense line items and for the real estate taxes the other income or expense line items. Despite this impact on FFO, it is important to note that this change does not affect our current cash flow, because we are increasing these costs regardless of accounting treatment. Instead, adopting the appropriately conservative policy for predevelopment lands increases the quality of our earnings and FFO. Now, let me turn to three items that positively affected our FFO for the quarter compared to a normalized FFO run rate. Number one, our GAAP NOI was materially ahead of run rate. This resulted primarily from two large lease termination fees, one is from OfficeMax at our West Oaks in Novi, Michigan. We have executed our lease with old navy take this space. The other was from Wal-Mart at Village Lakes in Tampa. We continue to evaluate proposals for that space. Altogether, lease termination fees accounted for an incremental $1 million or $0.03 per share of FFO for the quarter. Second, our joint venture related income was also ahead of run rate. One reason is the previously mentioned lease settlement with Albertson's at Mission’s Day in Boca Raton. So we expect to replace with two new tenants in the second quarter. Another is that our management and leasing fees which can be variable quarter-to-quarter were strong this particular quarter. These joint venture items account for approximately $0.02 of FFO in the quarter incremental FFO. Third, our general and administrative expense, benefited from the reversal of an expense accrual. This added $0.01 per share to FFO for the quarter. As a result of these three items, our FFO for the quarter excluding impairment charges was $0.33 per share, which is approximately $0.06 per share above a normalized FFO run rate. Turning to the operating front, our same-center NOI declined to 1.8% for the quarter. In response to feedback from the investment community, we have revised our definition of same-center NOI. We now presented on a cash basis that is excluding straight-line rent and mark-to-market rent, we also exclude lease termination fees to mitigate their volatility although lease termination fees are certainly a recurring source of income in our business. To keep our calculation focused on current results we exclude prior period adjustments, which can swing positive or negative in any giving quarter. Our recovery rate of 91.8% for the quarter was negatively impacted by (inaudible) in the quarter, we expect our recovery rate to average 92.5% for the year and to run at 93% of year end. Our bad debt expense for the quarter was $618,000. This was higher than the rate we expect for the balance of the year. For the full year we expect bad debt expense to be approximately $1.8 million or of 1.5% of total revenues. Our G&A is now expected to be approximately 16.5% to $17 million for the year this is due to two non-cash changes, in the quarter we reclassified our Florida office cost from operating expenses to G&A. In addition, we will be expensing a modest of development in G&A going forward. Turning to our outlook, we are reducing our 2010 FFO guidance by $0.10 per share at the midpoint of the range to a new range of a $1.4 to a $1.12 per share. The revision to our guidance reflects our decision not to capitalize interests and taxes add our predevelopment projects. We have also increased the lower end of the guidance range to reflect our comfort level that our business plan for the year is on track. Let me emphasis several points about this changing guidance. First to repeat in earlier observation, there is no cash flow impact from the decrease in FFO guidance. The cost we are now expensing are cost we would be incurring regardless of the accounting treatment. Second, our operating results remain on track with our internal budget. Our same center NOI guidance for the year remains unchanged at minus 2% to minus 3%. While the leasing environment continues to be challenging we believe that we have appropriately accounted for current market conditions in both our prior and current guidance. Third, our revised FFO guidance range continues to incorporate impact of our capital plan and deleveraging goals for the year. We remain focused on achieving those goals during the balance of this year. With that I would like to turn the call back over to Christen for questions.

[Operator:]

(Operator Instructions). Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question. Your mic is now live.

[Todd Thomas:]

Jordan Sadler is on the line with me as well. Dennis, in your prepared remarks, you mentioned that the company is looking at new external growth opportunities. Are you engaged in discussions today or is it that you see the company moving forward through the year on the external growth platform?

[Dennis Gershenson:]

Well, obviously our external growth we consider both acquisitions and developments, and obviously my comments that I believe speak for themselves relative to where we are at on the development side. On the acquisition side, we made a conscious choice even as late as last year to keep our channels of communications open with the financial institutions that we deal with relative to assets where they believe that either borrowers having some problems or that they taken centers back. We also have a significant broker network that we continue to talk to, so to the extent that we have an active acquisition team, they continue to look at potential acquisitions. However, we have committed that with our balance sheet as it exist at this moments, we wouldn't go ahead and make an acquisition. But obviously we are seeing some opportunities, we’re seeing some opportunities that we think would make sense for us. So the sooner that we move on getting our balance sheet in shape the sooner we’ll make those acquisitions.

[Todd Thomas:]

Okay, so are the acquisitions maybe predicated on the completion of some asset sales and maybe you can kind of update us as to where you are with your plans to sell some (inaudible) and stabilized properties?

[Dennis Gershenson:]

We have spent the tail end of last year in the first several months of this year really looking at and coming over our existing assets to determine which ones did we would indeed be interested in selling we’d very pleased to see what’s going on in the marketplace and the rapid decent of the cap rates for quality assets. So we have indeed teed up a number of centers that we believe would be right for sale and we’re on the front end of that process now but we expect that to accelerate relatively quickly.

[Todd Thomas:]

Okay, and then on the development projects, is there a chance that you may begin moving forward on any of them in 2010 or would it mostly be 2011 at this point? And maybe can you rank where you are with each of the projects and which ones sort of may move forward first and so forth?

[Dennis Gershenson:]

Well as far as the two the Florida shopping centers are concerned we, as I indicated we’ve been in discussions with our potential and anchor tenants and they’ve all indicated for those two opportunities that 2012 is this the period of time where they would consider opening which means that more likely than not work would not be done in 2010. As far as Heartland just concern the lion’s share of that project really will involve the sale of properties two anchor tenants such as home improvement, electronics extra, so at least for the immediate future we would see little vertical development by bite my tongue we will see no vertical developments in that that we will extent money for certainly in 2010. The only project and we have made significant progress, with our perspective joint venture partner on the residential we have some very significant interest in potential joint ventures on office because we are involved in a number of RFPs request for proposals for additional office space in our site and the retail leasing has moved along significantly. So if there is any possibility that one of these projects could commence in 2010 I would put my money on acquire.

[Jordan Sadler:]

Hi, it's Jordan Sadler. Greg, I just wanted to say congratulations and look forward to working with you. I have a question regarding some of the charges in treatment this quarter. It looks like obviously there is some accounting treatment changes and recognitions and I'm curious about the timing in concert sort of with your addition, like the impairment and then the change on the capitalized interest on these developments. It seems a little bit more than a coincidence so I'm curious, number one, is this your effort, you're putting your mark and taking sort of a conservative stance on these issues? Do you think I know you're maybe 60 days into the job so it's probably tough to fully get your arms around everything, but about how far along do you think you are in the process and how comfortable are you so far with what you've seen given the changes you've made so far?

[Greg Andrews:]

Let me start, taking that in reverse order, I'm very comfortable with all of the processes that we take, we undergo and reporting on the very comfortable with all the people on our staff who have shown incredible amount of dedication and work ethic and so again 60 days you're right it's a limited amount of time, but I think I have come at this speed very quickly to address the two major items that you mentioned. One is related to the impairment of our equity and joint ventures and there as I mentioned the sort of key test is whether you consider any kind of change in value to be temporary or otherwise certainly what we've seen over the last year is that it's been very hard to take value and what people thought might have been value a year ago has now rebounded considerably and so I think, the a logic that we have been employing which was that the market was sort of then some temporary throes of seeking level as in fact them what played out, today we feel like a year away from sort of what precipitated all this and the market hasn’t be reached a level, we can predict where its going forward, but clearly because we're still a bit down on a fair value basis compared to our book value we thought it appropriate to take that charge in this quarter. And then related to the other issue, the capitalization of interest and taxes, that’s our policy decision made by the company as we sort of sat down and really look that the timing of these development projects, we felt that in general we were far enough away from beginning construction in earnest that it made sense to not add to our basis in those projects while we were continuing to commence and pre-lease the projects. So that was a change based, I think more on just a rigorous look at the timing of when development will begin in earnest.

[Jordan Sadler:]

Now from an accounting perspective technically, is it a function of your decision whether or not to increase or maintain the basis? Do you have that leeway? Or is it more a function of whether or not you have a plan in place, you're pursuing entitlements, you're in the lease-up process, you're pushing dirt?

[Greg Andrews:]

You are entitled to be capitalizing interest as long as you're perusing the activities requires to put your asset into service. So then the interpretation of that comes when you say what those perusing activities mean, in our case we do continue to peruse activities primarily on the pre-leasing front and the entitlement front. But, we are not pushing any dirt around, we are not building anything and I think the adoption of a conservative policy is a statement about where we want to go as a company in terms of addressing these kinds of issues and certainly we feel like we’re in the camp of the sort of better group of peers in adopting this policy.

[Jordan Sadler:]

Helpful, thank you.

[Operator:]

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please proceed with your question, your mike is now live.

[Nathan Isbee:]

Hi. Good morning.

[Dennis Gershenson:]

Good morning

[Nathan Isbee:]

Just focusing on the renewal rents spreads, clearly there was some short term leases impacted it, but even if you X those out, they were still down 9%, which was down significantly from the previous few quarters. If you could just talk about a little bit what was in there and what gives you comfort that that will rebound as we go through the year?

[Dennis Gershenson:]

We not only looked at the first quarter but, we’ve looked at the numbers for the balance of the year, and for better or worse those retailers that we renewed, that we thought were important to the tenant mix and important to the continuation of occupancy. The biggest hit came in the first quarter. Again we have looked at the balance of the year. Those leases will come in at much better spreads and we have achieved in the first quarter. So that we feel very comfortable saying that the mid to low single-digits as far as our lease spreads going forward, so that when we look back at this at the end of the year, that will be negative in very low single-digit. So these number will change in the second, third and fourth quarter.

[Nathan Isbee:]

All right, thank you. And you'd done this last quarter. Can you just give an overall update on where you stand with your empty boxes?

[Mike Sullivan:]

This is Mike Sullivan, we have the currently 15 vacant boxes over 19,000 square feet and as Dennis mentioned we’re making some good progress we signed actually total 4 in the first quarter, we have a realistic opportunities to other four in the second quarter and out the balance of those boxes more than half of them are currently going under negotiations with natural retailers, the other half of being actively marketed. In other cases in the portfolio, where we have these short term extensions for our OTAs and in particular where we have vacant of these obligated anchors we are also marketing that aggressively, so the short answer is we’re getting some very positive moving on big box.

[Nathan Isbee:]

Okay, thanks. And just moving to the development side of things, Greg, can you just walk through the CIP line on the balance change, I guess even from 12/31 went down, I guess there was some reclassification in there. Can you just walk through what happened?

[Greg Andrews:]

Sure, there were I think two things, one is that we completed some of our redevelopments as Dennis mentioned earlier, and then we did reclassify land at the acquired project that had been classified previously as CIP because of some site work and things that have been done, so, I think that the goal there was to provide a clear representation of what our true land help through development is.

[Nathan Isbee:]

Okay, thank you.

[Operator:]

Thank you. Our next question comes from the line of Michael Mueller with JPMorgan. Please proceed with your question. Your mike is now live.

[Joe Dazio:]

Good morning guys. It's Joe Dazio here on the line with Mike. Question about to page 19 of the Supplemental, the Lease Expiration Schedule. Are those rent per foot numbers cash or GAAP?

[Greg Andrews:]

Yes those are cash numbers and also there the rent in place today, I think some companies I have seen report the rents that they expect at the expiration but these are the current rent.

[Joe Dazio:]

Okay and then just curious I guess, I know, Dennis, you touched on the balance of 2010 a little bit but in the first quarter it looks like I guess the average rents tonnage from the 11s and maybe that was impacted a little bit by the three short-term anchor extensions, but if you look at the next couple of years, it seems like the expirations are in the $12 range, $12 to $12.50. Do you think it's safe to say that the mark-to-market is today going to be flat so maybe down 10% or do you think that it's just a function of mix and maybe those are higher rent spaces that are coming to in the next few years?

[Dennis Gershenson:]

If you are specifically talking about anchors, the majority of those, you know the anchors are either at the same rental on an exercise of a potential option or slightly higher. So I don’t see, especially if the economy comes back as we’re all hoping it will. We don’t see those numbers drifting down significantly.

[Operator:]

Thank you. (Operator Instructions) Our next question comes from the line of Rich Moore, RBC Capital Markets. Please proceed with your question. Your mike is now live.

[Rich Moore:]

Hello. Good morning guys and Greg, I just want to add my congratulations. And forgive me, guys, we got dropped for a second so I made duplicated question, but the first thing, on the lease spread and occupancy. Did you guys change at all the way you do those this quarter?

[Greg Andrews:]

Yes, and I guess couple of very important ways and I'm glad you asked so we can highlight this. On occupancy we’re presenting in two ways right now, one is the percent leased and then the other is the percent occupied meaning economic occupancy. So if you look at the property status report in our supplemental you’ll see a column for each of those and that I think intended to help clarify as you know Rich most of the peers in our sector report percent lease as occupancy and we were always reporting the actual economic occupancy, which is typically a lower number so we were feeling a little disadvantage in that regard and we decided lets just percent at both ways and you can decide where to focus your attention. The second thing is on the lease spread we are presenting now the lease spreads for leases that we’re executed in the current quarter and on a cash basis and comparing to the older rents for the same space were available which in most instance this is available, but not always. And we use to present the lease spreads more on the basis of what leases had been scheduled to expire in that particular quarter. So now we're focusing more on current leasing activity which I think gives you a more real-time trend as Dennis pointed out what we reported in the first quarter, I think was somewhat unusual in terms of the decline and we do anticipate better results in the next few quarters. I think the activity that we've seen so far in April clearly is pointing to a better number so far for the second quarter.

[Rich Moore:]

Okay, good. Thank you. And how far back do you go, Greg, looking at the last known rent, I mean if these are the boxes vacant, for example, do you think (inaudible)?

[Greg Andrews:]

It sort of what’s available, I mean most vacancies are vacant forever, so it’s probably as far back as a couple of years.

[Rich Moore:]

Okay, good. Thank you. And then did you give a year-end 10 occupancy target?

[Greg Andrews:]

We did not.

[Dennis Gershenson:]

We did at the tail end of last year, which was between 90% and 91%.

[Rich Moore:]

And you think that stays that way, Dennis?

[Dennis Gershenson:]

Yes.

[Rich Moore:]

Okay, good, thanks. And then you were talking about the JVs and the impairments you made, kind of going back to Jordan's question, would you think, Greg, that that review is complete at this point, I mean you've only been there short time. Have you been through all I guess of the JV assets and you feel comfortable that were done with the impairments?

[Greg Andrews:]

Yes, absolutely. We went through a very thorough process, Rich where we essentially had to come with up with a value of each asset in all of our joint venture, there are nine joint ventures, 33 assets. That was quite and involved process and took a work on the part of whole number of people here from the accounting department and the financial planning department being a joint ventures acquisitions, every thing that this sort of come up with the assumptions and inputs. This is our conclusion from that process, obviously market conditions can change and so I don’t want to speak to what we might have to do in response to a change in market conditions, but have said that I feel like we are done with that.

[Rich Moore:]

Okay, good thanks. And then the last thing I have is on the balance sheet. It seems that your, at least to us, that your debt situation is pretty good at this point. It doesn't seem like you need to rush to make dispositions. If you don't need to rush to make new joint ventures to raise equity. No need to rush to issue equity, don't have a whole lot of maturities. And is that accurate? Do you guys view it the same way or is there more urgency than I suspect?

[Greg Andrews:]

No you are picking up on a point that made in my prepared remarks which is that we have a considerable flexibility to determine sort of what the manner and timing will be for any kind of deleveraging activities. That said we have made that a goal and it’s a goal we take seriously and we believe it’s the right move for the company, it’s just a question of sort of how we proceed with that achieving that goal over the balance of the year.

[Rich Moore:]

Okay, very good thank you guys.

[Operator:]

Thank you, our next question comes from the line of David Fick with Stifel Nicolaus, please proceed with your question. Your mike is now live.

[David Fick:]

Good morning

[Greg Andrews:]

Good morning David.

[David Fick:]

Just a follow-up on that question.

[Dennis Gershenson:]

David we can’t hear you very well.

[David Fick:]

Can you hear me now?

[Dennis Gershenson:]

Little better, go ahead. I think we can hear you.

[David Fick:]

Sorry about that. Just a follow-up on Rich's question. Can you talk a little bit about where you might federation in that least considering how strong the markets are right now? Is that something that you'll think about doing given the top price today?

[Greg Andrews:]

Yeah it’s certainly on the menu of options, along with the number of other options that we talked about before sales of assets, sales of out parcels, joint venture arrangement that assets and then, we do also anticipate refinancing or financing certain properties. So it’s definitely on the menu and again we have some flexibility in terms of how we proceed to choose things from that menu.

[David Fick:]

Lastly, it some detail, it sounds like the Alberton's releasing and divisions be different. Can you talk a little bit about both the economics and the need to does not, that are consideration there?

[Dennis Gershenson:]

Well, Alberton’s had intended to close and they had telegraph this to us for quite sometime. So we had plenty of time of plan for that. Without because until we sign leases historically we’ve never really said who the retailers are but what we do expect in the second quarter to be able to tell you exactly that who is going into the space, it we will replace the existing supermarket at least in part with another supermarket Alberton’s was 65,000 square feet, so it was a very significant size space. So we plan to maintain the food elements as well as bring in another national retailer that will be a destination use for the shopping center and the new rentals should exceed the rentals we would receive in from Alberton’s and what also is nice is that the termination fee from Alberton’s will for all intents purpose cover all if not almost all of the cost to put the new retailers in.

[Dennis Gershenson:]

So David, just to add Albertsons was paying less than $6 a foot for their space, so we have a real opportunity there.

[David Fick:]

And the redemising the costs are essentially covered a bit?

[Dennis Gershenson:]

Could you repeat that statement, I’m sorry.

[David Fick:]

The redemising costs are essentially covered?

[Dennis Gershenson:]

Yes, that was done.

[Operator:]

Thank you. Our next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed with your question. Your mike is now live.

[Jordan Sadler:]

Hi, it's Jordan. I just had a quick follow up regarding sort of your commentary, Dennis, on acquisitions and pursuit of investment opportunities. The word aggressive characterizing some of the cap rates and I assume by aggressive you meant high and something which you could be prove to be opportunistic. Could you maybe just flesh out return hurdles on acquisitions or new investment opportunity?

[Dennis Gershenson:]

Let me clarify, if I was talking about aggressive cap rates at least in my comments. I would have meant that the cap rates would be low for those high quality assets, which encourage me to say that as we look across our portfolio and thinking of selling assets, we would sell the ones that are very stable with little significant growth, because we are seeing cap rates that either in the low 7s and either in the 6s. But as far as acquisitions are concerned, without climb to say we would be looking for assets with specific cap rates as I try to outline for you. We’re looking for acquisitions where we see upside potential that could either be in some potential on a relative basis significant lease up of empty space and that might be other asset, this is good asset, but for a variety of reasons the people who are attempting to lease it, don't have the same motivation that we would. Or that we see an expansion opportunity or some other way where we can add values, so we’re not going to buy anything in the sixes and then expect value to it, but to say that we would buy 8 at 8.5 relay wouldn’t and tell the story of the types of acquisitions that we’re looking for. But whatever we do there will be some nice upside on a potential acquisition.

[Jordan Sadler:]

And in terms of maybe a stabilized un-leveraged cap rate or un-leveraged IRR?

[Greg Andrews:]

I don't think we want to be disclosing what our hurdles are for some sort of theoretical acquisitions that we haven’t identified. I think we certainly can say that in the market place it appears as un-leveraged IRRs are settling into 8% to 9% range kind of this quarter, I guess a fairly typical good quality property that’s what we’re seeing out in the marketplace today Jordan.

[Dennis Gershenson:]

Let me just add one thing to that, I think the upside of our comments are that as we’ve gotten the handle in the balance sheet as hopefully we are communicating here that we’re making some very significant progress in improving core asset, we want the investment community to know that we are not lying dormant in those external opportunities which will help drive our growth. I think that’s the primary message we hope you take away from us.

[Jordan Sadler:]

That’s helpful. And in circling back to your comment on disposition cap rates for quality stuff versus the previous question regarding equity issuance. How do you prioritize these today, given the asset markets are coming back and you can sell some assets inside of maybe where you are trading today

[Dennis Gershenson:]

Well, I will certainly say that that asset sales are absolutely part of our capital plan for 2010 and you will indeed see our selling some of our stable assets. Again whether that’s outright or into joint ventures and obviously into joint ventures would have be our preferred model of raising capital as far as shopping centers are concerned, because we have a tremendous amount of faith in the assets that are in our portfolio in all of our markets.

[Greg Andrews:]

Jordan, that’s a great question, its obviously very complex question because there is multiple elements to sort of that comparison and certainly there is a way to do a relative pricing, the cap rate that we might sell asset, ad compare to the employ cap rate on our stock for example, but there are so many other issues underlying that including our portfolio management strategy of balance sheet management strategy and so forth. So it’s really hard to into is that question in lot of detail just because there are so many aspects to it.

[Jordan Sadler:]

Okay, it’s helpful. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please proceed with your question. Your mike is now live.

[Nathan Isbee:]

Yes, just looking at both the $100 million invested in Land Held for Development, could you just give me a little color on your thinking? It's really not a cheap carry, carrying that amount of land on your balance sheet, and how you view the next step there in terms of required returns versus if you were looking at a new development deal.

[Dennis Gershenson:]

Well what’s interesting report to that is to that there were a number of circumstances that caused overhead and acquire the properties that we now own. The primary driving factor of course was for all tends of purposes with the exception of Hartland that this land was immediately adjacent to our existing shopping centers and the amount of anchor demand to gotten into our existing centers really drove us to move ahead with these sites, we also made these moves in economic times that our different from the ones we have now. It’s certainly what exactly the hurdle rates would be going forward as an interesting and in part of challenging question and partly because obviously the pendulum in dealing with anchor tenants has swung to the benefit of the tendencies is supposed to the landlords. But obviously in a perfect world we would like to achieve an un-levered double-digit return on anything that we do.

[Nathan Isbee:]

IS that realistic?

[Greg Andrews:]

Let me answer the question this way, I mean I think, in sort of business 101 there’s a distinction made between some costs and then incremental costs going forward and I think our analysis is going to follow the precepts of business 101 and 201 and three and 401 which is less focused on incremental capital and incremental return obviously there is value to that land so we need to factor and what that value is in making that calculation, but I think the appropriate way look at it is can we earn a good return on money going forward into those project and that’s how we’re going to make that analysis.

[Nathan Isbee:]

Okay, I get where you're going with that. All right, thanks.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the floor back over to Dennis Gershenson for any closing comments or remarks you may have.

[Dennis Gershenson:]

Ladies and gentlemen, I just want to say thank you very much for your intention. Again, we feel confidence, but our 2010 business plan will move ahead on flat and we look forward to speaking to you in about another 90 days. Have a great day.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference. You may disconnect your lines at this time and we thank you all for your participation. Have a wonderful day.