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Glimcher Realty Trust (NYSE:GRT)

Q1 2014 Results Earnings Conference Call

April 24, 2014 10:00 AM ET

Executives

Lisa Indest - CAO and SVP, Finance

Michael Glimcher - Chairman and CEO

Marshall Loeb - President and COO

Mark Yale - Chief Financial Officer

Analysts

Christy McElroy - Citi

Todd Thomas - KeyBanc Capital Markets

Craig Schmidt - Bank of America

Ki Bin Kim - SunTrust

Paul Morgan - MLV

Tayo Okusanya - Jefferies

Ben Yang - Evercore

Cedric Lachance - Green Street Advisors

Nathan Isbee - Stifel

Operator

Good day, ladies and gentlemen. And welcome to the Glimcher Realty Trust Q1 2014 Earnings Conference Call. My name is Kim, and I will be your coordinator for today. At this time, all participants are in listen-only mode. Later will conduce a question-and-answer session. (Operator Instructions). As a remind this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host of today, Ms. Lisa Indest, CAO and SVP, Finance. Please proceed.

Lisa Indest

Good morning and welcome to the Glimcher Realty Trust 2014 first quarter conference call. Last evening, a copy of our press release was circulated on the Newswire and hopefully each of you have had the opportunity to review our results. Copies of both the press release and the first quarter supplemental information package are available on our website at glimcher.com.

Certain statements made during the 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 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 financial 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’re pleased by the start of fiscal year 2014 and optimistic about how it positions us for the rest of the year in terms of the continued execution of our business plan and strategy. While the severe winter weather created a challenging operating environment during the first quarter we were encouraged by the overall strength of our operating metrics within the mall portfolio.

Total occupancy on a comp mall basis was approximately 95% as of quarter end, up 90 basis points over the prior year driven primarily by a 230 basis point increased in mall store occupancy. Releasing spreads continue to be solid up over 20% for leases signed during the quarter a record for the company, all while maintaining a portfolio occupancy cost ratio at nearest store close of 10.4%.

We certainly saw the impact from the weather on our traffic and sales productivity during the quarter. With this backdrop we were pleased with the $471 per square foot in portfolio sales matching a record for the company and representing a 4% increase over the first quarter of 2013. More importantly we delivered another quarter of positive NOI growth from our Core Mall portfolio up 2.6%. If you were to neutralize for the impact of snow removal cost during the quarter our growth would have been closer to 4%.

As discussed during our last earnings call we’re continuing to work on the remixing of our portfolio to enhance the overall quality through redevelopment, divestitures and acquisitions, with redevelopment typically being the best use of our capital, we see such activity being consistent in ongoing part of our asset management strategy. While we have been active on the acquisition front over the last couple of years, we now believe we have the critical massive properties to anchor the top, so our focus today is shifted to bringing up the bottom.

Accordingly, we believe monetizing a portion of the bottom half of our portfolio is important and a major focus for the company. With respect to divestitures, the company continues to move forward with the marketing of Eastland and have initiated the process for Puente Hills.

With respect to Eastland, the six months marketing process of the property commenced in January. If no sale occurs then the servicer will accepted the end of such period, a deed in lieu for settlement of the $40 million of mortgage debt currently in place on the property.

In terms of Puente Hills, we have recently selected a broker to sell the property with an offering memorandum ready to hit the market over the next couple weeks.

Further we are also exploring broader opportunities to dispose of a portion of the bottom half of our portfolio. Incremental to the Eastland and Puente Hills disposition activity, we would like to raise approximately $200 million to $300 million of capital through the sale of three to four additional malls.

In this regard, last night we announced that we're moving forward with the marketing of 13 of our malls with the objective of selling a subset of such properties. The idea behind listing the larger portfolio is that we don’t want to guess or assume, which properties of the market will be most interested in, by offering a larger selection, we believe that we’ll be in a best position to maximize the element pricing and execution of our strategy.

The capital raise from these dispositions would primarily be used to reduce overall debt levels moving us closer to our longer term balance sheet targets for debt to EBITDA coverage and the ratio of debt to total asset value to ensure that we have ample liquidity to fund our current redevelopment pipeline.

The 13 properties as a pool generate average sales per square foot in the mid 300s. The company’s best estimate of the annualized dilutive impact on FFO from this disposition activity along with Puente Hills will be approximately $0.03 to $0.05 per share.

With the transaction market for B malls recently accelerating, we’re optimistic about the potential for success. While we would prefer not to incur the dilution, we believe with an improved balance sheet, a higher quality portfolio and an enhanced growth profile resulting from the dispositions, the company will be worthy of a higher valuation.

As we have noted, redevelopment will continue to be a priority in terms of capital allocation. We believe we have the proven ability to deliver a solid return on investment, while repositioning assets for future growth within their markets.

We are pleased with the results of our $60 million investment in our Outlet Collection brand between Jersey Gardens and Seattle, the Outlet Collection now represents more than 20% of the total company NOI and has generated average annual growth of 7% over the last five years.

We plan to commence projects at University Park Village and Town Center Plaza in 2014 and Polaris during late 2014 or early 2015. Additionally, we view Phase III of Scottsdale Quarter as being part of the company’s redevelopment pipeline and are real excited about the recent progress being made on this project as well.

While not currently in an acquisitive mode, our recent acquisitions including Pearlridge, Town Center Plaza and Crossing, University Park Village, Arbor Hills and our Oklahoma City properties have been important steps in the evolution of our company. Our focus has been to expand key retailer relationships and we simply want to be where the best retailers are. Accordingly as we have loved to grow our exposure to such talent as Nike, Apple, Lululemon, Anthropologie, Intermix and J. Crew, our most recent acquisitions have gravitated toward smaller open-air centers.

The types of environments currently preferred by these retailers. While we still have full confidence in the dominant traditional and closed mall, we would expect the trend towards open-air and mixed-use within our portfolio to continue as we assemble a portfolio of highly performing and highly relevant shopping malls, designed to meet our shopper at multiple touch points.

Shopping is a tactile and social interaction, and we need to add things to do as well as things to buy and continue to make the experience at our centers paramount to our leasing, property management and acquisition strategies. We believe it’s important to focus on content and context equally to bring people out of their homes into our properties.

Continuing to deliver meaningful growth on a long term basis is deeply rooted in maintaining relevancy to our shoppers and our retail partners. Our strategy of maximizing contributions from our existing portfolio, thoughtful capital allocation and looking for opportunities to improve our balance sheet will continue. With regional mall occupancies generally 90% industry wide and virtually no new meaningful retail supply coming online, we believe in the long term potential for the higher quality mall business.

This belief along with the growing evidence that institutional capital is increasingly focused on acquiring assets in the B mall segment further reinforces our optimism for successful future.

Now with that said, I would like to turn the call to Mark Yale to provide you with more detail on our financial results.

Mark Yale

Thank you, Michael and good morning. Our reported FFO per share for the first quarter of $0.16 were right in the middle of our guidance range going into the period. Biggest driver of this quarterly performance was property operations, or mall net operating income showing positive growth again during the first quarter, up 2.6% which was in line with our expectations.

As discussion previously, this growth was pressured by heightened snow removal cost associated with severe winter weather experienced during the quarter. Neutralizing for these incremental costs, NOI growth would have been over 100 basis points higher. If not for timing issues that led to a low level of lease termination and outburst of sales income along with $400,000 of transaction cost incurred during the quarter associated with Oklahoma City property’s acquisition, we would have reported an FFO number at the higher end of our guidance range.

In terms of the balance sheet, we finished the end of March with approximately $17 million of cash on hand and $180 million of unused capacity on our credit facility, giving us ample flexibility from a liquidity perspective. As mentioned in previous calls we plan to utilize available capacity on a recently amended unsecured credit facility to pay off the $95 million mall at Fairfield Commons mortgage during the second half of 2014. Fairfield represents our only remaining 2014 debt maturity, our plan is then to add Fairfield to our unencumbered pool thus providing the necessary collaterals to support full availability under the $300 million revolver.

When included Fairfield Commons, the company will now have 8 unencumbered mall properties with the total value of approximately $0.5 billion. Exclusive of any impact from the property dispositions Michael mentioned, we expect to finish 2014 with $150 million to $175 million of remaining capacity on our credit facility. We have also been focusing on our nearly $500 million of mortgage maturities that occurred during fiscal year 2015. As discussed previously with the projected debt yield of over 11% on these properties in 2015, we’re not currently anticipating any issues with our ability to [rollout this debt]. And more practical issue evolves the 4.7% weighted average interest rate on these mortgages and what interest rate risk we might have upon refinancing. Accordingly, we’ll be looking for ways to minimize this risk and take advantage of the low interest environment we’re seeing today as we move through fiscal year 2014.

Due to recent equity pricing levels we do not issue any common shares under the company’s ATM program during the first quarter of 2014. Finally, within our earnings release we reaffirmed our FFO guidance for fiscal year 2014 in the range of $0.74 to $0.78 per share. Key assumptions as detailed in our initial guidance remain the same. Due to the uncertainty of the scope mix of assets involved, pricing and most importantly the ultimate timing, dilutive impact of the potential divestitures previously discussed are not included in our current 2014 outlook other than the disposition of Eastland mall.

We also provided FFO guidance for the second quarter of 2014 in the range of $0.16 to $0.18 per share. Key assumptions driving the guidance include net fee income of approximately $150,000, lease termination and outparcel sales income of around $1 million and core mall NOI growth of approximately 3% to 4%.

I’d now like to turn the call over to Marshall.

Marshall Loeb

Thanks Mark. Although tenant sales and traffic during the quarter were challenged by the severe winter weather experience in much of our portfolio, we’re pleased to see the sequential increase in portfolio sales per square foot from year-end 2013 and the 4% increase over prior year. Solid performance from Scottsdale Quarter and our Outlet Collection properties helped offset sluggish sales in the Midwest.

More importantly, we’re not seeing any behavioral change from retailers in terms of committing the new space or extending expiring leases as evidenced by a record 21% positive releasing spreads during the quarter and 2014 renewals which are in line with historical trends.

While we have seen an increase in bankruptcy activity so far this year, the level of activity remains near historic lows and our exposure’s manageable. We're also experiencing high portfolio occupancy, minimal new supply and tenant health ratios of approximately 10.4%. Accordingly, we have a strong pipeline of new and renewal deals and expect to productive Las Vegas Recon Conference next month.

With this backdrop we remain acutely focused on maximizing the contribution from existing properties, we see ample runway to drive future growth adding premier tenants that value the customer experience and expanding our relationships with national, regional and local restaurant concepts that bring people out of their homes.

An important way to achieve this is through redevelopment and reinvestment back into our best properties, as discussed previously we view redevelopment as one of the best uses of our capital. As it relates to near term redevelopment we are focused on several opportunities. The project with the greatest 2014 impact involves the retaining of a junior anchor space at University Park Village. Through a $3 million investment, we will reconfigure the suite into five different spaces allowing us to bring first to market retailers to this center, while nearly doubling the previous rents. We have signed leases with J.McLaughlin, Kendra Scott and Starbucks with more to follow, based on current tenant demand, we're looking at additional ways to densify side.

We also expect to start on project to Town Center Plaza, where we're at a pedestrian plaza allowing us to bring online 8,000 square feet of new food and entertainment related space. As part of the plan, there's also an opportunity to add new outparcel pads. Leasing is progressing well as we continue to work through the approval and entitlement processes. We're also working on plans with respect to the redevelopment of Polaris parcel formally occupied by the Great Indoors. We're currently engaged in discussion with several junior anchors, restaurants and other retailers about being part of the project. At this time, we would not expect to commence construction activities until the second half of the year.

Another area of focus in 2014 is Scottsdale Quarter Phase III. Our multi-family developer program last November on a 275 unit for residential project with construction proceeding as scheduled. We also plan to commence construction on the Southeast corner of the parcel later in the year as we're getting close to moving forward with a 150,000 square foot building, anchored by ground-floor retail with office space on the upper levels. As a reminder, our existing office space in phases one and two is 100% leased.

Additionally, we're focused on incorporating a four star boutique hotel to round up the Phase 3 mix rather than moving forward the department store on the Central parcel. While we've not quite finalized plans and underwriting on Phase 3 at this point, we are most likely looking at a 7% plus yield on an incremental investment of over a $100 million.

At this time, I'll turn the call back to Mike.

Michael Glimcher

Thank you Marshall. In closing, we are very pleased with our ability to continue to deliver record results for the company and to execute against our business plan. We have a great team in place, which is proven to yield strong fundamental results and bring us closer to portfolio averaging $500 per square foot and 3% to 5% NOI growth. But more importantly, it's also a team that understands the changing dynamics of our industry.

We are keenly focused on creating high-quality retail centers that connect the highest performing brands with interesting new restaurant entertainment concepts and other complimentary uses in growing regions throughout the U.S. whether open air and closed or mix use. We believe going forward retail will continue to be the engine that drives mix use around the country.

At this point, we would like to open up our call for any questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from the line of Christy McElroy from Citi. Please proceed.

Christy McElroy - Citi

Hi, good morning, everyone. Michael, just following up on your asset dispositions program. I am wondering you know sort of philosophically, should we read anything into your rolling this to market with 13 malls as an indication of your sort of view of those malls longer term and where they sit in, in terms of your vision of an ideal portfolio? And would you consider selling a more meaningful number then the three to four if you found sort of the demand and pricing to be more aggressive than your original expectations?

Michael Glimcher

Christy, thanks. Those are really good thoughts. We would like to have a portfolio doing in excess of $500 a foot delivering 3% to 5% growth. And so ideally each asset would do that, not on a blended basis, but each asset would do that at a minimum. So certainly these are properties that are not doing that today, they all contribute, they all probably deliver closer to 1% to 2% growth and from a sales per square foot number are less then what we want to be, but they are high quality assets, we believe they are a lot better quality than most of what’s being marketed out there.

Having said that we have a short term capital need for $200 million to $300 million. Would we upsize the transaction, I think if there was a strong interest -- this is something that we want to do and we don’t have to do and if there is a strong interest and the pricing was good, would we upsize it somewhat, we would consider that and then redeploy capital back into the portfolio, do additional work on the balance sheet. And also at that point you may have an opportunity to look externally at additional acquisitions of assets that may fall more in line with what the ideal portfolio looks like.

So for us, we are evolving; we are more than mid way through our evolution; and it’s step by step. And this is a very measured process, so it’s three to four assets, it’s not a massive portfolio today but if it gets a little bit bigger, it’s certainly something we would consider but don’t have to do. Hopefully that answers your question.

Christy McElroy - Citi

You mentioned a couple of times in your prepared remarks about the strength of the institutional capital out there in the B mall segment, I am wondering if you are putting a 13 malls on, does that sort of extend to the C malls, do you have any sort of indication there? I know in the past you’ve talked about sort of the 300 to 400 per square foot range is being a source of capital, assuming now you are also sort of marketing the sub 300 malls, what sort of your -- any indications there?

Michael Glimcher

I think our believe is that properties over 300 are certainly a lot easier to finance and can go the CMBS route. I think we have a concern that below 300 needs to be bank financing. Now, having said that there is a robust market for bank financing and you need the right institutional buyer who can write the equity check. So, I think what we are offering here and what we would expect would be to sell some sort of a blended portfolio of some of the -- within that portfolio, some of the top, some of the middle, some of the bottom. But we think for the most part that CMBS markets really there for the north of 300.

Christy McElroy - Citi

Okay. And then lastly, I know you talked about this before but I wanted to ask about the 0.3% decline in inline store rents year-over-year which I realized reflect the space under 10,000 square feet. What was that year-over-year percentage including the space under 20,000 square feet? Why aren’t you seeing more of an uplift in rents on the below 10,000 square feet space? And can you provide a little bit of color on what that 21% re-leasing spread reflects?

Mark Yale

Hey Christie, it’s Mark. I’ll touch on the average rent per square foot. Part of it is the mix, so we did disclose in the information on a comp basis and rent per square foot was up modestly 0.4%, so we did shift there and that was consistent with where we were at the end of the year. I think another big driver that’s impacting the rent per square foot is Seattle. I mean once again with our smaller portfolio, we’re going to through a major transformation with Seattle, bringing on a lot of space with that being outlet and leasing it with outlet kind of doing [$100, $200], you can imagine rent per square foot there is a bit below the average of the portfolio. I think that’s about $25 at Seattle from the average rent per square foot for the portfolio is $35 and with the amount of space coming online, it had a pretty significant impact. If you neutralize for Seattle, our growth in average rent per square foot would have been closer to 2%. So certainly that is a part of it and clearly it’s the right answer from the bottom-line in terms of mood for the Seattle. What we do know is on a comp basis if you look at minimum rents quarter-over-quarter, not on rent per square foot but minimum rents, they were up 2.3% in the first quarter.

So hopefully that gives a little bit of color and maybe Marshall if you want to talk about the re-leasing spreads?

Marshall Loeb

Sure. Hey Christie, good morning. On the releasing spreads, it is really, it’s the last cash rent collected on comparable space versus new cash rent. So, it ignores any ramp ups or straight line or anything like that. It’s last month’s cash versus next month’s cash. It’s a comparable space, spaces and different people measure in different ways. We don’t include if someone expands or take space that was previously vacant or anything like that. So it is really space to space whether it’s renewal or someone moving end to the same square footage previously occupied by another tenant.

Christy McElroy - Citi

And Marshall, that’s on all mall non-anchor space -- not just space under 20,000 square feet or under 10,000 square feet?

Marshall Loeb

Yes, all mall, yes, non-anchor which becomes 20,000 feet is under.

Christy McElroy - Citi

Okay. Thank you.

Marshall Loeb

Sure.

Operator

Your next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Please proceed.

Todd Thomas - KeyBanc Capital Markets

Hi, good morning, Jordon Sadler’s on with me as well. Just a couple of additional questions on the asset sale plans. I was wondering is there a timeframe that you have in mind to complete the plan or do you suspect that this will be somewhat open ended? I know you didn’t update guidance for the year, but when would you expect to wrap-up the process here?

Michael Glimcher

Hi. It’s Michael. I think we’d like to have this wrapped up certainly by year-end. It depends on which assets and whether there is a loan assumption and that sort of thing, but I think over the next, call it 90 to 120 days we should have a pretty good indication of where this is going and hopefully be able to give a lot more color by our next call and then really try to wrap things up. It’s obviously bit of a disruption, we’d like to get through the process and move on. So I’d say by the end of the year, we won’t be talking about it a whole lot more.

Todd Thomas - KeyBanc Capital Markets

Okay. And then obviously, so you listed 13 malls that you’d be willing to sell. I guess I’m a little unclear, does the plan end with three or four though or does that really continue over time until you set at all of these properties. I guess I’m wondering if you too get competitive bids from more than the three or four that you stated, why not raise more capital in excess of your current needs and say redeem preferreds that are outstanding, I see over a $100 million of Series G preferreds that are yielding 8%. I guess what are your thoughts there?

Michael Glimcher

Well, again I think as I said earlier to Christy, we have a specific capital need that we’re solving for if the transaction becomes a little bit larger, because the markets there and because pricing is more aggressive, we’ll certainly consider that. But this is not a 13 mall sale, this is a 3 to 4 mall sale that we’re focusing on today. And we'll see what the market tells us and why we did it this way. We don’t know which asset is most valuable to someone else. So over time, are these assets that we would consider, yes.

But we’re always going to be looking at the bottom of the portfolio to sell, we're always going to be looking to add at the top and we're always going to be considering reinvestment in the center and at the top of the portfolio to make it better.

So, we’ll probably be seeing similar things on a call five years from now and ten years from now. It’s just active asset management and realizing when we maximize value with any given asset.

Todd Thomas - KeyBanc Capital Markets

Okay. And then just switching over to Scottsdale, I was wondering if you could just provide the yield first on Phase 1 and 2 at the end of the quarter. And then regarding Phase 3, I was wondering was the 7% return on the incremental capital that you expect to spend, was that just for the center parcel with the boutique hotel or was that for all the investments related to Phase 3?

Michael Glimcher

We were talking about as it relates to Phase 3 is that we're looking at spend of in excess of $100 million and it would be there are three parcels in Phase 3 called the North, the Central and the South parcel. The North parcel has 275 for rent units under construction, people will be living there in 2015, which is very exciting that would be ground-floor retail which will be occupied in ‘15. The South parcel would be a building that would be about a third retail in two-thirds office and then the Central parcel is where we are considering hospitality along with additional retail. So that $100 million plus would relate to that whole thing in phase 3. And I think we talked about as it release to Scottsdale really not breaking it out.

As part of our portfolio, what I can tell you is Scottsdale performed right in line with our plans, so Phases 1 and 2 are progressing and we feel good about. It’s one of the properties in our portfolio.

Todd Thomas - KeyBanc Capital Markets

Okay. And then just one last question. Mark, can you just remind us what the company’s long term debt to EBITDA target is?

Mark Yale

Yes, I think where we want to be at the end of 2015 is about 7.5 times on debt to EBITDA and debt to total asset value, we would like to be about 45%, so that’s part of how we identify the whole in terms of the capital we like to raise. So at those levels, if we bring that capital then that certainly brings us within those ranges and within those targets.

Todd Thomas - KeyBanc Capital Markets

Okay, thank you.

Operator

Your next question comes from the line of Craig Schmidt from Bank of America. Please proceed.

Craig Schmidt - Bank of America

Thank you. I see the possible proceeds maybe $75 million to $100 million redevelopment. I am wondering where the overall redevelopment spend might rise to, given your 100 plus in Scottsdale and Polaris?

Mark Yale

Hey Craig, it’s Mark. I mean we probably have $200 million plus redevelopment pipeline that we would look to move forward with over the next probably 24 months, maybe even 36 months on some of it. We got some things at Pearlridge we are focused on, but we are in the planning stages, that’s going to take some time in terms of moving forward with. So certainly that $100 million gives us a good start to focus on. And then as Marshall mentioned we’ve got other projects and it’s probably a $200 million plus pipeline.

Craig Schmidt - Bank of America

Okay. And would Oklahoma City be part of that leased your term Seattle pipeline.

Michael Glimcher

Sure. It’s certainly something that we are planning now Craig. We are in the design phase now with the idea of adding more retail and perhaps wrapping some other uses around it in a similar way to what we did in Scott sale, but we are really in the planning phase, but that’s something that would fit in the next 24 months certainly.

Craig Schmidt - Bank of America

And just when does [Dix] open? I see it completes this quarter, but the [Dix at West Shore] when does that open?

Michael Glimcher

Yesterday.

Craig Schmidt - Bank of America

Great. And does the fact that it had a double digit return looks like the 15% what was maybe coming that’s best above the sort of 8 to 9 average?

Lisa Indest

There would be 8 to 9 average just that Craig there is certainly below you are looking at it, some of it 7 and Dix was just a very strong return with the rents on that investment.

Craig Schmidt - Bank of America

Okay, thank you.

Operator

Your next question comes from the line of Ki Bin Kim from SunTrust. Please proceed.

Ki Bin Kim - SunTrust

Thanks just a couple of quick follow ups. Your sales NOI and if we assume the 4% saw on a clean basis without the snow removal cost what impact is from your redevelopment assets at Scottsdale Quarter of that growth rate?

Marshall Loeb

It’s certainly a important part of it and with Scottsdale and Seattle not impacted by weather probably it was a bit more in the first quarter. But as we talked about the end of the, when we provided the guidance of 3% to 4%, it’s important part of it, but we also have growth outside of those properties, but certainly it’s important aspect of a bunch of pieces they go into it.

Ki Bin Kim - SunTrust

Okay. And I don’t want to or point but if I assume that the 100 basis points positive impact would that be way too aggressive?

Michael Glimcher

It’s Michael. Ki Bin, it’s a piece of it, it’s baked into the portfolio. I think we don’t want to give that granular, it’s like anyone else’s portfolio, those existing assets that are going to contribute, there is redevelopment that’s going to contribute and then obviously we have lost over a 100 bps of growth because of snow. So it’s a lot of factors that rolled up to it. But it’s a robust portfolio with contributions throughout, it’s not any one given asset that’s delivering that growth. And (inaudible) we feel very comfortable with the 3% to 4% for the year even with the first quarter being a little bit wide.

Ki Bin Kim - SunTrust

Okay. And then just if you could provide a quick update on the leasing at Seattle given that Seattle (inaudible) under redevelopment, where are we that fully leased or half, or how much more do you have left to do?

Marshall Loeb

Ki Bin it’s Marshall. We’ve got, we targeted a $100,000 feet and we’re north of that number now. We’ve opened a lot of the major stores opened in ‘14, but this year we were just out there last week. We have about another call it 9 to 12 stores that we’re in the process of opening. So we’re seeing good improvement in Seattle, but we're not nearly finished and then we’ll hopefully in ‘15, we’ll have another half dozen stores, so that all is still filling up there. We think we have got the critical math, this year will be the second half of that and then we’ll keep moving from there.

Ki Bin Kim - SunTrust

And is that project within your expectations or do you think it’s been doing a little better?

Marshall Loeb

I’d say a little better, just because it’s gone so smoothly. I mean I think our team’s done a really nice job on it, it looks great if you’ve got a chance to see it, the stores that are opening are performing and I’m excited about the next dozen tenants we're going to add this year, usually expect the bad news surprise or two or mixed up along the ways, then a smooth project and we’ve been fortunate with our timing and with the team we’ve had on it.

Ki Bin Kim - SunTrust

Okay and just last question, quick one. Could you talk about how much CapEx is associated with the renewal leases, I know malls won’t really report the CapEx per square foot for the lease spreads, but I was wondering if you provide any kind of detail around that?

Marshall Loeb

On our CapEx, I guess, I’m just looking at our quarter end, non-anchor and this is actually the stand, maybe here is a timing, and so I was thinking after I answered Christy’s question earlier our releasing spreads are when they are signed not when they start, so there could be a lag of that. That 21% won’t drop in April 1st, I wish it did, but it won’t. We spent a little over $3.4 million on our non-anchor store CapEx in first quarter. So that’s the number, probably the reality is there are some deals that we were finishing up in first quarter and there were some that we were starting in first quarter. I mean we usually track it and the number is usually on a renewal, it’s new deals, it’s one to two years depending on the tenant of the total term, renewals a lot of times where there will be no CapEx and we’ll ask them to remodel, to give us the newest prototype, it’s typical if you said, how does the typical transaction shake out.

Michael Glimcher

And probably, you are right, we do not break out between renewal and new leases, that's a combined number. But I think the trends and the detail that Marshall laid out between the renewals and the new leases is probably pretty consistent within that $3.4 million that we incur during the first quarter.

Ki Bin Kim - SunTrust

Okay. Thank you guys.

Operator

Your next question comes from the line of Paul Morgan from MLV. Please proceed.

Paul Morgan - MLV

Hi, good morning. Just going back to the asset sales a little bit more. I mean should I think of the $300 million incremental as being driven by what you see as your use of proceeds, since obviously the 13 malls is a much bigger number, is it that you figured out, kind of here is what we see what we could do with the proceeds? And then if we upsized it from here we’d really want to sign something to recycle the capital back into, is that a right way to look in it?

Michael Glimcher

It's Michael speaking. That's exactly the right way to look at it. And it's really having the flexibility with our balance sheet to be able to do the things that we want to do probably as we talked about the $200 million about two-thirds of it is reinvestment and about a third of it is really to work on the balance sheet.

So, I think anything incremental would be for something else. I think you got it right.

Paul Morgan - MLV

Okay. And the $0.03 to $0.05 annual dilution, I mean is that sort of a stabilized number. Because you alluded to the redevelopments and obviously there is kind of a could be a timing differential between the closing of the asset sale and redevelopment. Should I think of that as 79% yield on redevelopments upon stabilization and net of all of that is $0.03 to $0.05 dilutive.

Michael Glimcher

That's correct Paul. It's not the stabilized number, so there could be some timing issues, but once the dust settles, we think it ultimately is about $0.03 to $0.05 of dilution.

Paul Morgan - MLV

Okay, great. And just lastly you mentioned that you are looking at the 2015 maturities and the rate risk associated with those given with they are right now and ways to manage that, I mean do you have any more color on what you might be thinking of doing ahead of those maturities to manage that risk?

Mark Yale

Yes, Paul, it’s Mark. I mean it’s a host of things, it’s looking at addressing them today, does it make sense to incur the seasons we have done that before, it’s a matter of do [we have] some type of hedging and locking the rate in anticipation of the financing, Seattle is a maturity in the beginning of ‘15, so we are starting to look at that in terms of what’s the best way to move forward with it. So it’s really a host of different approaches and we are really kind of rolling those up right now and we would probably have more feedback in terms of our plans on the July call for second quarter earnings.

Paul Morgan - MLV

But in your guidance doesn’t really assume anything in particular for next year’s maturities?

Mark Yale

It does not, that’s correct.

Paul Morgan - MLV

Okay, thank you.

Operator

The next question comes from the line of Tayo Okusanya from Jefferies. Please proceed.

Tayo Okusanya - Jefferies

Hi, good morning. Just a couple of quick ones. Did you have to look at this little bit cap rates on the open air centers that you have acquired during the quarter?

Michael Glimcher

No, we did not have. We talked about a first year yield of about 6% on the income producing part, I mean part of the $52 million investment there was undeveloped land, which we are going to redevelop, but if you look at what we allocated to the actual income producing the per share yields about 6%.

Tayo Okusanya - Jefferies

Okay. And how of this is allocated towards what the income producing fees?

Michael Glimcher

About $45 million to the income producing and about $7 million to the undeveloped land.

Tayo Okusanya - Jefferies

Okay, that’s helpful. And then just second question. I mean there is a lot of talk out there about potential outlet center being built in Island sometime in 2016 wondering what you think about this and what the potential competitive implications could be to Jersey Gardens if any?

Michael Glimcher

Good question, I think we trade at Jersey Gardens in one of the most crowded retail markets in the country and we have always had a lot of competition, whether or not that gets build there is still lot of competition Jersey Gardens is probably in the top decile of outlet centers in the country. I think we spent over $30 million renovating it upgrading the tenancy, we’ve been driving sales, we have been driving traffic. So I think our best defense against not just a potential competitor but against what exists today is being aggressive and offensive and that’s what we have been doing there.

So I can’t speculate whether this project or that projects gets built, I can just tell you that our job is to make Jersey Gardens the most valuable asset we possibly can and if you look at the physical plant the mix of tenants and what we have been doing we’ve had sales growth every year in that asset, we’ve had NOI growth and we continue to head in that direction and robust tourism probably about a third of our customers are getting [off a plan] incoming to the property. So it’s our job to make it and continue to make it a dynamic asset and I think we are doing our job well there.

Tayo Okusanya - Jefferies

Great, very helpful color thank you.

Operator

Your next question comes from the line of Ben Yang from Evercore. Please proceed.

Ben Yang - Evercore

Hi thanks. Hey Michael I am just curious where the 7% to 9% cap rate assumption on the dispositions is coming from -- is that what brokers are telling you, of the base level to actual transactions or maybe some anecdotal information as you’re exploring the private market?

Michael Glimcher

I think that it’s a good question. We’re working with (inaudible) on this process and they certainly know where the market is. And so based on what we’ve heard from them, based on comp that they’ve seen in the market that’s where they feel the pricing will be. And again it’s asset-by-asset, but I think that’s a good range.

Ben Yang - Evercore

Okay. And then I think you also mentioned that your malls still are better quality than what is currently being marketed, give us sense of how many BMC malls are currently for sale and maybe what exactly the buyers are going to be looking at as they can choose among, what looks like a pretty big supply of BMC malls for sale?

Michael Glimcher

There are malls that are actively on the market and then your chatter about things that are softly listed or that are possibly going in the market. I think our view is we continue to put capital under fiscal plans of these assets. They’re well occupied in the 90s, even though they’ve gone to the 3% to 5% growth profile, they probably have the 1% to 2% growth profile and perhaps for a buyer who’s going to allocate additional capital that could be greater. So just based on what we see out there, the condition of the physical plans and quality of the markets, I mean these are really good assets that again it’s something that we have a desire to evolve our portfolio, it’s not that there is anything wrong with them, some of them may just not fit the next version of Glimcher. And so just based on what we see on the market and what we think is coming on the market, we think that these assets are higher quality than most.

Ben Yang - Evercore

I guess between the formal and the top listing, I mean what is it like, you think there are like 50 malls that are out there currently?

Michael Glimcher

It’s so hard to put a number on it but I would think one to three multiple players could probably build pretty substantial company based on what’s out there. And I think there will be another couple of players in that space. So it’s hard to put a number on it there, because a lot of have circled assets for sale, they’ve said that they are quietly marketing. So, it’s really hard to put a number on it. What I can tell you is we intend to sell three to four assets here and that’s not a daunting test relative to billions of assets or a dollars worth of assets or 50 malls.

Marshall Loeb

Yes. I was just going to add, I mean that’s part of -- certainly we're solving for capital need today, but we're also being realistic in terms of access that there is competition in market and we probably factor that in terms of what we realistically can get done. And we think within that timeframe in terms of that modest number and quality of what we're putting on the table, we're certainly hopeful we can get this process to finish line.

Ben Yang - Evercore

Got it, clearly makes sense. And maybe just final one, I think Mark you mentioned that the AMBS and bank financing market is pretty robust with the access of assets but obviously, not all malls can get financing. So, I’m just wondering if you have any thoughts on what the lenders are looking at that would maybe making assets un-financeable?

Mark Yale

Yes, I think a couple of things, one is it’s not set in stone, but certainly $300 per square foot if you are under that, you better have a very good story for why you are, the next part of that is going to be looking at the anchors. And it’s not so much that there is a pennies or [sears] it’s just how are those anchors performing and what’s the confidence level in terms of whether those anchors could be replaced if necessary. And I think there is much more comfort level certainly in those malls that they are only game in town, or they’re not in a larger metro area, but they own that market that’s the thing.

I think the other element is just the size, I think if you got a $30 million, $40 million, 50 million to get done, that's easier to get into a pool than if you get over a $100 million worth, it becomes a very big asset and start focusing on that concentration. That’s where you can run in some challenges.

So, there is bids out there, it’s certainly -- you’ve got out a really good tight story, good performance, solid sales across the board in line and the anchors. But if you do and you really got a mall that's proven that is viable and it's got a loan going forward, there is a debt market.

Michael Glimcher

It's Michael speaking, Ben I think in addition to having our brokers market, the assets are also in contact with an understanding whether or not they can arrange debt for these assets and that was part of the analysis.

So, as they talk to potential buyers, they are also talking to them about can we sell you the asset, or can we arrange financing for you as well. And so, I think we get a level of comfort there that these are certainly financeable assets.

Mark Yale

And so many assets have CMBS that already in place, which might be attractive to some buyers, might not to be to others, it's somewhat interesting in terms of the profile is, what kind of leverage they want to go and you get, all that kind of comes into play, and certainly there is debt in place on handful of these assets well, which could be helpful.

Ben Yang - Evercore

Got it. So based on that, I guess the 5.5% to 6% average [interest debt], I guess I just sense that that’s kind of below market debt on those assets?

Michael Glimcher

Ben it’s just looking at what the rate that is specifically on the assets that are part of that portfolio. So, I mean we’re giving blended numbers and this is all going to be done on asset by asset basis.

Ben Yang - Evercore

Great, helpful. Thanks guys.

Michael Glimcher

Thanks a lot Ben.

Operator

Your next question comes from the line of Cedric Lachance from Green Street Advisors. Please proceed.

Cedric Lachance - Green Street Advisors

Thank you. Michael, if I look at assets on the market, and sure you guys talk about $200 million of potential redevelopment in the next couple of years, it seems that the first wave of selling might not be the last wave. If you think about the 13 you’re marketing, could you see them being disposed over the next two to five years?

Michael Glimcher

Good question Cedric. We like all these assets and they’re certainly properties that we’re comfortable owning. Like I was saying earlier, as we bring up the bottom, some asset is always going to be on the bottom. And when we look depending on where your share price is, and when you are looking to raise capital certainly with share price that you don’t like, selling an asset is a much better option. So it depends on where are we at that moment in time, what are our capital needs.

But look, our portfolio will evolve, it’s been evolving and it will continue to. So, I think every year we’re probably going to buy some assets, every year we are going to sell some assets and every year, we are going to invest capital in the portfolio. And that’s our job is to actively manage this portfolio. And when you realize the value of an asset, it’s time to move on and if there is a opportunity to add value, we need to reinvest and if there is something compelling to buy, we need to buy. And so I think, like I said, I think I said little bit earlier we’re probably going to if you listen to our call in five years, it may sound like the same call.

Cedric Lachance - Green Street Advisors

Okay, well it’s on five years. You want to be a mall company in five years or you want to be open air centers company in five years?

Michael Glimcher

We want to be where the best retailers want to be, so if it’s full price or off price, if it’s got a roof on it or not, if it’s wrapped with apartments and hospitality and office and or it’s wrapped with department stores, we don’t really care, we want to be a retail company that has highly performing properties, doing in excess of $500 a foot, delivering 3% to 5% growth with the world’s best brands.

So we think things are evolving pretty quickly and we are trying to get out ahead of the curve.

Cedric Lachance - Green Street Advisors

Okay. Would you consider going through joint ventures in terms of raising some of that capital from the asset dispositions?

Michael Glimcher

Absolutely if that was the best way to execute and we were also able to continue to operate some of these terrific assets and keep some of these terrific teams in place, sure we would consider that.

Cedric Lachance - Green Street Advisors

Okay. And maybe a final question, based on numbers, you traded about at 25% discount to net asset value, why is share buyback not part of the potential use of proceeds as you have mentioned so far on the call?

Michael Glimcher

We talked a little bit about that and preferred is something we can certainly redeem. Our biggest issue is we want an A quality portfolio of assets, we believe we have an A quality team, we also want an A quality balance sheet. And if we have enough proceeds that we feel we can go ahead and buy back, we are certainly grossly undervalued and we’d love to have an opportunity to buy back some of the shares where we are trading but are not going to lever up the company. And we have done a lot of hard work to get to where we are and we want to get to a better place as far as balance sheet. So that’s the conundrum that we have.

Cedric Lachance - Green Street Advisors

Okay, thank you.

Operator

Your next question comes from the line of Nathan Isbee from Stifel. Please proceed.

Nathan Isbee - Stifel

Hi, good morning.

Michael Glimcher

Hi Nate.

Nathan Isbee - Stifel

Jersey Gardens, you just poured a significant amount of money in there and you have had some success with both Century and Tommy Hilfiger. I am just curious if you can give us a sense of the next round of leasing that’s going to take place there in terms of timing and the scope of what we can expect over the next year or two?

Michael Glimcher

I will touch on it, and I will certainly let Marshall if he wants to indulge it. I mean we don’t have specific names to name and we only name signed leases but we have been a more sort of moderate down the middle. But I will let pricing and as the names you touch on we are starting to push up the quality and maybe price points. So we’ve created an environment where better quality brands would like to operate. So we certainly want to upgrade and have more designers and maybe a deeper mix of product. But to say specific brand, it’s just we would like to go more upscale and maybe we’re more Macy’s today and we want to be a little more Bloomingdale’s tomorrow as top give analogy. But we certainly -- the customer loss what we have today, and we want to keep the customer we have and then also be able to grow for a higher quality customer.

Marshall Loeb

Yes. I think that’s fair Nate. The latest opening we just had, maybe these are good example Michael Kors just opened in the last month or so which I guess be, we believe will be a high performer especially in the outlet sector. There is a few names we could name that are in the higher-end outlets that we still don’t have as we get space back and then probably with those retailers get the right space back within the center. We still think there is a good runway in Jersey Gardens, now that we’re giving that critical mass to kind of keep setting up the Dominos. Who are the best performing outlet retailers, ones that aren’t at Jersey Gardens, we’re getting and what we thought we’re getting more and more compelling story and especially after that renovation before they perform but they did in the mall, then looked the way those retailers want it. Now it’s performance and it’s a great looking physical land.

Michael Glimcher

And I think it’s fair to say Marshall just with renewals and the opportunity to get tenants to market rents such a nice runway for us as well.

Marshall Loeb

Sure.

Nathan Isbee - Stifel

And I guess that’s a good sideway, the next question about the 21% comp leasing spreads, Mark you referenced before on the average base rents mix having an impact, would you say if there is any one or two properties that really drove those leasing spreads, perhaps and it’s like the Jersey Gardens?

Mark Yale

Jersey was strong, actually Seattle had good re-leasing and spreads too. And then it’s one quarter, so it’s a mix but I mean those two were nice quarters, Scottsdale we’re seeing some re-leasing spreads that are nice. And even in the middle tier, Ashland Town Center had really strong releases but material amount releases roll and we had some nice pops in our rents there, so next quarter it maybe, Ashland is in the 13, so there could be some that are within that 13 dispositions pending on the mix that rolls. And that’s why I like the 10.4% occupancy cost, because that’s pretty consistent within our top tier and our lower tier as well, that we can see something like Ashland really jump up, we had some nice jewelry renewals and things like that within Ashland last quarter.

Nathan Isbee - Stifel

Okay. And then just on Scottsdale, this $100 million on phase, maybe you can clarify, does that include netting out the land sale for the apartments?

Mark Yale

Yes. It does Nate.

Nathan Isbee - Stifel

Okay, thank you.

Operator

This concludes our question-and-answer session. I will now turn the call back to Ms. Lisa Indest.

Lisa Indest

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

Operator

This concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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