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Executives

Greg Andrews - Chief Financial Officer

Jeff Olson - Chief Executive Officer

Tom Caputo - President

Tom McDonough - Chief Investment Officer

Arthur Gallagher - General Counsel

Analysts

Vincent Chow - Deutsche Bank

Craig Schmidt - Banc of America

Alex Barron - Agency Trading Group

Nick Vetter - Green Street Advisors

Michael Mueller - JP Morgan

David Fick - Stifel Nicolaus

Paul Adornato - BMO Capital Markets

Rich Moore - RBC Capital Markets

Dawn Wolf - Northern Interiors

Equity One Inc. (EQY) Q4 2008 Earnings Call February 26, 2009 9:00 AM ET

Operator

Good day ladies and gentlemen and welcome to the fourth quarter 2008 Equity One earnings conference call. My name is Towanda and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions) As reminder, this conference is being recorded for replay purposes.

I’d now turn the presentation over to your host Mr. Greg Andrews, Chief Financial Officer; please proceed sir.

Greg Andrews

Good morning everyone. Thank you all for joining the Equity One fourth quarter 2008 earnings call. With me on the call this morning are Jeff Olson, Chief Executive Officer; Tom Caputo, President; Tom McDonough, Chief Investment Officer; and Arthur Gallagher, General Counsel.

Before we start I’d like to address forward-looking statements that maybe addressed on the call. Forward-looking statements involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Equity One with the SEC, specifically the most recent reports on Form 10-K and 10-Q which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. We will open the conference up for Q-and-A after the presentation.

I’ll now turn the call over to Jeff Olson.

Jeff Olson

Thank you, Greg and good morning. Thank you for joining us for our fourth quarter earnings call. I’d like to review with you the significant events of the quarter including the positives and negatives of our results and then discuss some of our strategic initiatives.

Tom Caputo will then review operations and Greg Andrews will walk you through our numbers. The positives of the quarter were as follows.

One, excluding $0.09 a share in non-recurring items our fourth quarter FFO was $0.28 a share which is inline with expectations. Greg will discuss the components of the non-recurring items.

Two, our operating results were stable. Occupancy held firm for the quarter on a sequential basis at 92.1%. Our release in spreads turned the quarter; we were up 7% on new leases, 11% on renewals and 9% on tenants subject to options. Our receivables are in good shape. In fact we have reduced our receivables greater than 90 days to $2.9 million from $3.1 million last year.

In addition we have a strong leasing pipeline ahead of us. Just like week we signed an 18,000 square foot least with PetSmart at out center in Enfield Connecticut.

Three, on the development and redevelopment front, Publix opened at Sun Lake our development project in Tampa and Whole Foods opened at our Mandarin project in Jacksonville. Both stores are doing well and we anticipate small shop leasing will pick up now that our anchors are open.

In addition we are expanding southeast regional in Jacksonville by 12,000 square feet to accommodate new store for Staples. At Wesley Chapel indicator we are making good progress with Corinthian college, who is building a 50,000 square foot facility in a space that was vacated by Wal-Mart nearly five years ago. Corinthian is expected to open in June of this year and we expect that to help the adjacent retailers in our overall leasing effort.

Four, we provided 2009 FFO guidance of $1.20 to $1.30 that is inline with expectations.

Five, we sold our remaining interest in Sparkleberry Shopping Center for $24 million reflecting a cap rate in the mid-to-low 7. We have used those proceeds to repurchase $32 million of our own debt primarily our April ‘09 bond at a cost of $27 million

Finally six, in January, we acquired an additional 27% interest in DIM Vastgoed, a Dutch listed real estate Company with ownership interest in 21 shopping centers on the East Coast, totaling 2.6 million square feet. We now control 75% of the company. We look forward to working with DIM supervisory board to improve its corporate governance and operational performance. This transaction increases the size of our portfolio by 16% as measured by gross leasable area.

The negatives of the quarter were; one, our same-site NOI was negative 1.7%. This was primarily a result of an increase in annual real estate tax assessments where we took the full hit in the fourth quarter when updated assessments were finalize, which were higher than amounts previously accrued. We plan to appeal those increases when excluding this adjustment our same-site NOI would have been flat for the quarter.

The good news is that we saw revenue increased by 3.3% primarily a result of built in rental increases, higher recoveries and positive releasing strives and then second, we pushed our development and redevelopment stabilization dates back on River Green from 2010 to 2011, [Tampa nodes] to 4Q, ‘09 from 1Q, ‘09 and on Sun Lakes to 1Q, 2010 from 4Q, 2009.

In addition our net cost has increased by $2.5 million at Sun Lake as a result of lower expectations for Tab sales and then increase in soft cost. Our cost increased by $700,000 at Mandarin, as a result of additional site work and tenant improvement costs. We also dropped Dolphin Village from our redevelopment pipeline and added it back to the core based on current market conditions.

Our development and redevelopment pipeline totals $51 million. We are expecting a 9.6% un-leveraged yield on this investment. Looking ahead, our operating results should provide relative stability as compared to other categories of retail real estate due to our focus on necessity oriented customer.

For example, our top six grocers Publix, Kroger, SuperValu, Winn-Dixie, Food Line, and Buy-Low account for nearly 25% of our rent overall. These grocers generate sales of approximately $500 a foot and have an average rent of under $10 a foot. Most grocers could afford to pay approximately twice this amount and still maintain profitability given our sales volumes. Likewise, our balance sheet is in terrific shape.

We have capital in place to retire an April 2009 bonds of $176 million as a result of careful planning done last year through our equity raise, mortgage financings and recasting our line of credit through September 2011. After this debt is retired, over the next six years we have an average of only $60 million per year in debt maturities.

Our initiatives for 2009 are first and foremost centered around, leasing and expense control. Tom will discuss this in more detail, but we feel very good about the team we have in place to work our assets in this type of an environment. We have made some notable additions in the past six months through the hiring of talented leasing agents. On the expense side, we have cut back in other areas in an effort to reduce our G&A and property related costs.

For example, the majority of our senior management team has voluntarily reduced base pay by 10%. We are also re-bidding every contract and consolidating our vendors. Other initiatives for 2009 include the successful integration of DIM, improving our already healthy balance sheet and being on the hunt for distressed opportunities.

In addition, we have created a Corporate Sustainability and Social Responsibility Council that addresses policies and procedures that pertain to energy consumption, waste, recycling, land use, development construction and our engagement with the community.

Like many organizations, we believe the time is now to embrace opportunities that can ensure we operate with social, environmental and economic awareness. Before turning the call over to Tom, I’d like to discuss our dividend policy.

After considering current economic conditions, upcoming debt maturities and the new tax ruling allowing REETs to distribute stock dividends, we have decided to keep our existing cash dividend of $1.20 a share intact. If we have serious booming debt maturities, large capital commitments, above average leverage, large tenant bankruptcy risk or cash flow coming from unpredictable sources we might have a different opinion.

However, we have positioned our balance sheet for times like this and over time we expect that we will grow into a more comfortable dividend coverage ratio. While we will consider our policy on a quarter-to-quarter basis, based on what we know now we do not foresee any reduction or change in its composition.

Tom will now walk you through our operations.

Tom Caputo

Thanks Jeff and good morning. The current economic environment continues to present a real challenge for retailers and shopping center owners. We expect profitability from most retailers will be under pressure for the foreseeable future and we expect more store closing during the balance of 2009. We are fortunate to own a strong portfolio dominated by shopping centers, anchored by highly productive supermarkets.

The supermarket industry is one of the few sectors which have increased sales and profits over the past year. We operate a very defensive portfolio with 55 centers anchored by Publix with average sales of $587 per foot and 13 centers anchored by Kroger with average sales of $400 a foot.

Equity One as not been materially impacted by most of the troubled retailers in the news. However, we are not entirely immune to some Big Box fallout. Our portfolio does include two centers formerly anchored by goodies, one store closed in the fourth quarter and one store closed at the end of the January.

During the first quarter, Home Depot announced the closing of their Home Depot Expo concept. We own two centers anchored by Home Depot Expo, one in our joint venture with GRI and one in our core portfolio. Both centers are well located. The Expo leases have five to seven years of remaining term and the rents are well below market.

In addition, our Circuit City vacated their store and a center we own in our joint venture with GRI. Maintaining a high occupancy rate in our portfolio is one of our highest priorities. Last September, we reassigned some of our key development personnel and created a group fully dedicated to tenant relations. This group is actively meeting with regional and national retailers to assess opportunities and strengthen our relationships with new and existing tenants.

Since the beginning of October, our tenant relations team conducted over 30 portfolio reviews with retailers and members of our leasing team to better understand retailer performance at existing EQY locations, and explore possibilities for expansion at other Equity One sites.

Over the last six months, we have retooled our leasing team by adding several experienced agents. Our leasing team is very focused on leasing up vacancy and retaining tenants in our portfolio. Our agents no longer have the luxury of waiting for the phone to ring to make deals. They are all on the street two to three days canvassing competitive centers for new tenants. The strength of our leasing team is reflective in our fourth quarter results.

We were able to hold our same-site occupancy flat quarter-over-quarter at 92.1%. Staying even in this environment is truly a remarkable fee. During the fourth quarter we executed 56 new leases totaling approximately 142,000 square feet at an average rate of $15.31 per foot. It is important to note that 52 of the 56 leases were with a combination of national, regional and local shop tenants under 5,000 feet.

In addition we renewed 80 leases totaling approximately 235,000 square feet at an average rental rate of $17 a foot and 17 other tenants exercised contractual renewal options for leases totaling approximately 135,000 square feet at an average rent rate of $9.48 per foot.

As Jeff noted, the most significant lease completed during the quarter was a creative transaction with Staples for 18,000 square feet at South Beach Regional Center in Jacksonville. In order to complete this transaction, we will demolish a 4500 square foot restaurant formerly occupied by Hooters and build a new Staples store. Cash leasing spreads for new leases in the fourth quarter narrowed to 7%, but TIs for these new leases were modest at $2.81 per foot.

Cash leasing spreads for our negotiated renewals were 10.8% and spreads for our contractual renewals were 8.6%. Jeff noted our same-store net operating income declined 1.7% during the fourth quarter. The decline was primarily due to an unusually large increase in real estate taxes at several centers where the final tax assessment resulted in net cost which were much higher than anticipated.

All of these new assessments are being appealed. The decline in NOI does not reflect almost $2 million in annual minimum rent from tenants who have executed leases, but will not commence paying rent until their stores are ready for occupancy. In 2009, our property management team will be focused on property expense controls, combined with enhanced quality and service standards.

We have re-bid our major third party contracts and will realize significant cost savings for each of these services in the range of 10% to 30%. Simultaneously we are reducing the number of vendors providing these services. The savings will help reduce occupancy costs for our tenants and a portion of the savings will drop to our bottom line.

In view of the current economic climate, it’s no surprise many tenants are requesting rent relief, in some cases tenants view rent relief as an entitlement rather than a remedy for real need. We evaluate all requests for rent release on a case by case basis. Before we consider any requests we require the tenant to provide supporting documentation, including historical sales, tax returns and a business plan.

If we decide to grant rent release, our goal is to defer rent rather than forgive the obligation, insist on the right to market and recapture the tenant space, eliminate future renewal options and eliminate any exclusives. Total rent relief granted to date is less than $350,000. The acquisitions market for institutional quality asset continues to be extremely difficult primarily due to the credit markets which are operating with a fraction of the capacity available a few years ago.

Investment sales activity is off by approximately 75%. We continue to explore various opportunities on and off the market. We believe there will be an opportunity to purchase assets in distress this year. We would anticipate pursuing these distressed opportunities with one of our existing partners or with other capital sources who have expressed an interest in teaming up with Equity One.

In summary, we are pleased with the leasing results we posted in the fourth quarter. We believe we have a top tier leasing team which is comprised of individuals who are passionate about providing great results despite the headwinds we face in this economy. We are equally excited about the 2009 plans for our property management group which is implementing revised policies and procedures to carefully monitor our expenses while simultaneously enhancing the services and standards at our centers.

Now I’ll turn the call over to Greg Andrews for his comments about our financial results.

Greg Andrews

I’d like to cover four topics this morning. The first is a review of the balance sheet at year-end and several subsequent events of note. The second is the effect of our acquisition of additional shares of DIM Vastgoed. Third is a review of our income statement for the quarter and fourth our guidance and key drivers that are likely to affect our results next year.

First the balance sheet; we ended the quarter in a strong position with net debt-to-market capitalization of 43.9%. Most important of all, our liquidity remains excellent. At year-end we have $5.5 million in cash and $128.8 million of short-term debt securities.

The outstanding balance under our $227 million line of credit was just $35.5 million. Our only upcoming debt maturity in 2009 is our 3 7/8 bond issue which comes due on April 15. The original size of this issue was $200 million. However, during 2008 we successfully repurchased $23.8 million of these bonds at a weighted average price of $97.05 on the dollar.

As a result at year-end the remaining bonds outstanding amounted to $176.2 million. Our other capital commitments during 2009 are modest. We will amortize approximately $10.4 million of mortgage principal and in addition the cost to complete our remaining development and redevelopment program is just approximately $10 million.

Turning to recent events, subsequent to year-end we received repayment on $42 million of our short-term debt securities. We used these proceeds to pay-up line of credit which has no outstanding balance today. The remaining $86 million of securities mature over the balance of the year.

We believe our strategy of maintaining liquidity, while earning a decent return on these bonds has struck the right balance between prudence and profit. Let me now turn to our investment in DIM Vastgoed. At the end of the third quarter of 2008, we owned approximately 3.8 million shares or 46.5% of the outstanding common stock of DIM.

DIM is a Dutch investment company whose primary assets are 21 shopping centers in the southeastern U.S. Most of the properties are anchored by productive supermarkets such as Publix and Kroger. During the fourth quarter, we purchased additional shares at DIM on the open market. On January 14, we closed on a negotiated purchase of a block of 1.2 million of DIM shares in exchange for 0.8 million shares of Equity One stock.

We also agreed to purchase another 800,000 or so shares of DIM in 2009 or 2010 and in doing so we immediately acquired the voting rights of these shares. Today we own 64% of DIM and have voting control of 75% of the common stock. We are in discussions with DIM’s board and management regarding the manner in which future operating and financial decisions are to be made.

As a result, the precise accounting treatment for our investment remains open, but we do anticipate recording our share of DIM’s earnings as part of our earnings in 2009. DIM’s balance sheet is healthy with liabilities consisting primarily of long-term fixed rate mortgage debt at a weighted average rate of approximately 6%.

The only significant debt that DIM has coming due before 2012 is $51.8 million of mortgage debt due in September of 2009 and that carries an interest rate of approximately 7.8%. DIM is considering a variety of refinancing alternatives and we expect to be in a position to provide more detail on our next call. Now I’d like to run through our income statement for the quarter.

During the quarter we had four unusual items of note. First, we recorded non-cash impairment charges of approximately $4.8 million or $0.06 per share. These related to the write-off of predevelopment cost at two centers as well as the write-off of goodwill.

Number two; we recorded a non-cash provision for income taxes of $1 million or $0.01 per share. In a nut shell we adjusted a valuation allowance for a deferred tax asset associated with one of our taxable rate subsidiaries.

Number three; our G&A expense of $9.6 million contained approximately $1.7 million or $0.02 per share of non-recurring items. The majority of this was the write-off of pre-acquisition cost including costs related to DIM.

These write-offs relate a new GAP pronouncement FAS 141(R) under which companies must expense their acquisition costs. G&A expense also included severance benefits or a reduction in force in the fourth quarter. In addition, we incurred approximately $0.01 per share of G&A expense related to employee training, system upgrades and process improvement. We do not anticipate such amounts going forward.

Number four, we recorded a net gain on the early extinguishment of debt of $1.1 million or $0.01 per share in the fourth quarter related to our repurchase of $20.3 million of our own bond at a discount. As previously mentioned our same-property NOI decreased 1.7% for the quarter reflecting an increase in expenses driven by higher real estate taxes and to a lesser extent repair and maintenance cost.

Well, much of the increase is passed through to our tenant, a portion is absorbed by the company and this has the effect of reducing our recovery ratio in the quarter. Now let me turn to our FFO guidance for 2009.

In setting our guidance we made the following key assumptions. We anticipate that same-property NOI will decrease between 1% and 3%. Coming up with this estimate we have looked at all expiring leases, at risk tenants, account receivable balances and potential un-reimbursed expense. Whether we achieve the high or low end of this range will depend on our entire organization.

Our talented leasing agents who will strive to generate a brisk pace of leasing at the best rents possible, our able property managers will exert maximum efforts to reduce expenses and our efficient lease administration and accounting team who will ensure we are billing and collecting accurately and on a timely basis. I have confidence that our team can deliver.

Earlier this year we repurchased $12 million of our bond at a discount, recognizing a gain on the earlier extinguishment of debt of approximately $0.05 per share. We have included this in our guidance. We have not incorporated any further such gains. The account letters of intent and contracts related to the sale of various land parcels that we expect to close in 2009.

Our FFO guidance includes $0.05 per share of gains that we anticipate from these sales. Overall, our outlook reflects the stability of our portfolio Productive Grocery Anchor Shopping Centers as well as the strength of our balance sheet. In fact, our balance sheet strength has always provided a considerable competitive advantage, but never as much as today. Because of our financial position we are ready to tackle tomorrow’s challenges and to harvest tomorrow’s opportunities.

At this point I’d like to turn the call back over to the operator for Q-&-A.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Vincent Chow - Deutsche Bank.

Vincent Chow - Deutsche Bank

Just a quick question on the guidance, so if we take out the gain on the extinguishment debt and the land sales, we are talking about 110 to 120. The ex-gain sort of run rate Q4 is $0.27, so at the low end it seems like there’s still a projection of some growth. I just want to make sure I understand where that’s coming from.

It seems property NOI is supposed to be down. Is that increase driven primarily by the increased investment in DIM Vastgoed or in any combination of that and maybe operating expense control or G&A expense controls?

Greg Andrews

Yes, Vincent, that’s a good question and expense control clearly is one of the most important initiatives that we have going into 2009. So we do anticipate at the corporate level a lot of effort to control our cost. To some of that pickup that you reference relates -- also you have to realize that when you are comparing the fourth quarter to a full-year there is some seasonality, we get percentage rents in the first quarter that aren’t very large in the fourth quarter, so you would need to factor that in. Then of course there’s no income from DIM in the fourth quarter, but there is going to be income from DIM recognized during 2009.

Vincent Chow - Deutsche Bank

Can you give us a sense what you expect to be in ‘09 for DIM?

Greg Andrews

We can give you a sense of it, but not anything really precise. The company’s properties are very stable and we expect that stability to continue into 2009. So we anticipate that the run rate of NOI and therefore our share of that would be roughly consistent with what it has been in the past.

So I think for 2008, they had indicated essentially when you convert from their accounting which is international financial reporting standards to the kind of our accounting which is FFO, they indicated that the FFO is about $1 and we anticipate something in the range of that going into 2009.

Vincent Chow - Deutsche Bank

That dollar was for the full Company?

Greg Andrews

That dollar is per share of DIM and so we own over 5 million shares, so something along that range. We will however incur some additional G&A costs related to the integration, but that puts a little bit of a parameter around it for you.

Vincent Chow - Deutsche Bank

One last question on the gains that you booked in the quarter, are you still in the market for additional debt buybacks? Is there a potential upside from additional return beyond the first quarter amounts?

Greg Andrews

At a price, absolutely.

Operator

Your next question comes from the line of Craig Schmidt - Banc of America.

Craig Schmidt - Banc of America

I’m just wondering the unanticipated increase in real estate taxes. Is this a possible sign of future things to come with the municipality is probably feeling the pinch of the economy and looking for ways to increase revenue. Is this a possible merging trend?

Greg Andrews

It’s a great question. I think if you look at the particulars of what we saw in the fourth quarter, I don’t think that’s what we saw. Instead what we saw were a couple of instances where properties hadn’t been reassessed for several years and the assessors were playing somewhat catch up, but your question as to what stance they adopt going forward is a very good question, but one that I don’t think we have any particular insight to.

Just as a related point we maintain a very active program to appeal any assessments that we don’t feel are reasonable and so we put a lot of effort on that front to keep our real estate taxes at the appropriate levels.

Craig Schmidt - Banc of America

Just as a follow-up. On the land sales, is this something that you are pretty far long with the negotiations in or is this your expectation you might achieve during the year?

Jeff Olson

There are some that are out in the market today, Craig and others that we anticipate. One of the things we are looking at doing this year is selling about $20 million to $30 million of our out parcels that are leased on a long-term basis, to companies like Walgreens and McDonalds.

The 1031 market is one that happens to be very active and alive today. We are seeing Cap rates in the 6% to 7% range on those types of properties. So we would be very comfortable selling at a six’ish Cap rate on an out parcel that may not matter to the shopping center in any case, because it’s so far removed and then use that capital to repurchase other portions of our own capital structure that may include our own debt.

Operator

Your next question comes from Alex Barron - Agency Trading Group.

Alex Barron - Agency Trading Group

I wanted to ask you, as far as your 2009 guidance can you tell us what assumptions you are making with regards to occupancy and rent spreads as well?

Jeff Olson

In general, we are expecting some decline in occupancy, probably in the neighborhood of 150 to 250 basis points and we think rent growth is going to be very modest.

Alex Barron - Agency Trading Group

I also noticed on your balance sheet, it seems like the properties for sale is down to zero, is that correct? You guys aren’t thinking of selling any other properties at the moment?

Greg Andrews

Alex, this is Greg. That’s correct, there are some formal accounting rules as to when you classify property as Held for Sale and nothing in our portfolio meets that criteria right now, again as Jeff mentioned with respect to some of the out parcels we are beginning to look at that. If we get to the point where we have formal contracts, then properties could be reclassified as Held for Sale, but today nothing meets the criteria.

Alex Barron - Agency Trading Group

What is that criteria? Is it like having a contract or an LOI or something like that?

Greg Andrews

Yes. That is pretty much it.

Operator

Your next question comes from Nick Vetter - Green Street Advisors.

Nick Vetter - Green Street Advisors

With respect to the distressed opportunities, what sort of cap rates and un-levered IORs would you need to see before you pulling the trigger?

Jeff Olson

We don’t have a specific threshold, other than it really needs to be an unbelievable opportunity to compel us to do something. So in each case, you have to look at it on a case-by-case basis. It would be very high.

Nick Vetter - Green Street Advisors

Okay. So low teens, mid teens or just depends?

Jeff Olson

It depends. High.

Nick Vetter - Green Street Advisors

In relation to that, you mentioned earlier that you are thinking about doing these deals in joint ventures. Just curious, is your thoughts on doing those deals in a joint venture or on balance sheet, seems like on balance sheet you might be able to capture a little bit more of the upside.

Jeff Olson

Again, I think it really would depend on the particular acquisition that we are looking at and one of the things we really want to protect is our balance sheet because we think going into this environment we are positioned so well and we don’t want to lose that competitive advantage in the marketplace. So, we will constantly surround ourselves with potential JV partners in order to leverage our position in the marketplace.

Operator

Your next question comes from Michael Mueller - JP Morgan.

Michael Mueller - JP Morgan

Good morning and I apologize for any background. I am in a train station here, but Greg with respect to DIM and the consolidation of that. Should we expect that to occur, do you think in the first quarter going forward?

Greg Andrews

Yes Mike. We are still going through a process which involves discussions with the existing supervisory board, management boards at DIM. That process is going very well and we are very pleased about it, but we want to kind of get through all of that before we make final determinations with respect to exactly how we tackle the accounting.

I think the important point is our share of their earnings will be included in our earnings for 2009.

Michael Mueller - JP Morgan

With respect to the comment on working on integrating DIM in 2009, can you talk about what control and influence you guys had thus far on the operations and what’s likely to change at the margin in 2009?

Jeff Olson

Unfortunately, Mike we are a bit restricted in providing too much additional detail on that issue because we are in the middle of discussions with their Board given our increased ownership position, so I would expect on the next call we would be in a much better position to get into some of the details regarding that.

Operator

Your next question comes from David Fick - Stifel Nicolaus.

David Fick - Stifel Nicolaus

Just one minor follow-up on Michael’s question that you may be able to answer and that is, since you know that you are going to be consolidating results this year, won’t you have to restate last year as though you were consolidated for comparability purposes?

Greg Andrews

David, we wouldn’t have to restate last year. We would have to, I think in the footnote provide a condense set up financial information for the prior few years, but it wouldn’t be on the --

David Fick - Stifel Nicolaus

I’m sorry, that makes sense. A big picture question and I generally hate these on calls, but I think it’s very relevant to your situation. If you think back a year ago Florida really led the economic downturn and you saw it before any of your peers in the small shop space.

I’m just wondering as you look forward, how are you handicapping Florida with respect to housing. It would seem to me that generally you would see a lot of housing clearing that you have agnostic sellers at this point in the banks. A lot of that condo inventory that has been coming on-line over the last six and nine months it is going to be clearing out to end users and at some point you guys, maybe this is optimistic but you are going to see a net benefit of the increase in housing units there over the next 24 to 36 months. How do you look forward on that or is that maybe too optimistic?

Jeff Olson

I tend to agree with you Dave, but I think during the downturn so many people were led to the conclusion on our portfolio that is almost a one to one correlation between the housing market and our properties and what a lot of people don’t quite understand is most of our properties in Florida, by far the overwhelming majority are already in very mature neighborhoods that really were not impacted by the condo craze that occurred.

I do think that you will see absorption overall in the housing market. I think it will have some positive impact on our properties, but I don’t think that will be the single most important aspect to it. We just got sales in from most of our grocery stores and in Publix, in particular their sales were ahead. I think we came in at 587 a foot last year, which was at a higher level than last year in spite of the overall environment.

David Fick - Stifel Nicolaus

What is happening? Is it total inconsistent with what you are seeing happen erosion at the tenant level in the small shop space in particular.

Jeff Olson

There I think when the economy started to turn, some of the smaller shop tenants that had more difficult financing those businesses through traditional vehicles like their lines of credit went away and I think we saw a little fall out there, but it wasn’t overwhelming, all things considered.

Operator

Your next question comes from Paul Adornato - BMO Capital Markets.

Paul Adornato - BMO Capital Markets

I was wondering if you can talk about the two properties that were transferred to the GRI joint venture. What is the potential for additional properties from your existing portfolio going into that structure?

Greg Andrews

Yes Paul. The two properties that were transferred in the fourth quarter were part of a group that we had struck a deal with GRI on early in the year, but those two had mortgage debt that needed to be assumed and it just took a while to work through that process. That’s why it was contributed kind of later in the year, but they had been contracted earlier and were part and parcel of the center that had already been sold to GRI.

Paul Adornato - BMO Capital Markets

With respect to the DIM portfolio, do you think that all of those properties would be held on balance sheet or is there potential to contribute some of those to joint venture?

Jeff Olson

I think initially they would be held on balance sheet and we’ll leave our options open as far as potential joint venture.

Paul Adornato - BMO Capital Markets

Second question, I was wondering if you could talk about the tenor of negotiations with the supermarkets and Publix in particular. They are doing well in this environment. You said that they can pay perhaps double what they are currently paying. What are some of the critical numbers and metrics that you look at when you are negotiating leases with the supermarkets?

Jeff Olson

It’s primarily occupancy cost. I mean just given the stable portfolio that we have and the limited amount of projects in our development and redevelopment pipeline, there aren’t many active negotiations going on, on new leases with many grocers today other than those that are looking to expand their existing stores, but overall what the grocers are concerned about is how will their sales volume be relative to their occupancy costs.

Operator

Your next question comes from Rich Moore - RBC Capital Markets.

Rich Moore - RBC Capital Markets

When we add DIM to our models, it seems it’s like an acquisition. Can you give us the normal acquisition parameters like total size and NOI yield for the company or for DIM?

Greg Andrews

Rich, it’s a little premature again because of the integration discussions that we are having today. In very, very round numbers they are 21 properties with a value in the neighborhood of $400 million in DIM and against that I think they have about $260 million of mortgage debt.

Rich Moore - RBC Capital Markets

Then NOI yield type, some thoughts on that, rough estimate is fine.

Jeff Olson

I don’t think we can really give you a yield. The financial statements are filed and I would encourage you to look at their financial statements Rich.

Rich Moore - RBC Capital Markets

That’s fair enough, Jeff.

Jeff Olson

That might give you some guidance.

Rich Moore - RBC Capital Markets

Sure that’s fair enough. Then I’m looking on page 18 at the TIs and they seem unusually high, but I’m guessing that’s a mistake. Is that right, Greg? It does seem high to me.

Jeff Olson

$2.81?

Rich Moore - RBC Capital Markets

No. The total down there.

Greg Andrews

You are correct. We’ll correct that and have it posted up on the website correctly.

Jeff Olson

The $2.81 is correct and the $1.46 is correct.

Rich Moore - RBC Capital Markets

Yes and I did the average and that 703 that’s seems to be it.

Jeff Olson

Rich good call.

Rich Moore - RBC Capital Markets

My math was fundamentally sound. All right thank you guys.

Operator

(Operator Instructions) Your next question comes from Dawn Wolf [ph] - Northern Interiors.

Dawn Wolf - Northern Interiors

Hi, this is Don Wolf. Given the impact that the recession has had on consumer confidence and retail sales, do you think that you are doing enough to help the small tenants get through this? I mean most of the focus on this call I’ve heard has been on anchor tenants like supermarkets. No surprise, I’m one of those small tenants and I was just wondering what are you trying to do?

Tom Caputo

This is Tom Caputo. I think as we indicated in our remarks, we review each case on an individual basis and I know that we review tenant sales, tenant business plans, etc and we make the best decision. We think we can make working with the tenant to try to help them get through a difficult time. That’s what we do, we get request from people who absolutely don’t need any help and we get request from people who do. So we try to help the people that need it the most and do not give any help to those who do not.

Operator

At this time we have no additional questions in the queue. I would now like to turn the call back over to Mr. Jeff Olson for any closing remarks.

Jeff Olson

Well we appreciate everyone’s time and focus and we look forward to talking to you next quarter. Thank you very much.

Operator

Thank you for joining in today’s conference. That concludes the presentation. You may now disconnect and have a great day.

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