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CBL & Associates Properties, Inc. (NYSE:CBL)

Q4 2012 Earnings Conference Call

February 6, 2013 11:00 ET

Executives

Stephen Lebovitz - President and Chief Executive Officer

Farzana Mitchell - Executive Vice President and Chief Financial Officer

Katie Reinsmidt - Senior Vice President, Investor Relations and Corporate Investments

Analysts

Todd Thomas - KeyBanc Capital Markets

Paul Morgan - Morgan Stanley

Christy McElroy - UBS

Ross Nussbaum - UBS

Quentin Velleley - Citi

Craig Schmidt - Bank of America Merrill Lynch

Nathan Isbee - Stifel Nicolaus

Rich Moore - RBC Capital Markets

Ben Yang - Evercore Partners

Michael Mueller - JPMorgan

Jeff Donnelly - Wells Fargo Securities

Carol Kemple - Hilliard Lyons

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CBL & Associates Properties, Inc. Fourth Quarter 2012 Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, February 6, 2013.

I would now like to turn the conference over to Stephen Lebovitz, President and Chief Executive Officer. Please go ahead, sir.

Stephen Lebovitz

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss fourth quarter results. Joining me today is Farzana Mitchell, Executive Vice President and Chief Financial Officer and Katie Reinsmidt, Senior Vice President, Investor Relations and Corporate Investments who will begin by reading our Safe Harbor disclosure.

Katie Reinsmidt

This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the company’s various filings with the Securities and Exchange Commission, including without limitation, the company’s most recent Annual Report on Form 10-K.

During our discussion today references made to per share amounts are based on a fully diluted converted share basis. During this call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on Form 8-K along with a transcript of today’s comments and additional supplemental schedules. This call will also be available for replay on the Internet through a link at our website at cblproperties.com.

Stephen Lebovitz

Thank you, Katie. 2012 was successful year for CBL on all fronts with major new strategic financing initiatives, attractive acquisitions, a growing pipeline of redevelopments, expansions and new development opportunities and accelerating operational strength.

We are pleased to achieve our same center NOI growth goal with a 2% increase for the year meeting the top end of our guidance range. This growth was the product of occupancy gains, positive leasing spreads and sales growth as well as expense efficiencies. Portfolio occupancy increased 100 basis points year-over-year. Mall leasing spreads increased 8.4% for the year. And comp store sales grew 3.6%. This strong performance plus interest savings generated from loan repayments, refinancings, and improvements in our line of credit spreads brought our adjusted FFO to $0.62 per share for the quarter and $2.17 for the year, a 5.9% increase over last year.

A key contributor to our strong results in 2012 was the ongoing improvement in our leasing spreads. We added more than a dozen first-time retailers to our portfolio including Lego, Armani Exchange, Tilly’s, Clark’s, Microsoft, Garage, Michael Kors, Pandora, Crocks, Plow and Hearth, Altered State and Love Culture. Demand from these retailers as well as expansion of our existing retailer base allowed us to improve our results steadily over the year.

For the fourth quarter, leases for stabilized malls were signed at a 6.8% increase over the prior gross rent per square foot. Renewal rents were signed at 4.2% increase and new leases were signed at an 18.6% increase. For the fourth quarter, leases three years or less comprised 42% of the leasing activity. Our goal is to continue to convert short-term leases to longer terms, which will benefit our future growth. For the full year, leases for stabilized malls were signed at an 8.4% increase over the prior gross rent per square foot. Renewal rents were signed at a 4.7% increase and new leases were signed at a 23.4% increase. This continued demand from new and existing retailers generated year-over-year occupancy increases across our entire portfolio, with occupancy improving 100 basis points to 94.6% and stabilized mall occupancy improving 30 basis points to 94.5%. Our occupancy has now returned to pre-recession levels showing the resilient nature of the mall business and our portfolio. The holiday shopping season was solid and in line with industry expectations. For the year CBL portfolio mall sales increased 3.6% to $346 per square foot compared with $334 in the prior year period.

This year most of our malls opened at midnight on Black Friday to very strong traffic especially from younger shoppers. Black Friday sales were strong and continued over the entire week-end with targeted promotions making for a strong November. December was slower overall, but traffic and sales picked up near the Christmas holiday.

Regionally we saw strength from our border malls which was partially fueled by the favorable exchange rate. As we look forward to 2013 the steady economy and an improving job picture in our markets which have benefited from strength in the energy and manufacturing sectors lead us to project sales growth similar to what we experienced in 2012. The continuation of the lower tax rates on middle-income consumers was particularly welcome news to shoppers in our markets. We are pleased to complete two off-market acquisitions in December for a total investment of $96.1 million including the assumption of our share of debt. We completed the acquisition of a 49% interest in Kirkwood Mall in Bismarck, North Dakota and executed an agreement to acquire the remaining 51% which we expect to close following approval by the vendor.

The aggregate purchase price for Kirkwood Mall is $121.5 million including a $40.4 million non-recourse loan with a fixed interest rate of 5.75%, maturing in April of 2018. Kirkwood Mall is a terrific acquisition for us and compliments Dakota Square Mall in Minot, North Dakota which we acquired earlier in 2012. The mall enjoys tremendous growth with its proximity to the Bakken formation and benefits from the stability afforded from it’s location in the capital city. The mall sales were up double-digits in 2012 to over $400 per square foot. Occupancy costs are low at around 9% and we see significant upside potential in this center.

Additionally in December we acquired the remaining 40% interest in Imperial Valley Mall and Commons in El Centro, California form our joint venture partner. We developed this center in 2005 and since that time it has enjoyed strong growth in NOI. 2012 sales were at $392 per square foot and occupancy with 95.5%. The mall was well positioned for growth in the future from both its local market and shoppers from the Mexican border town, Mexicali.

I will now turn it over the Katie for her comments.

Katie Reinsmidt

Thank you, Stephen. During the fourth quarter we completed the sale of several properties including Hickory Hollow Mall in Nashville, Tennessee, Town Mall in Franklin, Ohio and Willow Brooke Plaza, a community center in Houston. The properties were sold for an aggregate sales price of $26.5 million. Subsequent to the end of the quarter we completed the sale of two office buildings in Greensboro, North Carolina for a sales price of $30 million. The collective proceeds from these dispositions match out well with the equity needs from our recent acquisitions. We are pursuing additional opportunities to prune non-core and mature assets from our portfolio where we can achieve attractive pricing and hope to have additional announcements to make in the near future.

During the fourth quarter we completed several development projects including Waynesville Commons our community center in Waynesville, North Carolina. This center opened 100% leased anchored by Belk and Petco. At Southhaven Towne Center we opened a 15,000 square foot expansion with Men’s Warehouse and College Station. This month we will begin construction on the second phase adding another 18,000 square to be occupied by Ulta Cosmetics and Versona. Last month we announced a new 65-35 joint venture development projects in Slidell, Louisiana with Sterling Properties. Phase I of Fremaux Town Center is a 295,000 square foot power center development with Dick’s Sporting Goods, Michael’s, Kohl’s, PetSmart, T.J.Maxx, Ulta, and additional shops and restaurants. The project is located on the northern shore of Lake Pontchartrain across from the City of New Orleans. This area experienced tremendous growth following Hurricane Katrina. The project is already 70% leased or committed with construction scheduled to begin in March and a grand opening slated for the second quarter of 2014. Our second phase is in the planning process.

During the fourth quarter, we announced a new expansion project at our Cross Creek Mall in Fayetteville, North Carolina. Cross Creek is one of our most productive centers maintaining a full occupancy rate and generating sales well over $500 per square foot. In 2012, the mall underwent an interior and exterior renovation with updated entrances, lighting, flooring, new seating areas, and an amenities package. The 46,000 square foot exterior expansion will allow us to accommodate a number of retailers that are in demand by the market, but we currently don’t have space for it. The expansion of 89% leased or committed with Chico’s, Loft, White House Black Market, Men’s Warehouse, Reed’s Jewelers and Lane Bryant. Construction is underway with an opening planned for late this year.

With the overall high occupancy rate at our malls and the increased demand by retailers for new stores, we are focusing even greater attention on redevelopments and expansions at our existing properties and expect this activity to accelerate in 2013 and 2014. With construction progressing ahead of schedule, we were able to recently announce an accelerated opening date for the Outlet Shoppes at Atlanta and Woodstock, Georgia. The project is now slated to open weeks earlier on July 18. The center is approximately 85% leased or committed with great retail names, including Saks Fifth Avenue Off Fifth, Nike, and recently announced new addition such as Asics, Coach, Columbia Sportswear, OshKosh B’Gosh, and Waterford Wedgwood . Atlanta will represent the fourth outlet center in our portfolio and we expect continued opportunities for expansion at existing centers and new developments with our joint venture partner, Horizon Group.

Construction continues on The Crossings at Marshalls Creek, our 103,000 square-foot shopping center development in Stroudsburg, Pennsylvania. The 85% leased or committed shopping center development will be anchored by Price Chopper supermarket and Rite Aid and will feature approximately 22,000 square feet of stores and restaurants. The grand opening is scheduled for June 2013 continually improving our shopping centers to ensure that our ongoing market dominance has always been a priority for CBL. In 2012, we added more than 20 junior anchors and 15 restaurants to our centers. We also completed renovations on four centers and just recently announced our program for 2013. This year we will renovate four centers, including Friendly Center in Greensboro, North Carolina, Mall of Acadiana in Lafayette, Louisiana, Greenbrier Mall in Chesapeake, Virginia, and Northgate Mall in Chattanooga, Tennessee. We are also doing upgrade work in Mid Rivers Mall in St. Louis, Missouri. Renovation work is beginning over the coming months and scheduled for completion before the holiday season.

I will now turn the call over to Farzana to provide a financing update as well as a review of fourth quarter financial performance.

Farzana Mitchell

Thank you, Katie. Our financing strategy going forward centers on positioning our balance sheet to achieve an investment grade rating. As part of this process, we are paying off property specific loans as they mature to increase the size of our unencumbered NOI and gross asset value. While we believe most of our key financial ratios would already meet the investment grade criteria due to the laddering of our maturities achieving the necessary ratio of unencumbered NOI to secure an investment grade rating will take us 18 to 24 months.

Initially, we planned to use the capacity available on the lines of credit as well as the term loans to help mitigate maturity and interest rate risk. Ultimately, once we achieve an investment grade rating we will have the flexibility to access the public debt market to achieve longer term fixed rate financing as well as continue to access the secured debt markets selectively. During the quarter, we made significant progress towards our balance sheet goals. We closed on the extension and modification of our two largest credit facilities. The facilities were converted from secured to unsecured and expanded by $155 million to an aggregate capacity of $1.2 billion. The maturities of the facilities were extended to 2016 and 2017 including extension options. And the average spreads reduced by 60 basis points across the leverage grid.

In December, we closed a new loan secured by West County Center in St. Louis, Missouri. This property is owned in a joint venture with TIAA-CREF, the new 10-year, non-recourse $190 million loan has a fixed interest rate of 3.4%, representing the lowest coupon CBL has achieved today.

Our share of the loan was $95 million, which generated excess proceeds to CBL of approximately $23 million after payoff of the existing loan. In November, we retired the $167 million unsecured bank term loan. We also retired the loan on Monroeville Mall, which was scheduled to mature in January. In January, we retired the loan secured by Westmoreland Mall which was scheduled to mature in March. We are taking advantage of the open to prepayment at par date due to retire maturing debt and save on interest expense. After the payoff of the loan secured by Monroeville and Westmoreland Malls, this year we have approximately $187 million remaining of maturing property-specific mortgages. We plan to retire the loans secured by wholly owned properties using our lines of credit.

The loan secured by joint venture properties, including Friendly Center in Greensboro, North Carolina will be refinanced. We will announce details of the new financing activities as they become available. We ended the quarter with $818 million available on our lines of credit providing ample capacity and flexibility. Our financial covenant ratios remain very sound with an interest coverage ratio of 2.6 times and fixed charge coverage of 2 times. Our debt to GAV ratio was 52.7% at year end. Our debt to total market capitalization was 54.7% at December 31, 2012 versus 59.7% at the prior year end.

Fourth quarter 2012 adjusted FFO was $0.62 per share, a 3.3% increase over the prior year period. Adjusted FFO for the year grew 5.9% to $2.17 per share compared with $2.05 in the prior year period – in the prior year. FFO in the quarter and the year was reduced by $3.8 million charge related to the preferred C redemption in November. FFO during the quarter and full year was positively impacted by growth in the same center NOI as well as lower interest expense resulting from our recent loan repayments, favorable financings, and lower rates on the lines of credit as compared with the prior year period.

FFO was also favorably impacted by contributions from our 2012 acquisitions. G&A, as a percentage of revenue, was 4.9% for the year compared with 4.3% in the prior year. G&A in the fourth quarter included severance expense as well as normal compensation increases and higher state taxes. Our cost recovery ratio for 2012 was 99.7% compared with 101.7% in the prior year as a result of lower tenant reimbursements. As Stephen mentioned earlier, we acquired the remaining 40% interest in Imperial Valley Mall, because we acquired a controlling interest as a result of this transaction. We will begin accounting for this property on a consolidated basis and will no longer account for it as an unconsolidated equity method investment. This change in accounting required that we adjust the historical carrying value of our investment in this property to fair value upon consolidation, which resulted in a gain on investment of $45 million. We also acquired the remaining 40% interest in land that is available for the future expansion of Imperial Valley Commons, which is already accounted for on a consolidated basis.

During the course of our quarterly review, we determined that an impairment of $21 million was necessary to write down the carrying value of this land to its estimated fair value. We were pleased to achieve 2% same center NOI growth for the year, which met the high end of our guidance range of 1% to 2%. Same center NOI in the mall portfolio increased 1.7% over 2011. Total same center NOI in the fourth quarter increased 2.2%. Total and same center NOI growth for the quarter was driven by top line revenue growth as a result of the occupancy gains and positive leasing spreads with operating expenses in the malls staying generally flat year-over-year on a same center basis. Other NOIs benefited from lower operating expenses for our subsidiaries that provides security and janitorial services.

Bad debt expense was $181,000 for the quarter compared with a reversal of $279,000 for the prior year period. We have a positive outlook on our growth expectations for 2013 and are providing initial FFO guidance in the range of $2.18 per share to $2.26 per share. The guidance incorporates same center NOI growth forecast of 1% to 3% and portfolio occupancy improvements of 25 to 50 basis points for the year nearing 95%. While the occupancy growth is lower compared with 2012, we would benefit from the continued conversions of our short-term leases.

Our guidance also assumed the payoff of the Westfield preferred by mid-year. As always, our guidance does not include any unannounced acquisitions or disposition activity. As we have said in previous calls, we continued to be focused on reducing our overall leverage. Our strategy is to access the most attractive sources of capital to accomplish this and all equity options are available to us including – today including joint ventures. We have been successful in completing non-core dispositions, which has helped to raise equity as well as improve our portfolio and we plan to be aggressive and continuing these efforts. Additionally at the right valuation level, we would view common equity as an option and would consider an ATM program, which offers the lowest execution cost and allows us to be selective on pricing.

Now, I’ll turn the call back to Stephen for closing remarks.

Stephen Lebovitz

At the beginning of 2012, our corporate goal was to continue the momentum in our operating results from the second half of 2012 into the New Year. I am proud of our entire organization for pulling together and achieving this goal. Our results for the year showed underlying strength of our portfolio and validate our market dominant mall strategy. We also saw renewed external growth and see even greater opportunities for acquisitions, redevelopments and expansions in the years to come.

The supply-demand dynamic in 2013 bodes well for continued improvement in our leasing results. With little or no new development underway, retailers should continue to channel into the dominant retail facilities that we own and operate. Retailers now are focused on broadening their omni-channel strategies which encourage shopping in their stores. Bricks and mortar stores continue to play a critical role and these trends will continue to fuel the demand for new stores. 2012 also marked the fundamental change in our balance sheet strategy that will allow us even greater financial flexibility and strength in the future. Our operational improvements combined with historic low interest rate environment have allowed us to reduce our overall cost of debt positively impacting our outlook. We are looking forward to another year of strong results for CBL.

We’ll now be happy to answer any questions you may have.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Your first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Todd Thomas - KeyBanc Capital Markets

Hi, good morning, I’m on with Jordan Sadler as well.

Stephen Lebovitz

Good morning.

Farzana Mitchell

Good morning.

Todd Thomas - KeyBanc Capital Markets

Hi, just a question. As we think about the company’s goal of obtaining investment grade rating, that the non-core retail and office properties on the market, if you completed all of those sales that you’re contemplating, would that potentially be enough to keep the company from issuing equity or is it right to assume some capital raising, some issuance as part of the road to get to that investment grade rating?

Stephen Lebovitz

Sure. I think like we said in the call that we feel like it’s important to raise cash through a combination of methods and this includes disposition of a non-core and the office continuing to work on potential joint ventures and potentially equity depending on what happens with our stock price. And now we feel like we have the lowest multiple on our peer group and we think there is room in our stock price. So, today, we feel like equity would be dilutive on that basis, but where we think beyond the road it makes sense. Really, the investment grade is almost a separate issue and we look hard at the ratios, we met with the different agencies, and really what’s driving the investment grade is the timing of un-encumbering enough assets, so that we could have a higher ratio of unencumbered NOI and gross asset value to what we have now.

And our leverage, there are companies out there several companies that have higher levels of leverage that are investment grade. So, the leverage is really a goal that we have had internally, it goes back to 2009 when we raised equity to the Teachers joint venture that we did to the dispositions. And we have made tremendous progress and we want to continue to do that, but it’s a corporate goal, it’s not something that’s being forced on it, on us. And also we have the luxury of being patient on that with the new line of credit. We have got more than ample capacity to handle all of our pay-offs for this year. The Westville preferred that we’d like to payoff later this year, the summer. So, we feel like there is really all the different alternatives available to us without a gun to our head or anything pressuring us to do something immediately.

Todd Thomas - KeyBanc Capital Markets

Okay. And then I know that the guidance excludes any future unannounced acquisitions or dispositions, but can you just clarify is there any capital raising either common stock or preferred issuance in the 2013 guidance?

Stephen Lebovitz

No, there is nothing in the guidance from a capital raising point of view. And like I think Farzana made the point in her comments the dispositions that we did really match off with the acquisition. So, we are able to hold our leverage level at the capital level, because of that we would view that as our strategy going forward.

Todd Thomas - KeyBanc Capital Markets

Okay. And then just lastly, I may have missed it, but did you talk about where your occupancy costs ended the year. And then I was wondering if you expect to see similar leasing spreads on gross rents in ‘13 relative to the 8% to 9% increase you saw in 2012? Maybe you could just talk about some of the trends you are seeing so far in ‘13 here?

Stephen Lebovitz

Well, sure. First on the occupancy cost, we don’t have that, yeah, we’ll have it in our 10-K, but we are still collecting that information. We anticipate some modest improvement there given the increase in sales that we had this year. As far as leasing spreads, our goal is double-digit across the board. We were 8.4% average this year. With the new leasing that we are doing, picking up and the new leasing spreads are high-teens or even north of 20%, we think that’s realistic. And also with the higher percentage of longer term leases that we are doing on renewals, we should see better leasing spreads. So, we are cushing to make that goal. At the same time, there is always some retailers that for whatever reason have their individual struggles that we work with and those impact us on a quarterly basis, but on the whole, we feel positive as far as our outlook for the year.

Todd Thomas - KeyBanc Capital Markets

Okay great. Thank you.

Stephen Lebovitz

Thanks a lot.

Operator

Our next question comes from the line of Paul Morgan with Morgan Stanley. Please go ahead with your question.

Paul Morgan - Morgan Stanley

Hi, good morning.

Stephen Lebovitz

Good morning.

Paul Morgan - Morgan Stanley

In terms of the same store guidance, is there any - should we expect any shift in the mix, I mean, your 1% or so in the malls, but kind of big numbers in the other retail which has kind of bounced around quite a bit over the past few years. I mean should we think of your guidance as kind of more what you would expect for the malls or is it being boosted by again higher numbers from the associated community center?

Farzana Mitchell

Majority of our same center NOI growth comes from our malls. So, we expect and hope that, that’s really where our growth will come from, because if you look at our rental income, majority of it all comes from malls. So, we expect that steps where we will get the the pickup.

Paul Morgan - Morgan Stanley

Okay, so, yes, I mean, in this particular quarter, for example, it doubled, the rest even though it is a small proportion. It was 1.2 and 2.2, and 30 basis points, so but when you give the guidance range you do expect a core acceleration in the mall absent it – what else goes on the rest of the portfolio?

Farzana Mitchell

Yeah, absolutely because on a quarter-by-quarter basis, it’s really hard to determine, that’s really where your growth will be. And this quarter yes we had a larger increase in the community center, but really on an overall basis, our growth really is in the mall sector and that’s really the majority of where the revenues come from.

Paul Morgan - Morgan Stanley

And then just to be clear, 42%, what is that number exactly, that’s the leases that are three years or less across the whole portfolio or is that on your new activity?

Stephen Lebovitz

That was just leases signed this quarter, not necessarily occupied, but just the leasing activity for the quarter that was signed.

Paul Morgan - Morgan Stanley

Okay. So, across all new and renewal in the malls?

Stephen Lebovitz

Correct.

Paul Morgan - Morgan Stanley

Okay. And what was the number pre-recession, I mean, what should we expect it to converge to over time?

Stephen Lebovitz

We didn’t’ really track it pre-recession. We started tracking it and it had been up as high as 60% or even higher than that during immediate years during the recession and after. And our goal is to push that down into the 30% – 30% to 35% range. There is always going to be moving parts. We are always doing short-term renewals to make room for other tenants and waiting for retailers to figure out long-term strategy. So, it’s important and we encourage it in certain situations to give ourselves the flexibility especially with the redevelopment activity that we are working on and like we said in the call that’s an even bigger priority and the short-term leasing in many cases if necessary to allow that to happen.

Paul Morgan - Morgan Stanley

Maybe do you have any color behind kind of what the dialogue is with retailers who have been kind of thus far reluctant to commit, I mean, is it they don’t feel like they’re in a capital position to put money into a new store. I assume this is like a lot of cases they’re not rolling into a new store format, but if they would do a longer term deal they would want to do that and maybe that’s an obstacle to doing a longer term deal. I mean, is it that or are they just not sure about where they want to be from an overall store count perspective and how might that be evolving?

Stephen Lebovitz

Yeah, it’s really a combination. Sometimes you have retailers that are in a corporate situation where they are not making long-term commitments. They might be transitioning from a strategy point of view. Other times, we are trying to maintain our flexibility. We’ll do short-term renewal, while we are working to replace someone, but we might have a deal ready or it might not be able to happen in the current year that happens a lot and that’s probably the biggest reason behind them.

Paul Morgan - Morgan Stanley

Okay and then do you think that as you look at your TIs assuming that the number goes down, I mean, should we expect a meaningful boost in that number versus the $57 million in 2012?

Stephen Lebovitz

Well, the TIs increased this year really because of the additional leasing that we did across the portfolio and some of it was driven by some big box activity that we did because like we said we did over 20 boxes throughout the portfolio and that easily involves TI and CapEx as part of that. And looking ahead, we feel like ‘13 will be comparable to what we had this year.

Paul Morgan - Morgan Stanley

Great, thanks.

Operator

Our next question comes from the line of Christy McElroy with UBS. Please go ahead.

Christy McElroy - UBS

Hi, good morning guys.

Stephen Lebovitz

Good morning.

Farzana Mitchell

Good morning.

Christy McElroy - UBS

In Q3, you talked about a lower recovery ratio year-over-year putting pressure on your same store NOI growth. In Q4, it seems like that the recovery ratio is much higher year-over-year. Can you sort of quantify what impact the difference in recovery rate had on your same store NOI growth or can you sort of breakout the same store revenue growth versus the same store expense growth in the quarter?

Katie Reinsmidt

Hey Christy, it’s Katie. We actually saw operating expenses in the malls stay flat year-over-year, which as Farzana mentioned that in her comments. So, it’s really kind of the other category that saw the boost in same center NOI resulting from a reduction in our operating expenses, which you saw that in the recovery ratio, but it wasn’t actually coming through the malls that was just a benefit we had in lower expenses from our subsidiary that does maintenance and janitorial services.

Christine McElroy - UBS

So, was that sort of a one-time thing, I am just kind of thinking about what it should look like in 2013?

Katie Reinsmidt

Yeah, it was definitely a one-time thing. And I think next year or this year 2013, we are going to be in the same range as we were for this year overall, so in the high 90s.

Christine McElroy - UBS

Okay. And how many of your J.C. Penney stores are being outfitted with the new store in store concept and has J.C. Penney or Sears approached you about buying back any space?

Stephen Lebovitz

Sure. With J.C. Penney, it’s roughly 60 of the 70 are scheduled to have the kind of the full renovations for the shops that they are working on. And on the other 10, they are putting in the merchandise from the retailers that they are bringing in, they are just not spending the CapEx to actually create the full new look with the Main Street and all that. So, that’s where that stands. They have not approached – J.C. Penney has not approached us about any type of closings or buybacks there for any of their stores. And there have been several renewals within the portfolio that we have had this year that they have gone forward with per the lease. Sears is ongoing as far as discussions with them about their stores. They have really a variety of strategies as far as their stores that they are working to execute. And we have talked about in the past that one of our centers, Friendly Center in Greensboro, they subleased to Whole Foods. They own the store, and they downsized and renovated, and Whole Foods has been a great addition to the center. So, that was a win-win for us. And in certain locations, we are working with Sears to work with their box to take back portions of it, because of overcapacity they have and to bring another retailer. So, we are unfortunate we have a great relationship with them and we think that it will give us some opportunities to add GLA, which is good given our occupancy levels and our interest in just bringing in the new retailers to our different centers.

Ross Nussbaum - UBS

Hi guys, its Ross Nussbaum here with Christy.

Stephen Lebovitz

Hi Ross.

Ross Nussbaum - UBS

Hi, how are you, Stephen? First question I am looking at your supplemental, your average base rent for your stabilized malls was effectively flat at year end year-over-year. And I am trying to understand that number given the contractual rent increases that you have combined with the positive releasing spreads. Why was that number flat? It was $29.72 versus $29.68 the year before?

Farzana Mitchell

The centers this year, the average base rent this year includes our outlet centers, and they have lower base rents. So, we have El Paso, we have Gettysburg, and also Dakota Square malls, their rents have been – the average rents because of these three properties, the average base rents are lower. So, that’s really what has driven the overall average rents down. So, comparatively next year, it will be a different number.

Katie Reinsmidt

Ross, if you actually take the outlet centers out of our average base rent number in our year-over-year comparison our rents would have been up $0.33.

Ross Nussbaum - UBS

Katie, that’s helpful. Okay. The second question is on your earnings guidance, I want to make sure I am understanding what is or isn’t in there, because you talked about possible equity issuance, joint ventures, dispositions, is any of that in the guidance?

Katie Reinsmidt

None of the new acquisitions will be – if we acquire any other property, that’s not included. The only property that we have included is Kirkwood Mall. It does not include any future disposition, it does not include any equity offering, it does include that we are paying off Westville preferred in mid year. So, that’s baked into the guidance.

Ross Nussbaum - UBS

And so it includes the payoff for the Westville preferred, but what is the assumption in terms of the capital using to take that out?

Farzana Mitchell

We will use our lines of credit to pay that off initially.

Ross Nussbaum - UBS

Okay. So, we should assume that there might be an adjustment to guidance to account for capital activity, sales, or joint ventures at some point during the year? Would that be an unreasonable thing to assume?

Farzana Mitchell

Yes. We will update that every quarter whenever we have new activity whether its equity, whether its acquisition, whether its disposition, we’ll update our guidance every quarter to include that.

Ross Nussbaum - UBS

Okay, thanks very much. I appreciate it.

Stephen Lebovitz

Thank you, Ross.

Operator

Our next question comes from the line of Quentin Velleley with Citi. Please go ahead.

Quentin Velleley - Citi

Hi good morning.

Stephen Lebovitz

Good morning.

Farzana Mitchell

Hi.

Quentin Velleley - Citi

Just in terms of your some of your prepared remarks, you spoke about the expanding pipeline of growth opportunities. And I know you have sort of mentioned an acceleration in center expansion plans. Could you maybe talk about some of the other components of this growing pipeline, so that how many outlet projects might you be looking at, but I guess more importantly, what are some of the acquisition opportunities and what are some of the – I guess the potential volume of acquisition opportunities?

Stephen Lebovitz

Well, I mean, I think as you know, we don’t project the dollar amount of acquisitions that we are planning on doing. And also we don’t really project any type of redevelopments until we announce them, because there is a lot of work to do to make sure that real and we don’t want to announce anything until we feel like it’s ready to go forward. But just in general, there last year we were pleased with the acquisitions we were able to do both the Minot was a marketed deal, but Kirkwood was not and because of our relationships and our reputation we were able to make that happen and that was we think a terrific acquisition for us to complement, Dakota Square and Minot and also to give us another mall with sales above $400 a foot and with an NOI growth profile that’s very attractive. And there is more property is coming available this year than last year. So, we are always looking and we are also pursuing off-market transactions that fit with our strategy.

So, I think it’s just a function, Quentin, of a more robust economy. The progress that we have made on our operating fundamentals, the capital markets, all these different aspects play into it, and give us a better external growth profile, and on the redevelopments as we are close to 95% occupancy. So, for us to accommodate the retailers that want to come into the markets we need to pursue expansions and redevelopments. And we announced Cross Creek Mall in Fayetteville, North Carolina like we said in the call and that’s the kind of project that we are trying to execute. We can add 45, 50,000 square feet. There really are very few new developments happening. So that allows the center to increase its market share and increase its dominance and that’s the kind of the formula that we are looking to execute. So, we see continued opportunities there and that’s what we are pursuing internally.

Quentin Velleley - Citi

Okay, great. And then just and I am not sure if I missed this, but the cap rates just for the model in terms of the $30 million of office assets you sold and also on your acquisition of Imperial Valley?

Stephen Lebovitz

You didn’t miss them we didn’t state them. The buyer on the office buildings is another public company. So, you are welcome to ask them. They requested that we not disclose it. And on the JV acquisition, we did not disclose that at our partner’s request. And also it was the mall, it was the - there was some vacant land, out-parcels, the vacant land at the associated center. So, our cap rate would kind of be misleading because it includes the land in addition to just the income.

Quentin Velleley - Citi

And it is that land, is there a longer term development opportunity with that land or is that something near-term?

Stephen Lebovitz

It’s going to be over time, the out parcels are around the mall and also adjacent to the associated center and there is ongoing one or two deals a year that gets done. And then the associated center, we are starting to see more activity there than we’ve had in the past few years, I mean, that area got hit by the recession and the mall held up really well, but as far as any new retailer interest, it wasn’t that strong. But now we are seeing some activity and trend, so we are hoping it will be near-term versus long-term.

Quentin Velleley - Citi

Okay, thank you.

Stephen Lebovitz

Thank you.

Operator

Our next question comes from the line of Craig Schmidt with Bank of America Merrill Lynch. Please go ahead.

Craig Schmidt - Bank of America Merrill Lynch

Most of my questions have been asked, but in the fourth quarter, was there any outlet NOI in the same center NOI calculations?

Farzana Mitchell

No, there wasn’t any.

Craig Schmidt - Bank of America Merrill Lynch

So, and so Oklahoma City opening I thought late summer in 2011, that still didn’t qualify?

Farzana Mitchell

That’s correct, we have – our qualification is they have to be opened two full years and that’s the comparable.

Craig Schmidt - Bank of America Merrill Lynch

Okay and will you be reporting that separately or will that fall into one of your other existing buckets?

Farzana Mitchell

No, we will include that in our malls.

Craig Schmidt - Bank of America Merrill Lynch

Okay. Thanks a lot.

Stephen Lebovitz

Thanks Craig.

Farzana Mitchell

You’re welcome.

Operator

Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Nathan Isbee - Stifel Nicolaus

Hi, good morning.

Stephen Lebovitz

Good morning.

Nathan Isbee - Stifel Nicolaus

Just going back to the same store NOI discussion for this past quarter, Katie you mentioned that the rents, if I heard correctly, were flat?

Katie Reinsmidt

No, it was the operating expenses that were flat. The rents were definitely up.

Nathan Isbee – Stifel Nicolaus

No, no, no, I’m sorry, operating expenses were flat.

Katie Reinsmidt

Yes, yeah, the operating expenses were flat.

Nathan Isbee - Stifel Nicolaus

So, I’m just trying to figure out with contractual rent bumps, higher occupancy, positive leasing spreads. Why was same store NOI only 1.2%, what was weighting down?

Katie Reinsmidt

Well, I mean, I think there is a few things that go into it, it’s a quarterly anomaly, it is always the first thing where the rent starts coming in at maybe the end of the quarter there is always a lag effect that goes into that. So, I think it’s better to look at the same center mall NOI on a yearly basis instead of a quarterly basis. But at least I think that will be a better number to look at was 1.7 for the year, which was just right next to the 2% that we reported for the overall portfolio. But there is always lags that come in percentage rents and things like that that may fall in the first quarter instead of fourth quarter, different things like that.

Nathan Isbee - Stifel Nicolaus

Okay and then just on the same store NOI guidance for next year, it’s a pretty wide range. Can you just talk a little about what it can take to get you to the bottom or the top, are there any specific things you are allowing for on either end?

Farzana Mitchell

Hi, Nat, this is Farzana.

Nathan Isbee - Stifel Nicolaus

Hi.

Farzana Mitchell

You hope for the best and that’s really what we are trying to project at the top end of the guidance. And the unexpected we just wanted to account for the unexpected and that’s the bottom end of our guidance that’s just really how we view this in terms of our projection. And also depending on leasing and we want to – we hope to have a continued strong leasing efforts and with that 1%, 2%, 3% range gives us that the range that helps us to project where the guidance – the FFO will end up being.

Nathan Isbee - Stifel Nicolaus

Okay, and then I mean…

Farzana Mitchell

Just like we had in this – in past – in 2012.

Nathan Isbee - Stifel Nicolaus

Sure.

Farzana Mitchell

We had some strong leasing results that got us to the top end.

Nathan Isbee - Stifel Nicolaus

Okay, I mean, in your guidance, as you look at the first quarter and the typical seasonal move-outs, you really have not seen any significant announced retailer bankruptcies. How are you seeing that for your portfolio this year? Do you think it’s going to be below years passed in line?

Stephen Lebovitz

Well, the last couple of years have been pretty low. So, and we expect this year to be similar, we haven’t seen anyone, but there is retailers like Wet Seal or GameStop or Radio Shack or some retailers like that that continue to have their challenges, so it seems like there is always someone. And over the past couple of years there have been some retailers that we are worried about that has made good improvements when PacSun was really struggling and they have made some good progress. And Charlotte Russe, we had on our watch list a couple of years ago and their sales were up over 20% last year. So, we are always monitoring it, but I’d agree in general with your comment that the first quarter started out pretty benign and with the trends in the economy, we feel like it will be a good from that point of view.

Nathan Isbee - Stifel Nicolaus

Okay, great. Thank you so much.

Stephen Lebovitz

Thanks Nat.

Operator

Our next question comes from the line of Rich Moore with RBC Capital Markets. Please go ahead.

Rich Moore - RBC Capital Markets

Hi good morning guys. Question for you again on the lines of credit, it seems like you are going to add, you have already got $700 plus million on the lines right now and then you are going to add $185 million to unencumbered mortgages and another $400 million plus to put the preferred units, the Westville preferred units on there. And it strikes me that maybe the guidance is a bit aggressive at the moment given that you haven’t given –obviously you got to clear those lines somehow and so I am thinking that the guidance it stand, as it that includes the adding to the line but not the clearing out of the line is pretty aggressive maybe, is that true?

Farzana Mitchell

Rich, the – actually our lines of credit balance is a little over $400 million, so our capacity is around $800 million now. So, I think you might be including the $228 million that’s scheduled to be paid off later this year. So, I think we have looked at all the pluses and minuses in our guidance numbers and we feel comfortable with where we are in projecting our $2.18 to $2.26 guidance.

Rich Moore - RBC Capital Markets

And Farzana on that would you at some point maybe in the middle of the year consider an unsecured term loan, does that fit into the investment grade strategy and maybe clear the interim balances that you have as you are going forward with an unsecured term loan?

Farzana Mitchell

That’s correct Rich, as we fill up the buckets on the lines of credit, we will look to issue term loans and in order to clear as you just mentioned we will be paying off the Westville preferred. And then as we move forward we are looking back at the lines of credit we will back those decisions. But at this point, we are comfortable with the $800 or so million that we have – it’s available to us. We have already paid off two of the loans that mature or scheduled to mature this year. So, we really have a couple of other loans to payoff. And we have another loan which is a joint venture loan Friendly Center that we expect to refinance that. There will be nominal incremental increase to fund on that loan, but so far we have taken all of those into account in our projections.

Rich Moore - RBC Capital Markets

Okay, good. Thanks Farzana. And then there is obviously product out on the marketplace as you guys are well aware malls that are for sale out there, is there anything or how would you assess that I guess what are you seeing in terms of interesting product in the market if any?

Stephen Lebovitz

Well, there is – you are right there is definitely product out there. And I think our criteria is to be selective to look for properties like the ones we bought last year that are going to be additive to our portfolio, raise our sales per square foot, raise our NOI growth and that’s really the logic behind the dispositions is to recycle capital from assets where there might not be the growth opportunity going forward and there is definitely some things out there that are of interest to us. There is a lot that isn’t of interest to us. There is – that from a fair point of view. And we have always been opportunistic in terms of acquisitions and found opportunities that made sense for us and we will continue to do that this year.

Rich Moore - RBC Capital Markets

Okay, great. Thank you, guys.

Stephen Lebovitz

Thanks Rich.

Operator

Our next question comes from the line of Ben Yang with Evercore Partners. Please go ahead.

Ben Yang - Evercore Partners

Yeah. Hi good morning. Thanks.

Stephen Lebovitz

Good morning.

Ben Yang - Evercore Partners

Just a question on the investment grade rating goal, I mean, obviously there is no urgency to get there that you had mentioned, but do you have any thoughts on how much equity you would need to get there from the combination of sources you had previously referred to?

Farzana Mitchell

Ben, I think when investment grade rating looks at the debt to gross asset ratio as opposed to where, how you would look at the leverage ratio. So, the criteria is different. The important thing that they are looking at is really the unencumbered NOI. And that’s where we are focused on. As we are moving forward, we are un-encumbering our secured debt and creating the unencumbered NOI pool. That’s where we are focused on. All of our other ratios are quite favorable. And as Stephen mentioned to you that mentioned earlier that compared to other companies, our ratios are really solid. And so that’s really our focus to un-encumber the NOI, to create the unencumbered NOI pool going forward, and as we pay these loans off, we will have that pool to actually illustrate and demonstrate. And then they will also look at what our future expectation is compared to the loans that have coming due next year. So…

Stephen Lebovitz

Sure. So, I mean, but you do need to do equity to un-encumber the pool of assets. So, I think it’s clear that whether through joint ventures, asset sales, or new equity that has to be part of the game plan. So, I mean just hypothetically if you did have a gun to your head and had to do a secondary offering tonight, I am just curious about what the size of that would look like hypothetically.

Farzana Mitchell

Yeah. I mean, we are, I don’t think we are in the position where we would – where we can state a hypothetical number. I mean, we do a lot of sensitivity analysis to project different amounts and it depends on a lot of factors including what dispositions we can execute the joint ventures. There is a lot of private equity money out there that’s looking to invest in malls. So, there is good potential for us there to explore joint ventures for kind of malls in the 250 to 350 range. So, that would be something that we are definitely interested in looking at. And given where we are today like we said we have got a lot of flexibility. We have capacity. We have lots of room under our lines. We have the ability to do term loans if we feel like that’s the best thing from an interim strategic point of view. So, that’s really the way we are looking at it.

Ben Yang - Evercore Partners

Okay, fair enough. Just last question, do you have any thoughts on the outlet market in Columbus, I mean your partner Horizon is trying to build something there, and do you think you might team up with them to develop an outlet center in that market or is there any reason that give you pause in terms of trying to doing something there?

Stephen Lebovitz

Well, we have got a great relationship with Horizon. Everything we have done with them has worked out well. Columbus is competitive like you pointed out, but we are evaluating it. Horizon is in there with their side and we are going to study it and see where it goes.

Ben Yang - Evercore Partners

Okay, thank you.

Stephen Lebovitz

Thanks.

Operator

Our next question comes from the line of Michael Mueller with JPMorgan. Please go ahead.

Michael Mueller - JPMorgan

Thanks, hi. I guess, it sounds like you are pretty confident you will have some asset sales hit this year and how confident are you about acquisitions? I mean are you pretty optimistic that you will be able to execute some other acquisitions?

Stephen Lebovitz

It’s really hard to say. I mean this time last year, we didn’t anticipate doing the acquisitions like we did. And we don’t feel any pressure to do acquisitions if something comes our way, then we’ll do it, but we are not desperate to do anything by any means. So, we don’t feel like we have to force ourselves to overpay or to chase competitive assets or part of the competitive process and we will just evaluate each thing individually and see where it goes.

Michael Mueller - JPMorgan

Yeah. I guess, next question, I mean it seems like a lot of questions on the call are all trying to get to an idea of like how much de-leveraging could we expect? So, for thinking about and I know you don’t want to talk about equity and that’s fine, but if we are thinking about either third-party dispositions or a sale of JV interest. I mean, what’s the real rough number of real rough range in terms of the number or it’s like dollar amount that you would like to achieve? And do you think it is internally as more of a just a 2013 priority or is it something that’s – it takes multiple years to knock out?

Stephen Lebovitz

Well, I give you credit for being creative in the way you asked the question. So, we can’t announce this certain amount, I mean, we’ve never done that. And it really don’t make sense, it’s not, it’s definitely not something we feel like we have to do in ‘13, it’s a longer term two to three years or I mean, we’ve got with the lines of credit we’ve got – we’ve some time, we’ve got some room. And you can look at where our leverage has come down. We do, we have about $80 million a year of amortization. So, you can count on that and even beyond that we said we are committed to it. We have made progress in the last few years and we’ll continue. And you look at where our peer group is and everyone is really made good progress in de-leveraging and we want to continue to do so as well. Sorry for not being more specific, but that’s just really as much as we can say right now.

Michael Mueller - JPMorgan

Okay, got it, thank you.

Stephen Lebovitz

Okay, thanks.

Operator

Our next question comes from the line of Jeff Donnelly with Wells Fargo Securities. Please go ahead.

Jeff Donnelly - Wells Fargo Securities

Good morning, guys.

Stephen Lebovitz

Good morning, Jeff.

Farzana Mitchell

Good morning, Jeff.

Jeff Donnelly - Wells Fargo Securities

I guess I’ll l be a bit more direct maybe than Rich is. Do you guys have any interest in the portfolio properties that (Matrix) has had on the market. And I guess as a follow-up, just more generally, where do you think cap rates are on malls today. I know they range all over the place, but brokers we’ve talked to have told us that malls that do around $400 a square foot in sales are about a seven cap today and those in the $300 to $400 range center around on an eight cap. I was just curious how that compares with your observations?

Stephen Lebovitz

Yeah, I think that’s pretty comparable to where we see things, I mean, that’s where the trades that have been done in terms of malls that have been sold have gone in that cap rate range. There is always individual circumstances in any transaction and it depends on the level of debt in today’s market because of just where interest rates are and that’s definitely a factor. Certain buyers are willing to be more aggressive because they can use higher levels of leverage and if anything that’s going to drive cap rates down from where they are now. So, we see cap rates compressed over the past year and that’s going to continue just because of how attractive interest rates are and the ability to generate accretion from that and lock in these rates for longer terms.

Jeff Donnelly - Wells Fargo Securities

And what about the first part of my question, did you guys look at all at the Matrix portfolio? Is there any interest there for you in that – in those assets that they might be marketing?

Stephen Lebovitz

Yeah, forgot about that part of the question. No, we look like we say, we look at everything. There is that the mix bag or some malls in there that would be a good set, some that aren’t, but we are continuing to look at like a lot of people are and I think there is still allowed to go before that gets played out.

Jeff Donnelly - Wells Fargo Securities

And then I had a follow-up to I think it was Christy’s earlier question on Penney’s, maybe just from a different angle, have you guys considered particularly in the case of the 10 properties you said that are not getting the full JC Penney’s treatment. Have you guys considered approaching Penney’s to take unprofitable stores off their hands or buy in stores where you just think you’re going to be better served in the long run with it in the hands of another retailer rather than waiting for them to approach you?

Stephen Lebovitz

Yeah, I mean, that’s a good question. We’ve always been proactive with department stores. We had a number of centers were Belk and Dillard had multiple stores. And we work with them to replace them over time in orderly basis. And same thing with Penney we have dialog with them going all the time. If for some reason, we get the sense from them or we’ve seen an opportunity to replace them in a center where they’re not doing as well, then we are proactive to do that. Just now, this year we’ve got a Dick’s under construction at South Park Mall where Dillard’s was in that. They weren’t doing particularly strong volumes, so we approach them about buying the store and did and have the replacement lined up to do that. And that’s something we are always doing and it’s not just penny, it’s with other stores. The good news is that over the past few years, we have worked through a lot of that with on the other stores and you look at Belk and Dillard’s and Macy’s and Bon-Ton’s performance has really strengthened this year and the department stores are stronger than ever.

Jeff Donnelly - Wells Fargo Securities

I am curious, because I am sure you talked to your peers in the mall business, is there threshold of pain you think out there on Penney’s reinvention where the declines in cross-shopping traffic and sales causes you and other landlords to, I guess, for lack of a better term, cry uncle and push back on them or has that already happened?

Stephen Lebovitz

I think we have all gone to Dallas. We have seen their prototype for their - the new JCP with the shops within the store concept. It’s a great vision. And the execution of it this year has certainly been painful. We are all going to be anxiously looking at their earnings when they come out into February and we are not – we don’t have high expectations, but they have a vision for the company going forward that’s very compelling. And we are working kind of talking to them and being patient to see it executed, because over the long-term it will be a stronger anchor at our properties.

Jeff Donnelly - Wells Fargo Securities

And just one housekeeping question and I am sorry if I missed it, but I think the short-term leases finished in 2012 at around 42% of the portfolio, I think you said. Do you have a sense of how that’s going to trend in 2013? Do you have a target where you would like to be in a year or two?

Stephen Lebovitz

Yeah. We said our target is in the 30%, 35% range. It’s still too early to see the trend, but we saw progress that we started the year in the high 40s and moved down to the low 40s. So, we feel optimistic that we will be able to continue to make progress there.

Jeff Donnelly - Wells Fargo Securities

Great, thanks.

Stephen Lebovitz

Thank you.

Operator

Our next question comes from the line of Carol Kemple with Hilliard Lyons. Please go ahead.

Carol Kemple - Hilliard Lyons

Good morning. I just have a couple of questions on the outlet side, how many sites are you all currently looking at?

Stephen Lebovitz

We are looking at several sites, I can’t be specific with the number, but Horizon has great relationships with retailers and we feel really good about some of the opportunities that they have in front of us. And we are hoping that in the next quarters that we will be able to announce our next project with them.

Carol Kemple - Hilliard Lyons

Okay. And on a market, just take for example Columbus, Ohio where I think there is four companies looking to build there, if another one of your competitors actually put a shovel in the ground first, would you all drop out if you entered that market, or would you try to be a second outlet center in one market?

Stephen Lebovitz

Well, we haven’t said anything about Columbus one way or another. Horizon is in the mix there. Like I said earlier, because of our relationship with Horizon, we are evaluating it, but I don’t think Columbus has room for two outlet centers and it just depends on who gets the retailers. And I don’t think anyone wants to see another St. Louis. I don’t think there are any winners in that situation, where two centers are getting built. And hopefully, the retailers will be able to work with the developers to have some discipline in the market.

Carol Kemple - Hilliard Lyons

And do you all have a specific threshold with Horizon that say once they get the outlet center 50% pre-leased, then you’ll come in, what kind of criteria is there before you all will get involved in a site?

Stephen Lebovitz

We don’t have a fixed criteria. We have got a great relationship with them. We are talking about new opportunities and really it’s a case by case basis. We have been lucky on both Oklahoma City and Atlanta had over 60% pre-leasing before we came into the projects. And that was really fortunate from our point of view, and we are pleased with that, but that doesn’t mean that was down or anything going forward.

Carol Kemple - Hilliard Lyons

Okay, thank you very much.

Stephen Lebovitz

Thank you.

Operator

Our last question is a follow-up question comes from the line of Quentin Velleley with Citi. Please go ahead.

Stephen Lebovitz

You’re still – are you still there?

Operator

Quentin Velleley, your line is open please go ahead with your question. Please verify if your line is muted or pick up your handset. I am sorry we are still unable to hear you. We will be moving on. We have no further questions registered.

Stephen Lebovitz

Alright. Well, we would again like to thank everyone for their participation. And like I said, we are really pleased with our results for the fourth quarter for 2012. And we are even more excited for this year and continuing the momentum from last year and continuing our strong performance. So, thank you all.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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