Washington Prime Group Inc.
Q3 2013 Earnings Call Transcript

Published: 25 Oct 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the Glimcher Realty Trust earnings conference call. My name is Shauntelle and I will be your facilitator for today’s call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Lisa Indest, Senior Vice President, Finance and Accounting with Glimcher. Please proceed.

[Lisa Indest:]

Good morning, and welcome to the Glimcher Realty Trust 2013 third quarter conference call. Last evening, a copy of our press release was circulated on the Newswire, and hopefully each of you have the opportunity to review our results. Copies of both the press release and the third quarter supplemental information packet are available on our website 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 Securities and Exchange Commission. Members of management with us today are Michael Glimcher, Chairman and CEO; Marshall Loeb, President and COO; and Mark Yale, CFO. 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. We are very encouraged by the continued progress made and the execution of our transformative strategy into a Class A mall REIT and believe that both our financial and operational results delivered during the third quarter are reflective of such progress. First, from a financial perspective, our $0.17 of FFO per share was right in line with our guidance range going into the quarter and our $0.51 of adjusted FFO per share for the first nine months of the year represents 13% growth over the same period in 2012. A significant factor in this performance was contributions delivered from our Core Mall portfolio where operating fundamentals remain solid. Aided in part by the dispositions of Tulsa Promenade and Lloyd Center earlier in the year, we continue to drive growth and productivity within our portfolio with quarter end sales reaching $465 per square foot, representing 8% growth over the prior year. Total occupancy now sits at 95%, which includes an increase in mall store occupancy of nearly 200 basis points from the end of the third quarter of last year. Re-leasing spreads continue to accelerate, up 19% for the quarter while maintaining a portfolio occupancy cost ratio at near historic lows of less than 10.5%. We also completed the redevelopment of our Outlet Collection properties in New Jersey and Seattle, with the grand re-openings of our newly renovated properties scheduled to occur this month. Through these projects we have created fashion mall environments featuring some of the top outlet brands in the world. Both centers look great and we should commend our entire team, from leasing to construction to legal which delivered both projects on time and on budget, to the mall teams which seamlessly coordinated the transformations on the ground. The contributions of many talented people led to the success of our Outlet Collection portfolio, which will generate growth opportunities for the foreseeable future. Most importantly, we generated Core Mall NOI growth of 4.7% during the third quarter. When considering the nearly 5% growth generated during the first nine months of the year, it's clear that our transformation strategy is starting to deliver tangible results. While we are pleased with this progress, we appreciate there is still work to be done in terms of building a sustainable growth platform. First, we need to take advantage of opportunities already in place within our current portfolio. This includes continuing to leverage the low occupancy cost throughout our existing properties by driving positive re-leasing spreads on renewals and enhancing the overall quality of our tenant mix and occupancy. It also involves pushing the first two phases of Scottsdale Quarter towards stabilization. Solid progress has been made at Scottsdale with the occupancy growing to the mid 90% range when including signed leases not yet opened and leases out for signature. Secondly, we will look for further opportunities to reinvest in our top tier core properties through redevelopment, as we believe this still represents the best use of our capital on a risk adjusted basis. In addition to our Outlet Collection properties, we see further redevelopment opportunities throughout the portfolio including Polaris Fashion Place, where we are in the planning phase for the redevelopment of the former great indoor space. We will also be focusing on Phase 3 of Scottsdale Quarter, where we expect our multi-family developer to break ground next month on a 275 unit for rent residential project. The next component of the strategy focuses on external growth. Accordingly we're pleased to have acquired during the second quarter of this year the 60% interest in WestShore Plaza which we did not previously own and we were excited to start 2013 with the acquisition of University Park Village in Fort Worth, Texas. It's an open-air center generating sales per square foot of over $800 with a tremendous growth profile. Our search for similar new opportunities will continue, with the focus on properties with high sales productivity, outsized growth potential and the rent roll of tenants that we have or with whom we're looking to expand our relationships. Not only is the content of the property important but also its context and its environment. In this regard, we continue to be drawn to more open-air centers and [makes use] properties driven primarily by the retail component. Finally such investments can be difficult but the good news is with the smaller size of our portfolio we only need to execute on a handful of acquisitions to make a meaningful difference. In fact, we're currently focused on several opportunities that meet such online criteria. Finally, we're also looking to improve on the quality of our portfolio as well as our growth profile through divestitures. Solid progress was made in this regard earlier this year with the sale of our ownership interest in both Tulsa Promenade and Lloyd Center. Conversations also continue with the special servicer on the loan for our Eastland Mall. We're also keeping an eye on the transaction market for so called B malls which has recently accelerated. While we don’t have any of our mall assets formally on the market at this time, we are very interested in opportunities to monetize the bottom half of our portfolio, especially if we believe we can redeploy such capital into higher growth assets. We also believe this represents an attractive alternative in terms of investment capital when considering the current cost of our common equity. We now have our site clearly set on $500 per square foot in portfolio sales, a goal we hope to meet by the end of 2014 through a combination of organic growth as well as the remixing of our portfolio. This combined with modest occupancy cost of less than 10.5% provides the company with meaningful long-term growth prospects. Now with 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 to everyone. Our reported FFO per share for the third quarter of $0.17 fell right in the middle of our guidance range going into the period. Biggest driver of this performance was property operations, with Core Mall net operating income showing solid growth again during the third quarter of 4.7%. With respect to the contribution from Scottsdale Quarter, the yield on the project during the quarter when excluding several non-recurring charges increased to nearly 4% roughly in line with our forecast. Now let’s turn our attention to the balance sheet. With the recent amendment to our $13 million loan on the Scottsdale Quarter Phase 3 ground, we have now addressed all of our 2013 debt maturities. The modification also contemplates the pending sale of the north parcel which will require a $6 million pay down of the loan upon closing of the transaction. We have also been focusing on the upcoming 2014 debt maturity at Jersey Gardens. We currently have a commitment on a $350 million loan with a seven year term at a rate below 4%. We expect the loan to close within the next 30 days. While we will incur a [deficience] [ph] penalty on their early pay-off, we value certainty and believe it is prudent to take advantage on these favorable market terms especially when considering the potential for capital market’s volatility into fiscal year 2014. As previously discussed, we anticipate utilizing the company’s ATM program from time-to-time to help fund redevelopment and major retenanting activities throughout the portfolio. Due to recent equity price levels, we do not issue any common shares under the program during the third quarter of 2013. Finally, we did narrow our FFO guidance for fiscal year 2013 by a penny on each side to a range of $0.69 to $0.71 per share. Other key assumptions as detailed in our previous guidance remain the same. This guidance does not reflect the impact from the pending Jersey Gardens refinancing including any associated [deficience] [ph] charges. Key fourth quarter assumptions driving the guidance include net fee income of approximately $300,000, lease termination income of around $250,000 and core mall NOI growth of approximately 2%. Fourth quarter growth is being pressured by the Saks closing at WestShore along with the shift in the timing of certain marketing expenses in which more expenses being recognized in the fourth quarter of this year than compared to the prior year. Without these items forecasted growth would have been approximately 3% for the quarter. I’d now like to turn the call over to Marshall.

[Marshall Loeb:]

Thanks Mark. With constrained supply continuing to be an important positive catalyst, retailer profitability remaining solid and bankruptcy activity muted near historic lows, we remain enthusiastic with the underlying fundamentals of the mall business. Further, we’d expect that total occupancy of over 95% by year-end and portfolio occupancy cost sitting below 10.5% we’re optimistic about our ability to continue to deliver meaningful growth from our core portfolio. Although tenant sales moderated over the last six months, we’ve not seen any behavior change from the retailers in terms of committing the new space or extending current leases. The deal pipeline remains robust and we feel confident about our ability to continue to drive positive releasing spreads. With this backdrop, we remain acutely focused on maximizing the contribution from existing properties. We plan to continue driving such growth through executing on redevelopment projects, raising occupancy quality by replacing weak performers, increasing rents upon lease roll and pushing the first two phases of Scottsdale Quarter towards further stabilization. As Michael mentioned, we’re excited to complete the redevelopment of our outlet collection properties in New Jersey and Seattle with the grand re-openings of our newly renovated properties scheduled this month. Both centers look great and we are tracking in line with underwriting on a roughly $60 million investment. At Jersey, the tenants associated with the renovation have come online throughout the year. Seattle by contrast experienced an acceleration in openings over the last 30 days with total occupancy reaching close to 93% of grand reopening earlier this month. We are also expecting another handful of additional store openings in Seattle into next year. Through this project we’ve revitalized more than a 100,000 square feet of merchant space adding vibrancy and relevancy to Seattle. Once again with the type of tenants we’re adding, we see the potential to drive sales well above $400 per square foot at the center, great improvement for a property that was generating sales in the low $200 just two years ago. As discussed, we view redevelopment as one of the best uses of our capital as it relates to near-term redevelopment opportunities, we’re focused on the Polaris [Fossil] formally occupied by the Great Indoors. Here we have the opportunity to add approximately 125,000 square feet of additional open-air retail, restaurant and entertainment space. We are working towards securing final anchor approvals that allow us to move forward with the project. Another area of attention is Phase III of Scottsdale along with other redevelopment opportunities within our top tier properties that are in the initial planning stages. Additionally, we continue looking at ways to take advantage of adding big box retail into the malls throughout our portfolio. In terms of the first two phases of Scottsdale Quarter we’ve seen a nice improvement in yield during 2013, but still have a great deal of runway to work with as we look for growth in 2014 and beyond. In this regard we have approximately 20,000 square feet of space broken forward to the signed leases or letters of intent which we expect to come inline over the next several quarters. Additionally, while most national retailers at Scottsdale Quarter are performing at high levels, in terms of sales performance, we're continue to strategically address a handful of first generation underperforming local and regional tenants with below market rents generating sales volume well below the center average. Such tenants could comprise up to 10% of the current retail square footage. And we expect to address the majority of the space during the first half of 2014. Finally, we're pleased to see our Tier 1 portfolio grow the 91% of the company's NOI and it's a portfolio that generates over $500 per square foot in sales with occupancy over 95%. At this time I'll turn the call back to Michael.

[Michael Glimcher:]

Thanks Marshall. With the tremendous amount of progress behind us, we are proud of all the advances made year-to-date and certainly in recent years. That being said, we are acutely aware that there is additional work to be done for Glimcher to be competitive with the top performers within our sector. It is infinitely clear however that the foundation for growth in future success has been laid. A higher quality portfolio with growing sales and low occupancy cost, a long list of redevelopment opportunities and normally a team that has shown the ability to evolve this portfolio and the organization. We look forward to not only ramping up the year of excellent progress, but to future years where we are positioning ourselves to compete with the best. Now at this time, we'd like to open up our call for any questions that you may have.

[Operator:]

(Operator Instructions). Your first question comes from the line of Craig Schmidt of Bank of America. Please proceed.

[Craig Schmidt:]

Thank you. The 471 foot going to 465 does that have anything to do with any repositioning of the portfolio or was that just a sales decline?

[Mark Yale:]

Craig, it’s Mark. Really two things; one is just it’s always a different mix of reporting. We actually saw a drop sequentially last year so it can be a mix of who is reporting at any given point in time, but also it is reflective of a deceleration in retail sales. We definitely experienced that here in the third quarter and the trailing 12 months I think our sales were flat. So clearly I think consistent with others we saw those trends in our portfolio as related to sales.

[Craig Schmidt:]

And do you think it will be flat through the fourth quarter?

[Michael Glimcher:]

Craig, it’s Michael speaking. It’s definitely hard to say and we're not economists, but when I look at ICSC and NRF and ShopperTrak, I mean there is an expectation of anywhere from about 2.5% to up to 4% of sales increase in the fourth quarter. So based on a pooling of multiple experts, they’re seeing a little bit of growth. And probably the thing that makes us most comfortable is with the lowest occupancy cost within the sector at under 10.5% and our ability to deliver in the mid-teens at about 15% year-to-date 19% for the quarter re-leasing spreads we feel like even if sales were to flatten out a little bit and experts are saying they are going to actually come up a bit, we have a lot of runaway to increase rents and drive NOI growth.

[Craig Schmidt:]

Okay. Thank you.

[Michael Glimcher:]

Thank you, Craig.

[Operator:]

Your next question comes from the line of Todd Thomas. Please proceed sir. Todd, your line is open please proceed.

[Todd Thomas:]

Okay. Great, sorry about that. First question, just trying to reconcile the fourth quarter slowdown and same store NOI and sort of attempt to understand what happened here in ’14. I understand that the move out of Saks at WestShore was an impact - will be an impact, I was just wondering maybe you can walk through the timing and details specifically around that and the commencement of the Dick’s Sporting Goods in early ‘14?

[Marshall Loeb:]

Sure, Todd. It’s Marshall. We had Saks for the first half for the year and again that was in a joint venture, it was 40% ours, 60% Blackstone, now as we took Blackstone out, it was about $2 million a year in rent that Saks was paying. So that's out completely for the back half of the year. Timing wise, we’re underway with construction with Dick’s Sporting Goods. I believe we deliver the space to Dick’s Sporting Goods in mid-February. So probably add another 60, 90 days and it will open. They can open later in the year in Florida it’s kind of a full year market for them. So we should pick backup with the Dick's Sporting Goods, it will be at our lower run rate in terms of rents, but that was a kind of where a lot of the improvement when we had bought the WestShore back when it was an older Saks lease that had a heavy tenant improvement allowance, but we will tick back up at a lower run rate probably in about May. And then also other thing which is just our marketing expenses kind of the other thing that hits us in fourth quarter is just timing. That won’t happen again in fourth quarter, but just will absorb a little more marketing expense for the full year will hit us in fourth quarter of this year. So between the two of those, that’s probably what dropped us a good close to 100 basis points.

[Todd Thomas:]

Okay. It’s helpful. And then regarding redevelopment you are finishing up the two outlet collection properties. Jersey Gardens, Seattle you have some work to do with The Great Indoors Box at Polaris. Are there additional centers in the portfolio where you have identified some value creating redevelopment opportunities as we look ahead over the next couple of years?

[Michael Glimcher:]

Todd, it’s Michael. We spoke about Polaris; we are just finalizing anchor approvals once we get through anchor approvals. We are already pre-leasing we already have the re-development design. And there is a pipeline, there are a number of additional redevelopments and additions that we can do to existing properties. So I think there is almost, I don’t say infinite, but there is almost an infinite amount of opportunities only constrained by how many people can focus on them and how much capital. So we are really excited about that and we love reinvesting back into the portfolio, just coming up to Seattle opening a week ago and Jersey next week when we see the impact they can have on an existing asset to take something that was moderate in Seattle and make it really good and really strong or something that was already strong in Jersey and make it even better. It’s a great place to spend money on risk adjusted basis. We love focusing capital back to the core portfolio, but we have a pipeline that’s very deep that can keep us busy for probably the next handful of years.

[Todd Thomas:]

Okay, great. And then just last question for Marshall. With the sales environment sort of softening a bit here I was just wondering do conversations with retailers begin to shift here, do you need to start having conversations about 13% and 14% occupancy cost targets versus maybe 14% and 15%? I mean you mentioned that your occupancy cost ratios are at record lows, but at what point or how quickly do you think those conversations really start to change? And then lastly, is there is any risk to percentage rents in the fourth quarter given the slowdown that we are seeing a bit here?

[Marshall Loeb:]

We’ve not seen any, we had three good retailer meetings on the West Coast this week, and certainly the tone when we talked about the sales environment, but we are not seeing any slowdown from 13% to 14% occupancy cost. And then really in terms of them these are all kind of three retailers we’d like to grow the relationships with. And the type of centers we have been acquiring in the last few years, not seeing a slowdown in their plans either. So eventually it could catch up. And you are right, if things get really bad from a sales perspective, but for now and heading into the New York ICSC with terms of our meetings and things like that, we are not feeling an impact from the real estate side, from the retailers.

[Michael Glimcher:]

Todd, it’s Michael. I would say with 95% occupancy and really strong sales within our portfolio and low occupancy costs from our perspective, I think that retailer in the portfolio that aren't performing at or above the mall average are probably those that are in jeopardy and the better performing retailers the top quartile or the top half, they are still growing, they are still looking for opportunities and they are also still generating sales, that give them the ability to pay higher rents. And when you look at our re-leasing spreads over the first three quarters of the year, we feel really confident about the ability to drive NOI growth.

[Todd Thomas:]

Okay. Thank you

[Operator:]

The line is Nat Isbee of Stifel. Please proceed.

[Nathan Isbee:]

Hi, good morning. Michael, you referenced that infinite opportunities in the portfolio, the multi-year redevelopment opportunities. You have done a good job transforming the portfolio, upgrading it, you have low occupancy costs as it relates when we are there from a leasing perspective. I'm just curious at this point, why they need to go out and acquire more?

[Michael Glimcher:]

What is needed, good, good question. There is probably multiple areas that we want to grow. Investing back in the quarter, we think on a risk adjusted basis is a best place to spend capital. But we also want to recycle first in capital and with some strength and the opportunity to sale some B mall properties. We think there is an opportunity to sell some assets, redeploy that capital into other properties that have a higher growth profile coupled with investing in the core portfolio. And it's a just a matter of timing and if half of the capital went into the core and half went into new opportunities that will provide growth in out years. I think it’s a good balance for us. I mean we see opportunity and even in a new acquisition like a University Park Village to add additional space, we just pick up the center already, there is already a built-in opportunity to grow that. So we're thinking about this year and next year but we're also trying to build opportunities in out years so that we can continue to grow for the next 5, 10 years and beyond.

[Nathan Isbee:]

Okay. So even with the cross the capital you think it makes sense to go out, acquire numbers as reinvesting?

[Michael Glimcher:]

I think we're likely going to be less aggressive than we were maybe a year ago when we were really trying to reshuffle the debt, but there is together still some assets in our portfolio that aren’t providing a level of growth that we would like. So if we can sale lower growth asset and roll that capital partly into redevelopment and partly into a new higher growth opportunity, we think that’s a good balancing act for us.

[Nathan Isbee:]

Okay, thanks. And then just going back on the fourth quarter growth. Mark you’ve had the Saks result of WestShore this quarter and you did 4.7%, you have a relatively easy comp from the fourth quarter last year. You’ve had tenants coming into Seattle and I assume other parts of the portfolio. I am just curious if you can get a little more granularity in terms of what’s weighing down on the fourth quarter growth?

[Mark Yale:]

Yeah. Marshall mentioned the marketing and all that I think along with WestShore probably impacts growth that we would have forecasted by 100 basis points. So that gets us 3%. We think that positions us well as we look into 2014 to continue to drive similar type of growth overall on balance in ‘13 into ’14. And you can always have some ins and out quarter-to-quarter, but we think when you factor in those kind of one-timers, growth in the fourth quarter is pretty consistent with the trend that we're seeing in ‘13.

[Nathan Isbee:]

How much are you talking about in terms of the marketing expenses?

[Michael Glimcher:]

The two pieces between the WestShore, Saks and then the marketing 100 basis points, I mean that’s $500,000, $600,000 combined of impact on growth.

[Nathan Isbee:]

And then just circling back on Scottsdale, you talked about some of the first generation leases. Can you give us a little bit of a better sense what's moving around in there? What new tenants are coming and perhaps a little more color on Phase 3? At what point can we expect to hear something positive on that?

[Michael Glimcher:]

What we needed Michael, I think there a lot of positive things. An example is in Phase 2, we're taking what was an upper level of space, which was basically a nice (inaudible) and we're replacing it with suite supply, which is an international fashion tenant, the first store we’re going to do in the Western United States, that will be upgraded from a local tenant to an international tenant and there is a lot of ins and outs like that. And the more that we push occupancy up, the more we feel comfortable pushing an underperformer out. So it's probably no different than any existing assets that we're constantly upgrading the mix and pushing out the bottom 10% and then trying to push up to the top 10%. It's probably to just have a little more focus on it. And then when you think about Phase 3, there is three parcels in Phase 3. There is a north, central and a south parcel. The north parcel is the parcel that will have the 275 unit apartment development, which we're very excited about with around floor retail which we’re out aggressively on pre-leasing. There is central parcel where we have talked about the possibility of the department store or mixed use of retail and hospitality and perhaps other uses. And then the third parcel which is the south parcel, we are in the pre-planning phases for a building which we haven’t put numbers around and we haven’t publicly talked about, but it would essentially be another building like buildings B and C which were the large buildings on Scottsdale Road which would be ground floor retail with office above. We’re 100% leased on our office space. We have a lot of demand for people who want a office in this unique mixed use environment and we have additional retailers that we could accommodate that we have leases out to on the ground floor. So as we give more color on that, I think probably into early next year we will be talking a building on that south parcel and building on the north parcel. So two thirds of Phase III will be accounted for and then we’ll hit a inflection point where we have to decide we have the ability to make and anchor deal and frankly the economics are really tough and we debate back and forth and we have made a decision on whether it makes economic sense or not. The projects performing at an incredibly high level and as we read out the underperformers, it’s going to be one of our top sales per square foot and already is and we expect it to go higher on average. So we are really, we feel like we’ve got most of Phase III accounted for just that middle parcel and I think like everyone we probably like to stop talking about it and just have it finish. So I think some point into next year we will have to make a final decision, but the truth is if we finish the north and the south parcel up and you just have a piece ground for expansion, it’s not the worst thing to have to accommodate a unique opportunity that presents itself to you and again the center is performing at the really high level. So hopefully that is not too long of an answer but it answers your question.

[Nathan Isbee:]

And then just finally on University Park village, is there any movement on the Barnes box and what you potentially could do there?

[Michael Glimcher:]

Yeah, we actually are actively leasing that space and we come to a conclusion that they are not willing to or in a position to pay what we believe the market rent for that space and part of our underwriting of the asset was knowing that their lease term was coming to an end. So we have leases out on the majority of that space at significantly higher rents, and that was part of our underwriting when we bought the center and it was part of the opportunity. And while we saw a tremendous growth profile in the property, and I will tell you the level of interest in that property is exceeding our expectation and that’s why we also you talk about a pipeline, we’re exploring the opportunity of adding some deck parking and adding some more retail square footage. We are in the early stages of, we don’t numbers to put around it or to announce, but it’s just one of many redevelopment opportunities that we have in the pipeline.

[Nathan Isbee:]

All right, thank you so much.

[Operator:]

Your next question comes from the line of Jeff Donnelly of Wells Fargo. Please proceed.

[Jeff Donnelly:]

Good morning guys. Michael the question is really just on acquisition land dispositions, I guess just pricing in the market. Have you seen a shift in the appetite I guess let’s say for non-core malls in the market as interest rates have risen and maybe similarly is that maybe made it easier to acquire out there?

[Michael Glimcher:]

We haven’t Jeff on sort of higher end have seen cap rates moving out not really, but I’d say on the other side of things there are lot of people out there looking for yield and there is, well, I don't want to say it's an infinite list, but there is a growing list of buyers for B and even C properties. So we're optimistic just based on the reversing core we've had without actually actively marketing anything that we’ll be able to sell some of our bottom half. And on the other side of it, I think things are still relatively expensive. Even though interest rates have moved up a little bit, they are still pretty low.

[Mark Yale:]

Yeah. And I was just going to say, this is Mark. I mean we definitely what's encouraging for us is the level of activity really since the summer in terms of some of these B or non-core mall assets. So hard to say because they’re just not a whole lot of comps to understand how pricing might have been impact to my interest rates, because there wasn't that's really a robust market before that. But it certainly feels like once the market absorb the kind of shock in interest rates, it's a place in June and the debt market settled down then all of a sudden we've seen some transactions and certainly seeing some buyers who are very active and interested in those types of properties.

[Jeff Donnelly:]

And I guess maybe could definitely the rise in interest rates hasn’t really caused lenders and you to early scale back on proceeds for some of these properties, because typically the buyers here are very leveraged driven?

[Michael Glimcher:]

There is really, Jeff, it's Michael. Not enough data for us to know that, but it seems like the buyers were talking to, I mean they’re putting substantial equity in and there seems to be a desire from a lender standpoint to put money out it’s has been very difficult for lenders, they want only product of capitals that are on sale for a long time and they are having a hard time putting it out.

[Jeff Donnelly:]

Okay. And then I'm just curious, concerning the outlook projects you have completed and I'm trying to get a sense of how much more, I guess any upside there is for stabilization. Are you able talk about maybe what they’re yielding on absolute basis in Q3 versus where you see the multiple rent stabilization for us to kind of figure out maybe how much further they have to go?

[Mark Yale:]

Hey Jeff, Mark. Let me try to answer it this way and make the math easy, it’s about $60 million investment. We're expecting roughly $5 million of incremental NOI, about 10% of that actually came through in 2012. We're thinking about 40% ultimately will come through in ‘13 and then the balance will be in ‘14 maybe a small piece into ‘15 because there are some stores at Seattle that won’t open until the beginning of next year, but hopefully that helps and kind of gives you the breakout of how that $5 million has and will come through our earnings.

[Jeff Donnelly:]

Okay, that’s great. And just maybe one last question maybe specific to you guys just I guess anecdotally which you hear is, obviously most mall owners have pretty healthy exposure to see us penny. I guess first part is, what sort of upcoming expirations or exposure do you have to build anchors and maybe what a renewal conversation is like and if maybe you haven’t had them recently, what anecdotally do you hear from other mall landlords about the nature of those conversations?

[Michael Glimcher:]

Jeff it’s Michael. I mean there is a lot of dialogue going on and to put brackets around it the two of them combined are about 20% of our space, but only 3% of our NOI. We have some conversations going on. There are certainly locations we would like to recapture. But the truth is, we haven’t had a lot of impact on our malls that I don’t, as far as what’s going on out in the field obviously Penny hasn’t been driving as much traffic than as they had historically. I think their losses at least recently have been substantially less. But when they have a renewal they have a renewal option and they have the right either to exercise the option or not and more likely they’re not, they’re either going to exercise or option or we’re going to probably take a space back sitting at 95% getting space back as a good thing in our world, it’s a step back and probably three steps forward when you look at that ratio of how little a rent is paid versus how much square footage is used. Hopefully that helps.

[Jeff Donnelly:]

No, it doesn’t. I mean I guess did you today have any, I guess call it constructive knowledge or sense of locations where you think that really like to give you back to sort some point either at least expiration or earlier or is that I guess I’m just trying to address is how probable it is, you get stores back either for a negotiation or distend to the lease and then beyond that how deep your replacement options are?

[Michael Glimcher:]

Well, first of all we hoped that about 60 then we hoped whatever version they wanted and that they do well and wish all of our retail partners the best of luck and success. In event that they don’t, we have a debt chart and certainly some malls are stronger than others, but we've got anywhere from half a dozen with dozen different options in some cases return to our building and we have restaurants or open-air retail, in some cases we plug it in with another anchor or in one other cases in our smaller malls, there are small enough boxes where we've got things like DICK’s Sporting Goods and other box retailers. So the tough day would be if you got all of them back in one day and so did all of your peers, I don’t see things even if they were to unwind in that way. And I look back when people bring out what's happening with this anchor or that anchor, what happened with Montgomery award, what happened with Marvin’s, what happened with all the company inventory when you drive around and when you look at especially within the mall REIT world, we've absorbed all that space. There probably aren’t any or many of those boxes still around. And we only have two vacant boxes of any significant size available on own portfolio. So again I don’t think they all come back on the same day to us or anyone else. I think that’s highly unlikely. I think there is a lot of phases that goes through. And then ultimately like I said, we wish our retailers success and good luck.

[Jeff Donnelly:]

Great. Thank you very much guys.

[Operator:]

Your next question comes from the line of Michael Bilerman of Citi. Please proceed.

[Katie McDonald:]

Good morning. This is Katie McDonald on for Michael. Could you elaborate on some of the redevelopment opportunities that you are seeing in the existing portfolio? And what level of spend you might budget in the next couple of years?

[Mark Yale:]

We don’t have specific redevelopment opportunities we were talking about. I think the idea was in the case of Polaris, we are in the planning stages and depending on how the mix comes together whether it’s more restaurants or more retail because it’s a blend of the two that’s going to affect cost, but will also affect return in the case of Southern it’s early on like University Park Village it’s just an idea at this point that we are planning.

[Marshall Loeb:]

I would just add, unfortunately or fortunately there is a long process in these redevelopments where it’s approvals you need to get and all it always seems like it takes a little bit longer than you’d like. So it’s naturally kind of spreads out the spend. So when we talk about on what’s on the drawing board, how much of that actually gets done in next 12 months versus the next 24 months maybe in the next three years some of it just can’t takes care of itself because there is a long lead process.

[Michael Glimcher:]

Yeah we’d love to give you exact dollars per year over the next amount of years put into the model, but as Mark said a lot of it requires anchor approvals and city approvals and it’s just a process. But I think hopefully you’re reading the body language. We’re very confident that there is a deep enough list that there could multiple redevelopments done in each year going forward.

[Katie McDonald:]

Okay. Thank you.

[Operator:]

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

[Carol Kemple:]

Good morning. Following up on the JC Penny’s serious conversation, I know the 33% of your NOI. Do you have any idea of what percent of your NOI would be tied to co-tendency clauses with those two retailers staying your malls?

[Mark Yale:]

Carol, we don’t have an exact number at our fingertips and part of it is this is one lease and both they live and what’s happened with anchors and a lot of these causes are tied to one or more anchors living a mall. But the good news is we’re starting with a relatively position of strength then we have about 50,000, we have about 100 boxes of 50,000 square feet on our portfolio and only two are vacant, so that’s helpful, but a lot of times it’s unnecessary in co-tenants it’s two or four, three or four and I think as Michael said one probably isn’t issue, if you lose two that could be, but the good news is we are pretty full as we look into any potential or challenges or issues on that front.

[Carol Kemple:]

Okay. And earlier in the call you mentioned that you are looking at some acquisition opportunities, are those off market opportunities?

[Michael Glimcher:]

Carol, it’s Michael. We try to find as many opportunities off market as possible. And I’d say, if I look at our pipeline it’s generally off market. And if there is a mix, it’s probably two-thirds off market and one-third on market.

[Carol Kemple:]

And at this point everything in your pipeline is it open-air centers lifestyle centers or are you looking at any traditional malls?

[Mark Yale:]

It’s primarily open-air and there is the rare in closed mall, but I would say again if I want to put numbers to it, I’d say 90% of what we are looking at is open-air.

[Carol Kemple:]

Okay. Thank you.

[Operator:]

Your next question comes from the line of Ben Yang of Evercore. Please proceed.

[Ben Yang:]

Yeah. Hi, thanks. Maybe for Michael building on your earlier comments on the B malls, do you have any thoughts on the pricing we've seen some of the recent B and C mall trades and also what they might suggest for the value of your own stock?

[Michael Glimcher:]

Well certainly, we like the pricing, there is a not of lot of data point, but it would tell me that the bottom half of our portfolio is probably worth a lot more than it's being valued at today. But it also for me what it says is we have an opportunity to sell some assets and get what we think are good prices and then redeploy that capital. So I don't know how that goes into your model, but it seems like people are realizing there is a lot of upside. And like every other portfolio you have only extra amount of capital and you are going to allocate more heavily towards the top half. So a new buyer of mall in your bottom quartile or your bottom half should have the capacity if they allocate capital to do more with it, because we've been directing capital more to the top of our portfolio.

[Ben Yang:]

Sure. But I think you also said that you won’t actively marketing in your B malls currently. So I'm just wondering why not take advantage of that arbitrage and sell into the private market as aggressively as possible?

[Michael Glimcher:]

I think we've had enough reverse inquiry that we have a broad up group and you could probably guess who is out there and who is in the market and who do you have casual conversations with. I don't think we want to engage in a formal process and frankly get on these calls every quarter and talk about where are you with the sales process, there is likely candidates or people who come to us and we've been able to sale a couple of things that we're marketed we think we’ll have opportunities to sale some assets that are not broadly marketed but certainly with the data of what has sold and the volume of reverse inquiry will certainly have enough of a subset that we’ll feel we got market pricing.

[Ben Yang:]

Okay, got it. And then maybe for final question. So I know it’s a Board decision but given that your FFO has grown much faster than the dividend which it looks like has been flat or coming up on five years. Do you have any thoughts on when you guys might actually push against your taxable income and has it actually raised the dividend is that potentially a 2014 event or maybe sooner or later? Any thoughts on when that might happen?

[Mark Yale:]

Ben it’s Mark. That won’t be an issue in 2014, as you said that I mean we certainly have coverage on the dividend at this point. We hopefully will continue to grow and that coverage as we look to 2014. But it really comes down to if we do our free cash flow what’s the best use of that capital.

[Michael Glimcher:]

Yeah. And I would say we've been finding great places to put our capital and to reinvest in the core portfolio. We have found greater growth opportunities. Hopefully our shareholders don’t agree that we're investing it wisely and they want to keep capital within the company.

[Ben Yang:]

So then is it fair to assume based on those comment that the catalyst were actually raising the dividend as when you push against that taxable income number? And was just kind of obviously distributing more cash to your shareholders, would you say that’s the catalyst?

[Michael Glimcher:]

I can’t speak for the whole Board. It’s something we sit around the table and we talk about and we probably will these factors. And so it’s something we certainly have consistent and serious conversations about. And we also solicited invested feedback. And by and large we haven’t had push whatsoever about pushing up the dividend.

[Ben Yang:]

Got it. Thanks guys.

[Operator:]

Your next question comes from the line of Daniel Busch of Green Street Advisors. Please proceed.

[Daniel Busch:]

Thank you. Michael you talked a lot about acquisitions and redeploying or recycling capital back into some of the better assets. And Mark you mentioned earlier, you guys obviously been talking to [ATN] this quarter, again will start by that. And given that your shares are trading at a pretty good discount to the value of your asset, at what point you guys start thinking about potentially buying back your own stock?

[Michael Glimcher:]

DJ, it’s a great question and certainly there is just probably a point where you do you think about and you don’t want to be trading, where you are trading today. Right now I think if we sold an asset or two, we would probably focus on work and we reinvest that in the portfolio. We also have some preferred out there, that's paying north of 8%, that maybe something interesting to look at. But it’s something you consider at on that we’re asset threshold today.

[Daniel Busch:]

Okay. And then maybe just a question for Marshall. I am just trying to understand the mix in the portfolio, your leasing spreads up to, we’re pretty sad that the average rate growth was essentially flat. What’s kind of keeping that number from growing, is that just a mix that you have? The outlet centers becoming a bigger part or can you just explain that?

[Mark Yale:]

Yeah. It’s Mark. Just a real quick and I think Marshall can elaborate on a broader view. But I think what you are seeing is as we have been driving occupancy and our inline occupancy increased almost 200 basis points. And we released vacant space, obviously it’s not of the highest quality so where we have short term tenants or vacant space, it’s not near the 50 yard line. So it’s probably below market space in those properties. So as we continue to drive we’ve done a really nice job of that you are typically seeing average rents per square foot below the average of the portfolio. So even though, it’s clearly the right answer from an NOI perspective, it’s put a bit of pressure on that metric. If you look at our malls that are more stable where we work through and we are almost full that’s where you are seeing some nice growth in average rent per square foot. But as we work through and address some of those vacancies which are on the 10, 20 yard line or the short-term tenants in there, that’s where we are really driving the occupancy and that’s muted some of the growth you would see from a 19% re-leasing spreads we had in the quarter.

[Daniel Busch:]

Okay, great. And maybe, excuse me if I missed it, but did you give the yield for Scottsdale quarter? I didn’t see it in the press release. Can you give us an update on what the yield curve is there?

[Michael Glimcher:]

Yeah it was just under, just right around 4% or little under 4% for the third quarter.

[Daniel Busch:]

Okay, thanks guys.

[Operator:]

Your next question comes from the line of Tayo Okusanya of Jefferies. Please proceed.

[Tayo Okusanya:]

Hi, good morning everyone. Michael could you just talk to us little bit about kind of latest in regards to competition in Columbus, Ohio specifically again Simon and Tanger trying to do some outlet business there, that had been some talk you guys could also do something the kind of defend your home, to up a little bit as well?

[Michael Glimcher:]

Sure, Kyle. There is three proposed outlet sites in the Columbus market and one is the Simon and Tanger joint venture, and one is the Horizon and there is a site that we have looked at as well. It’s really ultimately going to be decision of the retailers, there is the core group of retailers that make or break these centers and the retailers have been somewhat on the sideline. They are trying, we all have relationships, it’s our home market, they have strong relationships with obviously those other three landlords as well, and nothing’s really crossed the starting line yet. Ultimately the retailers are going to site which project happens. And ultimately I think each market, size of the market by Columbus just under 2 million people is going to get that outlet center. And so it would be something we would like to do on our home market, it’s not something that we have to do. And if the retailers float with us or decide they ultimately want to go with us, it’s something we would build and we would be very comfortable building and we’ve had a great success in this sector. And if the retailers go with Horizon or if they go with the Simon or they don’t go to the market, that’s alright. So it is still a little bit early on any we’re going to make smart decisions and really we’re not in a position where we are going to try to build the center at the same time with someone else or going to any kind of a battle and a lot of markets, you have seen multiple centers get build or trying to get build. We have too many opportunities in too many places where we can spend capital in a very accretive manner that we are not going to put capital at risk in a confrontational situation.

[Tayo Okusanya:]

Got it, that's very helpful. And then cross sale with the first two phases now a pretty much 97 leased, how should we be thinking about phase three.

[Michael Glimcher:]

Well, we're pre-leasing the building with the multifamily and I know Marshall and T.J. and the team are really doing a really strong job with that. And then the building I talked about on the sale side, even though we're not quite ready to announce the dollar amount and everything else, we're out pre-leasing that and when we’ve got great momentum on it. So, look again over the next couple of years we'll hopefully get the majority of it finished up and we won't be talking about Scottsdale on these calls everytime.

[Tayo Okusanya:]

I hear you, sir. Alright. Appreciate the color. Thank you

[Operator:]

At this time, there are no additional questions in the queue and I would like to turn the conference over to Lisa Indest for closing remarks. Please proceed.

[Lisa Indest:]

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

[Operator:]

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.