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Executives

Lisa Indest – Vice President, Finance & Accounting

Michael Glimcher – Chairman and Chief Executive Officer

Mark Yale – Executive Vice President, Chief Financial Officer

Marshall Loeb – President and Chief Operating Officer

Analysts

Quentin Velleley – Citigroup

Ben Yang – Green Street Advisors

John Roberts - Hilliard Lyons

Rich Moore – RBC Capital Markets

David Fick – Stifel Nicolaus

Nathan Isbee – Stifel Nicolaus

Michael Bilerman – Citigroup

Glimcher Realty Trust (GRT) Q3 2008 Earnings Call October 23, 2008 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Glimcher Realty Trust third quarter earnings call. My name is Eric and I will be your audio coordinator for today. Now, at this time all participants are in a listen-only mode. We will facilitate a question-and-answer session at the end of the presentation. If at any time during the call you require audio assistance, press star followed by zero and a coordinator will be there to assist you.

I would now like to turn the presentation over to your host, Miss Lisa Indest, Vice President of Finance and Accounting. Please proceed.

Lisa Indest

Good morning and welcome to the Glimcher Realty Trust third quarter 2008 conference call. Last evening a copy of the press release was circulated on the newswire and hopefully each of you had 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 www.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 our various SEC filings.

Management may also discuss certain non-GAAP financial measures. Reconciliation of each non-GAAP financial measure to the comparable GAAP measure is 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 Chief Executive Officer; Marshall Loeb, President and Chief Operating Officer; and Mark Yale, Chief Financial Officer.

And now, I would like to turn the call over to Michael Glimcher.

Michael Glimcher

Thank you, Lisa. Good morning and thank you for joining us on today’s call. It is difficult to choose a starting point after the last couple of months. Obviously, we are experiencing unprecedented time as it relates to the global debt and equity markets, experiencing record levels of volatility and significant downward pressure on equity share prices. Glimcher has not been immune to these pressures, seeing a drop in our share price to levels completely incongruent with the asset value of the underlying real estate. While we are disappointed about the impact on our shareholders, it is important to understand that the share price is not a short-term issue for the enterprise.

As we have discussed previously, and it is important to know once again at this time none of our debt covenants are based upon our equity market capitalization and our current capital plans do not call for the issuance of common equity. Accordingly, we continue to focus on the execution of a straight-forward plan that addresses liquidity and capital allocation, maintaining occupancy and generating positive releasing spreads and the successful completion of our strategic redevelopment and development pipeline, which will ultimately provide for longer term shareholder value creation. All of these, while delivering consistent and reliable earnings results throughout the year. The good news is in the short term for another quarter we have made tangible progress on all these fronts.

To begin with we delivered a solid quarter from a financial standpoint with our $0.46 of

reported FFO per share for the third quarter falling at the upper end of our guidance range going into the period. As it relates to liquidity, we sold the last remaining hotel out-parcel at Jersey Gardens for $5 million during the quarter. The Great Mall remains under contract for sale. In exchange for additional time through the end of the year to close, we receive $2 million in non-refundable earnest money from the prospective buyer. With nearly 10% of the purchase price in hand, we remain cautiously optimistic regarding the consummation of this transaction.

Additionally, we are making progress with our financing plans. Within the last two quite turbulent weeks, we are closed on $80 million mortgage loans, allowing us to address our last significant debt maturity in 2008 and bring up important capital that will be used to tackle our modest 2009 debt maturities. Closing these loans at this time speaks volumes about the Company standing within the landing community and the confidence as it relates to our business plans and our management team.

With respect to leasing activity, we are projecting occupancy as of December 31, 2008 to be in line with the levels from year end 2007, of course, to 94%. The near 20% positive releasing spreads for the quarter more than met our expectations and support our goal of double-digit releasing spreads for the entire year. Aggregate in-line sales year-over-year were down approximately 1% but we did see improvement from the second quarter with sales actually up $1 to $363 per square foot for the core mall portfolio. We are encouraged about the positive fundamentals experienced to date, but have a degree of concern about the current economic situation and probable corresponding impact on consumer spending.

Our retailer partners have been cautious throughout the year. However, over the last month we have seen a heightened level of conservatism regarding their views for 2009. With retailers being more diligent with the inventory levels and an increasing level of caution regarding the holiday shopping season, we are tempering our expectations for 2009. Marshall will provide further details and thoughts on this later on in the call.

On a positive note, the addition of new retail supply nationally over the next several years appears to be limited at best. Therefore, even with less new stores opening, the probability of securing store account increases with little to no new retail product coming online. Having well located assets occupied at the 90+% range will bode well for our portfolio. We are optimistic that this will strengthen the position of our assets as the retailers are ready to aggressively expand again, looking primarily at 2010 openings.

From a redevelopment perspective, the list of store openings continues to grow with respect to our $50 million lifestyle addition at Polaris Fashion Place. Joining the Cheesecake Factory, which opened late in the second quarter were Destination Maternity, New Balance, Godfrey’s and Buckeye Corner. Additionally, the two-story Barnes & Noble signature store is scheduled to open just next week. The remainder of the project will come on line throughout the fourth quarter of this year and into the first half of 2009. We have approximately 90% of the space addressed of which over 80% are fully-executed leases and another 10% under letters of intent.

As it relates to ground-up development, construction of our Scottsdale Quarter project located in Scottsdale, Arizona, is moving along according to plan on budget and on time as we work towards a phase one opening during the first quarter of 2009. Earlier this week, we announced some of the key retail merchants and restaurants that will be joining us at Scottsdale Quarter. We are extremely proud at the initial line up in overall selection of fashion, designing, and entertainment that we will offer to our guest.

As we have discussed previously, the Company would be interested in opportunities to joint venture or perhaps sell a portion of its trade area dominant portfolio. However with the uncertainty created by the current capital markets, it is difficult to forecast the timing, specific pricing, and size of such an opportunity or whether these types of opportunities may be realized in the near term.

With all that said, I would now like to turn the call over to Mark Yale to provide you with more detail on our financial operating results.

Mark Yale

Thank you, Michael, and good morning. As Michael discussed, we reported FFO per share of $0.46 for the third quarter of 2008. Favorable results compared expectations with respect to the Steve & Barry’s bankruptcy was the primary driver of these results. Excluding Steve & Barry’s, our top NOI growth or call formal portfolio was effectively flat during the third quarter leading our expectations going into the period. Redevelopment activity within the portfolio contributed approximately 50 basis points of positive growth. Total quarterly rental income from Steve & Barry’s for the Quarter Mall portfolio including the $800,000 of non-cash write-offs of lease inducements, straight line receivables and other intangibles related to the bankruptcy decreased approximately $1 million for the third quarter of 2007. This compares to our original expectation of lost revenue of $1.5 million for the quarter.

And now, I would like to review our guidance for the remainder of the year. In our earnings release, we reaffirmed our previous 2008 FFO guidance at a range of $2.02 to $2.10. A more positive outcome from the Steve & Barry’s bankruptcy and higher lease termination income helped offset a reduction in guidance for joint venture fees, the negative impact of interest cost into the recent sharp increase in LIBOR and a more tempered forecast for the core mall NOI. Based upon these items, we are most comfortable focusing on the midpoint of our range.

For the fourth quarter of 2008, we are forecasting an average LIBOR rate from approximately 4%, net fee income of $1 million and a lease termination and out-parcel sales income of $500,000 to $1 million. Exclusive of the Steve & Barry’s lost rent, we are anticipating core mall NOI growth to be negative approximately 1%. On a full year basis, we are still anticipating positive growth of approximately 1% overall. Forecasted growth assumes approximately 50 basis points of contribution redevelopment on a full year basis. Other key assumptions from previous guidance remained unchanged.

As Michael discussed, we believe our remaining 2008 loan maturities are manageable. Just as a reminder, in the last two weeks we have closed on two separate financings totaling $80 million. The first was a $40 million mortgage on our Morgantown Mall property, and just yesterday, we closed on the second a $40 million loan on our Northtown Mall.

Once again, we are pleased with the ultimate execution under these difficult market conditions.

Over the past several quarters we have been engaged in discussions with the special service in our Eastland Charlotte Mall regarding underlying mortgage and its effective maturity in September. Negotiations on the restructuring of this mall continue and we remain optimistic the issue will be resolved shortly. With the exception of Eastland Charlotte Mall, we have now completed the refinancing of all of our remaining debt maturities for 2008. With respect to the 2009 debt maturities, we plan to use the line of credit capacity created by the closing in the Northtown financing to address the repayment of our Grand Central Mall. The $46 million loan represents the Company’s most significant property debt maturity next year. Other properties mortgage debt maturing in 2009 includes loans on the Great Mall and Tulsa Promenade.

As Michael discussed, the Great Mall is currently under contract for sale, with closing scheduled for mid-December. We also expect, if necessary, that sufficient capacity available under our credit facility to address the $18.2 million pro rata share of the Tulsa Promenade debt. In addition to Tulsa Promenade, we have engaged brokers that are in the market on potential financing opportunities for our Morgantown Commons property, which is now unencumbered and the Polaris Lifestyle expansion targeting approximately $20 million to $30 million in total proceeds.

As a fallback we are looking at opportunities with respect to the Grand Central Mall in case we are unable to secure the level of financing as planned. In this market, we believe it is important to have as many oars in the water as possible to ensure ultimate execution.

We finished the quarter with $354 million outstanding on our $470 million line of credit, and are well within the line of credit leverage limitation. The Company’s credit facility is scheduled to mature in December of next year, but just had a one year extension provision at the option of the Company. Obviously, having to enter the unsettled credit market today would be problematic, so this is helpful to potentially have over 24 months ultimately address the renewal of our line.

I would now like to turn the call over to Marshall.

Marshall Loeb

Thanks Mark. As Michael mentioned, we are working through a challenging environment with some signs of progress. Through our renewal pipeline, we continue demonstrating the embedded growth within our portfolio. Quarterly realizing spreads rose almost 20%, bring year-to-date to positive 15%. With our occupancy cost still below 13%, we expect the trend to continue. Third quarter core mall store occupancy was 90 basis points below the prior year. The decline is disappointing, as it breaks eight consecutive quarters of higher core mall occupancy. However, when we look at our pipeline of signed deals projected to open before year end, we anticipated December 31st occupancy to be closed to 94% consistent with prior year. In fact, our square footage of new and renewal leasing is up over 5% year-to-date.

We focused throughout the year in our special releasing business. This business takes on an even more added emphasis coming into the holidays. With the short term nature of the business, we are modestly concerned about performance in the current environment. The good news is evidenced by third quarter results as the business is holding up. The portfolio was stable through the third quarter and based upon fourth quarter projections we anticipate consistent results with fourth quarter 2007 though slightly behind previous expectations.

In terms of new leasing opportunities, there has been increasing cautiousness from tenants, especially over the past several weeks. The good news is we have made tangible progress on our 2009 leasing plans that we have recently seen some proposed deals pushed into 2010 by tenants and anticipated remodels deferred. As it relates to 2009, we are in the middle of our budgeting process. While not complete, our goal in the current environment would be to hold 2008 NOI at levels exclusive of contribution from redevelopment.

A material contribution towards maintaining 2009 NOI is managing costs. Examples where we are making progress include a new trash removal agreement this past quarter boosting 2009 FFO. Continuing to implement sustainability initiatives which we began seeing the benefits from last year and they continue growing and maintaining an aggressive stands on property taxes where we reap material benefits.

A big topic of discussion during our last call is Steve & Barry’s. We have more clarity today but questions still remain. This is what we can confirm. We will keep four locations at rents equal to 60% of the original amount. Relocations have closed and with respect to the remaining four locations, they remain open and we have agreed to revise terms. The amended leases, however, have not been accepted by Bay Harbor, who is seeking additional time before making a final formal decision.

It appears these locations will stay open through the year end but their long term prospects remain unclear. Our redevelopments continued to progress and we are pleased with recent execution. Since our last call, LA Fitness and the Herberger’s Fashion Department Store successfully opened at Northtown in suburban Minneapolis. At Ashland Town Center, JC Penney’s opened strongly in their new prototype and finally, at Johnson City, a new Victoria’s Secret and Bath and Body opened in the former Goody’s Department store and JC Penney’s successfully opened their expanded and remodeled store.

Finally, on the development front, we remain enthusiastic about Scottsdale Quarter. First as to timing, the initial phase of the three-phase project will open in March 2009, phase two follows in spring 2010, with phase three, which is not being developed by the Company delivered later.

The partial list of retailers released earlier in the week includes names such as William Sonoma Home, Wells Town, Gold Class Cinemas, a 36,000 square foot premium movie theater featuring gourmet food and fine wine, H&M, who will be opening their first Arizona store, [Hookville] Grocer, a Napa Valley-based gourmet grocer which has common ownership with Dean & DeLuca, and an enticing lineup of restaurants, including names such as Brio’s Tuscan Grill, Bing Crosby’s and Martini Park. Many of these names will be new to the Phoenix market. Further and not included in the list are other iconic retailers who signed leases in phase one for flagship stores, but remain under confidentiality agreements through opening. All sold 86% of the phase one retail and roughly 60% of the total retail square footage in all three phases is spoken for either through signed leases, leases out for signature or letters of intent. From an office perspective approximately a third of the office spaces under lease with several proposals currently under negotiation. As we continue signing leases, we will update you on additional names to this development.

I would now like to turn the call back to Michael.

Michael Glimcher

Thanks Marshall. Once again, we are quite pleased with our staggered debt maturity strategy and the execution on our relatively modest financing plans that has allowed us to address a significant portion of our shorter term maturity risks. We are also encouraged by the continued solid performance of our property portfolio. Certainly there are serious risks especially with the probability of a difficult holiday season for our retail partners. However, our portfolio is better positioned than ever to weather this turbulent environment. Most importantly with the proper team in place and clear improvement of operating fundamentals and asset qualities we remained positive regarding what we can accomplish at an enterprise throughout these volatile times, and more importantly provide growth in the years to come.

Now with all the said we would like to open up our call for any questions.

Question-and-answer session

Operator

(Operator instructions). Your first question comes from Quentin Vellelley with Citi. Please proceed.

Quentin Vellelley - Citigroup

This first question is you had previously disclosed that you might, you are handing the case back on the Eastland Charlotte asset. Just given that you have going to be trying to restructure that loan. I just want to know what changed there.

Michael Glimcher

Sure. We continue to work on this line with the servicer. We are optimistic that we will have things resolved soon. We are willing to stay involved in the asset for a short period of time as long as we do not have to commit any significant level of additional capital and we will have clarity on this prior to year end.

Michael Bilerman - Citigroup

You may have the point of getting secured debt, it is Michael Bilerman speaking, the ability of an asset under performing and below producing negative cash flow that you basically give back keys and that is it. You do not have the liability and you do not have an asset that is under performing, dragging down your core.

Michael Glimcher

That is certainly one thing to consider, I think exiting the asset in honorable way and being able to help the servicer work through that at a cost that would not be significant to the Company is something that we would like to be able to deal but either way it will be addressed by year end.

Michael Bilerman – Citigroup

Who is the lender?

Michael Glimcher

It is with us, a special servicer called L&R.

Quentin Vellelley - Citigroup

Is there any, do you have relationship on other loans? Is there a quid pro quo going on?

Michael Glimcher

No, this relates only to the Eastland Charlotte and again it is a balance between a financial decision and maybe an honorable move here. So that is really all we have to comment on that.

Quentin Vellelley - Citigroup

Okay. Just switching across to the Steve & Barry’s, I noticed that you have disclosed that three, three are closing and then there is seven left. Are any of these other stores likely to close? And also can you give us some color on the rent renegotiations that you have had with these guys?

Marshall Loeb

Sure. Well, this is Marshall Loeb. Three have closed and those were our two West Virginia malls, Grand Central Morgantown and Merritt Square down in Florida, they have sign leases on four of the stores in Jersey, Seattle, our Super Mall, Northtown in Minneapolis and Great Mall. And then we have four that we have reached agreement. The four they are keeping open. The current rents are about 60% roughly of what the previous rents were and on those four let us see… call it $0.5 million in previous rents is where we were, a little north to that. And so we will lose that and then the other four, I am guessing, I am sure I do not think it will be a package decision and it is just my opinion. I am imagining they will look at each store one by one. If we keep all four, I would consider that lucky and but I do not expect to lose all four by the same token outfits, three that are here and smaller markets in Ohio and then one other asset is at Puente Hills, which is in our joint venture in the Los Angeles market.

Quentin Vellelley - Citigroup

Okay. Are there any other tenants that you are watching closely at the moment?

Marshall Loeb

Sure. I think in this environment we watch all of them, I would say at least by category and you have heard the names, the Mature Women’s is struggling a little bit from the jewelry category. We have seen some risks. I think everybody is nervous about the holiday season. Short term, I feel reasonably good and I think we will make it through the holiday season. Linens-N-things is one that just…, we were lost two of our three Linens-N-things stores that they told use we were keeping another one and I guess with their bankruptcy they were unable to work through their financing. So we just lost our third Linens-N-things store in Dayton and it will be, we are crossing our fingers over the next bankruptcy season, which really is next February of 2009.

Michael Glimcher

I think it is really important to know them and we do from time to time, 75% of our rents are made up of retailers. We have less than 1% exposure too and you only have about a dozen or so retailers that range from that 1% to 3% range, so it is a very broad risk and it is spread out throughout a lot of our retailers. So that one retailer cannot impact you so greatly.

Quentin Vellelley - Citigroup

Okay. Just switching again, on your credit line covenant, I just want to know where those covenants are and whether you have it, any discussions with your lenders on that.

Mark Yale

Sure. Quentin, this is Mark. As it relates to the covenant and we have not got into disclosing where we specifically are. But I cannot tell you that we are in declines for covenants as of the end of the quarter and based upon our detailed forecast through the rest of the year. We will be in compliance at the end of the year and we have not had any discussions yet at this point with respect to our participants banks and just not at a point where we need to or whether this be the right time to have the discussions. I think certainly once the credit markets stabilize and we are probably anticipating sometimes toward the beginning of the next year and that will give you appropriate time to start talking about the renewal of our line.

Quentin Vellelley - Citigroup

Yes, and when you had previously disclosed the number of the shuteye development project. Are those projects on hold at the moment just getting an upside on those?

Michael Glimcher

Clearly in this environment we are not committing to anything new. We are out looking at opportunities, we do not think that this environment will last forever and they are all multiple year lead times on projects. So we are looking at opportunities. Working opportunities or we are going to spend very little of what we call R&D money on the front end and we are not obligating in the Company or the shareholders to anything.

Quentin Vellelley - Citigroup

Okay. Thanks guys. That is great.

Operator

Your next question comes from Ben Yang – Green Street Advisors. Please proceed.

Ben Yang – Green Street Advisors

Hi, good morning. A few more questions on your line of credit, it looks like you guys are at least on track for extending that line into 2010. But do you have a game plan for how you address your line beyond 2010?

Michael Glimcher

Hi Ben, it is Michael speaking. Clearly in this turbulent and uncertain environment we are focused on today and the fact that we got $80 million worth of loans down in the last two weeks, we feel at about that. The fact that we are managing our debt maturities, the fact that we do have some time on our line we feel good about that, but can you tell me which one of those banks and in what form are they going to be around and what the environment is going to be and what lines of credits are going to look like. There is just so much uncertainty out there, beyond 2010. We certainly have great relationships as evidenced by closing loans and getting things done with our lender partners. But the idea that something could get extended to 2010 or beyond 2010 today is probably unlikely. We are optimistic that if things settle down and there similar liquidity in the market, we can start thinking about things and clearly we want to be out ahead of it well before the maturity.

Ben Yang – Green Street Advisors

Okay. And can you remind us what the cost of exercising that extension option is?

Mark Yale

I think I believe it is 15 basis points.

Ben Yang – Green Street Advisors

Okay. And then different topics, can you tell us what your same store sales was for the quarter and maybe how that trended during the quarter?

Mark Yale

Sure. Our sales, they are down a percent from a year ago but actually off slightly from the second quarter and if it helps a little bit more, our traffic was about in line. It was down 2% and I saw one of your basis, I believe it was yesterday and ours was similar, I guess during the quarter July and August we are relatively flat, in September was down going to 5% to 6% range that was eventually consistent with our portfolio so that’s what is made us a little bit nervous as we had in the holiday season. Summer was okay. Sales were actually up from second quarter and it was a drop off in sales volume at the tail into the quarter.

Ben Yang – Green Street Advisors

Okay. And then finally on Scottsdale Quarter, three months ago you talked about 100% of your phase one retail being addressed and as it stand as of last week, you only have 86% addressed. Did anything fall out there? Were there any particular retailers pushing back their openings?

Michael Glimcher

Yes. We did not necessarily, we did not lose any signed leases, certainly, and it is Michael speaking. I think sometimes we are talk about letters of intents and there are some retailers that are pushing from ’09 to 2010. This is a marquee project though, I was out there earlier in the week. As I said, we are on time and on budget and it is not a matter of the ability to lease the space. I think this is evidenced by some of the names that we put out. It is the ability to lease a space to the premier retailer or making ten year leases. We do not want to just sign a lease. We want to sign a lease with a marquee type tenant so the demand has not slowed for the property. We are being very picky about getting the right retailer and phase one is one of the best exposures on Scottsdale Road. We do not want to just put any name there.

Ben Yang – Green Street Advisors

Okay. Thanks guys.

Operator

Your next question comes from John Roberts - Hilliard Lyons. Please proceed.

John Robert – Hilliard Lyons

Good morning Michael. Can you discuss your thoughts on the dividends at this point? And has there been any discussion about potentially temporarily suspending the cash payment of dividend and using that cash to buyback shares in this environment? I have to think that will be hugely accretive both on a cash flow and a [NAV] basis.

Michael Glimcher

John I want a good thoughts there. Clearly, it is a Board decision. It is something that we would generally, in normal times discuss on an annual basis and certainly something that you would discuss maybe on a more quarterly basis. But it is really a full Board decision and as nothing has changed regarding the dividend policy, I really I do not want to make any comment on beyond that presently.

John Roberts - Hilliard Lyons

Okay. You have got a share price that is probably, what, a third of [NAV] at best? You are going to had quite a bit and I do not think that you have huge amount to cash flow just by buying, using that cash flow to buy back shares at this point. Anyway just a comment on that, and could you just discuss maybe what you are seeing and what you and your colleagues in the business right now are discussing about the general market tenor at this point about with share prices the way they are?

Michael Glimcher

It is certainly frustrating again. We said we are fortunate that we are not issuing equity. To us, it is really more than anything else about liquidity. I think a lot of the more highly leveraged REITs, especially mall REITs have suffered disproportionately and I think we have been dragged down maybe by some of our peers. But the two components that we think are most important are our debt maturities and liquidity and again, getting $80 million of loans done in the last two weeks. We think with something just short of miraculous and addressing liquidity. We think as we can show the market that we really do not have refinancing issues. We do not have liquidity issues, which we keep on eliminating any prospect or any thought that we do. We think that should bode well for our share price, but the biggest issue and I do not care if it is mall REITs, REITs or any industries, there is just no liquidity out in the marketplace and still some mechanism exist for liquidity. I think it is going to put pressure across industry sectors.

John Roberts - Hilliard Lyons

Okay. Any thought, I guess in this environment it is almost impossible to do it. But given the share prices have there been thoughts about potential buybacks of stock?

Michael Glimcher

I think first and foremost, we want to have as much liquidity as possible, that we talked about before, to the extent that we would have some additional liquidity and some additional capital. I cannot think of a better place to spend money than on buying our shares. And clearly, wherever you believe or any ideas were somewhere well below that and our share price is incongruent with our NAV. So that would be a great place to spend money. We are being very cautious about spending money anywhere or spending money on the new project that we are committed to and that there are loans in place. We are spending money operating the business that we are certainly being as conservative as possible with capital.

John Roberts - Hilliard Lyons

Alright Michael thanks.

Michael Glimcher

Thank you so much.

Operator

Your next question comes from Rich Moore – RBC Capital Markets. Please proceed.

Rich Moore – RBC Capital Markets

Hi, good morning guys. I think everybody is trying to figure out, per your comments, Michael, what is going on with the debt markets and when they might unfreeze? I mean could you characterize for us, maybe, Mark, it is for you, what loan officers are saying to you at this point? I mean is there any thawing in their conversations? Are they more optimistic than they were a month ago or less optimistic? Or how would you do that?

Mark Yale

Rich, it is Mark. What I would say is I think there is some more optimism that they finally understand their financing structure, what their ultimate cost of capital is going to be. And as they sort through that, as they understand that they are going to continue, they are going to be there, that they know how they going to finance their business. We are seeing some optimism that they can get back to business. I would not use the word aggressive but get back to lending, which what they need to do, but I think it is going to be quite honestly probably at the beginning of next year before we see that. But at least I think now, they are not focusing on survival. I think they understand they are confident they are going to be there. Now it is a matter of exactly what the business model is going to be, sorting that through, what their cost of capital is and what they need to do, what kind of spreads that they need to be profitable.

Michael Glimcher

Rich, it is Michael. Until there is something like the CMBS market whether it is that or something that is reinvented, certainly it is going to have much lower leverage levels and has had historically but until there is a mechanism like that in place, things are pretty backed up. And the bulk of what we have done has been with our line banks and with other commercial banks and that has just been the environment, and we are not special within the REIT industry or within corporate American by and large. It is just where things are today.

Rich Moore – RBC Capital Markets

Okay. Good, thank you. And then on the dividend, if I could real quick, what is obviously you guys have to maintain your REIT status. You have to stay at 90% of taxable net income. Is there, what is the payout ratio, Mark, the fed payout ratio roughly that corresponds to what that minimum 90% would be? And I assume you could not really go below that, is that right?

Mark Yale

Correct. We have to abide by the REIT rules and I do not want to get into the specifics but clearly, we have flexibility. If you look at our return of capital last year, I do not think you are going to see a significant change in our taxable income. We did reduce our dividends, but I think that level of return capital is going to come down. But there is still would be ample cushion and there would be flexibility along those lines if we would want to entertain that.

Rich Moore – RBC Capital Markets

Okay. So you could cut some, but maybe half or something but not much more, I would assume?

Mark Yale

Correct.

Rich Moore – RBC Capital Markets

Okay. And then I am curious on Scottsdale. I mean you did define what “addressed” means and I appreciate that, whether it is signed or out for signature or letters of intent. But I am curious, you sound a little more cautious on the tenant environment and if these tenants get very cautious, how much of that 86% that is, quote, “addressed” could actually walk away from the development without any penalty of any kind?

Mark Yale

We, by and large, within that for phase one have got quite a few and signed leases, I think of that 86%, 70% are actually executed leases, in other cases on ones that are not fully executed, we have plans that are done and approved and then with the city, even if the lease document is not signed. So we are feeling really confident about that property. Retailers are not, most of them are opening more than one store. Retailers are not opening fewer stores and those who have cut store count down by 50% or by 75% or whatever the number, if they are opening up 10% or 20% of the stores that they were opening last year if it is that low, this is the kind of place that they are opening up stores. I do not know of another William Sonoma Home Store opening up anywhere in the country. There is not that many of them something like a West down, I know there is very few of but I think retailers like that know this is a marquee location. I am signing a lease that I need to be in the A location for the next 10 years plus and so I maybe on a tough environment this quarter or next quarter but this kind of real estate is not going to exist and so, it is difficult. Everything is difficult. Everything is slower whether it is your most premium property or your most moderate asset. But we have a lot of confidence on this property and in the interest level just has not waned whatsoever.

Rich Moore – RBC Capital Markets

Okay. Very good, thank you, and then on the last thing on that as well, if I could, is concessions and getting these tenants into either Scottsdale or Polaris or anywhere else for that matter. Are you having to offer more concessions, would you say, at this point?

Michael Glimcher

Again, we are on time and on budget. That there was a pro forma that said it is X amount of rent and X amount of TI. I think we have been consistent with where we thought we would be.

Mark Yale

Rich, I will add if you look at back in our supplement, we have actually spent less on non-anchored TI year-to-date than we did last year. I mean a lot that we did a lot of leasing of last couple of years. We have done a lot year-to-date. You are right. I think we are seeing it some from the retailers is just pressured on their capital, they are managing their own liquidity.

Rich Moore – RBC Capital Markets

Okay. Very good guys, thank you.

Operator

Your next question comes from David Fick with Stifel Nicolaus. Please proceed.

David Fick – Stifel Nicolaus

Good morning gentlemen. The Puente Hills syndication never materialized, the second $45 million and it looked like that was because the recourse element, your JV partners would not sign off on that. Did you give any consideration to potentially taking that yourself, given that I think it was only 25% total subordination for that, which puts you up to about 50% guarantee position?

Michael Glimcher

David, it is Michael speaking. We look at that from all angles and we considered putting up recourse and we really, as you know, we look at that across the whole portfolio and not just asset by asset, in a case when you have a partner you have to look at what works for them as well and do you want to use your recourse full and do you want to use your balance sheet on a JV asset or do you want to use it necessarily on a point on that.

Mark Yale

I think those partners were more comfortable keeping the interest aligned shoulder to shoulder and I think that made some sense. And quite honestly, you can look at that recourse as being somewhat tangible, David, and in essence, we had that available to apply towards the financing when we do ourselves 100%. So we think we will have the opportunity to ultimately make that up somewhere down the road.

David Fick – Stifel Nicolaus

Okay. Your buyer increased their hard deposit on Great Mall. You said last quarter that that would go $1 million but now looks like it is gone to $2 million. Why did thy do that, number one? And number two, what do you think about declining and closing while there is any proceeds there?

Michael Glimcher

Scheduled to close by year end and part of them giving us the additional capital was us giving them a little additional time to understand what they want to do with the asset and we have said, we are going to give you time. We want real monies to know that you are for real and you are going to close, so there is no financing contingency, which is a positive. We have a couple of million dollars of their money, almost 10% of the purchase price. So if it weren’t for the environment, I would say, it is an automatic. In this environment I would say, I am cautiously optimistic that they should move forward.

David Fick – Stifel Nicolaus

Okay. Nate Isbee is with me. He has a question also.

Nathan Isbee – Stifel Nicolaus

Hi, good morning. Can you quantify what your co-tenancy exposure is on you Bon-Ton locations?

Marshall Loeb

I have to look for that, can we get back to you on that? I am not sure I can answer that.

Nathan Isbee – Stifel Nicolaus

Sure.

Michael Glimcher

We had have to sort that, that is probably a pretty decent sized report because we have quite a few stores.

Nathan Isbee – Stifel Nicolaus

Okay. And just one other question, you quantified your third quarter sales report. What are you hearing from the mall level in October when the market really started melting down?

Marshall Loeb

September was the worse month of the quarter and October probably has not changed a lot from that. So it is probably off to a slower start and October compared to prior year is similar.

Nathan Isbee – Stifel Nicolaus

Okay. What did you say about September? I might have missed that.

Marshall Loeb

I am sorry. Mall traffic and our sales volumes were roughly flat July and August and then September, we are off 5% to 6%, which was consistent with what Tallman said, which I thought was interesting. I cannot speak for any of our other peers, and then October is more like September than July today.

Michael Glimcher

That is to be expected.

Nathan Isbee – Stifel Nicolaus

All right, thanks.

Operator

(Operator Instructions). Your next question comes from Michael Bilerman – Citigroup

Please proceed.

Michael Bilerman – Citigroup

Yes, it is Michael Bilerman. Mark or Mike, I want to come back to the credit line. In reviewing your documents, there is one piece that says that subject to the sales of certain conditions for you to extend. What are those conditions?

Mark Yale

Primarily, we cannot be in default when we exercise the extension option.

Michael Bilerman – Citigroup

And what would be deemed to be default?

Michael Glimcher

If you go through the agreement, there are many stipulations in there. It is just making the payments. It is being in compliance with all the covenants.

Michael Bilerman – Citigroup

Well, then, on the covenants, you have a net worth covenant of debt to total assets, secured debt to total assets, and interest coverage, fixed charge. Can you go through where you are today and I think that debt to total assets is the most restrictive and you are currently at 66%. I do not know what your covenant is. But can you go through each of those, where you are today and then where the covenant is.

Marshall Loeb

I think it was responded in another question, we have not disclosed where we are all with specific individual covenants beyond the fact we are in compliance and just as a reminder, in terms of all those covenants, we will say that mostly driven off an asset value, which does not tie to any type of market capitalization. It is predefined in the agreement. It is basically applying a cap rate to an NOI. So there is no tie-in to what is happening with perceived markets prices or anything of that sort.

Michael Glimcher

I would say, Michael, it is Michael speaking. That is based on where business plan and program most conservative business plan, we are comfortable that we have and will continue to meet this covenant and have the opportunity to extend the line.

Michael Bilerman – Citigroup

How many unencumbered assets do you have?

Marshall Loeb

Unencumbered right now would be, I think we have Indian Mound, Morgantown Commons, and then we will be paying down Grand Central with the proceeds from Northtown. So at that point, Grand Central would be unencumbered when we pay that off.

Michael Bilerman – Citigroup

And what is the book value of those three assets? Those are the only three assets that are not secured?

Marshall Loeb

Well, we also have the Polaris Lifestyle expansion that is an unencumbered parcel. So, I mean if you looked at all those you have just roughly, you are talking about somewhere in the neighborhood of probably a little under 200 million of value.

Michael Bilerman – Citigroup

And how much you have recently given recourse on some loans, how much total recourse do you have outstanding?

Marshall Loeb

I do not have that number right in front of me, but that is a covenant in the line and obviously, every decision we make, we factor it in. And we make sure that we are not going to have any issues there and really, it is the last couple of deals we have done. It is on Colonial Park, which I think we have offered 20% recourse. Morgantown Mall and Northtown both have 50% recourse and then we are fully recoursed on Great Mall which we are planning on paying off when we sell the property.

Michael Bilerman – Citigroup

Okay. I think there is a lot of obviously, given the environment and having such a large line of credit in a low unencumbered pool, I think it would be very helpful to layout a very clear specifics, here are all the covenants we have in the line. Here are the conditions that we can have because I think there is a lot of worry with such a large, even if you have the ability to extend some, what happens in 2010 with that line. We are hearing from a lot of lenders that are scouring through credit agreements trying to find a way out to reduce their commitment and so I think you have got to provide some comfort to the street that it is not going to happen.

Michael Glimcher

I appreciate it. It is Michael speaking. I appreciate your input. We just borrowed $40 million from three of our land banks yesterday and they continue to grow their relationships with us. We certainly monitor and look at all the terms and conditions on a regular basis at this time more than ever, we have not disclosed those terms publicly, but we appreciate your feedback and your input on the topic.

Michael Bilerman – Citigroup

How much does the lead bank have those [inaudible] in the seventy?

Michael Glimcher

Fifty million.

Michael Bilerman – Citigroup

So it is pretty broadly distributed amongst how many lenders?

Marshall Loeb

I think there was, I do not have exact count in front of me, 9 or 10 in there, so 50 is the highest.

Michael Bilerman – Citigroup

And just a last question on out-parcel sales, the cost. Does that represent fees or that is just the basis that you had in the parcel?

Marshall Loeb

For the third quarter and that was just one out-parcel in Jersey Gardens and that was just the underlying basis of the land and predevelopment costs that we’re involved with that.

Michael Bilerman – Citigroup

There were no fees to third parties?

Marshall Loeb

There were no fees to third parties. No.

Michael Bilerman – Citigroup

Okay. Thank you.

Michael Glimcher

Thanks a lot Michael.

Operator

And we currently have no more audio questions in queue. I would like to turn the call over to Ms. Lisa Indest for closing remarks.

Lisa Indest

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

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Source: Glimcher Realty Trust Q3 2008 Earnings Call Transcript

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