Glimcher Realty Trust Q1 2009 Earnings Call Transcript

Apr.23.09 | About: WP Glimcher (WPG)

Glimcher Realty Trust (GRT) Q1 2009 Earnings Call April 23, 2009 11:00 AM ET

Executives

Lisa Indest - VP, Finance and Accounting

Michael Glimcher - Chairman and CEO

Marshall Loeb - President and COO

Mark Yale - CFO.

Analysts

Quentin Velleley - Citi

Nathan Isbee - Stifel Nicolaus

David Fick - Stifel Nicolaus

Ben Yang - Green Street Advisors

Rich Moore - RBC Capital Markets

Michael Bilerman - Citi

Operator

Good day, and welcome to the first quarter 2009 Glimcher Realty Trust Earnings Call. My name is Candice and I will be your coordinator for today. At this time all participants are in listen-only mode. We will conduct the question-and-answer session after management’s remarks. (Operator Instructions).

I would now like to turn the presentation over to your host Ms. Lisa Indest, Vice President, Finance and Accounting. You may proceed.

Lisa Indest

Good morning and welcome to the Glimcher Realty Trust 2009 first quarter conference call. Last evening, a copy of the press release was circulated on the newswire and hopefully each of you had the opportunity to review our results. Copies of both the press release and our first quarter supplemental information packet are available on our website at glimcher.com.

Certain statements made during this conference call, which are not historical, maybe deemed forward-looking statements within the meeting of this Private Securities Litigation Reform Act of 1995. For a more detailed description of the risks and uncertainties that may cause future events to differ from the results discussed in the forward-looking statements, please refer to our earnings release and to our various SEC filings.

Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our earnings release and the financial reports we filed with the Securities and Exchange Commission.

Members of management with us today are Michael Glimcher, Chairman and CEO; Marshall Loeb, President and COO, and Mark Yale, CFO.

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

Michael Glimcher

Thank you, Lisa. Good morning everyone and thank you for joining us on today's call. We are very pleased with the start of fiscal year 2009, especially when considering the challenging economic environment, we are currently facing.

To begin with, we delivered solid quarter from a financial standpoint with our $0.46 of reported FFO per share for the first quarter falling at the upper end of our initial guidance range. We also reaffirmed our full year 2009 FFO per share guidance.

Property fundamentals were inline with the companies operating plan. We did see a slightly sharper seasonal decline in occupancy from yearend with mall store occupancy dropping to 91.2%, as of March 31, 2009. However, when considering sign, but not open leases, occupancy increases to 92%. The level at which we currently anticipate finishing 2009.

Re-leasing spreads were flat on a relatively small population of deals. The 3.6% decline in comp mall store sales for the 12 months ended March 31 2009, along with the 1.6% decrease in Core Mall NOI were both modestly better than our expectations going into the quarter. We were also encouraged by customer traffic for the entire portfolio only being down by approximately 2%.

Even though the American consumer is being more cautious in terms of spending, they still enjoy the mall experience and retailer's still perceive malls as their premium distribution channel. All this buds well, when market conditions do stabilize.

As discussed in our previous conference call minimal risks remain with respect to our redevelopment pipeline. Construction of our lifestyle addition at Polaris Fashion Place was completed late last year and we currently have over 90% of the space leased. Additionally with the recent opening of the multi-level Forever21, we have nearly 80% of the space already open and operating.

The only other redevelopments of any significance are the Goody's conversion at our mall at Johnson City where we are adding a new 20,000 square foot Forever21 to the center, and the addition of a 50,000 square foot LA Fitness at Lloyd Center. Both leases are fully executed and scheduled to open by yearend.

From our ground-up development perspective construction of our Scottsdale Quarter project located in Scottsdale, Arizona is moving along according to plan. The first couple of retail stores in Phase I opened in last March, Sonoma Home and West Elm. Sonoma Home is one of only 11 stores nationwide and both stores are exclusive to the state of Arizona.

The other retailers in the initial phase are planning to commence operations throughout the remainder of this year and we currently have over 90% of Phase I retail addressed through signed leases or letters of intent. We are extremely proud of the line up and overall selection of fashion, dining and entertainment that we will offer to our guests.

Now withstanding the inherent risk associated with development in this environment, we remain confident of our ability to execute on this unique opportunity. As we discussed at our last call, our mortgage debt maturities through 2011 are quite manageable, at least the upcoming maturity our $470 million credit facility, as the only major balance sheet issue that needs to be addressed by the company.

We are in compliance with all of the line of credit covenants as of March 31, 2009 and our 2009 projections keep us in compliance, thus providing us with the opportunity to extend the facility through the end of 2010. However, there is a risk that, if economic and capital market conditions continue to deteriorate, we could end up with pressure with respect to certain covenants within our line of credit. I know mane of you have been seeking disclosure of the status of our key covenants.

As we have disclosed in our SEC filings, the most restrictive covenants in our credit facility involved limits on overall leverage and the amount of recourse debt, the company can maintain as well as minimum fixed charge coverage. However, it has never been our policy to provide specifics on where we stand with any of these or other covenants in the credit facility, and we have no plans at this point to change our reporting practices.

With the overall uncertainties surrounding the maturity of our credit facility, we understand the need to address a longer term extension of the facility sooner rather than later and that it will likely involve some de-leveraging for the company. In that regard we have been aggressive in implementing our plans to de-lever the company's balance sheet.

First, we reduced our common stock dividend to $0.10 per share for the first quarter, which on an annual basis would generate over $35 million of additional cash. Clearly, the dividend represents a source of liquidity that is under the company's control and enhancing our liquidity is a strategically sound step in this environment.

Additionally, through a series of headcount and salary reductions, we have lowered corporate overhead by nearly 20%. Finally, the most important part of the plan involves joint venturing or selling assets from within our portfolio.

As we have discussed previously, we understand that in the current market, it might be necessary to move up the quality chain to free up liquidity. Accordingly, we have a number of a quality assets with favorable debt in place that we would be prepared to joint venture at appropriate pricing levels.

In order to ensure that we have the time and flexibility to execute this strategy, we have commenced discussions with the lead bank in online regarding extension and modification of our credit facility. With the strong banking relationships we have forced over the years and well positioned mall portfolio that generates stable cash flow. We remain optimistic that we will be able to secure in longer term solution to our line of credit.

We appreciate that the spotlight is clearly on our balance sheet at this point. We have significant challenges ahead of us, but we believe our relative smaller size and simple capital structure are clear advantages.

The amount of targeted de-levering is significant, when compared to the company's capitalization, but it is not material on an absolute basis. We have one bank group to work with and are dealing with an issue in the millions of dollars versus the billions.

With that said, I’ll now turn the call over to Mark to provide you with more detail on our financial results.

Mark Yale

Thank you, Michael and good morning. As Michael discussed, we reported FFO per share of $0.46 for the first quarter of 2009 falling towards the upper end of our guidance range. Our comp NOI growth for Core Mall portfolio was down by approximately 1.6% for the first quarter, driven primarily by lost rental income from tenant or joint venture bankruptcy that occurred subsequent to the first quarter of 2008.

Lost from rent Steve & Barry's alone represented a 140 basis points of the quarterly decline. As we noted in the release there were no significant changes in the key assumptions that makeup the guidance and accordingly we reaffirmed our ‘09 FFO guidance at a range of $1.85 to $1.95. We should note that this guidance range doesn’t address the potential impact of any asset sales or modifications for our credit facility that Michael discussed.

Remember, key assumptions that makeup the guidance include an anticipated decline in core mall NOI of 2% to 3% excluding the positive impact from redevelopment. G&A was modestly above planned in the first quarter due to one-time expenses associated with the cost reduction initiatives Michael discussed.

However, we still expect to finish the year at approximately $18 million in total G&A cost. Should note that the majority of the corporate overhead savings were in the areas of development and construction, cost were previously deferred or capitalized.

The anticipated level of lease termination and net outparcel sales income is projected to be in the range of $2.5 million to $3.5 million. We are anticipating $4 million to $4.5 million of net fee income. Additionally, we are assuming an average LIBOR rate of 1% to 1.5% for the remainder of the year.

We also provided FFO per share guidance for the second quarter of 2009 in the range of $0.40 to $0.44. Key assumptions driving the guidance include net fee income of $1 million, lease termination in outparcel sales income of a $0.5 million to $1 million, and a decline in Core Mall NOI of approximately 2% to 2.5%.

As Michael discussed the most significant remaining mortgage step maturity is our $18.2 million pro rata share of the mortgage on Tulsa Promenade which matured in March. We are currently working with the lenders on an extension on this non-recourse debt.

In the first quarter, we did close on a $24 million mortgage loans financing on the companies recently completed lifestyle addition at Polaris and initially funded $7 million form the loan. The remaining proceeds we'll be received over the next several months as various [tents] open in the project.

We also continue to work on the remaining syndication of the Grand Central Mall mortgage. Remember we closed on $25 million mortgage loan in February and for a period of six months after the initial funding the loan amount can be increased to $47 million through additional commitments from lenders. Conversations regarding participation are ongoing with several different lenders at this time.

When factoring in available extensions, we have only two maturing mortgages in 2010, totaling approximately $80 million, both of which are non-recourse. One mortgage is on our mall at Johnson City, a center doing about $400 per square foot sales, and the other on our Polaris Town Center, an institutional quality tower center. In 2011 we have another two maturities, totaling approximately $60 million. Accordingly we believe our near term mortgage debt maturities are quite manageable.

We finished the quarter with $392 million outstanding on our credit facility. During the first week of April we received an additional $11 million of proceeds from the Polaris Lifestyle mortgage loans, these funds were immediately applied against the line of credit. We are still estimating available capacity on our line of credit facility of $80 to $100 million as of December 31, 2009.

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

Marshall Loeb

Thanks Mark. As Michael mentioned we are working through a challenging environment that's not gotten easier in 2009. Good news is that our focus on tenant retention we've addressed over 70% of our renewals at this point and are ahead of last year's pace. Re-leasing spreads were flat for the quarter, but looking into our current pipeline, we expect positive spreads in the mid-single digits for the year.

Rent relief continues to be conversation topic with analysts, investors. Strategically dealing with rent relief request has always been part of the business and we have a process in place to address the activity, certainly the number of request and the level of concession have increased over last year.

Although, the majority of our tenants have not made requests, we're not adjusting rents on a portfolio basis for any retailer and the ultimate answer most of the time is still no. Finally, we believe we have an appropriate accommodation in our full year forecast for this type of activity.

While occupancy declined since yearend, we have signed leases for over a 150,000 square feet scheduled to open later this year. On the anchor side, between signed leases and heavily negotiated layers of intent, we have over 125,000 square feet of anchor space address with the opening date scheduled by yearend.

Even in the difficult environment, we expect to finish the year with inline occupancy between 92% to 93% and anchor occupancy around 93%. We experienced another decline in annual sales, but see tangible signs of stabilization as the trailing 12 months of average inline sales were consistent with 12/31. Obviously, a prolonged environment of declining sales to be problematic, but in the shorter term, say the next 12 months with retailers doing a solid job of managing inventory and cost mainly expect to remain profitable and cash flow positive through 2009.

Additionally most of our top retailers have strong balance sheets with significant cash on hand. We also continue seeing stabilization in our sales at our small market fortress locations such as Morgantown Mall, Ashland Town Center and Grand Central Mall. These properties represent the only gain in town with limited competition and also located in non-housing bubble markets.

Accordingly, we believe the overall diversity within our portfolio represents a positive in this environment. We expect new retail supply nationally over the next several years to be minimal at best. Having well located assets occupied in the 90-plus percent rates will bode well for our portfolio. We are optimistic this will strengthen the position of our assets, when retailers began expanding again.

At this time, I’ll turn the call back to Michael.

Michael Glimcher

Thank you, Marshall. Once again these are unprecedented times with serious risks, especially with respect to access to liquidity in the shorter term. Executing on our strategy of selling non-core mall assets over the last several years had been a huge positive for the company.

Our real estate portfolio is better position than ever to weather this turbulent economic environment, generating substantial and stable cash flows. We must continue to maximize property fundamentals, focus on liquidity and near-term debt maturities, specifically the credit facility, all are delivering consistent and reliable earnings results.

We are pleased with the progress made during the first quarter and remain positive regarding, what we can accomplish, as an enterprise throughout this volatile time and more importantly provide growth in future years.

With that said, we would now like to open up the call for questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). Our first question will come from the line of Quentin Velleley of Citi. Please proceed.

Quentin Velleley - Citi

Yeah, good morning guys. Just firstly on the Tulsa line, which reflected on, can you just maybe provide a little bit more detail as to where you’re with lender in negotiations at the moment? And secondly, if you’re still in default in light of this year, does that impact your ability to exercise the option on the line of credit?

Mark Yale

Quentin this is Mark. The answer to your last question, it would have no impact. But you are referring our Tulsa mortgage loan that’s within JV or pro rate share, that loan is just over $18 million, did mature in March. It is cash flowing in terms of servicing the interest. We continue very good dialogue with the lenders on that loan and we are cautiously optimistic that we are going to be able to get a longer term extension on reasonable terms here in the near future.

Quentin Velleley - Citi

Okay. [Mandy] had a question.

Unidentified Analyst

Hey guys, last quarter Jersey Gardens kind of stood out as one asset that influenced the sales per square foot. You mentioned the smaller market assets. What kind of happened in the rest of the portfolio or Jersey Gardens specifically?

Marshall Loeb

Hey, [Mandy], it’s Marshall Loeb. Jersey, you are right. I mean that’s a great asset for sure, really proud of it. It continued to perform well in the first quarter. It’s a mix bag. We are seeing more weakness in some of our, kind of this is an over generalization, larger market models and maybe housing bubble, Florida, California, some of those were small market malls have continued up.

And on a net basis we were pleased to see or maybe cautiously optimistic that our sales per square foot were consistent with year end. And maybe we have and essentially when you read in the paper, hit bottom where people talk about the economy on sales per square foot, maybe we've hit bottom and we'll go up from here and we're optimistic that our traffic has remained relatively flat, down 2% is certainly not material for them a year ago.

Michael Glimcher

[Mandy] it's Michael. I will just add that on more robust times, people look at our smaller market malls and they said why they are relatively flat and we don't see lot of growth. I think the other side of that coin is, in more difficult times, they are relatively flat and you don't see a lot of movement, they are just good stable steady performer. So we are pleased about that part of the portfolio.

Michael Bilerman - Citi

It's Michael Bilerman speaking. Michael can you just help me understand, why you're decision in not providing clear outlines of where you are in your covenants, I'm trying to understand the rational behind not doing it when it is the most critical factor that's suspecting your equity?

Michael Glimcher

Well, certainly, we believe as we said during the call that there is nothing more important to address right now than our credit facility. And we are certainly in discussions as we have said, with our lead bank on extending that facility and talking specifically about the terms of the facility.

When something is not fully completed its hard to speculate what the exact terms are going to be, as it relates to where we are today with it, I think we are pretty clear we were in compliance at quarter end, our budget keeps us in compliance throughout the remainder of the year and sure of that it's our decision not to disclose any more detail.

Michael Bilerman - Citi

But then you also said that there were certain scenarios that you would be under default and rather than surprise your equity investors down the road, why not just be very clear and open with the street as here's what it is, here's where we are and let people figure out if you're going to default or not?

Michael Glimcher

What I would say is based on our business plan and based on where things have gone certainly through one quarter of the year. We are very comfortable with where we are based on our projections; we are comfortable with where we go through the end of the year. There is so many different scenarios that can affect a business and no one knows what's happening certainly in the banking environment and the credit market.

Could you tell me if we're going to lose 1% of our occupancy or will all malls lose 5%? I sure, don't think so. There are just so many variables and it's really difficult to point out all that what is scenario, so based on that it's our decision to make the disclosure, while you may not agree with it, how we have done it.

Michael Bilerman - Citi

And just in terms of size, so the 390, it sounds like, if you are able to renegotiate whether it'll be on rate or the terms. The total size is likely to come down significantly. Where is that equity going to come from? And sort of can you at least put some goal posts around where that goes? Does the 390 go to 200, is that sort of what we are thinking about or is it going down to 300 or is it a 100?

Michael Glimcher

Again, overtime, I think we are seeing and talking very generally that lines have gone from large and unsecured to smaller with more security. Clearly a way for us to delever and to focus on the line would be through the joint venturing and perhaps sales of certain assets. It's really difficult not knowing where that market is today. But we certainly are open to and are very clearly looking at the joint venture or perhaps sales of assets to get to that point.

The line over time will come down, again I don’t have a final answer for you and we do have time on the line. We do anticipate being fully in compliance through the end of this year and have been ability to extend into 2010, but part of us looking at it now as looking for additional term and perhaps looking to loosen up some covenant. So, I’d just like to say, over time it will be less than end of this today and over time we’ll de-leverage through assets sales or joint ventures.

Michael Bilerman - Citi

So, we understand the line of credits or complete unsecured line of credit today, where you’re limited I guess on how much recourse you can put into your secured debt. How much unencumbered assets book value you have, where you could provide that additional value to your line lenders?

Michael Glimcher

Currently, its probably Mike at about 150 and as I said over time we’re going to look to de-lever and we think the best opportunity for that is joint ventures or asset sales.

Mark Yale

And I think Michael this is Mark. I think the idea and just can’t get into those specifics to work it through right now, but the modification would allow us to give us the time to evolve in an orderly fashion to get aligned to where needs to be. Also if you remember in the last call, just to put some goal post around, what our goals are.

We did talk about trying to free up about $100 million to $200 million worth of liquidity. Through asset sales, we obviously freed out some liquidity through we did with the dividend. In that range, we think that gets the line right sized on a go forward basis. And what we are looking forward, with the bank group is to get the time to be able to execute that strategy in orderly fashion.

Operator

Our next question will come from the line of Nathan Isbee of Stifel Nicolaus.

Nathan Isbee - Stifel Nicolaus

Can you just talk about the 150 basis point occupancy decline year-over-year, just looking at your top muster a tenants list, it seems like a number that we’ve had store closures were these expected lease expirations or were these had enough to a closures?

Marshall Loeb

Nat, it’s Marshall. I’d say expected store closures we have lost eight tenants really this year and $100 million in rents. Expected and that they were in our guidance earlier in the year, what's been interesting so far bankruptcies were more painful to us, if I'm answering, this is helpful, probably late '08 than they have been in '09, we lost some tenants.

Our drop in occupancy was more than the previous years, but what was we looked into it, just with the bankruptcies themselves; we would have had more of the drop. The 150,000 square feet were encouraged that those are just the sign leases, if you go further back, we've done more renewals and we are probably almost 300,000 square feet of leases, so you could double it between letters of intent to sign leases. So, the pipeline, retailers still are opening new stores, albeit at admittedly in a slower pace than in previous years.

Michael Glimcher

And Nat, it’s Michael. I’d add although this decrease is greater than previous years, its consistent with where we expected it to be and as we talked about we get back over 92%, where we expect in the year just with leases that we already have done. So, we're feeling comfortable about how we finish out the year and it is quiet frankly greater than a year prior, but no surprises here either.

Nathan Isbee - Stifel Nicolaus

Okay, thanks. And could you just talk about three Saks locations in the portfolio and clearly the luxury segment has been under a lot of stress and this talked that Saks specifically has taken a hard look at all their, at New York locations trying to see which ones make sense and which don't, and if you have any view or had any talks with them about your specific locations?

Michael Glimcher

We have an ongoing dialogue with Saks certainly. Two of them were full price Saks stores. One of them is Saks outfit store. Their outfit business happens to be quite robust. At the Jersey Gardens we'll also have Saks at West Elm and Polaris both very successful centers for the company.

So we have ongoing dialogue, we have operating conveyances in place. Certainly the luxury segment has been challenged, but there is no reason to believe that those stores wouldn't continue to honor their operating conveyances and operate in those centers as Saks.

Nathan Isbee - Stifel Nicolaus

And whether the current tenancy clause is related to Saks look like in the two full price locations?

Michael Glimcher

I'd really sort it, Nat. It probably relates to a small amount of tenancy that is probably the more premium tenancy within those two malls or adjacent to Saks. So, I don't think it's usually detrimental. But again, we'll have to sort that and look at it on a case-by-case basis. And again in our centers those stores have held up pretty well.

Mark Yale

There's no anchor vacancies in any of those three centers today, if that's helpful.

Nathan Isbee - Stifel Nicolaus

Okay, thanks. And just the last question Scottsdale, when do you think you're going to be ready to announce more store openings. I have been there a few weeks ago it looked like the tenant right in the middle of the centers its bears a strong resemblance to pretty popular retailer?

Michael Glimcher

While again I think as we've said on some previous calls, we've signed confidentiality agreements as it relate to specific tenants and want to be respectful of those relationships we have with some premier national retailers. So it's a tremendous project as we said in the earlier remarks. It's difficult environment in which to develop.

However, better quality retailers and again it's more about popular names in that centre, like [cinema home], what's Nike and things that we have announced they are not necessarily luxury, but well known brands. If those kind of retailers, if they are doing ten deals this year and next year Scottsdale Quarter probably on their list. It happen just to be a great location that that type of retailer wants to be in, and they know they are making a long-term decision and they know that they are finding a location that just is irreplaceable.

So we are excited about the progress on that project as you could see. We are well underway. We've probably got more than two-thirds of the construction completed as we put the infrastructure and in Phase I, to support Phase II, and its just going to be a tremendous project. But again we're going to respect the relationships we have with retailers and we'll continue to release names. But we are very excited about the project.

Nathan Isbee - Stifel Nicolaus

And that one retail rate in the middle when do you expect that to open?

Michael Glimcher

This summer.

Operator

Our next question will come from the line of David Fick of Stifel Nicolaus. You may proceed.

David Fick - Stifel Nicolaus

Yes, just a follow-up on the Scottsdale observations. What is your current performing yield on that project?

Michael Glimcher

We've talked about high-single digits…

Mark Yale

Around 8%.

Michael Glimcher

8% range.

David Fick - Stifel Nicolaus

Okay. And then lastly I just want a second on Michael Bilerman's observations and frustration with the disclosure on line of credit, your peers many of them do provide this disclosure and folks who in the past to not provide the disclosure exchange of policy and recognition of the current market environment including companies like (inaudible) who would previously refused and they are now providing complete detail and as a public company my view is that you're obligated to provide this information and that it's a real to service not just to and I think it's simply inexcusable. That's my observation. Thank you.

Michael Glimcher

Thank you for sharing your viewpoint.

Operator

Our next question will come from the line of Ben Yang from Green Street Advisors.

Ben Yang - Green Street Advisors

Hi, good morning. It's Ben here. Just going back to the loan on Tulsa, can you help me understand your decision to what this loan going to default; it looks like you could pay the loan back or at least your share. Whether your partner that was unwilling to payback the loan, is it that the default interest rate might be more attractive than rates that you’re seeing on new loans. Can you just help me understand what happened here?

Michael Glimcher

You know I think its delay process, and everything is taking a bit longer and we have been in constant dialog with the lending group and we're just trying to workout the terms that make sense for all parties to move forward with and we’ve made some nice progress and as we said before, we are hopeful that we're going to have that situation resolved in a short manner.

Ben Yang - Green Street Advisors

Is it possible that you end up getting this mall back to the lender, is that part of the discussion that you might be having today?

Michael Glimcher

It’s Michael speaking that's not our intension and we're optimistic that we’re going to get to a positive resolution for all parties involved.

Ben Yang - Green Street Advisors

Okay. And then final question, what's an appropriate pricing level for joint venturing your assets. Can you give us a range to help us understand, where you might be willing to sell pieces of your portfolio?

Michael Glimcher

I think is difficult and that we're going to be negotiating with other parties to put brackets around it. I think, as we look at it and when we look at on asset by asset basis, what does that asset mean to the portfolio currently and how accretive sized dilutive is the transaction that we would do and once we do overall impact on our balance sheet. So, it's difficult to put a specific price, you also have to look at the debt side, the debt that can be assumed along with that property that should factor into the pricing. So, that’s another variable.

Ben Yang - Green Street Advisors

Okay, thank you.

Michael Glimcher

I think the main point we’d like to make is that, we are certainly committed to asset sales or perhaps joint ventures at appropriate levels.

Operator

Our next question will come from the line of Rich Moore of RBC Capital Markets. You may proceed.

Rich Moore - RBC Capital Markets

Hello, good morning guys. As long as you guys are within your covenants on the line of credit does that mean it automatically extends at the same terms to the end of 2010?

Mark Yale

Yeah, Rich this is Mark. Six months out, which actually is in June, we can go ahead and elect to extend and it’s a 15 basis point fee and extends on the same terms that are in place today.

Rich Moore - RBC Capital Markets

So, worse case, Mark you have the line of credit through the end of 2010 provided you stay within the covenant?

Mark Yale

That is correct.

Rich Moore - RBC Capital Markets

Okay. But your best guess is that through your negotiations if you extend beyond 2010 you will have a smaller capacity?

Mark Yale

I think somewhere down the road, as we move forward it’s going to be smaller capacity it’s going to be in different pricing and security that would be involved is not there today.

Rich Moore - RBC Capital Markets

Okay. So, now as you guys look to makeup that difference it seems like you are kind of out of bullets other than the sale of assets, which we know hasn’t been going very well for anybody in the joint venturing of assets, which with a very few exceptions. I think hasn’t been going very well either. It sounds number one like, the lower quality assets in the portfolio are probably not of interest to buyers right now, is that accurate?

Michael Glimcher

Its Michael speaking, Rich. It’s more likely that we’d look at doing something with a higher quality asset based on where the environment is today.

Rich Moore - RBC Capital Markets

Okay. And then what is the feedback you are getting, I mean what is the level of interest because I got to believe there is some level of trepidation to jump in at a cap rate that could conceivably go higher. So what are you hearing I guess Mike, from these various potential partners?

Michael Glimcher

I think there is a lot of interest circling around and there is a lot of parties that are looking and doing underwriting. There certainly no one seems to want to be the first acquirer of an asset and it seems very little movement in the market place. There still seems to be 100, maybe 200 basis points spread between the bid and the ask, and I'm not going to necessarily say what those kind of cap rates are.

But based on the dialogs we've been having, it seems like things are starting to narrow. It seems like people are starting to think about it more. And again if you look at our better quality assets, we've got some attractive in place debt and I think without attractive in place debt this conversation would be awfully difficult.

But again as we've seen there hasn't been a lot of movement in the market and that's why getting some additional term on the line and some listing of covenants gives us more time and more flexibility to wait until it's the right time to execute on a plan such as this.

Rich Moore - RBC Capital Markets

Okay. So are you down the road at all in any of these negotiations, I mean would you characterize these all as sort of early term negotiations with potential partners or have you made some more substantial partners?

Michael Glimcher

I would say that we've had and again it's not a large group of certainly credible and capable joint venture partners who have spend a lot of time and effort doing underwriting and work various stages, with various parties and again they are still somewhat of a spread between bid and ask. And I think there is also probably a little nervousness on the investor side to say what's the right point to put the toe in the water and as you see no one wants to put their toe in water yet.

Rich Moore - RBC Capital Markets

Okay. So do you think that it's conceivable something could get done by yearend, is that sound realistic?

Michael Glimcher

It's possible, but again, trying to get some additional term on the line and flexibility, we rather have more time than less time certainly as we said, we have the ability to [extend till] 2010. But if we can get some additional time, I think that gives us the flexibility. I don't know where the markets going to go, I certainly can't predict it. I do know that having more time gives us more flexibility.

Rich Moore - RBC Capital Markets

Okay. And then the last thing, as you think about asset sales is there any interest in straight out buying a regional mall asset. I mean, have you seen any buyers, I don't mean your investment partners, but I mean actual buyers for assets, I mean are those sort of emerging or not really there?

Michael Glimcher

I mean, by and large what we're talking about are joint ventures. Again, I think we're committed here to de-levering. So if for example there was a much more aggressive price buying, like buyer versus joint venture, its something you look at, and something you would consider de-leveraging is certainly a most important thing that we're focusing on. But are there buyers out there, I don't know, we'll be talking really more to joint venture partners.

Operator

We have a follow-up question from the line of Quentin Velleley of Citi. Please proceed.

Michael Bilerman - Citi

Hi, its Michael Bilerman back in the line, Dave's pick was little more eloquent than me, but I would incur with his comments as well. As you think about your other source of raising capital, you talked about the dividend and we've obviously seen a substantial amount of equity being raised, a number of companies that have pursued a recap type transactions. Granted your equity market gap is around $100 million, but how do you feel about solving some of the issues that way?

Michael Glimcher

Michael, it's Michael speaking. At our current price it really doesn’t solve the issues. If we were able to perhaps execute on some asset sales perhaps, as we announced an extended line of credit and we do see some share price growth that would be maybe the final step in restructuring our balance sheet it certainly something to look at, but with the current price it just doesn’t make sense.

Michael Bilerman - Citi

And when you think about your unencumbered assets you have Indian Mound, New Town, which are book basis about 30 million books versus sales productivity of $227 million and then you have Morgantown Commons community center. I mean do you think you could be even able to leverage those or is that even collateral that the line of line lenders would want?

Michael Glimcher

I think certainly if you are line lender with an unsecured line having collateral at any level is better than not having collateral. So, would those be the first choice if they look at the menu of assets probably not, but those are probably, what’s available today.

So, I think it’s a reality of number one, when you’ve got great banking relationships we’ve got pleasure working with some really great people. We have a portfolio that has continue to perform and continue to generate great cash flow, which does make our lender committee really comfortable. So, I’m optimistic that with they won’t necessarily have the exact collateral and the exact asset that they’d like it’s a step in the right direction.

Michael Bilerman - Citi

And looking at Polaris, the power center matures in 2010. You do have an option to extend, where would the 820 rate go to if?

Mark Yale

Actually, Michael it's Mark. We actually we do not have an option to the extend.

Michael Bilerman - Citi

I thought you had it in your [shop].

Michael Glimcher

That might be the new Polaris Lifestyle addition loan that we just put on, we have some extension options, but on the Polaris account that's the CMBS that matures.

Michael Bilerman - Citi

Okay. It's listed here in (inaudible) on page 10 is, this loan matures in June 23, with an optional prepayment debt of June 2010.

Michael Glimcher

Yes, that's where the rate goes way up. It’s one of those things, where it shoots up to double-digits and really forced into a maturity at that day.

Michael Bilerman - Citi

Right, that's what I was just, I mean like, even if you couldn't refinance how high if a rate does it go and we are talking.

Michael Glimcher

It goes into the double-digits, but that is an option that would be available to you, it goes into hyper amortization basically.

Michael Bilerman - Citi

Right, that's what I was wondering. And then just want to clarify there is $100 million to$150 million that you’re looking to raise, is that pure equity above and beyond in terms of net cash proceed?

Michael Glimcher

That would be net cash proceed, that's correct.

Michael Bilerman - Citi

And so, if you are selling, if we put all the things together, right. So, you take your $100 million unencumbered assets. You provide that to the land lenders to get an extension and then you embark on asset sales, but the asset sales would need to be significantly in excess of a 100 and 150 in order to generate the $100 million and $150 million of net cash.

Michael Glimcher

That's correct.

Michael Bilerman - Citi

How are you think about I guess the debt on that side? Because I assume that there are going to be levered assets. The reduction of taking out that your share of the leverage, how does that sort of factor into it or is it really, you got to take out your equity piece by selling 50% or 75% of the equity, which could amount, I mean it depends how much you’re selling, but significant amount on your asset base to generate 100 to 150.

Michael Glimcher

Again, there are so many variables of work half, where it is. What percentage of an asset do you sell, yeah, but certainly to generate $100, $150 million in delever, you're certainly taking some value off the table from what you currently have. But what's most important right now is de-levering.

Operator

(Operator Instructions)

Ladies and gentlemen this concludes the question-and-answer portion of today's call. I will turn the call back to management for closing remarks.

Lisa Indest

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

Operator

Thank you for your participation. You may now disconnect. Have a great day.

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