Washington Prime Group Inc.
Q4 2009 Earnings Call Transcript

Published: 19 Feb 2010

[Operator:]

Good day, ladies and gentlemen, and welcome to the Glimcher Realty Trust Q4 earnings conference call. My name is Veronica and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator instructions) I would now like to turn the call over to your host for today, Ms. Lisa Indest, Vice President, Finance and Accounting. Please proceed.

[Lisa Indest:]

Good morning and welcome to the Glimcher Realty Trust 2009 Fourth Quarter Conference Call. Last evening, a copy of our press release was circulated on the newswire and hopefully each of you have had the opportunity to review our results. Copies of both the press release and the fourth quarter supplemental information packet are available on our Web site at Glimcher.com. 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. For a more detailed description of the risks and uncertainties that may cause future events to differ from the results discussed in the forward-looking statements, please refer to our earnings release and to our various SEC filings. Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP measure to the comparable GAAP measure are included in our earnings release and the financial reports we filed with the SEC. Members of management with us today are Michael Glimcher, Chairman and CEO; Marshall Loeb, President and COO; and Mark Yale, CFO. And now I would like to turn the call over to Michael Glimcher.

[Michael Glimcher:]

Thank you, Lisa, and good morning, everyone, and thank you for joining us on today’s call. It’s incredible to think about where we’re just 12 months ago and what has transpired since in the capital and credit markets. When coupled with a deep economic recession, this has clearly been one of the most challenging periods in both the industry’s and the Company’s history. Our response to the crisis was centered around the fundamental idea that you can only control what you can control. Accordingly, we did not panic and focused on managing our enterprise at the highest level. As it related to property and operations, it was important for us to leverage our strong retailer relationships, to minimize tenant attrition, and prudently manage all controllable expenses. Facing difficult headwinds from the troubled economy, occupancy within our portfolio fell by only 2%, ending the year with the second highest occupancy level in the Company’s history. Our year-end occupancy also remains at the top of the peer group and was in line with our initial guidance going into the year. In addition, we did all of this while generating positive releasing spreads of 10% for the fourth quarter and 4% overall for the year. Net operating income from our mall portfolio was down about 3.5%, a quite strong performance considering the challenging environment we faced throughout the year. We were also encouraged by customer traffic being even portfolio-wide, which was an improvement from the prior quarters. As we have said before, the consumer might be spending a bit less in the current environment, but she is still showing up. All of this once again supports the view that malls still represent an important social experience and the premier distribution channel for most retailers and consumers. We also made great strides in leasing with respect to our $250 million Scottsdale Quarter development project. Phase I came online during 2009 and we currently have approximately 70% of the leasing for the entire project addressed. When stabilized, this property should perform at the highest level within our portfolio. Additionally, we added new retailers to the Glimcher platform, including Apple, H&M and West Elm. Not only is this exciting for Scottsdale Quarter, but this has opened doors to potential leasing opportunities throughout the Glimcher portfolio. We also have over 90% of our $50 million Polaris lifestyle expansion leased and opened. The fact that we have maintained leasing momentum, speaks to the irreplaceable nature and strategic value of both of these new projects. On the capital and liquidity front, we were able to raise $115 million of gross proceeds through a secondary offering in September. Due to the strong demand, we had the opportunity to upsize the offering. The gross proceeds were $35 million above the original targeted level. We are also excited about our announced joint venture with The Blackstone Group, where they will acquire a 60% interest in both our Lloyd Center and WestShore Plaza properties, generating about $60 million of net proceeds that will be available to pay down the credit facility. This transaction should close shortly after we complete the loan assumption process, which is well underway. Based upon where we’re in the process, we would expect to close on the joint venture within the next month. Additionally, this venture provides us an opportunity for growth through acquisition. Both of these transactions have helped with the renegotiation of our existing $470 million credit facility. After exercising the one-year extension option available in the existing facility, we currently have term through December of this year. We disclosed last night in our press release that we had commitments from ten of our line banks for the extension and modification of our credit facility. The good news is that we can now report that this morning, we received the final required commitment. The modification includes providing the Company, subject to certain conditions, with two one-year extension options that would take the credit facilities maturity date through December of 2012. The modification calls for an immediate reduction in the aggregate loan commitment amount to $370 million at closing, stepping down to $250 million by December of 2011. With $75 million of cash currently on hand, addressing this initial reduction will not be an issue for the Company. There are also several step-downs in between closing and the second extension date; but we do not anticipate any issues with meeting such reductions. We expect to close on the modification and extension within the next several weeks. We recognize there is still work to be done on the deleveraging front, but we now have more flexibility and time to execute on our strategy. We will continue to look at a host of options to accomplish this, including further asset sales, joint ventures, and additional equity issuances of either common or preferred and utilizing longer-term debt to reduce our reliance on our short-term credit facility. Once again, we don’t need to do something immediately and we will be patient as we look at future opportunities available to us. As the spotlight turns to 2010, we are encouraged by an overall improvement in the environment. The capital and credit markets have stabilized. And retailers for the most part had a profitable holiday season after a very difficult first half of 2009. Now with that being said, challenges still remain. While unemployment is stubbornly high, it does appear to have stabilized. However, economists predict this will be a slower recovery. Retailers and consumers both remain cautious and have limited access to capital. Those retailers with capital are allocating more dollars to refreshing their existing fleet of stores versus aggressively looking to open new stores. Accordingly, we will need to maintain our sense of urgency. With these challenges in mind, we look at fiscal year 2010 as a year to position the Company for real growth in 2011 and beyond. First and foremost, we need to close on the credit facility modification and extension along with the Blackstone transaction. We are extremely confident that both will occur sometime during the first quarter of this year. From there, we will continue to focus on improving our balance sheet and our liquidity position. We will also look to drive occupancy gains during the year, with a goal to get back a portion of the 200 basis points that was lost during 2009. And finally, we need to complete the leasing of Scottsdale Quarter. This is a premier project. However, due to uncertainty associated with ground up development, it is considered a risk for investors. Accordingly, it will remain an area of focus until the Company completes the leasing of this first-class asset. Finally, we will build on our best-in-class operating platform through process improvement and technology. Leveraging our platform by attracting additional third-party capital will be an important way for Glimcher to grow in the future. We certainly proved our ability to secure new capital during a challenging 2009 and are confident that we can duplicate these successes in attracting additional capital for growth opportunities here in 2010 and beyond. Now with all that said, I would like to turn the call over to Mark Yale to provide you with more detail on our financial results.

[Mark Yale:]

Thank you, Michael, and good morning. Excluding the impact of $6.8 million of non-cash charges, we reported adjusted FFO per share of $0.31 for the fourth quarter of 2009, which fell within the middle of our guidance range going into the quarter. The non-cash charges involved two items. The first was a non-cash charge of $1.8 million on undeveloped land in Vero Beach. 10-acre parcel was purchased in 2007. We also had an option to buy an adjacent parcel that together would support the development of a 500,000 square foot retail center. As the Florida economy savored we decided to let the option expire. No near-term development plan is in place for the parcel. We were required to write the land down to current fair value, resulting in a $3.4 million impairment charge. In conjunction with this charge we also recognized a $1.6 million gain on the fair market value of derivative instruments involving certain options associated with this development, thus resulting in a net $1.8 million non-cash charge. The second non-cash charge involved the recognition of a reserve against a $5 million note receivable that was part of the consideration received in connection with the sale of our University Mall property in 2007. As part of the original sales transaction, we received $139 million in cash and a $5 million note from the buyer of the property. Due to a substantial decrease in the value of the mall, due to a decline in NOI, and a rising cap rates, we do not believe the note is collectible, and accordingly, we fully reserved against the entire amount of the note during the fourth quarter of 2009. Focusing on our core results, our comp NOI growth for our Core Mall portfolio was down by approximately 5% in fourth quarter, driven primarily by lost rental income from tenant bankruptcies, store closings and rent relief. Lost rent from Steve & Barry’s alone represented approximately 100 basis points of the quarterly decline. I now like to review our guidance for fiscal year 2010. In the release we introduced our 2010 FFO guidance at a range of $0.76 per share to $0.82 per share. It’s important to keep in mind several transactions that drive the majority of the year-over-year decrease in FFO per share including, one, the full-year dilution from the 30 million shares issued in connection with our September 2009 secondary offering. Two, the dilution from the pending Blackstone transaction. And finally, three, dilution from the pricing increases and amortization of upfront fees associated with the anticipated amendment and extension of the Company’s credit facility. As previously disclosed, we expect to incur approximately $10 million in upfront fees in connection with the credit facility modification. FFO per share in 2010 would be in the range of $0.80 to $0.86 when excluding the $3 million of amortization expected to be recognized in connection with these fees during the year. Other key assumptions that make up the guidance include an anticipated decline in Core Mall NOI of 1% to 3%, driven primarily by a full year impact of rent relief concessions granted throughout 2009. We expect to see G&A in line with 2009 levels between $18.5 million and $19 million. Anticipated level of lease termination income and net outparcels sales income of between $1.5 million to $2.5 million. And finally, we are forecasting $3.5 million to $4.5 million of net fee income. We also provided FFO per share guidance for the first quarter of 2010 in the range of $0.18 to $0.21. Key assumptions driving the guidance included net fee income of $1 million; lease termination income of $300,000 to$500,000 and a decline in Core Mall NOI of between 3% to 4%. The guidance also assumes closing on both the Blackstone JV transaction and the credit facility modification in early March. Turning our attention to the balance sheet, we have already begun work on addressing our 2010 mortgage debt maturities, two loans that total approximately $80 million, both of which are non-recourse. One mortgage is on our mall at Johnson City Center, doing $400 per square foot in sales; and the other on our Polaris Towne Center, an institutional quality power center. We are encouraged by recent developments in the permanent debt market and initial feedback from our marketing efforts has us optimistic that we’ll be able to address these maturities with longer-term nonrecourse debt. Turning to the focus on the balance sheet, we wanted to point out the significant level of cash and cash equivalents as of year-end, approximately $75 million relates to proceeds generated from the Company’s recent equity offering. As Michael discussed, we will apply these proceeds against outstandings on the Company’s credit facility upon closing of the modification and extension. And we finished the quarter with $346 million outstanding on that credit facility. With that said, I would now like to turn the call over to Marshall.

[Marshall Loeb:]

Thanks, Mark. As Michael mentioned, we’re working through a challenging environment that commenced well over a year ago. The good news is we see signs that the headwinds are beginning to abate. On the leasing front, we finished the year with in line occupancy for our Core Mall portfolio at 92.5%, a 60 basis point improvement from September 30 and comfortably within our guidance range for year-end occupancy. While down from last year, our occupancy rate places us at or near the top of our peer group for the third consecutive year. Sales fell 3% on a comp basis for fourth quarter, but moderated over the course of the holiday season, with December showing the best performance down only 1% over December 2008. Even with the slightly negative sales comps, the solid job most retailers did managing inventories and costs led to improved profitability during the holiday season. With January’s positive retail sales comps of over 3% and limited tenant bankruptcy activity so far in 2010, we’re hopeful that store closings during the first quarter of the year will remain manageable and that retailers will become more comfortable allocating capital to new stores. In summary, retailers are wisely remaining cautious; but we are seeing signs of a growing pipeline of new deals. We’re still waiting for the pipeline to firm up, but believe the strong holiday season in terms of retailer profitability is thankfully a positive step in the right direction. The fixed CAM growing within our portfolio, we will continue to focus on managing operating expenses in 2010. The benchmark to measure our expense is the CPI rate of inflation. On this basis, we’re happy to say that our CAM growth has been roughly three quarters the rate of inflation over the past five years, generating over $6 million in savings. The vast majority of these savings are permanent in nature and not temporary reductions due to the weak economy. For example, our kilowatt hours of electricity used on a same-mall basis has now fallen for 13 consecutive quarters. As Michael mentioned, we’re excited about the progress we’re making with respect to Scottsdale Quarter. Phase I came online throughout '09 and we have over 70% of the retail open. When factoring in signed leases and letters of intent, we have over 90% of Phase I retail space addressed, which puts our focus clearly on rounding out Phase II leasing. Through signed leases and letters of intent, we have over 70% of the retail space in Phase II now addressed and we expect the majority of these stores to open by year-end. We are pleased with our Scottsdale office leasing results in spite of the weak environment. The Phoenix office market experienced negative absorption in both 2008 and 2009. Negative absorption in 2009 was approximately 670,000 square feet, which left the market roughly 25% vacant. The positive signs underneath this backdrop are that fourth quarter absorption was positive for the market and for Class A space in the Scottsdale Airpark. The Scottsdale Airpark Class A space in fact had positive absorption for the full year. Further, our property is well located and very unique in the marketplace due to its mixed use nature. Simply put, in a period of oversupply, we’re thankfully not a commodity. Supporting this position is the fact that in less than 12 months since completion we have signed four leases totaling over 50,000 square feet. The common theme has been image-conscious companies who are relocating their headquarters to Scottsdale Quarter. Looking ahead, I am pleased to see our leasing discussions continuing with a nice mix of small and large square foot users with a pipeline totaling over 150,000 square feet. As these prospects become signed leases, we’ll keep you updated on our progress. Finally, we expect new retail supply nationally over the next several years to still be nominal at best. Having well located assets occupied in the 90%-plus range bodes well for our portfolio, allowing us to push rent, improve the tenant mix, and grow sales productivity with stronger retailers. We are optimistic this will strengthen the position of our assets when retailers gain the confidence to begin expanding again. At this time I’ll turn the call back to Michael.

[Michael Glimcher:]

Thanks so much, Marshall. When considering the challenges that we, along with our real estate peers, faced throughout 2009, I’m extremely proud of how our organization navigated through these difficult economic times and volatile capital markets. We responded quickly and capably to the recent opportunity to raise capital through a common equity offering. We have worked diligently in getting our credit facility extended and in addressing all of our mortgage debt maturities. And finally, we maintained a clear focus on property operations and leasing, maximizing property performance in this down economic environment. As we move forward into 2010 with our experienced team and a solid Core Mall portfolio generating stable cash flows, we are seeing a number of positive developments in both the operating environment and in the capital and credit markets. This organization is poised to capitalize on opportunities to grow the platform. Operationally, we are best-in-class. We can and will leverage our base and our premier team will take advantage of the opportunity in the marketplace. This all bodes well as we put the challenges of 2009 behind us and look forward to improved performance and future growth. Now with that being said, I would like to open up the call for any questions.

[Operator:]

(Operator instructions) And your first question comes from the line of Quentin Velleley from Citi. Please proceed.

[Quentin Velleley:]

Good morning, everyone. Just in terms of the line now that you’ve got all the commitments, I’m wondering if you can run through what some of the key conditions of the new line will be outside of the scheduled pay downs that you have.

[Michael Glimcher:]

Sure. Quentin, it’s Michael, just to start with and I’ll let Mark give it a little more color. First of all, we’re excited and obviously we had new news that we have all commitments in place, whereas we were shy of one commitment as we put the release out last night. So that’s a certainly tremendous progress. And also having the opportunity for the additional year is probably the part that we’re also really excited about. Those are probably the most important points I would raise.

[Mark Yale:]

Yes, and this is Mark, Quentin, I’ll try to provide a little bit of color. Obviously, it’s a bit premature. We’ve still got to get this closed and at that point be more happy to go through all the details. At a very high level, the covenant restructuring that everyone saw that we had disclosed in connection with the original modification is very similar in this. No significant changes. Pricing is going to stay the same at L plus 400 and there is a LIBOR floor of 1.5%, so the gate will be at 5.5% in terms of our cost on borrowings. And that happens to be our assumption for the full year. And as Michael talked about there are steps. When we close we will immediately go down to $370 million commitment. And then as we get into that second extension period in December of 2011, we’ll step down to $250 million. There are a couple steps along the way; but just to put things in perspective we’re anticipating that when we close on the line our outstanding balance will be just below $300 million. And when we close on Blackstone, we’ll be below $250 million. So, we feel confident that we’ll be able to meet those step down reductions based on our plan. And as I said, it gives us the flexibility to continue to focus on our balance sheet. As Michael said, we want to continue to delever, but it can be more on our terms and that’s something we’ve wanted to do all along.

[Operator:]

And your next question comes from the line of Todd Thomas from KeyBanc Capital. Please proceed.

[Todd Thomas:]

Hi, good morning. I’m on with Jordan Sadler as well. Quick question. In the prepared remarks, you mentioned growth through acquisitions when you were discussing the Blackstone joint venture. Are you talking about some additional joint ventures or wholly owned? And can you provide some color on that comment and your external growth strategy, I guess, as you look ahead?

[Michael Glimcher:]

Sure, and it’s Michael speaking. I’ll speak for Glimcher and I won’t speak necessarily for Blackstone. But part of us entering into a relationship with them and part of them entering into a relationship with us, was really the opportunity to grow. And certainly, they’re excited and we’re very excited about the two mall joint venture. But $60 million investment is probably a rather small one for them and we are out certainly looking at opportunities and we would certainly see them as a first-class, high quality partner that we would want to grow a relationship with. So, it’s really going to be market-driven. We will see what opportunities present themselves out in the marketplace. But it’s a relationship that at minimum as you will start with two malls, and hopefully, we will grow to a much broader relationship, and we’re very excited about.

[Todd Thomas:]

Okay. And then on the 2010 guidance, can you talk about the trend in occupancy that you’re projecting throughout the year? How that might trend?

[Marshall Loeb:]

Sure, Todd. It’s Marshall. Typically, obviously, we will drop the first half of the year and then start to refill the bucket. So I would expect us to be obviously lower first quarter and probably slightly lower when we give you our June 30 numbers. Our goal, we were 94, I’m rounding, a little under 94.5% a year ago, 92.5% this year, is to try to make up some of that occupancy. So, if we can finish somewhere between 93% and 94% by year-end would be our goal. We have about 180,000 square feet of new leases that are in our pipeline for the year at this point and that’s about 300 basis points of occupancy. Again, some of those may replace tenants and we have just under 300,000 square feet of anchors that were scheduled that we’re trying to open this year as well. So that will hopefully back into those numbers by year-end.

[Todd Thomas:]

Okay and how about leasing spreads, how do you think they will come in for the year?

[Marshall Loeb:]

What was interesting is we got stronger during the year. If we go back and look just on our own, each of our quarters was stronger than the previous quarter, thankfully. What makes me still a little bit nervous is just the environment and then seeing some of our peers’ numbers where, maybe I’m always worried, but you just don’t see that same trend. I think net will be 5% to 10% is where we are predicting and we finished the end of the year at 10%.

[Michael Glimcher:]

And Todd, it’s Michael. I would add we run about a 13% occupancy cost in our portfolio. Some of our peer group is pushing up way into the high teens and so on. So what’s great about our retail partners that we do business within the Glimcher portfolio is that we have an opportunity to make a lot of money with them and they have an opportunity to meet a lot of money with us. And typically, the retailers that are the ones that are leaving, that are the ones that are performing below average; and the ones that we’re bringing in, are going to perform at or above the average, so, that would tell me that we should be able to continue to push rents. And certainly, Marshall and his team have done a great job doing that over a tough environment, and in a more stable environment, you hope to see better results.

[Todd Thomas:]

Okay. And then just lastly and then I’ll hop off. Most of your sales, I saw they rose at several properties. And I was just wondering if you could comment as to what the difference is at some of those properties. Is it a function of the tenant mix or the anchors or is there anything else that you can comment to specifically?

[Marshall Loeb:]

Sure. A couple of ours where they rose, like I’m picking Ashland, Kentucky, for example, we did a renovation, new JCPenney; Belk expanded there, anchor there, so I think it was really about the mall itself in that market help push it. What was interesting maybe as a trend within it and the same thing with Johnson City, a new Forever 21 anchor, a new Victoria’s Secret store, Bath and Body. Outside of that, some of our smaller market Ohio malls, Indian mound, River Valley, Newtown, we really take it in a weak economy, the way our read of this was that, as Michael said, she is still shopping, but she may not be driving into Columbus or into Pittsburgh, into a larger city. So, really the increase there was people shopping more locally and maybe buying basics rather than going on a larger weekend shopping spree.

[Mark Yale:]

And the only thing I could add I think there certainly is a correlation if you look at the markets, where we did have increases; you typically didn’t have a housing bubble or (inaudible) employment issues in those markets. And I think that was helpful in some of those smaller markets that Marshall was talking about.

[Todd Thomas:]

Okay, great, thank you.

[Operator:]

Your next question comes from the line of Nate Isbee from Stifel Nicolaus. Please proceed.

[Nate Isbee:]

Hi, good morning. Just getting back to the credit line, beyond the higher rate and fees, do the lenders gain any control over cash flow? In terms of a –

[Mark Yale:]

Yes, Nate, it’s Mark. It’s similar to what we disclosed in the previous modification we’re working on, that there is a requirement to take capital proceeds from equity offering, sale of properties, pay down the line and then there are reductions in the commitment amounts so long as that we have at least $60 million of capacity. Those conditions do not change.

[Michael Glimcher:]

It’s Michael. The only thing I would add is we have a strategy here to delever. And yes, there are some things that we agreed to; but there is nothing that is incongruent with what our Company strategy is, which is to delever.

[Nate Isbee:]

Okay, anything on the dividend, any say that they would have in a dividend?

[Michael Glimcher:]

As is relates to –

[Nate Isbee:]

To limiting it to the bare minimum.

[Mark Yale:]

No, it’s limited right now to where our current dividend is at $0.40 or the necessary amount to meet our minimum requirement for REIT.

[Nate Isbee:]

Okay. And could you just talk about in the guidance you talk about an equity contribution for Scottsdale? Was that a planned contribution or has anything change there?

[Mark Yale:]

No, that’s just continuing making our contributions to the project. You probably have noticed that over the last year or so we have been making the contributions in a form of a preferred and we are anticipating that would continue. And that’s the necessary equity that we’re anticipating putting into the project in addition to loan proceeds in 2010.

[Nate Isbee:]

Okay, thanks. And I guess just last comment you talk about the future possible acquisitions with Blackstone. It is interesting to note that there is a data room opening in Chicago.

[Michael Glimcher:]

That is interesting.

[Nate Isbee:]

All right. Thanks.

[Michael Glimcher:]

Thank you.

[Operator:]

Your next question comes from the line of Carol Kemple from Hilliard Lyons. Please proceed.

[Carol Kemple:]

Good morning. You all think there is a possibility with your projections for 2010 that the dividend could be cut from the $0.40 annual level where it’s at right now?

[Michael Glimcher:]

Hi, it’s Michael. I think what I would like to say is, we’d like to keep the dividend at the current level. We’d like to continue to pay it. It’s always a lever we can pull; it’s a source of capital. We’re only at about a 70% payout as it relates to the dividend; so we’re not anywhere near a full payout. Annual run rate is about $28 million. So, the way our budget was built, it was built around paying $0.10 a quarter or $0.40 annualized. But it’s always a lever that you can pull. But I’d say all else equal, we’d be desirous to continue to pay it.

[Carol Kemple:]

Okay. In the quarter, your mall anchors, they had good performance with the re-leasing spreads on those. Were those just old leases and that’s why you all were able to increase them so much or what was going on there?

[Marshall Loeb:]

Yes, Carol, it’s Marshall. There was a couple leases that rolled. One in Dayton and one in New Jersey. And you’re right, there were two renewals and we were just able thankfully up to push rents on both of those.

[Carol Kemple:]

Okay. And then do you have any malls at this point that you are getting close to not being able to make the mortgage payments compared to the rent you are receiving?

[Mark Yale:]

At this point, Carol – this is Mark, that all of our properties are cash flowing. And so that’s certainly a good position to be in at this point.

[Carol Kemple:]

Okay, great, thank you.

[Operator:]

Your next question comes from the line of Ben Yang from Keefe, Bruyette & Woods. Please proceed.

[Ben Yang:]

Hi, good morning. Michael, I’m curious why you did not collect 100% of the cash proceeds when you sold University Mall a few years ago. And as it pertains to the Blackstone joint venture, will they pay their share of the purchase price in cash or will there be some receivables outstanding on those as well?

[Michael Glimcher:]

I’ll answer your second question first. The Blackstone, again, as we have said, is a straight up JV and its cash and they will pay the full amount, so that’s not an issue. As it relates to University, if you could look back in time and just cut the purchase price by $5 million, frankly, if you could cut the purchase price by $10 million, you would have accepted the offer. The truth of it is that we left a receivable there. It was maybe more of a hope certificate than anything else. When you look at the erosion of the NOI there and you look at the point that we sold it, whether it be at the price with or without the $5 million, it was a great decision. It was done at the right time. So yes, we would have loved to collect an additional $5 million but if I could go back and do it all over again, I would sell it for $5 million less in a minute.

[Mark Yale:]

Yes, just go back to the original accounting, what would happen when we recognize that note it just resulted in a higher gain at that time which never went through our FFO.

[Ben Yang:]

Sure. And then you also sold several properties around that time. Did you collect the full cash proceeds on those property sales or do you have any notes receivables outstanding with those buyers as well?

[Mark Yale:]

That was the only note we had. So we have no receivables in terms of any type of seller financing, if you want to look at it that way on our books at this point.

[Ben Yang:]

And then just final question, there has been a lot of drama in your industry recently, specifically, Simon Property trying to buy General Growth. I’d be curious to get your opinion if you think a combined entity, a much larger sign in, is good or bad for the industry?

[Michael Glimcher:]

I think what’s really exciting, Ben – it’s Michael speaking, is that obviously, it’s Simon and there’s a lot of capital behind them and whether it be them or anyone else, the fact that there is so much interest in the industry and so much confidence in the industry and people realizing how valuable these assets are, that always is a huge positive. And so we want everyone in our industry to be strong. And we like our position where we are. We’d like to continue to grow our platform and we are happy if our peers continue to grow their platforms.

[Ben Yang:]

I guess what I’m getting is, do you think it lifts all boats that Simon has greater clout and is able to take maybe higher rent over the tenants or does a company like Glimcher perhaps get shut out of retailer open to buys because Simon has that enhanced leverage over the retailers? How do you think it impacts you down the road if this thing closes?

[Michael Glimcher:]

Look, throughout the year, you’ve had General Growth, you’ve had Westfield, and you’ve had Simon as very large entities. And ultimately, retailers and consumers pick their locations based on which stores are in the property and where they are located and not whether we own it or Simon owns it or someone else. So we’ve maintained, as Marshall said, at or the best occupancy in the peer group over the last three years. So I would say people have been happy to do business with us and operate in our malls. And so I don’t view it as good or bad. I just view it as a positive that so much capital wants to chase malls. And that it is certainly a good thing that people want to invest in the sector. So I really like the direction that our entire sector is going. We’ve always been a fraction of the size of our larger peers; so, if we’re a smaller fraction, I don’t think it becomes a competitive disadvantage. I think, if anything, our size becomes an advantage and speaking for myself and Marshall and Mark and other members of senior management, we’re out, we’re at our properties regularly, we’re with retailers, and we’re in front of them. And I think in our case we use our size as an advantage because we’re smaller. In their case, they probably use their size as an advantage because they’re larger.

[Ben Yang:]

Okay, that’s helpful, thank you very much.

[Operator:]

(Operator instructions) And you have a follow-up question coming from the line of Quentin Velleley from Citi. Please proceed.

[Quentin Velleley:]

Hi, there. Just in terms of the two mortgages that you’ve got to refinance this year. In particular, Johnson City, which I think I saw an article on Bloomberg regarding that potentially, being put into mortgage-backed securities. Can you just comment on how close or how far along the process you are in closing those refinancing?

[Michael Glimcher:]

Quentin, it’s Michael. We typically don’t comment until we actually have something finalized, even if ideas get leaked out in the press. I will tell you, generally speaking, it’s exciting that the securitized loan market seems to have come back to life and there seem to be great opportunities. If you look back at where we were a year ago, you were looking at doing shorter-term loans with recourse. And today, you’re looking at the ability to do longer-term 10-year kind of loans without recourse with the efficiency of the securitized market. So we have about two refis to do this year, our Polaris Towne Center as well as our mall at Johnson City. And at least at this point in the cycle, we are very upbeat and very optimistic that we will be able, as Mark said, in our earlier remarks, to put 10-year non-recourse money on those assets with high quality institutions. So very exciting versus where we were a year ago.

[Quentin Velleley:]

In a worst case situation, if you weren’t able to get refinancing on those mortgages, I assume that those properties would then drop into the pool of assets which would provide security for the line. Is that how it works?

[Michael Glimcher:]

What I would say is we intend to refinance and we have a line of lenders that are interested in both of those assets. And what else is probably an important thing for us to point out is, yes, we had more leverage than we wanted at the corporate level as it related to unsecured credit facility. But when you look at the asset level, we are typically around 60%. So these should be pretty straightforward refinancings in this stabilized environment. And there is not a requirement. And we wouldn’t expect to put them on to the line, no.

[Quentin Velleley:]

Okay. And earlier on, Michael, I think you said when you spoke about growth by acquisitions through joint ventures, given where your leverage sits and your desire to increase liquidity, reduce leverage, how could it potentially work that you would potentially get more joint venture capital into the business? I assume that you wouldn’t actually be putting any of your capital to work. Maybe if you could just talk through how the structure might work and how scalable you think that the Glimcher management platform might be.

[Michael Glimcher:]

From the standpoint of scale, I think the Company could easily manage, obviously, we would have to add some head count, but double the amount of assets and still be as hands on as we are today on a property-by-property basis. As it relates to how would you fund an acquisition, if you remember, we did this as a 60-40 JV on the two existing centers with Blackstone. Our thought of how you would move forward is, say, there were two more like malls, you might then turn it into a 20-80 JV and if there were it turn into eight centers, it maybe a 90-10 JV and so on. Obviously, at a certain point, you don’t have additional equity to fund it. But also to a certain point we will see where the market is and we will see if there is an opportunity to raise capital and do other things at that point, but, in the short-term you can certainly roll equity from the existing JV into new assets. And that’s how we would see doing it.

[Quentin Velleley:]

Okay. And just the last question, in terms of your re-leasing spreads which were quite strong for the shop space, I’m just wondering whether you have some kind of breakdown between the market dominant leasing spread versus the trade dominant leasing spreads. I assume they were much stronger for the market dominant assets.

[Marshall Loeb:]

This is Marshall. Quentin, you are correct. I’m looking down our list and it’s just the mix in fourth quarter. The vast majority of those were in market dominant malls. Really, I guess, at the end of the day it ends up being space by space and what that retailer sales are and how much embedded growth. But that snapshot in time, I guess, to your question, how did they look in fourth quarter, there was a predominant weighting towards market dominant malls.

[Quentin Velleley:]

So, I’m not sure if this was answered earlier, I might have missed it. But for leasing spreads for 2010, I assume you’ve done quite a bit of leasing. Are you expecting similar types of spreads?

[Marshall Loeb:]

Yes, we’re targeting 5% to 10% for 2010 and really we report them when the lease is signed. So say if it’s a 2010 lease that we signed in '09 it would get captured that quarter. So, yes, you’re right, we’ve done a fair amount of our 2010 leasing, but some of those in terms of re-leasing spreads would have been captured in '09 and this year we may be pulling some of the '011 leases in.

[Quentin Velleley:]

Got it, okay, and thank you very much.

[Operator:]

Your next question comes from the line of Rich Moore from RBC Capital Markets. Please proceed.

[Rich Moore:]

Yes, hello, good morning, guys, and congratulations on wrapping up some big items this current quarter that we’re in. I have a question for you on the two mortgages you’re working on for this year. You mentioned in the press release that you expect what appears to be pretty substantially higher proceeds than what those two mortgages are currently at. Why do you think that I guess? And you mentioned your lower loan-to-value, but are you hearing anything from the lenders? Or do you have any reason to think that that $90 million to $100 million is the right answer?

[Mark Yale:]

Yes, it’s based upon feedback. And we have been in the market; we’ve gotten and we have seen substantial interest in those opportunities. So, it is predicated on feedback. And just to capture a little bit, Rich, if you look back at where we’re today with those mortgages and the NOIs, its in place we’re looking at probably debt yields about 18%. And with what we’re seeing in the market right now and seeing other deals you’re probably seeing opportunities with that yield somewhere in the 12% to 14%. So, when you go through the math that gives you the opportunity to generate those types of proceeds from the two opportunities we have.

[Rich Moore:]

Okay, good. Thank you, Mark. And then the last thing I had was it seems when you put all this together, it seems pretty encouraging. When you take your cash of about $85 million and you take $60 million from Blackstone and you take $15 million to $20 million to $25 million excess proceeds on these two assets. You actually get quite a bit below the $250 million target that you have for the credit line in the press release. But also the $250 million you eventually have to get to by the end of 2012. Am I missing something there or do you have plans for some of that cash otherwise?

[Mark Yale:]

You’re right. We’re in the ballpark. The one thing we do need to accommodate for is our equity contribution to finishing out Scottsdale. We talked about $30 million, $35 million, so, we will need to factor that in. But I think to your point, we do have flexibility. As Michael said, our strategy is to continue to delever. We probably will want to delever a tad to be able to address the capacity and the step down, but we’ll have much more flexibility to do that. It’s just consistent with what we want to do as a Company anyway.

[Rich Moore:]

Okay, very good, thank you, guys.

[Operator:]

Your follow-up question is coming from the line of Nate Isbee from Stifel Nicolaus. Please proceed.

[Nate Isbee:]

Yes, Abercrombie on their call earlier this week talked about having 230 stores that are losing money and as they expire the next few years, they are going to be looking to close a number of those stores. Any thoughts on how that might impact you over the next year or two, knowing what you know about your current 19 Abercrombies?

[Michael Glimcher:]

Sure, if you look at our portfolio of stores with them, I would say that it’s predominantly weighted towards Hollister, which is obviously a more moderate concept. We also have several outlet stores with them, which have been doing some incredible business in our Jersey Gardens center, we actually have their only Gilly Hicks Outlet, and we have an Abercrombie and an Abercrombie & Fitch Outlet there and their business is really strong. I would say if you look at it and you look at every one, every other landlord’s fleet of Abercrombie stores, I’d say ours is probably in relatively better shape. When you consider the outlet stores, they are obviously a different distribution channel. When you consider the majority of our stores are their more moderate concept and in most of the markets we’re in it’s the only or one of only a couple stores. So again, they’re working through their issues, but I think we have a relatively safer fleet of stores with them than perhaps a lot of other landlords.

[Nate Isbee:]

Okay, thanks.

[Operator:]

There are no further questions. I will now hand the call over to Ms. Lisa Indest for closing remarks.

[Lisa Indest:]

Thank you, everyone, for participating in the Glimcher Realty Trust fourth quarter conference call. You may contact us directly with any additional questions or access our filings through Glimcher.com.

[Operator:]

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.