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Cedar Shopping Centers, Inc. (NYSE:CDR)

Q3 2010 Earnings Call

October 28, 2010 11:00 a.m. ET

Executives

Brad Cohen – IR, ICR

Leo Ullman – Chairman, CEO & President

Larry Kreider – CFO

Nancy Mozzachio – VP, Leasing

Analysts

RJ Milligan – Raymond James

Paul Adornato – BMO Capital Markets

Todd Thomas – KeyBanc Capital Markets

Craig Schmidt – Banc of America/Merrill Lynch

Nathan Isbee – Stifel Nicolaus

Arthur Friedman – Friedman Asset Management

Jordan Sadler – KeyBanc Capital Markets

Stephen Swett – Morgan Keegan

Mark Lutenski – BMO Capital Markets

Lindsey Scroll (ph) – Bank of America Merrill Lynch

Operator

Good morning and welcome to the Cedar Shopping Centers Incorporated third quarter 2010 earnings conference call. At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation.

It is now my pleasure to turn the floor over to your host, Brad Cohen with ICR.

Brad Cohen

Thank you very much, operator. Good morning. At this time, management would like me to inform you that certain statements made during this call, which are not historical facts may be deemed forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995.

Although the company believes that expectations reflecting any forward-looking statements are based upon reasonable assumptions, they are subject to various risks and uncertainties. The company can provide no assurance that expectations will be achieved and actual results may differ.

Many of the factors and risks that could cause actual results to differ materially from expectations are detailed in the company’s press release and that release was put out yesterday and from time-to-time in the company’s filings with the Securities and Exchange Commission.

In the end, the company undertakes no obligation to revise or update any forward-looking statements reflected in our circumstances after the date of the company’s release.

It is now my pleasure to turn the call over to Mr. Leo Ullman, Chairman, Chief Executive Officer and President. Leo?

Leo Ullman

Thank you very much Brad. Good morning, everyone. Thank you very much for joining us today on the Cedar Shopping Center’s earnings conference call for the third quarter 2010 results.

With me on the call today is Larry Kreider, our Chief Financial Officer. Other members of our team, including Tom Richey, President of our Development and Construction Division; Brenda Walker, our Chief Operating Officer; and Nancy Mozzachio, our Vice President of Leasing are also on the call and available to you.

We had a strong quarter reflecting our continued efforts to enhance our balance sheet while positioning ourselves to achieve growth in net income, assets, and stockholder value for a long time to come.

Our results in the third quarter and throughout the past year reflect the fact that we have carefully and thoughtfully enhanced our balance sheet flexibility by driving down our total borrowings to the point where our debt represents approximately 55% of our total enterprise value depending of course on our stock price.

Having regard to the nature of our properties and the solidity of our primarily gross re-anchored tendencies, our cash flow is predictable, and accordingly, our current level of debt is certainly at a comfortable level, although we will nevertheless, continue to look for effective means of further reducing our overall debt, when and where appropriate.

We have sourced equity funding from capital markets during the year including this quarter with aggregate proceeds this year of more than $130 million, and with a clear expectation that we will be able to put that money to work effectively and accretively.

The primarily focus of the company going forward, remains investments that leverage our returns, and generated attractive fees from our joint venture acquisitions with RioCan. I’ll revert to the nature effect and purpose of those joint venture acquisitions shortly.

Also, having regard to the extremely attractive current levels of financing available to us and to our strongly anchored properties, we have been able to obtain favorable long-term fixed rate financing to replace much of our floating rate debt, including of course, a number of properties in the collateral pools securing our floating rate credit facilities; such as, the recently announced Suite Square Financing.

We have been able to reduce the overall commitments on our principal credit facility, while in fact, greatly expanding the availability under our credit facilities through joint venture arrangements and our capital market activities.

We are also continuing our program of selling off certain properties, which no longer fit our core of primarily grocery-anchored properties in an effort to effectively recycle capital. In this connection, we expect to complete additional dispositions consisting of, among other things, a few of the remaining small drug store anchored properties in Ohio, and a few smaller properties in Connecticut, Maryland, and Pennsylvania.

While we expect to report some impairment with respect to certain of those capital recycling transactions, they will better position our company for future growth. In terms of growing income during coming years, we have had solid results in acquiring excellent properties through the joint venture with RioCan. The attraction of those arrangements with respect to the 20% Cedar interest in the joint venture properties is that we have been acquiring properties in the 7.6 to 8.3% cap rate range while being able to finance them in the 5% range.

Further, the fee structure for these arrangements, in addition to the leverage, permits us to generate attractive returns on an ongoing basis. We also benefit from initial acquisition fees and placement fees for arranging debt on the properties. The properties we have acquired, most of which are quite new, also feature long leases with strong anchored tenants, little vacancy, and solid demographics.

In addition to the joint venture activities, we are at the same time endeavoring to further enhance our on-balance sheet properties. Thus, we expect to be able to continue to develop smaller grocery-anchored properties, along the lines recently announced for Touchtown, Pennsylvania. Those properties would be similar for example, to our completed ground-up development supermarket anchored properties in Hersey and Campbelltown, Pennsylvania.

This represents a generally smaller property with a pre-signed lease with a grocer and little, perhaps 15,000 to 30,000 square feet, of ancillary retail space. The supermarket lease at those new smaller development properties will generally now involve a ground lease where the tenant will build the store, thus avoiding the cost and risk to Cedar of vertical construction.

In this connection, the company, together with its supermarket tenant relationships, has been exploring possible development opportunities. Among other things in the Northern tier of Eastern Pennsylvania, the benefit from the current and expanding activity related to drilling for natural gas in the Marcellus Shale area.

The opportunities for the company to join with private developers who are having difficulty accessing financing for properties which are largely entitled and preleased, remains a current focus and potential opportunity for the company. It will permit us to benefit from projects like our Upland Square multi-anchored property, the Stroudsberg, Crossroads two supermarket anchored property and the Limerick Walgreen-McDonald property, all in Eastern Pennsylvania.

We expect in this regard to be able, in effect, to merchant build such properties with a potential sale, for example into a joint venture including of course, the RioCan joint venture, where appropriate.

The portfolios we acquired from the Pennsylvania REIT and from [inaudible] are extraordinary, and clearly resulted from relationships enjoyed by our company. Those properties should continue to perform very well during coming years. The approximate $350 million of properties we have closed to date in our joint venture with RioCan have also enhanced the anchored tendencies including especially supermarkets as the hallmark of our portfolio, and have continued to reflect our move into strong markets and higher demographics.

On an operating basis, our occupancy levels are climbing again as we lease up a couple of our remaining development properties and re-tenant a couple of larger vacancies which hit our portfolio during recent quarters, but which we expect to fill during coming quarters with attractive leases. These include a new 86,000 square foot Giant Eagle’s Supermarket, opening on November 4, at the Town Fair property, a well-known big box of 65,000 square feet to replace most of a Sam’s Club at the Brickyard, and a fitness facility to fill half of the former Giant space at Oakhurst Plaza.

The leasing results for our portfolio will also continue to evidence increases in both renewals and new leases. We have already completed renewals for more than half of our leases coming due in 2011.

The maturities on our debt during the next couple of years are not significant. We have only one loan coming due next year, which we expect to move into our development credit facility. Our development property and construction credit facilities come due in 2011, but are automatically expendable for 1 year to 2012. And we fully expect to be able to further extend such facilities.

With that, I’d like to turn the call over to Larry Kreider, to walk us through some of the financial data, and thereafter, we would as always, welcome your thoughts and comments.

Larry Kreider

Thank you, Leo. For full results of our financial results for the quarter ended September 30, 2010, I refer you to our press release issued last night as well as our supplemental financial information published on our website, and also available at www.sec.gov.

Our results in the third quarter feature consistent operating results in our core properties, first measurable effects of properties acquired by the RioCan joint venture, and the continued progress we are making in securing our financial – our capital structure to promote stable growth.

As documented in our supplemental financial information document on Page 9, revenues and net operating income, including all of our managed properties and excluding noncash revenues, increased approximately 6% and 9% respectfully as compared to the second quarter of this year, primarily as a result of the newly acquired properties purchased by the Cedar RioCan joint venture; including the various fees we earn, continued leasing at our development properties, and stable results in the rest of our portfolio.

In terms of some of our key metrics as per our release, overall occupancy increased. Core renewal leasing rates increased. New lease rates exceeded terminated lease rates. Bad debt expense remains steady at about the 2% level, and expense reimbursements remained above 70%. Non-cash revenues continue to decline as predicted.

Our stable core results are demonstrated in same property results were before non-cash items. NOI for the third quarter of 2010 was the same as the second quarter at $21.8 million for the same 101 properties. Occupancy actually increased slightly in the third quarter from the second quarter to 89.6% from 89.4% after correction of the second quarter supplemental for a clerical error.

As in prior quarters this year, same property NOI is lower than last year’s comparable period, primarily because of re-tenanting at 2 properties, the Brickyard at Oakhurst Plaza, as we have previous discussed.

G&A levels have been, and continue to be approximately $2.4 million to $2.7 million per quarter, before taking into account non-cash stock based compensation, mark-to-market adjustments, which this quarter were minimal.

Our cash interest expense improved by approximately $600,000 in the third quarter as compared to the second quarter as a result of a full quarter’s benefit of the transfer of properties to the Cedar RioCan joint venture and a partial quarter’s benefit from the preferred stock issue completed in the third quarter.

The third quarter income statements also reflects a $2.6 million write-off of deferred financing cost of a result of our decision to reduce our aggregate commitment from $285 million to $185 million under our stabilized property line of credit. This will save $500,000 in unused commitment fees annually and reduce annual amortization of deferred financing cost by approximately $1.2 million through the course of the loan.

We intend to place properties specific debt on our properties wherever practicable to take advantage of attractive low long-term rates, now available to us.

Net cash provided by operations was $3 million in the third quarter of 2010, as compared to $13.1 million in the second quarter of 2010 reflecting seasonal payment of insurance and real estate tax bills and excluding some nonoperating cash flows from the Cedar/RioCan joint venture that we include in investing activities under accounting rules.

Since October 2009, we have raised approximately $250 million in new capital, including approximately $65 million from the transfer of 7 [inaudible] to the Cedar/RioCan joint venture. Also, removing approximately $94 million of debt, $129 million from issuances of common stock, $67 million from the issuances of preferred stock, and $3 million from the sales of noncore properties, also eliminating approximately $10 million of debt.

In 2010, to date as announced; we have completed approximately $345 million of property acquisitions through the Cedar/RioCan joint venture. Our net cash contribution has been approximately $48 million to date, and we expect to receive 12 to $17 million of cash upon placement of properties specific debt.

The joint venture has already placed $135 billion of property-specific debt and properties acquired by the Cedar/RioCan joint venture this year.

As a result, at the end of the third quarter, we had a debt-to-market capitalization of approximately 56.3% down from over 72% at September 30, 2009. A ratio of debt to EBITDA of 8 times, down from 9.5 times at September 30, 2009; $25 million outstanding under our $185 million stabilized-property line of credit, down from $239 million at September 30, 2009; and $140 million of immediate cash availability under that facility.

As stated in our press release, we have modified our 2010 annual FFO guidance to arrange a $0.56 to $0.58 per share excluding the effects of acquisition or dispositions not previously announced, mark-to-market adjustments related to stock based compensation and other nonrecurring adjustments. Our modified guidance reflects the preferred stock issuance in August. Percentage rent adjustments at a few of our properties, and a pace of lease up at some of our ground-up development properties.

I would now turn the call back to Leo, for Q&A, and closing remarks.

Leo Ullman

Thank you very much, Larry. Operator, we would be pleased to take any questions and comments at this time.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question today comes from RJ Milligan with Raymond James.

RJ Milligan – Raymond James

Good morning, guys. For the other revenue’s line, $1.6 million, is there a lease-term fee in there?

Leo Ullman

No. Those are probably – those are almost exclusively fees earned in connection with the Cedar/RioCan joint venture.

RJ Milligan – Raymond James

Okay. And then Larry, can you clarify the clerical error for the same-store occupancy? What was it in the second quarter?

Larry Kreider

As I said in my script, it was 89.4%. In the first quarter of this year it had been 89.1%.

RJ Milligan – Raymond James

89.1, 89.4, and then it goes up to –

Larry Kreider

89.6.

RJ Milligan – Raymond James

89.6. Okay, thank you.

Larry Kreider

89.9 in the first quarter.

RJ Milligan – Raymond James

89.9 in the first quarter. And then I guess my last question is, how much more do you think you guys can do with RioCan before you start thinking about coming back to the capital markets?

Leo Ullman

Well, as you heard we have considerable availability under our credit facilities. We have, at this point as Larry said, in the order of 140 million or so. We expect that to be well in excess of $100 million for some period to go. We could buy $500 million dollars’ worth of properties with $40 million of our own contribution at the 20% level, assuming financing at 50 to 60%.

So we do not contemplate having to go back to the capital markets for some time. Notwithstanding that, we are acquiring quite a few properties, as you may have noticed, and we do have opportunities to acquire additional properties and we look forward do that, but we think we can do almost all of that based on our present availability.

RJ Milligan – Raymond James

Great. Thank you, guys.

Operator

Our next question will come from Paul Adornato with BMO Capital Markets.

Paul Adornato – BMO Capital Markets

Hi. Good morning. Hey, Leo, you talk in your prepared remarks about doing deals accretively and you mentioned one transaction with a cap rate of 7-plus financed at 5-plus. Obviously that’s on the debt side. I was wondering if you could talk a little bit more broadly about just your weighted average cost to capital and just tell us, you know, what your goals are in terms of accretion. Do you look for immediately accretive transactions, accretive in year one, and you know, just refresh our memories on your philosophy in those areas.

Leo Ullman

Okay. We believe that our blended cost of capital is in the range of 7 ½ to 8%, assuming 50-55% debt at the attractive rates we were able to achieve now in the low 5 or less area. We want properties to be accretive from day one. Indeed, that’s the mandate we effective have to meet in dealing with our own board, so we do wish to show absolute special circumstances, accretion right at the outset.

We believe that when be buy a property at 7 ½ and finance it at 5, and then put 50% or more debt on it that we will be able to achieve close to 10% just on a leveraged basis and if it’s within the RioCan joint venture, for example, our continuing fees will add, we believe, 150 basis points or more on a continuing basis, let alone the acquisition fees and debt financing fees that we are able to attract, plus some reporting fees, etcetera.

So we believe that we can acquire properties accretively at the outset and indeed that’s what we are programed to do.

Paul Adornato – BMO Capital Markets

Okay. And could you comment on the preferred offering? You know, your thought process during that offering and, you know, if you were satisfied with the outcome of that?

Leo Ullman

The thought process very simply was that we wanted to match fund in essence. The property acquisitions we were in the process of doing with RioCan and we were looking for a number in the order of $40 million.

We contemplated, of course, different means of raising that money, but we felt that an equity raise was attractive with preferred stock because it would not dilute our existing shareholders and it would provide additional strength beyond our lenders. We felt the execution was very good in the sense that the book was well beyond the amount that we ultimately raised, which we decided to increase with board approval to $70 million.

The effective rate at 9.06 was a little dear and perhaps would have been slightly less dear if we had waited a month or two, but we sort of lead the process at this point and the preferred issue by reopening our existing preferred made it redeemable or callable immediately with no penalty upon a change of ownership and we immediately felt those two additional features to the preferred made it attractive for us to be able to call that preferred if the occasion should arise and if our source of funding would be appropriate to call some of the preferred.

But right now, we felt it was the most efficient means of raising some money without diluting the shareholders while we had clear opportunities to reinvest that money in higher yielding joint venture acquisitions, which we are in the process of doing now.

Paul Adornato – BMO Capital Markets

Okay. And finally, you referenced perhaps disposing of some non-core properties in Ohio, Maryland and Connecticut and also the potential for an [inaudible]. I was wondering if you could just give us a general order of magnitude in terms of the dollar volume of properties you’re looking to dispose and the – any potential impairment that you’re considering taking at this point on those properties.

Leo Ullman

I can’t tell you the impairment as yet. The order of magnitudes say that we are in the process of selling three properties in the 5 to $6 million range and one in the $10 million range. That would be 20 to $25 million. The impairments we hope would be relatively modest in comparison to those numbers. And all of those properties with possibly one exception do have some debt on them.

Paul Adornato – BMO Capital Markets

Okay. And is that – is that the entirety of what you consider non-core at this point, or is that just the first group that you’re considering?

Leo Ullman

Well, we are continuously looking at our portfolio and we would like to keep upgrading the portfolio as we believe we are doing, and lopping off a peripheral property here or there, but appreciate that we have bought most of these properties during the past three, four years and we like most all of them, but we will recycle where we think we can better use the proceeds in other acquisitions. But I don’t see it as being much larger numbers than what I’ve just said.

Paul Adornato – BMO Capital Markets

Okay. Thank you.

Operator

Our next question will come from Todd Thomas with KeyBanc Capital Markets.

Todd Thomas – KeyBanc Capital Markets

Hi. Good morning. Hey, Leo, back to the RioCan joint venture. It sounds like you and RioCan both have interest to grow this platform further and you mentioned that you have more acquisitions in front you, or available to you today. But should we expect the current pace of acquisitions to continue, or do you anticipate that that type of volume will taper off at bit from here? What should we expect looking into 2011 and even 2012?

Leo Ullman

Well, it’s hard for us to know, first of all, our joint venture agreement with RioCan goes to October of ’11 basically. So we do have a two-year agreement specifically and we had targeted 500 million I think it’s fair to say that RioCan’s appetite is probably considerably more than that if we can show them the right kind of properties along the lines that we have been showing to them.

And I think with our history of acquisition, we might be able to exceed the $500 million number by a 20 to 40% factor. We are seeing a number of properties and I don’t think the pace will be quite what it was during the last couple of months, but we are seeing some very nice opportunities.

Todd Thomas – KeyBanc Capital Markets

Are these mostly single assets, or are there other portfolios that you’re looking at?

Leo Ullman

Right now we’re looking at a couple of single assets of larger size and we are also looking at a couple smaller portfolios.

Todd Thomas – KeyBanc Capital Markets

Okay. And then Larry, the fee income, the other income that you mentioned is mostly fee income, can you sort of break that out even a bit further, perhaps as to what’s management and say leasing fees versus acquisition and financing fees?

Larry Kreider

Yes. The fee income from acquisition and financing was approximately 1.2 million and the remainder was the fee income for the acquisitions made in the period, primarily in the third quarter.

Todd Thomas – KeyBanc Capital Markets

Okay. The balance was the management fees? I’m sorry.

Larry Kreider

Yes. The balance was management fees, which is earned over time.

Todd Thomas – KeyBanc Capital Markets

Okay. All right. And then I just wanted to go back to the Sam’s Club in Connecticut. You mentioned that you’re in negotiations I guess to backfill that with a 65,000 square foot tenant. Can you provide some additional details there? Is that going to be like a redevelopment or is the tenant looking to just backfill some of that space?

Leo Ullman

Let me have Nancy Mozzachio address that because she’s been closest to it and may have something interesting to report. Nancy.

Nancy Mozzachio

Good morning, Todd. How are you? I’d like to report that we have a fully-approved deal with Kohl’s for 65,000 square feet of the former Sam’s Club. We will hopefully update leases prior to the end of the year and anticipate that we would deliver a [inaudible] to Kohl’s and Kohl’s will construct their own 65,000 square-foot store. We will construct another 25,000 square feet or so adjacent to Kohl’s and as a direct result of the announcement of Kohl’s, and some of our retail partners, we are actively negotiating letters of intent with other best-in-class retailers to take space in that same center.

Todd Thomas – KeyBanc Capital Markets

Okay. So – what’s sort of the economics, you know, for that project right now as you sit here and look at that in terms of, you know, dollars invested by – what type of return expectations do you have?

Nancy Mozzachio

Well, we certainly expect that there will be increases over NOI that was in place when Sam’s was operating in the shopping center. Since we purchased the shopping center, we acquired some additional land that enables us to place a pad site on that property so we will have additional income there. There are a couple of small tenants that we’ve helped hold on short-term leases that we expect to re-tenant the tenants that are very similar to some of the kind of ventures that we just recently acquired with RioCan; centers that contain Kohl’s, who will pay us more rent, better rent and are better-credit tenants overall.

So it’s sort of tough to give you the exact range because we are, in fact, in negotiations with some of the other tenants as we speak. But we certainly underwrote this transaction with Kohl’s to account for a nice uptick and NOI for this property.

Todd Thomas – KeyBanc Capital Markets

Okay. That’s helpful. All right. That’s all. Thank you.

Operator

And from Banc of America/Merrill Lynch, we’ll now hear from Craig Schmidt.

Craig Schmidt – Banc of America/Merrill Lynch

Good morning. I was wondering, the reduction in guidance, could you tell us on a per-share basis on which was the percentage rent adjustment and how much was the pace of the slower lease of both ground ups?

Leo Ullman

Well, I will give you approximate numbers. I don’t know if you asked about the preferred stock, but the preferred stock was roughly $0.015 we think for the year from the date of issuance in August. And I think the percentage rent and the lease up of development was roughly $1 million each.

Craig Schmidt – Banc of America/Merrill Lynch

Okay. And the – there was a significantly lower straight-line rent and a somewhat lower amortization of [inaudible] I believe to my abilities. Does this represent a good run-rate going forward?

Leo Ullman

I think the run rate on straight-line rent is going to increase somewhat. I think the amortization is about where it’s going to be.

Remember at the beginning of the year I said that the amortization of tangible lease liabilities would decrease this year and that case has continued pretty much as we expect.

Craig Schmidt – Banc of America/Merrill Lynch

Okay. Thank you.

Operator

(Operator Instructions). We’ll now hear from Nathan Isbee with Stifel Nicolaus.

Nathan Isbee – Stifel Nicolaus

Hi. Good morning. Just following up on that – the guidance reduction, how has the core portfolio aside from the percentage of rents factor their given the same [inaudible] tracking down about 4 or 5% relative to flat same-store guidance at the beginning of the year?

Larry Kreider

Well Nate, I guess just one point. As I said in my talk, same-store rent on a cash basis is exactly the same as the second quarter. It is very stable. There has been very little movement this year and in fact, you know, we expect uptick as we continue our internal leasing.

Nathan Isbee – Stifel Nicolaus

Okay, I understand, but you’re original guidance from comments made on previous conference calls reflected flat same-store at the beginning of the year.

Larry Kreider

Yeah, the – the decrease in the – the same-store activities were not involved in the decrease of the guidance.

Nathan Isbee – Stifel Nicolaus

Okay. I’ll follow up with you. And could you just talk a little bit, or detail the – in the acquisition transaction cost of about $2 million, it says there are fee paid to the investment advisor related to the joint venture. Can you talk a little bit about that?

Larry Kreider

Well, yes – yes there was a fee paid to Goldman Sachs based on the introduction to RioCan and at this point that fee has been basically fully earned and accounted for.

Nathan Isbee – Stifel Nicolaus

Okay. So that was – that came in this quarter?

Larry Kreider

It will be capped in the fourth quarter.

Nathan Isbee – Stifel Nicolaus

Okay. All right. Thank you.

Operator

We’ll now take a question from Arthur Friedman with Friedman Asset Management

Arthur Friedman – Friedman Asset Management

Hi. Good morning. How you doing? Good. I wanted to give you an opportunity; about a year and a half ago on the earnings call I asked you for a summary of your business, overall business and management strategy and I think you’ve answered a lot of my question, but I wanted to give you an opportunity – could you give a little financial picture with the RioCan joint venture, especially as I pour through the financials, it is a lot more complicated, your business story.

Could you just give us an overview of tying it all together, where you see your overall business strategy now, especially focusing on that joint venture?

Leo Ullman

Okay. Thank you for the call, Arthur. The RioCan joint venture, of course, is a locomotive for us in driving a lot of NOI growth going forward. Even though we have a 20% participation in all of these deals, we think on a leveraged basis with the fee structure and very importantly with the quality of the products that we are acquiring that we will be enhancing our income and other financial metrics going forward handsomely.

It will not be the total of our business and I don’t think it was intended to be the total of our business. We still have to look out for our own balance sheet and we are doing that primarily with a focus on what we believe to be potentially attractive smaller construction development opportunities and we’re working on those as we speak. We also think we have opportunities to join in with existing developers who are not able to pull the deal across the line and that will give us some opportunities again on balance sheet.

But of course, the RioCan arrangements permits us, as we have shown, to acquire properties with stronger credit pictures, with higher demographic pictures, with new stronger pretty properties that will greatly enhance, we think, our status within the areas in which we are operating. So I look at it not just in terms of accretion, which we hope and fully expect will be created handsomely, but also enhancement of our portfolio, enhancement of our position in our respective markets.

Operator

And with no question remaining, I’d like to turn the call back over to management for any closing comments.

Leo Ullman

We’d like to thank everyone for being on the call. I think before closing, Nancy, what I’d very much like for you to do would be just to indicate the kind of leasing activities that are going on for our properties with respect to the Upland property, the Crossroads 2 property, in addition to Brickyard which you mentioned with a Kohl’s. But I think we should make clear that while leasing activity for the past quarter has been relatively moderate, although showing increases as we have during the past many quarters, we are doing very well in fact, in leasing up the development properties.

Nancy Mozzachio

I certainly can, Leo, and I just want to add to your statement, there is a certain cadence that we are experiencing with big-box, large-box tenancies and other than the Kohl’s tenancy that we just announced, we’ve seen significant improvement in our leasing activities in Upland Square, for example, where we just leased a 21,600 square-foot box to AC Moore and there’s about another 8 or 10,000 square feet in addition to that that we’ve either leased and not yet delivered, or we are heavily negotiating a letter of intent.

The same is true for [inaudible], a much smaller property, but roughly 132,000 square feet or so. We are about 84% leased and seeing probably another 3 or 4% that we are in active negotiations and/or live negotiations.

In addition, our Columbia Mall property, we have and expect to countersign a lease with a 61,000 square-foot sporting goods retailer. We talked a little bit about – at the beginning of the call, about our Town Fair property in Indiana, Pennsylvania where we have taken at what was a 50,000 square-foot supermarket operator and replaced that with a Giant Eagle of 83,600 square feet. They will open on November 4th, as we had mentioned, at a very nice increase in rent over the previous rent from the other supermarket operator.

And as a direct result of completing the deal with that investment-class supermarket operator, we are in fact leasing space to such as the Pennsylvania Liquor Control Board for some of the best and biggest contracts that they are rolling out today.

So we are steering things, as I mentioned, a lot of lease velocity and in the middle market box, we have a number of deals that we see that are rolling out and hope to achieve in 2011 by the likes of TJ Maxx in one of our Western Pennsylvania properties and one of the Kraft chain down in Virginia, and probably another TJ Maxx contract on the Eastern portion of Pennsylvania. So there is a tremendous amount of activity of leases signed, leases about to be signed, and leases that we expect to contribute to 2011 income for the portfolio.

Leo Ullman

Thank you, Nancy. I’d like also, Tom, if you’re there, just to speak briefly about our development activities with respect to [inaudible], the Shore Mall, etcetera if you would.

Unidentified Company Representative

Sure. I’d be happy to, Leo. We’re making significant progress on the entitlement and approval process for a number of our developments, Pittstown, Pennsylvania specifically that Leo referred to earlier will be about a 75,000 square-foot ground-up project. The Shore Mall, which is a long-term redevelopment and demalling. We made some very serious progress in some public funding. The Shore Mall, if you recall has some serious access issues that will require a lot of money to correct, so we’ve made some very good gains in the last few months in that regard. [Inaudible] Plaza, we’ve received all of our municipal approvals and are moving forward with the relocation of a couple of tenants and the construction of a Giant. Nancy just alluded to Town Fair, which is finishing up.

In addition, we have a couple of small pieces of property that we purchased for development in the past couple of years.

So we’re making some significant progress with regard to those that are in the hopper so to speak at this point and we’re also looking at new markets with some of our grocery friends, specifically North Central and Northeastern Pennsylvania at the request of Giant Foods.

Leo Ullman

Thank you very much, Tom. I think with that, Operator, we would like to end the call. I would like to, in closing, comment that once again, with a fine management team supported by our board, our tenants, lenders and shareholders, we are staying the course. We continue to grow and enhance our revenues, our income, our core bread-and-butter portfolio and our balance sheet.

The path is clear and no great obstacles are in our way to create value for our shareholders. Thank you very much.

Operator

Ladies and gentlemen, that does conclude today’s conference call, and we thank you for your participation.

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