Glimcher Realty Trust Q2 2009 Earnings Transcript

Jul.23.09 | About: WP Glimcher (WPG)

Glimcher Realty Trust (GRT) Q2 2009 Earnings Call July 23, 2009 11:00 AM ET

Executives

Lisa Indest - Vice President, Finance and Accounting

Michael P. Glimcher - Chairman and Chief Executive Officer

Mark E. Yale - Executive Vice President, Chief Financial Officer and Treasurer

Marshall A. Loeb - President and Chief Operating Officer

Analysts

Quentin Velleley - Citi

David Schick - Stifel Nicolaus

Richard Moore - RBC Capital Markets

Jim Sullivan - Green Street Advisors

Operator

Good day ladies and gentlemen and welcome to the Second Quarter Glimcher Realty Trust Earnings Conference Call. My name in Becky and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call Ms. Lisa Indest, Vice President of Finance and Accounting. Please proceed.

Lisa Indest

Good morning and welcome to the Glimcher Realty Trust 2009 Second Quarter Conference Call. Last evening a copy of the press release is circulated on the newswire and hopefully each of you have had the opportunity to review our results. Copies of both the press release and our second 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 meaning of the Private Securities Litigation Reform Act of 1995. For a more detail description of the risks and uncertainties that may cause future events to differ from the results discussed in our 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 for 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 COO and Mark Yale, CFO.

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

Michael P. Glimcher

Good morning everyone and thank you for joining us on today's call. We are quite pleased with the company's overall performance during the first half of fiscal year 2009, especially when considering the challenging economic environment we're currently facing. To begin with we delivered a solid quarter from a financial standpoint with our $0.44 of reported FFO share for the second quarter falling at the upper end of our initial guidance range. We also reaffirmed our full year 2009 FFO per share guidance.

Propriety fundamentals were for the most part inline with the company's operating plan. We did see a slightly sharper decline in occupancies during the quarter than originally anticipated with mall store occupancy dropping to 90.3% as of June 30 2009.

However, when considering signed, but not open leases we remain optimistic that we will finish the year with inline occupancy around 92%. Consistent with our guidance re-leasing spreads were positive for the quarter, up 2% in the 5.7% decline in comp mall store sales was in-line with our expectations going into the quarter.

We were also encouraged by customer traffic only being down by approximately 2% portfolio wide. As we have said before there might be spending a bit less than the current environment, but the American consumer is still enjoying the mall experience. All of this once again supports the view that malls still represent the premier distribution channel for most retailers.

We continue to make solid progress on our Scottsdale Quarter, ground up development located in Scottsdale, Arizona. Instruction of Phase I is substantially completed and we have a GMP contract for Phase II greatly reducing any remaining construction risk for the project. We are also excited about Apple's successful opening in June. The 10,000 square foot store is their premier location in Arizona.

We also continue to make progress from our leasing perspective. We currently have over 90% of the Phase I retail addressed through signed leases for letters of intent. We have also signed new office leases for approximately 30,000 square feet over the last couple of weeks. The fact that we have maintained leasing momentum, both in retail and office through this challenging cycle is a true testament to the quality and strategic value of this project.

On the liquidity and balance sheet front, although we've not finalized anything on our broader initiatives during the quarter, we did make significant progress. As we discussed in our previous call, the upcoming debt maturity on our $470 million credit facility is the only major balance sheet issue that needs to be addressed by the company.

In that regard we have now executed a non-binding term sheet with the lead banks for a modification and extension of our credit facility. They have commenced the foremost indication of the deal with the goal of obtaining final commitments from the remaining lenders by next month.

The deal has currently structured, we'll provide a road map for right sizing of the facility and will give the company the flexibility and time to accomplish the de-levering necessary. The proposed deal will provide the company with the term through 2011 an appropriate covenant release in return for enhanced pricing for the lenders, restrictions on use of proceeds and step productions in facility commitment amounts during the new term.

The good news is that the deal is consistent with our strategy to de-lever and strikes the right balance between appropriate restrictions on use of capital and our ability to effectively manage our business. With that in mind, we continue to focus on de-levering the company's balance sheet.

Remember, we reduce our common stock dividend to $0.10 per share quarterly which on an annualized basis generates over $35 million of additional capital. 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.

In May, we formally commenced market interest in three of our assets. Two A quality mall properties Lloyd Center and WestShore Plaza, as well as our Polaris Towne Center in institutional quality power center located in Columbus, Ohio. With respect to the town center, we expect the initial bids in late August, so we don't have any specific feedback at this time.

As it relates to the two malls, we've been through several rounds of bids and have now received multiple offers from highly qualified investors on each property along with several bids for both. As we have stated previously, assuming everything is equal, our preference and goal would be to joint-venture the properties. But we have also received offers for outright sales as well.

Based upon the current offers and the quality of the bidders, in terms of their ability to execute and perform, it appears that we will be able to joint venture or sell these properties at cap rates in the single-digits. We appreciate that the spotlight is squaring on our balance sheet at this point. We have substantial challenges ahead of us, but we believe our relative smaller size and simple capital structure are clear advantages.

The amount of targeted delivering is significant, when compared to the company's capitalization, but is not material on absolute basis.

We have one bank group to work with and are dealing with an issue in the millions of dollars versus billions. With all that said, I'd now like to turn the call over to Mark to provide you with more detail on our financial results.

Mark E. Yale

Thank you Michael, and good morning. As Michael discussed with FFO per share of $0.44 for 2009, falling towards the upper end of our guidance range. Our comp and NOI growth for Core Mall portfolio was down by approximately 3.3% for the second quarter driven primarily by loss rental income from tenant bankruptcies that occurred subsequent to the first quarter of 2008.

Loss rent from Steve & Barry's alone represented a 160 basis points of the quarterly decline for nearly half of the drop.

Changes to key guidance assumptions, include adjusting our forecast for Core Mall NOI for the full year 2009. We're now anticipating a decrease of 2 to 3% including the positive impact of redevelopment. The decrease has been offset by lower than anticipated cost of funds which has allowed to maintain our 2009 FFO guidance at a range of $1.85 to $1.95.

We should note that this guidance range does not address the potential impact of any asset sales or modifications to our credit facility, as Michael discussed. Other key assumptions that make up the guidance includes finishing the year at approximate $80 million in total G&A cost, lease termination and net outputs sales income projected in the range of 2.5 to 3.5 million, and that's fee income of between $3.5 to $4 million.

Additionally, we are now assuming an average liable rate of approximately 50 to 75 basis points for the remainder of the year. We also provided FFO per share guidance for the third quarter of 2009, in the range of 0.39 to $0.43. Key assumptions driving the guidance include net fee income of $1 million lease termination and output sales income of 3 to 500,000 and a decline in Core Mall NOI of around 4%. The one remaining 2009 mortgage debt maturity that we've been working on has been our $18.2 million pro rata share have been mortgage on the Tulsa Promenade.

The loan matured in March, but during second quarter we have issued a short term extension, which pushed the maturity in the mid-July as we continued working on the longer term extension.

We have now agreed to the terms of the longer term deal, and are now working through finalizing the loan documents. We expect to close on the refinancing by the end of the month. The new term will take us through March of 2011 and will evolve a $5 million pay down.

During the quarter, we received an additional $11 million relating to our financing on the company's lifestyle addition at Polaris. We now have $18.5 million outstanding on this $24 million mortgage loan finance. The remaining proceeds will be received over the next several months with various tenants now under construction open on the project.

We also continue to work on remaining syndication of Grand Central Mall mortgage. Remember, we closed a $25 million mortgage line in February and for a period of six months after initial funding, loan amount can be increased to $47 million for additional commitments from lenders.

We received an additional $5 million during the second quarter and conversations regarding the final participation are ongoing with several different lenders. On factoring in available extension, 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 dealing about $400 per square foot in sales and the other on our Polaris Towne 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 maturity are quite manageable.

Finally, we finish the quarter with $376 million outstanding on a credit facility, representing a reduction of $15 million for the end of the first quarter. With all that said, I would like to turn the call over to Marshall.

Marshall A. Loeb

Thanks Mark. As Michael mentioned, we are working through a challenging environment that continued well into 2009. Generally speaking, retailers remain cautious with capital. Only a few are aggressively expanding and on-guard there will be more bankruptcies and store closing announcements.

While we've not been impacted by any significant individual 2009 bankruptcies, we are feeling the cumulative effect over 2008 and 2009 of smaller rent release concessions and store closing which in total pressure net operating income.

While our annual sales declined during the second quarter, we see signs of stabilization as the trailing 12 months of average inline sales were down around 2% from 12/31/08.

In other words, sales prescribed put barrel from the 2008 level that has held relatively steady in 2009. Obviously a prolonged environment of declining sales would be problematic, but in the shorter term probably over the next 12 months with retailers doing a solid job managing inventory and cost, many expects remain profitable and cash-flow positive through the balance of the year.

Additionally, most our retailers have strong balance sheet with significant cash-on-hand. We also continued seeing sales stabilize in our small market Portrush (ph) locations like Morgantown Mall, Ashland Town Center, and Grand Central.

These properties represent the only game in town with limited competition and located in non-housing bubble market. Accordingly, we believe the diversity within our portfolio helps in this environment. Against this backdrop, we project to finish the year with inline occupancy around 92%, which we think is a solid number when considering the current cycle.

Also contrary to what you hear you hear in the mediate, we are seeing activity in terms of store openings and lease signing. Examples, include opening of 15,000 square foot Old Navy at River Valley Mall this week, New Jersey Gardens, and dealers just opened in Aragon (ph) which is under construction in the old Steve & Barry's space.

Crazy 8 (ph) the new jamboree concept signed and leased this year and opened at Polaris fashion place this week. We recently execute our lease with Denim sporting goods in the former 70,000 sq ft Steve & Barry's space in Grand Central with plans to open by year end.

Victoria Secrets signed a lease during the quarter for portion of the former Steve & Barry's space at near square, and further recent openings include Root 21 stores at Super mall in Seattle and Ashland Town Centre in Toy at leverage town malls. This activity confines with an improved tone and tenant from retailers at the May ICSE contentions with the tenants we've found, we felt the right people attended and we held over a 160 retailer meetings. The diligent gloom from the year end was gone and discussions were more forward-looking versus focusing on store closing and rent release request.

Finally, we expect new retail supply nationally over the next several years to be nominal at best. Having well located assets, occupied in the 94% range for board well for our portfolio. We're optimistic this will strengthen the position of our assets when retailers began expanding again. At this time, I will turn the call back to Michael.

Michael P. Glimcher

Thank you Marshall. I'd like to point out that 90 days ago we were talking about potentially modifying our credit facility. We now have an executed term sheet negotiated with our lead banks for the modification and extension of the facility that are in the process of syndicating the deal to the rest of the bank group.

We were also discussing the possibility of joint venturing or selling some of our mall assets. Since then, we have formally listed three properties and have received multiple offers on the two malls from qualified buyers and investors. We are excited about the progress we have made, but we also understand it is ultimately about the successful execution.

We appreciate everyone's patience and support as we work towards that goal. I'm proud of how our organization is now beginning to through this difficult economic and capital market's environment. We have an experienced team, a sharp focus on executing our business plan and a solid Core Mall portfolio generating stable cash flows.

As we entered, the second half of the year, we will cope against the lower numbers and are optimistic that sales releasing spreads and occupancy have stabilized. Our portfolio has been resilient in this difficult environment and our experience and cohesive team has done a fine job executing our strategy, all of this will carry us through these unprecedented times and more importantly, position us well for strong performance once the economy recovers.

With all that said, I'd like to open up our call for any questions.

Question-and-Answer Session

Operator

[Operating Instructions]. And your first question comes from the line of Quentin Velleley of Citi. Please proceed.

Quentin Velleley - Citi

Hi, good morning it's Michael, I'm here with Quentin and Manny. Mark, maybe you can just extend a little bit on the line of credit in terms of, you talked about those initial size but then it would decrease over time as you have targeted deleveraging goals and so. Can you just sort of bracket that relative to the 470 today, 376 through, where does that take you? How much those lead banks are taking up this prior this indication.

And I guess if you step back from everything while this is a clear piece of, I guess on the sources front, how you and the company are thinking about just overall leverage today versus where you want to get to, given that your almost ten time's debt to EBITDA 75 to 80% debt to GAAP, I know that redoing the line is an important step, but I'm also thinking about where do you want the cap structure to be at the end of the day?

Michael Glimcher

Michael, why don't I start with this. Michael speaking and good morning to all three of you. While we have a non binding term sheet in place with the two lead lenders which would represent a little over a 100 million of about a 105 million. Again it's a non-binding term sheet. We're in the process of a syndication. So I really can't give much more cover on the details.

What I would say is, you've seen quite a few lines done specifically in the mall sectors as well as in the sector in general, and we don't see price in terms and orders going forward as being an outliner. I think you can use the existing deals in the market place as a template for we're going. Currently we're carrying more leverage than we would like to carry and we would certainly like to de-lever by a couple of $100 million.

But beyond that because it’s fluid and it’s been processed, I really can't give much detail on terms and conditions as they are likely to change more than change through the process.

Quentin Velleley - Citi

But the averages in terms of size, you talked about the two leads having about a 100 million. Is it 105 million of what in terms of commitment that they're going to put forward or at least what you are targeting for the line?

Michael Glimcher

I think, they represent a 105 million of the existing life key and via they, and so that's a 105 of the 470. Where it lines up, this is going to evolve overtime and over the next few years obviously we expect to pay the line down and we also would expect the capacity would come down. But to get into the exact numbers it's a fluid process, but I think you'd see a substantial reduction overtime.

Quentin Velleley - Citi

Reduction from ESP 370 is drawn. Is the expectation that becomes -- I'm just trying to get a sense of how much capital in order to get the line extension been re-done. How much you need to pay down as we think about where the source of that capital is going to come from.

And so I mean, is the target to get a $376 million line or is the target a $200 million line and then you have another $175 million of capital through equity raises sales throughout sales through variety of different measures?

Mark Yale

Yeah, I think, this is Mark. I think longer term probably if you really looking at a sustainable line going forward you're already talking about the capacity of 250 million and probably we're targeting to get withdrawal on that down to about 200 million overtime.

Quentin Velleley - Citi

But the initials, you have to come up with about a 125 million in terms to get the line initially done, or they're going to give you some room to go over that 250 and this can be predicated on the asset sales that you are underway.

Mark Yale

Obviously, the asset sales are the place where we going to come up with the significant amount of proceeds. I'd like to give you more color, quite frankly I'd like to able to tell you the line is done and this is exactly where we are. And again, as we said we're hopeful certainly by next quarter that will have a lot more to tell you, but at this point it's a fluid process. And again as Mark said, let’s look at over the next couple of few years of having align of roughly half a size and maintaining capacity on that line so we can operate the business going forward.

Quentin Velleley - Citi

Right. When you look at those asset sales, the three assets that given on the market, there's are about $260 million of debt associated with this three assets. You also talked about having big, well qualified buyers in a single-digit cap rate range. How much excess proceeds if you would sell off, obviously you eliminate the $260 million of debt of the balance sheet.

And I'm going to hold you to a price and just trying to get a sense of range on whether its $25 million, is it $100 million and trying to figure out how much excess above and beyond the debt you're going to be able to take out of the assets?

Mark Yale

Sure. And that's a really good question. I think the range is probably in the 125 to $150 million of proceeds range.

Quentin Velleley - Citi

Above and beyond the debt and that's assuming 100% sale of all through the asset?

Mark Yale

That would mean in total and obviously if it was an 80:20 or 90:10 you would adjust it in an excellent manner.

Quentin Velleley - Citi

And I think Manny has a question as well.

Unidentified Analyst

Hey guys. Just a quick question on you're JVs actually. It looks like the NOI and the JV assets is declining pretty significantly both quarter-over-quarter and year-over-year. I was wondering if you can just give us some color on what's gong on there.

Mark Yale

Okay, this is Mark. I mean the biggest driver of that is Quinta Hills, and if you look at what's happened with some of our big box and the vacancies between Linen & Things, Circuit City, Steve & Barry's, Comp USA that all that have once and that's really putting pressure on our NOI and our rents at Quinta Hills within the Hill and you're seeing that as within the JV income.

I think the other piece is a much smaller portion, is we did bring Scottsdale online for the first time. We had just a handful of stores open, but we got to run the centers. So it is modestly dilutive right now, so that's in the numbers as well. But the biggest drivers, Quinta Hills and Marhall, you might want to just speak on what we are doing, because we are making some progress and getting that addressed.

Marshall Loeb

I agree with Mark. We had every big box basically that's going bankrupt, had a location at Quinta Hills that fills like. And even had our... they were not bankrupt, but trouble we lost some orders just before that.

The good news is, as I look on the other side, our mall traffic since the innovation has been off and it's actually off this year as well, working on single-digits up, but our traffic is up, our small shop occupancy is up at Quinta Hill. We did Scottsdale has just opened a new Forever 21 there, that's been performing very well above their expectations. And line of credit. Hopefully on the next call, I think we'll made pretty good headway with the replacement anchor call it 90, 150 days, we'll have one of those anchors replaced as well. So we've gotten a couple of steps back with bankruptcies there, but we still like the assets. We're just working our way through it.

Unidentified Analyst

Okay, great. And then my last question, in terms of your guidance I think a originally you had guided to occupancy down kind of 150, 250 bids for the year, now sort of down 80 bids. I understand that your expectations, things are coming in kind of above expectations, but it seems like a big swing. Anything specific in there?

Mark Yale

We ended last year at 94.4; we felt comfortable at 92, so I think maybe with a little bit of luck we could ease above that. So that's....

Unidentified Analyst

You're talking about -- so you're talking about the end of 4Q versus the end of 4Q, not the average for the year?

Mark Yale

That's right. We will be reporting an end of the year, not of course the weighted average. Maybe that's the downturn.

Unidentified Analyst

Maybe yeah and that's maybe a little?

Michael Glimcher

I'll like to say we'll comfortably that we'll finish the year at 92.

Unidentified Analyst

And just a point of clarification on the three assets that you're targeting for sale, what's the total in size NOI today for those assets, but you haven't stripped them out and put them held for sale so just trying to piece that together?

Michael Glimcher

We've not disclosed that number and we're not intend to at this point.

Unidentified Analyst

I mean just a range so that we can really try to understand however thing works together I mean is it based on sales proceeds it sounds like it could be upwards of $40 million of NOI from these assets which is very high?

Mark Yale

To can get the gross value and then we kind of told you where we thought Cap rates would be comprised back in to that way in terms of what total amount of the NOI would be?

Unidentified Analyst

Which would be 20% of the NOI of the company, which seems a bit high, but I wanted you to just give us the numbers that we don't more often make errors. It’s out there in the public domain and buyers are looking at the books, are looking at the assets?

Michael Glimcher

I think we've got institutional buyers that have signed confidentiality including agreement that we're working at information that its really not probably in public domain.

Unidentified Analyst

Okay.

Michael Glimcher

Thanks a lot. Thanks for all these questions.

Operator

And your next question comes from the line of Nathan Isbee of Stifel Nicolaus. Please proceed.

David Schick - Stifel Nicolaus

Hey it's Dave Schick. Where are you or what kind of retail are you seeing get concession at this point?

Michael Glimcher

David its Michael speaking. It's really across the board different type of retailers. It depends on the locations. It depends on how much exposure we have to that given retailer. I think the point that Marshal was making in our prepared remarks is, there hasn't been anything that's been extremely large as far as a concession. There has been a lot of small concessions made here and there and I think probably the positive thing that we feel like we've really gotten through the majority of it.

David Schick - Stifel Nicolaus

Okay. And are you able to hold firm at your better malls and basically say what the occupancy is for your higher productivity stage like we're hearing from some of your peers where they're saying their top malls were not conceding not?

Michael Glimcher

It's really more tenant specific and it's interesting as Marshall commented earlier when you look at some of our smaller market which we call fortress or mini fortress whatever you want to call it. Our smaller market malls have hold up really well. And while they don't have to big peaks, they also don't have the big valleys, but it’s more tenant specific and is more the issue of how many source you have with that tenant, when are leases rolling, what are the issues with that retailer.

I think in this environment we've been fortunate that our portfolio has largely at it. The mature women's category, that's really been hit hard, we don't have a lot of exposure in the homes furnishings category, which is really hit hard we don't have lot of exposure to so. It sounds like, you can say there is a general symptom. Marshall has been dealing with quite a bit.

Marshall Loeb

I agree Michael. I'll say this David that as the other thing, we tried to do again the vast majority of these we said no significantly above half, to just to know. The other thing what we do rather than just take the occupancy here, what we've tried to do, if we get a better option we'll take the occupancy here and move in a next tenant. But if we don't a lot of times we've gone in and extended their term if we are reducing the rent or removed kick out options that they may have in the future.

And then probably along with that may be reverse order we've also got options to relax so may be we have to keep you and you need to be at a lower rent to stay in business but, give us a option to re-let so as soon as the market starts to turn, we've got the flexibility on that space.

So I would rather keep the lights on and collect something. And again as Michael said it's really mall by mall and you are right in a better mall, one that will hit us this year for example is Filene's Basement and Jersey Gardens, it will hurt third quarter but we already have a couple of good options we're pursuing on it. And so we will end up in a better spot there and that's kind of a good example of a good mall.

David Schick - Stifel Nicolaus

Okay. You obviously -- 2008 was a worst year -- worse year than 2009 in terms of kind of tenant bankruptcies and specifically Steve & Barry's you mentioned one of the back drills that you are in the process of completing. What about the rest of your 2008 box that you got back? Where do you stand with this?

Michael Glimcher

Again, we don't have a lot of exposure in the big box category. I think Steve & Barry specific. In Steve & Barry specifically as Marshall said I think in some of the prepared remarks, one of them we actually sold which was in the Great Mall so that came out. He mentioned that we have a -- yeah I'm supporting his taking a location in Grand Central Mall, he mentioned with backdrop Jersey location.

Marshall Loeb

Yeah, we back droved -- in a couple of our and things as well, we had two things, one is a specially a long term account. Another one is a permanent lease. I know you mentioned specifically Steve & Barry is at average 21, went into comp USA space that Puente Hills mall, other Steve & Barry's we have three of those filled and probably another of the 10 we probably we have another kind of called three to five in serious negotiations where we've got prospects with trading letters of intent and things like that with.

So we've some of those are done and finished. A number of those versus the lemans and things and then we have at Circuit City that we're working through that but, we've got a prospect for it that we hope maybe we could close by the end of this year.

David Schick - Stifel Nicolaus

Are you getting any sense for retailer stress at this stage in the third quarter of '09 in terms of the balance of this year? I think most of you were been surprised that how healthy retailers appeared to have been here today but, are you loosing any sleep at this point in terms of the potential recurrence of late last year?

Marshall Loeb

Maybe not mostly but,

Michael Glimcher

Look again we talked about traffic soft about 2% sales are up less than 6% while you don't want to report negative numbers. If you read the headline hearing numbers like that that are relatively small I think we're feeling confident the customer wants to come to our mall. She is probably spending a little bit less and timing slightly less often. But from a sales standpoint the glass is over 94% full from the traffic standpoint. The glass is 98% full. I think those are pretty solid numbers in a pretty tough environment.

Marshall Loeb

It could sound like may have a couple of questions.

David Schick - Stifel Nicolaus

Hey good morning. Yeah I just want to say, what was your bad debt expense in Q2?

Mark Yale

It was about 1.7 million.

David Schick - Stifel Nicolaus

Okay. And how is that compared to previous quarters?

Mark Yale

I think it was down slightly about $200,000 it was about $1.9 million second quarter last year.

David Schick - Stifel Nicolaus

Okay. Thank you very much.

Operator

And your next question comes from the line of Rich Moore of RBC Capital Markets. Please proceed.

Richard Moore - RBC Capital Markets

Hi good morning guys. Who are the buyers or the potential buyers that are looking at the three assets? I mean I realize you can't probably give a name, but the categories or the types of buyers that you're seeing interest from?

Michael Glimcher

It's institutional capital Rich, it's certainly not operators, it's not individuals, its large institutions who have this desire and the ability to close.

Richard Moore - RBC Capital Markets

Okay. Would they likely be assuming the debt? Is that the idea Mike?

Michael Glimcher

That's correct. I think it would probably makes those attractive beyond the fact that they are great assets is a fact that on the case of the two malls there is good in place debt which term and good rates.

Richard Moore - RBC Capital Markets

Okay. And it sounds like these guys would be less likely to won a like you say and manage the malls themselves so a joint venture is probably more likely since they need the help running the assets, right?

Michael Glimcher

Absolutely. And as we've said the joint is absolutely our desired outcome -- our more desired outcome in operating these malls from the standpoint of keeping them as part of the Glimcher portfolio is absolutely our desired outcome and hopefully the format it takes.

Richard Moore - RBC Capital Markets

Okay. And then underlying for a second, you have couple of unencumbered assets, couple of malls that are unencumbered. Would those then be secured by the line under the new arrangement or would they would unencumbered?

Mark Yale

The term sheet will cause them to be part of and would become unencumbered to be the part of the security for the line.

Richard Moore - RBC Capital Markets

Okay. And Mark, those were the only two is that right or I am missing one that might be unencumbered as well I think in early there?

Mark Yale

There are two malls and there are two community centers right now.

Richard Moore - RBC Capital Markets

And two community centers, that's right, okay. And then one last thing based on the total of, was that 5 million pay down on your share or was that 5 million from the partnership?

Mark Yale

That's from the partnership.

Richard Moore - RBC Capital Markets

So do that assures?

Michael Glimcher

How exactly it's structured we haven't got into, but it would be 5 million in the aggregate yeah total.

Richard Moore - RBC Capital Markets

Okay. I got you. Great, thank you guys.

Operator

And your next question is a follow up question from the line of Quentin Velleley of Citi. Please proceed.

Quentin Velleley - Citi

Hey guys. I have many of other couple of follow-ups. In terms of de-leveraging obviously the asset sales comes first and you guys want to decrease the sales lines, but where does the common equity play into it. It's been something that some of the REITs have done, you guys haven't obviously, so what are your thoughts?

Mark Yale

This is Mark. I think the idea here is get the line done, get these asset done, get people comfortable with that we've been able to address the right size in line and for those questions with that. And then from there let us see what happens with there share prices. I think, we are hoping to issue equity but I think from our perspective, and to be fair with our shareholders we really need to kind be that last piece of the puzzle and that's how we look at from a sequencing perspective. Buts it’s certainly out there and we want to get to the point, where it’s an option. And then, it’s something down the road that we understand going to be the part of the solution.

Quentin Velleley - Citi

Okay. Then I have sort of follow-up to -- question. Where do you see that's going for the year?

Mark Yale

I think, they are going to track very consistent with what you saw in the first couple quarters, so probably around that 1.5 to $2 million range.

Quentin Velleley - Citi

Okay, perfect. Thanks guys.

Operator

And your next question comes from line of Jim Sullivan of Green Street Advisors. Please proceed.

Jim Sullivan - Green Street Advisors

Thank you. Good morning. Curious with respect to the asset sales, why you chose the assets that you currently have in the market. How did you determined those where the right ones to put on the block?

Michael Glimcher

Jim that's a good question its Michael speaking. We looked at where we want it to come out from a standpoint of proceeds. We looked at what type of assets we thought buyers would be interested in. And then obviously the last piece of it was having really attractive in place debt at good rate with terms still less. So when we took those three factors and put them together it really drew up to the assets specifically.

Jim Sullivan - Green Street Advisors

And if not for the attractive in place debt would the Cap rate still be in the single digit?

Michael Glimcher

Asking and understanding where Cap rates are and what Cap rates people are paying, it's a really hard question to answer. Currently the in place debt, clearly that the fact that these are really high quality assets, who knows where the market is and who knows what exactly we're considering.

Mark Yale

Jim I'd say if you didn't have the that in place, I mean you could in call on to question where they get the assets sold at all because that's just a huge question mark in terms of what that might be available and that's just another known-unknown and that would try create some challenges even getting any execution at all.

Jim Sullivan - Green Street Advisors

And with respect to the line extension and modification, is that directly contingent upon success on the asset sales?

Michael Glimcher

No, they are really two separate items that we're managing here internally and they obviously will eventually cross paths but they are two separate items.

Jim Sullivan - Green Street Advisors

And then finally for Marshall. Marshall you said that the occupancy decline in the second quarter was a bit larger than you anticipated. Any trends with respect to where that occupancy decline occurred, higher productivity, lower productivity any trends geographically that you can point to?

Marshall Loeb

Yeah trends, a couple of them were -- we just lost them say is Shoe Pavilion in Seattle. So couple of them the ones that I already asked about was kind of into the portfolio it was a big tenant at A malls. So we've got one space that fell at Circuit City and our Shoe Pavilion were a couple of the larger ones.

I would say, if there were a trend, where it worries me more is where retailers close there bottom performing stores, there was a couple of the malls we lost it's a handful of store, two to three to four stores. But, it wasn't -- wasn't West Coast, Florida anything like that it's more mall specific where we've had malls that are lower productivity than geographic.

Jim Sullivan - Green Street Advisors

Thank you.

Marshall Loeb

You're welcome.

Operator

[Operating Instructions]. And your next question comes from the line of Cal Campbell of Third Line (ph). Please proceed.

Unidentified Analyst

Good morning. As you go through releasing your 2010 maturities, what percent of those do you thing you have taken care of at this point are you seeing any trends in releasing those?

Marshall Loeb

Cal this is Marshall, I'd say that the trend is certainly if you look at our releasing spreads we were in the teens and 2007 and again in 2008 so the trend has been down with sales and we were fighting hard to stay flat to slightly positive this year. So I think that trend we're trying to do as many renewals as early as we can and in terms of percentages into 2010 my estimate would be between kind of written agreements and what's been maybe a third of the way through into 2010 something like that.

Unidentified Analyst

So you've seen retailers wanting shorter leases at this point due to uncertainty or they wanting lower lease than trying to get lower rents that way?

Marshall Loeb

It's a mix but we have seen certain retailers and this is really that the new leases the terms haven't changed. The renewals there are number of cases where they are not sure in this environment so we've done shorter term renewals. What we've been willing to do that as well I think and we keep the occupancy, we keep national credit tenant in the space and we get an option in the market turns as they do.

We also part of our group we actually changed our compensation within our leasing tending to reflect that too. But before they were not compensated for doing renewal short term renewals and doing those earlier and we wanted to encourage that early this year as we kind of spotted that trend. So we actually changed their compensation for that.

Unidentified Analyst

Okay. And then on your supplement you have the components of other operating expense and there is a discontinued development write off what was that related to?

Michael Glimcher

That was just a couple of miscellaneous redevelopment projects that we have been working on and we just reached a point where we won't go move forward with it and from time-to-time, we'll have some of that clean up but it was just at our specific malls I thinks one was West Shore one was at North Town.

Unidentified Analyst

Okay, thank you.

Operator

This concludes the question and answer session. I would now like to turn the call back over to Lisa Indest for closing remarks.

Lisa Indest

Thank you everyone for participating in the Glimcher Realty Trust second quarter 2009 conference call. You may contact us directly with any additional questions or access our filings through glimcher.com.

Operator

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

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