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Glimcher Realty Trust (NYSE:GRT)

Q4 2010 Earnings Conference Call

February 17, 2011, 11:00 am ET

Executives

Lisa Indest – SVP, Finance and Accounting

Michael Glimcher – Chairman and CEO

Marshall Loeb – President and COO

Mark Yale – CFO

Analysts

Ki Bin Kim – Macquarie

Todd Thomas – KeyBanc

Quentin Velleley – Citi

Nathan Isbee – Stifel Nicolaus

Carol Kemple – Hilliard Lyons

Rich Moore – RBC Capital Markets

Ben Yang – Keefe, Bruyette & Woods

Cedrik Lachance – Green Street Advisors

Operator

Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2010 Glimcher Realty Trust Earnings Conference Call. My name is Katrina, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. (Operator Instructions)

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

Lisa Indest

Good morning. And welcome to the Glimcher Realty Trust 2010 fourth quarter conference call. Last evening a copy of our press release was circulated on the newswire and hopefully each of you have the opportunity to review our results. Copies of both the press release and our fourth quarter supplemental information packet are available on our website at glimcher.com.

Certain statements made during this conference call, which are not historical may be 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. Reconciliation of each non-GAAP measure to the comparable GAAP measure are included in our earnings release and the financial reports we file with the SEC.

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.

Michael Glimcher

Thank you, Lisa, and good morning, everyone. And thank you for joining us on today's call. As we reflect on fiscal year 2010, we’re quite pleased with the great progress we have made on the liquidity and capital front. The solid financial and operational results during the year and more importantly, how the company is positioned for future growth. The market responded well to our story, our strategy and execution during the year and our goal is to continue to carry this positive momentum through 2011 and beyond.

As it relates to the balance sheet strategy going forward, one of our areas of focus for 2011 is to continue to find opportunities to enhance our liquidity and improve the company's balance sheet. Accordingly, we believe the proceeds from last month's $120 million common equity offering coupled with the pending credit facility modification announced in January represent the next steps in the evolution of our balance sheet.

The credit facility modification will be on terms consistent with the current market and reflective of the company's improved balance sheet and overall risk profile. At this point, we’ve executed a term sheet for the modification and have received bank commitments for the full $250 million proposed modified revolver. We expect to close on the modified facility during the first quarter.

The fully committed term sheet calls for several key enhancements to the existing credit facility that will help support our business strategy going forward. First, it increases the credit facility from $200 million to $250 million. Second, it includes an additional one year extension option which would take the final maturity to December 2013.

Next, it eliminates the existing LIBOR floor of 1.5% and finally, it enhances our flexibility through the removal of requirements to use proceeds from capital events to reduce outstandings on the facility and allows for proceeds of the facility to be used for acquisitions, development and redevelopment.

To secure such favorable terms we will be granting first mortgage liens on our Morgantown Mall, Northtown Mall and Polaris Lifestyle Addition. These properties are currently encumbered by approximately $100 million of mortgage debt. We intend to repay it in full with borrowings under the amended credit facility through capacity created from the recent equity offering.

We believe out utilizing the proceeds from the offering ultimately to execute on the recasting of the credit facility is a prudent use of capital and through the improve pricing on the line we will be able to effectively minimize the potential dilution.

Even while maintaining a sharp focus on our balance sheet over the last several years, we’ve been extremely pleased with our ability to maximize property operations during the same time period. For the fourth quarter of 2010, net operating income growth was positive again, up nearly 3% over the fourth quarter of ‘09.

With this strong performance we were able to see positive NOI growth for the full year at 0.4% much improved from our initial guidance of negative 1% to 3% for the year. Both total mall and MI occupancy increased over the prior levels with total portfolio occupancy now close to 95% as of December 31, 2010.

Comparable store sales continued to trend positive as well, up 11% over last year to $371 per square foot, a record level of sales productivity for the company. With profitability up and sales performance improving, retailers are becoming more confident, leading to a focus on new business again.

Accordingly, we signed 250,000 square feet of new leases during the fourth quarter and nearly 400,000 square feet when including renewals. In fact, our new leasing activity for 2010 was up 77% over 2009.

All this was accomplished while generating positive releasing spreads of 3% on all comparable deals during the year. Finally, we’ve experienced minimal problem from tenant bankruptcies activity which has remained near store close even when considering the recent orders finally.

On another positive note with this year being the 10-year anniversary of Polaris Fashion Place and with the shorter term leasing executed over the last several years, our volume of lease expirations in 2011 is higher than we have been historically. When considering the improving economy and leasing environment we’re excited about the potential opportunity and upside associated with addressing these renewals over the next 12 months.

With the expectation of that these trends will continue into fiscal year 2011, we’re optimistic regarding our ability to continue maximizing property operations and to generate positive net operating income growth from our Core Mall portfolio, looking for an increase in the 1% to 2% range for 2011.

We’re also pleased with the progress made during 2010 on enhancing portfolio quality. As we’ve previously discussed, our size puts us in a unique position with a large enough platform to be relevant in the leasing game but small enough to be nimble and responsive to our retailers, our partners and the capital markets.

Additionally, with just a handful of strategic asset additions, we can dramatically upgrade the quality of our portfolio, as evidenced by the improvement in our portfolio metrics just discussed. We believe the recently closed Pearlridge Center and Scottsdale Quarter acquisitions fit that bill and are clearly in line with our strategy to improve portfolio quality.

Accordingly, in 2011, we will continue to focus on finding the right opportunities that not only make sense from a pricing perspective but which will also enhance the overall quality of our portfolio. We’re working hard and being creative in order to make this happen and we’re actively in the market today looking for potential transactions.

We’re excited to be able to expand our strategic relationship with the Blackstone Group through Pearlridge and believe this partnership puts us in the best position to pursue future opportunities that may present themselves in the marketplace.

Finally, we’re pleased with the progress made during the year on Scottsdale Quarter. Construction for the first two phases is complete with nearly 90% of both the retail and office space now addressed by executed leases or letters of intent. We are clearly securing the right tenants and remain extremely bullish on how special Scottsdale Quarter is.

We’re also pleased with our ability to gain control of full ownership of all improvements, as well as the fee interest through a series of transactions with our former partner during the year, having full control of both the ground and improvements enhances the overall value of our investment in this premier asset.

Based upon the current status of the project our focus is now shifting to having the right tenants open as quickly as possible in Phase I and Phase II and the finalization of plans for Phase III of Scottsdale Quarter.

As we’ve previously mentioned, we have been challenged in terms of the time necessary to get the property to full stabilization and certainly understand the project is putting pressure on our 2011 earnings guidance.

However, as we have communicated before, we’ve been more focused and concerned about where the project will be in 2012 and beyond rather than a short-term impact on current earnings. At this point the project is clearly performing, but it’s not yet contributing. Accordingly, once we work through 2011 we see Scottsdale Quarter being a solid growth driver for this company.

Now, with all 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. We reported FFO per common share of $0.20 for the fourth quarter of 2010 and $0.74 for the full year, both of which fell within our guidance range going into the quarter. Better than expected Core Mall net operating income performance helped offset the dilution from Scottsdale Quarter.

Focusing on our operating performance, comp mall NOI was up by approximately 3% for the fourth quarter. Growth in base rents and short-term specialty revenues drove the overall improvement and net operating income over the fourth quarter of last year. These were the same items along with percentage rents that led to the outperformance in the full year NOI compared to our original guidance.

I’d now like to review our earnings guidance for fiscal year 2011. In the release we introduced our 2011 FFO guidance at a range of $0.64 to $0.68 per share. This includes nearly 2 pennies per share of non-recurring charges associated with the prepayment of the mortgages assumed to occur in March of 2011 in connection with the credit facility modification discussed by Michael. The 2 pennies of non-recurring charges are primarily associated with the early termination of several swap arrangements and the write-off of unamortized deferred financing fees on these mortgages.

Other key assumptions that make up the guidance including anticipated increase in Core Mall net operating income of 1% to 2%, we expect to see G&A increase from 2010 level to approximately $20.5 million, mainly driven from the reinstatement of compensation that was reduced in 2008 and 2009. The anticipated level of lease termination income is around $3 million and net fee income is forecast between $3.5 and $4 million for the year.

Finally, with respect to Scottsdale Quarter, we’re expecting dilution in 2011 of approximately $2.5 to $3.5 million, inclusive of direct interest costs. This dilution is primarily the result of leases for certain retail tenants at the project, including opening co-tenancy clauses that allow those tenants to pay reduced rent until occupancy reaches minimum thresholds or certain main co-tenants open their stores.

With approximately 50% for the first phases of project currently open an occupied, many of these conditions will not be met until the second half of the year when occupancy should approach close to 90%.

In addition, many office tenants have rent abatement clauses that may delay rent commencement after initial occupancy. This reduce rent stream in place for much of 2011, is not enough to cover a full load of operating an interest costs on the project, leading to the anticipated dilution for the year. We do expect positive FIFO contribution from Scottsdale in fiscal year 2012.

We also provided FFO per share guidance for the first quarter of 2011 in the range of $0.11 to $0.13 per share. Key assumptions driving the guidance include net fee income of around $1 million, lease termination income of $3 to $500,000, growth in Core Mall NOI of around 1% and the recognition of non-recurring charges associated with the mortgage prepayments just discussed.

Turning our attention to the balance sheet. In addition to the credit facility modification we want to provide a quick update on upcoming debt maturities. With respect to our mortgage debt we only have three loans scheduled to mature in 2011 that do not have extension options available.

The $22 million mortgage on Ashland is scheduled to mature in November. Based upon the current debt markets and the quality of the property, we believe we have an opportunity to generate excess proceeds of $10 to $15 million upon refinance. The other two loans are held within joint ventures with our pro rata share representing less than $20 million. At this point, we’d expect a short-term extension of both loans at their current levels.

In terms of our other extensions in 2011, where we have options, the most significant involves our Scottsdale construction loan. To address any potential resizing issues associated with the upcoming extension on this loan, we are negotiating a modification to lock in $140 to $150 million of proceeds until May of 2012. At which point we’ll have another 12-month extension available. This level of proceeds is consistent with our capital planning and sufficient to support the completion of the first two phases of the project.

In return for the certainty we’ll agree to reduce the overall $220 million commitment currently in place, with the anticipated timing of cash flows on the first two phases and timing associated with Phase III is evident that our ability to earn out plus the full amount during the remaining term of the loan is remote.

Finally, we did utilized the $117 million of net proceeds from last month's common equity offering to pay down our credit facility. Upon closing on the line modification, we expect to draw approximately $1 million off the line to cover the mortgage prepayments leaving us with approximately $155 million outstanding on the modified $250 million facility.

With that said, I’d now like to turn the call over to Marshall.

Marshall Loeb

Thanks Mark. As discussed in the last earnings call the operating environment improved significantly throughout 2010. With increased sales, higher profits and minimal bankruptcy activity, retailers began shifting from surviving to growing again.

The combination of virtually no new retail supply and regional mall remain the preferred distribution network with occupancies generally in the 90 plus percent range is causing a growing concern for retailers that the space they want in the future may not be available. We experienced such action over the last due to from big box retailers and we’re beginning to see specialty retailers respond as well.

We’re also encouraged by fourth quarter portfolio sales trends, aggregate sales were positive for the third straight quarter at 371 per square foot for the 12 months ended 12/31/2010, compared to 334 per square foot for the same time last year. Also quarterly comp sales were positive for the fourth consecutive quarter of 5%, also encouraging releasing spreads were positive for the year up 3%.

Additionally, we still view portfolio occupancy costs as a more accurate predictor of embedded revenue growth. On this point we’re encouraged by our portfolio occupancy costs falling consistently throughout the year to approximately 12.5% at year end.

Our goals is to reach 14% occupancy costs and portfolio sales of $400 per square foot which would position us to drive rents for the next several years.

Finally, the most encouraging and meaningful of all these metrics is positive NOI growth for the third consecutive quarter. On the occupancy front, small shop occupancy was up 190 basis points from September 30th finishing the quarter at 92.8%, and 80 basis point up from 12/31/2009.

Additionally, total occupancy including anchors was nearly 95% at year end up 130 basis points from last year. Accordingly, we remained cautiously optimistic about new – about near-term leasing prospects and our ability to drive positive NOI growth from our Core Mall portfolio. While our guidance for 2011 calls for only modest increases in occupancy by year end, we expect to have the opportunity to improve the occupancy quality.

As we’ve discussed over the last several years we’ve executed shorter term renewals and given regularly where appropriate. With the improving leasing environment we have the opportunity to strategically plan and upgrade tenancy at each center.

For prospect of Scottsdale Quarter, we’re pleased to announce the execution of office lease with Starwood Hotels & Resorts for over 55,000 square feet. Starwood is relocating their western headquarters along with approximately 250 employees to Scottsdale Quarter by year end.

Starwood is a quality name that fits nicely with the strong retail brands already committed to the project. As a reminder, Phase I opened in 2009 while Phase II which is anchored by 18,000 square foot two story Nike flagship store and 45,000 square foot IPic movie theatre opened its first handful of stores during the second half of 2010.

Other key retailers in the project include Apple, Armani A/X, H&M, Lululemon and Free People [ph]. From a leasing perspective we’ve addressed roughly 90% of the Phase I and II retail and office space through executed leases and/or letters of intent. When stabilized this property should perform at the highest level of our portfolio on all metrics.

Another 2011 priority is finalizing the Phase III planning. We’re excited about the potential and varied options available. The current plan includes approximately 85,000 square feet of retail additional office, hotel and for rent multifamily sites. We're engaged in dialogue on all fronts and expect to have a more tangible update regarding plans including timing, costs and returns toward the second half of the year.

As Michael mentioned, we’re pleased with the overall execution on Scottsdale when considering the challenging economic environment. The value creation is there but candidly we’ve been challenged in terms of the time necessary to get the property fully stabilized.

Phase I and II will involve approximately $315 million of hard costs. We anticipate reaching stabilized returns of 6.5% to 7% on this part of the project sometime in 2012. Phase III will add an additional $35 million of net costs bringing the total costs to $350 million while taking the overall yield on the project to approximately 8%. We expect Phase III to stabilize in 2013.

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

Michael Glimcher

Thanks so much, Marshall. As I’ve said before, I'm so proud of how our organization has responded and performed over the last couple of years. The unprecedented capital market and economic environment during this timeframe created many challenges, but we were able to successfully navigate through the turbulence and emerge as a much stronger organization.

As proud as I’m about the accomplishments I'm far more excited about where we can take this company going forward. We were certainly pleased with the market's response to our strategy in 2010 and we’ll work hard to keep that positive momentum going into 2011 and beyond.

Now with that said, we’d like to open up our call for questions.

Question-and-Answer Session:

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Ki Bin Kim representing Macquarie. Please proceed.

Ki Bin Kim – Macquarie

Thank you. Just a few quick questions on the Scottsdale Quarter. First, how much of that project is in your current revenue run rate?

Michael Glimcher

Yeah. When you look at the current run rate for the fourth quarter, it was basically flat NOI for the fourth quarter. So and we probably had about $1 million in dilution when you factor in the interest cost. So not a big contribute in terms of when you’re looking at fourth quarter NOI.

Ki Bin Kim – Macquarie

Okay. And what percent of occupancy does the project have to go up to for a lot of tenants to start paying more normalized rents?

Michael Glimcher

It is a web of co-tenancies, so it’s lease by lease, some leases are at 65, some at 75, some are at 80 and then there is also name co-tenants as well, so that’s what we’re working through right now. But as we get further along and it’s probably that 75% to 80% threshold in occupancy is the majority of the ones that will kick in as it relates to opening occupancy levels.

Mark Yale

And I would also add to Michael, that we have the right to tenants either in sign leases or leases out. So we’re extremely comfortable regarding meeting co-tenancies and getting to the occupancy. Again, if evidence to how strong the property this is, the right kind of retailers have been signing leases and did sign leases through a very turbulent environment. It is all coming together. We’ve always said it’s not about if but when.

And we see a very clear path to this being incredibly successful. The people open are performing at an incredibly high level and the interest remains strong. So we’re extremely optimistic. It’s just giving it from this point to the stabilized point, it’s just going to take a little bit longer and that’s what has put a little bit of pressure on this year.

Ki Bin Kim – Macquarie

And when does capitalized interest related to the project stop being capitalized from a timing perspective?

Marshall Loeb

It’s going to be probably right after the first quarter. So I mean we’re obviously already expensing interest to a degree, I think as I mentioned about 50% of the project’s open, so roughly 50%.

But, once we get into really the second quarter of this year we’ll be ceasing to cap the primary amount of the interest. To the extent we still have space that’s being built trying to get it right for the tenants there’ll be some small capitalization that will continue. But really when you get into the second and third quarter the cap interest will be stopping.

Ki Bin Kim – Macquarie

Of this year, right?

Marshall Loeb

This year, 2011, yeah.

Ki Bin Kim – Macquarie

Okay. And last, just turning to the occupancy costs. You say it was 12.5% this year and you want to get it to 14%. So does that mean, when you’re signing leases today you’re signing it hopefully to at 16% occupancy costs pro forma?

And second part of question is, so with that in mind, I mean, what are you projecting for your mark-to-market on your lease rollovers for 2011?

Mark Yale

I think, the general theme of it is, sales are pushing into the high 300s and we see a very clear path of sales growing over time here to over 400 and it’s at 400 an average occupancy cost of 14% is reasonable. But it's a process to get to that point.

Marshall Loeb

And I would – this is Marshall. I would say, we are not targeting 16%. It is really those that are 12.5% roll we should be able to move them up closer to 14 and hopefully as Michael said, as sales keep growing then I think we can get there. So that will give you a sense maybe of re-leasing spreads and embedded growth that if you check our portfolio at 14% versus 12.5% and it’s – it will take years to chew through that as these leases roll.

Ki Bin Kim – Macquarie

So the second part of the question, so what are you projecting to a mark-to-market on a lease forward?

Michael Glimcher

We’re projecting 5% to 10% re-leasing spreads for the year. It’s hard because we and everybody defines it a little differently. We only count comp space to comp space. Some people include vacant space and different metrics in it.

So we’re projecting 5% to 10%. But if you look usually on our re-leasing spreads it’s about half of the total amount of leasing we do, so we projected and just kind of looking at our occupancy costs. That’s where we can drive it but we would tell you kind of directly answering your question, 5% to 10%.

Ki Bin Kim – Macquarie

Okay. Thank you.

Operator

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

Todd Thomas – KeyBanc

Hi. Good morning. I'm on with Jordan Sadler as well. Just a follow-upon the last question regarding the leasing spreads. I was just wondering if you could break it down and provide some color around each of the few pieces that you mentioned, the Polaris anniversary, the short-term leasing and then sort of other?

Marshall Loeb

Polaris, I’m trying to think a several parts to that question. Polaris is a lot, our lease role in terms of absolute dollar is higher this year than it was previously and a fair amount of that is some of it’s Pearlridge, which was just simply wasn't in our numbers a year ago and another big chunk of that is Polaris, which hit its 10-year anniversary. It’s got – it’s one of those that has a low occupancy cost, so that’s going to be a nice driver of growth as we reposition that and then with the new apple that we added last summer and things like that in Polaris. So I think that’s where that growth will come from.

Michael Glimcher

Yeah. But there is really, it’s hard to really calculate out what the exact average as Marshall said, we feel really comfortable with the 5% to 10% positive re-leasing spreads. We’ve certainly got a very comfortable occupancy costs. We’re seeing across the portfolio really nice sales increases and having a big anniversary year in an economy that’s improving in a property like Polaris as Marshall said with the new apple, the timing couldn't be any better.

So I think we just wanted to point out how excited we are to having a disproportionate amount of space rolling at quality asset to the year like this, as well as a lot of their short-term renewals we did over the last couple of years, when you’re sitting here at 95% occupancy you got a great opportunity to create upside in this portfolio. There’s just a significant amount of embedded growth in the existing portfolio and that gets us real excited about 2011.

Todd Thomas – KeyBanc

Okay. And regarding the short-term leasing, I guess, it was completed around the holiday season, everything in the back half of the year. I know you had a portfolio of Toys 'R' Us express stores. But I was just wondering if you could comment on whether or not you think that they or others may convert to permanent and maybe look to even expand.

Marshall Loeb

Yeah. Todd, it’s Marshall, again. We did – we ended up with 13 Toys 'R' Us stores just of their pop-up stores, we did sign an anchor store with them as well last year enabling under construction. So I think through that dialogue we came away with one permanent last year, one anchor store, call it one permanent in line and the 13 pop-up, three of them stayed, so hopefully, that was kind of a net positive and well, I'm sure we’ll re-look at Toys 'R' Us, as well as Spencer’s and some other people in that toy category coming up this holiday.

We also had a couple of Burlington Coat stores. They’re still in the numbers and they’ll be around through the end of this month and they’re, the feedback we’re getting from them, it was helpful to have these pop-up stores and it’s something they plan to look at next year.

Another one they just got approved by their real estate committee, but justice had looked at kind of I won’t say, pop-up holiday stores but really temp stores trying them out. And through that conversation we – it’s not done, done yet, but approve by their real estate committee to open up permanent stores as well.

So we see the trend continuing, I mean, I’m saying trying to think of a two or three name that we worked with directly. So kind of fun starting a pop-up stores we picked up a decent amount of activity and I'm hopeful other retailers kind of copy it. I view it from their way, a good way just to low cost way to try them all out before they commit capital wise and I think that’s why the trend is growing.

Todd Thomas – KeyBanc

Okay. That’s helpful. And then just lastly, the 100 basis point increase in store occupancy that’s embedded in your guidance, is that mostly being driven by new demand right now or just lower move outs and sort of a higher retention ratio?

Michael Glimcher

I would say it’s really a little bit of both, Todd.

Todd Thomas – KeyBanc

Okay. Thanks.

Operator

Your next question comes from the line of Quentin Velleley representing Citi. Please proceed.

Quentin Velleley – Citi

Good morning. And just wanted to talk a little bit about the trade area dominant assets and I think most of them performed pretty well over the year. I guess the exception on the occupancy front would have been Merritt Square and the SuperMall which were down sort of 7 and 900 basis point on the score occupancy. Just wondering if Marshall, if you can sort of talk through what’s driven the decline in occupancy in those assets and what the outlook is for those two assets.

Marshall Loeb

Sure. Both as you imagine a little different stories, at Merritt maybe on the global picture it was end of the year about 92% total occupancy both years, so total occupancy at Merritt was stable. It’s the small shop, I guess, where you’re looking where we have the decline and there were two big drivers of that. One, we had Steve & Berry's was at Merritt when we acquired it and obviously that was an anchor that closed. It was a well located anchor. So we’ve actually carved the Steve & Berry's out.

Victoria's Secret their only store opening in the U.S. this year is in Merritt. So they are going to open here an about another month and that’s a portion of the former Steve & Berry's, as well as rue21. So we turned that anchor into smaller shop space and then the other spot that we’re working on and it was also near center court because we had our, if you remember the Piccadilly Cafeterias, I guess they’re still around but not many of them. We had almost a 14,000-foot Piccadilly that closed.

So total occupancy – maybe on the total occupancy is the same. Small shop we increased the denominator with the Steve & Barry's and then we lost the Piccadilly, which is down time but probably upside longer term on NOI there because I think we can drive better restaurant and a better fashion merchandising than a cafeteria. Seattle, the NOIs held up there. It was an auto dealer that had a big high teens kind of square footage there in Supermall. So it’s a work in process still there at Seattle as we position that mall but it wasn't a big NOI drop but a big occupancy drop when we lost the auto dealer who was in the mall.

Michael Glimcher

And Quentin, it’s Michael speaking. As we see this year, we see a lot of improvement in quality of retailers that we are putting in, as Marshall talks about, Victoria secret replacing part of the Steve & Barry's et cetera. You’re going to have a point at the front end of the year where you’re going to lose some occupancy and then you’re going to have a point that we will ramp back up towards the fourth quarter.

But the nice sense is now there is a lot of demand in our activity as we said was up almost 80% as far as leasing year-over-year. So all of a sudden, there are a lot of better users that are replacing users that frankly were occupying space and that part of what’s enabled us to push our portfolio sales up to all-time high for us. And while we are optimistic about pushing it from the 370s up to closer to $400 range. So we are really excited about it and sometimes it – sometime it’s a step back to take two steps forward.

Quentin Velleley – Citi

Okay. And I guess, Michael, in terms of increasing the productivity and the quality of (inaudible) or the other option you’ve got. In addition to acquiring better assets and selling some of these weak ones and I know, we have spoken about it in the past. Do you think the market is getting closer to a point where you can get sort of low enough yields to justify the sale of these lower assets or are we still some way off?

Michael Glimcher

I think it is still going to be some amount of time. You are seeing a lot of interest in high quality assets but it seems to be a real bifurcation and that the higher quality assets, you know you could get a call almost any price, low quality assets, not a lot of market. There are some deals out in the marketplace now. There are some things that are not as high quality that seem to be getting traction. I also think with the incredible improvement in the financing market that is going to create an opportunity maybe for some private buyers or others that may be interested in some of the more moderate quality assets.

Mark Yale

Quentin, it’s Mark. I mean, Michael alluded that there is a portfolio of more moderate malls which we understand is going to trade. We don't know what the pricing is yet so that will give us at least a starting point to go through that evaluation. I think, the part of the complication is I think, that’s going to be delivered as part of that portfolio.

So I don't think it will be a true comp but at least gives us a starting point to understand where value is. That’s clearly that something part of our longer term asset management plan and capital planning and we would love to be able to attack the quality by divesting from the bottom and that’s something we will be looking at.

Michael Glimcher

And we will, as we have been, we will hit it from both ends. We brought the bottom up. We will continue to bring it up and we will continue like Pearlridge, like Scottsdale to add more to the top and that’s clearly our strategy going forward.

Quentin Velleley – Citi

Okay. Thank you very much.

Operator

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

Nathan Isbee – Stifel Nicolaus

Hi. Good morning. Just going back to discuss the quarter for a second, can you just tell us where you are in terms of NOI yield today and where you expect to be at the end of ‘11?

Mark Yale

You know, Nate, it’s Mark. I mean, it’s going to be – and we have not specifically disclosed that. You can probably back into it. I mean it's going to be in the, you know, low-single digits and it is going to be probably into 2012 before we really reach that stabilization yield that Marshall talked about on Phase I and Phase II, 6.5 and 7 but it does ramp up. In terms of dilution, we talked about it is greatest in the first, second quarter, then we start moderating from there and we almost get back to being flat for the first quarter and then as we said in 2012, we do expect to see a positive contribution.

Michael Glimcher

I mean, it’s unfortunately at this point burdened with all of the expense with much less revenue coming out of it. Like we said there is a clear path heading in the right way and if you walk in and see what’s under construction, the right tenants are signing up not just on the retail side but on the office side we are incredibly sighted excited about 55,000 square foot Starwood Hotel and Resorts leased on the office side and we’ve really got the majority of the office space accounted for as well in what’s frankly a difficult office market.

Nathan Isbee – Stifel Nicolaus

Okay. I mean, you are saying 6.5 to 7 in 2012 or you will be at five at the end of ’11 or you will be at four? I mean, could you just give us a little more color on how that will progress over the next 12 to 18 months?

Michael Glimcher

As you know, a little bit of it is a moving target of when do some of these retailers get open and so when does some of these revenue commence. And again, we are pushing to get many of them open earlier in the year. They could push to later in the year. So it is a bit of a moving target for this year. Like we said, we see some dilution from it this year and some nice growth from it next year.

Nathan Isbee – Stifel Nicolaus

Okay. And then just two more questions on Scottsdale. Can you talk little bit about the lease economics on the office space there?

Michael Glimcher

Sure, sure. Absolutely. I mean – what I would say the good news is we are at the top of the market. The tough news is the top of the market has come down a bit.

Marshall Loeb

I mean, we are – as Michael would say we are what has been fun about it is we are bias. It has been a great rotation in being mixed use. So I was reading was it a Cushman & Wakefield report recently and the ask in the market was in the low 20s and we are in the upper 20s in terms of achieving. So we are kind of mid to upper and we will have – usually you can work in 50-cent annual rent offs things like that. We are building out the space. It’s difficult to get a month of free rent for each year of lease term but the good news is we’re basically 90% done and we have seen a shift to some national credit.

And it’s, you know, two of our last three or four leases have been a subsidiary for Weyerhaeuser and Starwood. You know, Weyerhaeuser was a full floor user as well. So it’s nice to get that credit. We started out with a lot of local guys and we have seen some national tenants moving around of late.

Nathan Isbee – Stifel Nicolaus

I mean, you are in the high 20s. Where would you be on a net effective basis?

Michael Glimcher

Net effective, I’m trying – you mean average rent for the term.

Nathan Isbee – Stifel Nicolaus

Assuming everything is baked in there what is your given number for the TI packages.

Michael Glimcher

TI. I'm trying to because we are spilling out shells so that’s costing us call it in the mid 50s to build out the space and probably average rent over the term, we are signing seven to – Starwood actually disclosed their lease but it is in the teens, the term of that lease. So we’re probably – you know, if you bake in that on to the expense stop as we allocate around 10 bucks a foot as little it will take us to operate it. So I’m trying to giving you more details but as you back into it, that might puts us net effect of that’s kind of where we will dial in but we are building out shells. So everything is more costly right now.

Mark Yale

Actually, the good news is you are in a sub market that is 30% vacant. We have got about 10% of our space still available. We’re achieving rents that are 30 plus percent higher than sub market average. So a lot of really positive trends here.

Nathan Isbee – Stifel Nicolaus

Okay. And then just as you get a chance to really set (inaudible) space, can you just talk about what type of tenant you are looking to put in there? Would it be a grocery or would it be some other sort of tenant at this point?

Michael Glimcher

You know, initially, when we did the use we were anticipating residential coming online at the same time as retail and office. It seems like an exciting use. Unfortunately, we didn't have a great operator in there. There is a line forming for people who want that space. It is arguably one of the best pieces of real estate in the property and for us it is not about doing it quickly but deciding what the right use is. A lot of restaurants are interested in that particular space because it does have some of its own parking, some just normal retail but to be on that hard corner, there next to the Mastro's Steakhouse location and just a couple doors down from Apple and H&M. It is a prime piece of real estate and it unfortunately just didn't have the right user in there.

Nathan Isbee – Stifel Nicolaus

Okay. And just you are looking towards acquisitions just to further that portfolio upgrade, clearly did not get that space at Pearlridge. Can you talk about what your breaking point on that put that additional space at Pearlridge was and how it could possibly impact your plans in terms of what you have for that project over the next few years?

Michael Glimcher

Sure. We bought the mall without the former JC Penney space and we underwrote it without that space. We are incredibly optimistic about it. It’s going to be a great contributor this year. We like the asset and Blackstone likes the asset. We didn't get there. We had a line in the sand pricing wise where we and Blackstone were both comfortable and we all recognized going in that we didn't own that space.

So our position really hasn't changed since we bought the mall. We’re exactly what we were. We’re excited we’ve got a number of lease roles in the mall this year. We have got low occupancy costs. We have already made several strong leasing deals there. So, you know, in a perfect world you want to control everything you possibly can but at a price and unfortunately it, you know, it got higher than we were comfortable.

Nathan Isbee – Stifel Nicolaus

What was your line in the sand?

Marshall Loeb

If it helps Nate and this is what made the underwriting tricky too. I think, it was a private individual, local buyer that bought it and then without disclosing the absolute numbers, one of the bigger tenant there, there's a borders there and there is a dollar store, a price choppers, I forgot the name that is also in bankruptcy but it affirmed that lease. So it is a tricky underwriting in terms of yield because it is pretty easy to overplay when you are underwriting a borders rent that may go away and I think it’s a bankruptcy in a closed furniture store.

Michael Glimcher

And again, like I said, we would love to control everything we can but let's face it. We don't control the anchors in 90% of the case in our malls and people have centers adjacent to and next to your mall. So it is not an irregular situation and again as Marshall said poor credit, low NOI and a higher price was paid. So again, we are no worse off than we were before it was marketed.

Nathan Isbee – Stifel Nicolaus

Sure. Okay. And then Mark, just to finish up, on your guidance, you have occupancy going up but reimbursements going down. Can we just talk about that?

Mark Yale

Yeah. And then – as it relates to the reimbursement rate, I think, part of it has to do with on certainly several of our malls and we’re approaching over 90%fixed CAM. So our sensitivity as it relates to kind of breaking out the dollars between base rent and extras is not quite where it was before. And I know for example, we had a couple of large deals at Jersey where the tenant just wanted to pay rent, didn't want to allocate anything to extras. We are very high on fixed CAM there and at the end of the day, we ended up creating more revenue bottom line and we got more in base rent and gave a little bit back on extras but we ended up increasing the NOI.

So, it’s really has to do more with how some of these leases are being structured and you might see that even on a go-forward basis in terms of what happens with the recovery rate versus bottom line, is it adding to your NOI and we think obviously, with the 1% to 2% NOI growth, we are making the right decisions.

Nathan Isbee – Stifel Nicolaus

All right. Thank you.

Operator

Your next question comes from the line of Carol Kemple representing Hilliard Lyons. Please proceed.

Carol Kemple – Hilliard Lyons

Good morning. In your supplement, you all have that anchor rents increased 22% in the quarter for new leases and re-leasing. What led to that increase?

Michael Glimcher

Sure. I would say we can't speak specifically to it but it is generally a small set of deals. Marshall, do you want to…

Marshall Loeb

Yeah. Just pulling it out. You know, during the year, we replaced the goodies at Ashland with a TJ Max. We broke in Jersey. This is one of the bigger drivers. We broke down on Old Navy into an Old Navy renewable and a Vanity Fair, VF outlet that was a nice driver and then another one during the year which is under construction but replaced to circuit Circuit City out in Los Angeles that points the hills with Toys ‘R Us. So if you – probably, as Michael said that there is only a handful on our anchors, I’m giving you during the year but the biggest driver probably fourth quarter was the shift from Circuit City to Toys 'R Us.

Michael Glimcher

And there’s one other, forever 21 going into Filene's basement space in Jersey and that certainly was a nice move forward in terms of rent and the tenancy.

Carol Kemple – Hilliard Lyons

Okay. And then going forward as you all are looking at acquisitions, will you look at them on your own first or will you pass them by the Blackstone Group to see if they want interest before you would look at doing something by yourself?

Michael Glimcher

You know, what we are looking at opportunities with them, we are looking at opportunities independent of them and it really relates to their return threshold, the type of assets that they are looking for and then the type of assets that we’re looking for so. So if something will fit the box for them, some things won't fix the box for them. So we are active and again we’re out there, we’re looking at what is on the market, we’re looking at number of things that aren't on the market but it’s going to be a case-by-case basis.

Carol Kemple – Hilliard Lyons

Is it something where you found an asset would you ask them first and if they didn't want to get involved, would you just do it on your own or would you just think we’re just going to do this on our own without running the option by them to enter into the deal?

Michael Glimcher

You know, we have a very open and fluid dialogue with them. So we are talking about everything that we’re working on and frankly they share with us things that they are working on that don't necessarily relate to us. So I think it is very much informal. But if there was something that we didn't think met the return threshold and wouldn't fit the venture that we have with them, we would talk to them about it and we’d certainly let them know what we were working on if they expressed an interest surely would like to work with them. It is a great relationship.

Carol Kemple – Hilliard Lyons

So kind of your first priority is you’d rather work with them if you can but if a project doesn't suit their requirements, you would still look at it on your own?

Michael Glimcher

We would rather work with them on things that make sense for them. Just like Mark mentioned there is a portfolio of malls that’s out there and it is a more moderate quality. And we looked at it and for us whether there was something they were going to look at or not, it didn't fit what we are looking for. So each case is different.

Carol Kemple – Hilliard Lyons

Okay. That's helpful. Thanks.

Operator

Your next question comes from the line of Rich Moore representing RBC Capital Markets. Please proceed.

Rich Moore – RBC Capital Markets

Hi, guys. Good morning. On the Border's front taking a look at that tenant, did you have three boxes, is that right, that would be closed in this initial 200 that they want to close?

Marshall Loeb

Hey Rich, it's Marshall. We have – it’s actually two and then it may be, I got this question earlier in the week. It may be the third, may be out at Pearlridge and that anchor that we just turned up with (inaudible) that we didn’t acquire. So we have Dayton which is actually on the closure list. There was an e-mail that was floating around yesterday.

So that’s Dayton mall is on the closure list and then we have Parkersburg, West Virginia and that is not on the closure list. And then we have three Walden books so we have a total of five, two big boxes and three small shops that are borders and only one confirmed out of the way so far and that is our Dayton space.

Michael Glimcher

And we, frankly, have another box user who is interested in the property who we didn't have space to accommodate. So we feel very optimistic about that and in fact in the case as we have been looking for opportunities anticipating this. Of the Parkersburg location, we actually have several users that are interested in that box. So it is two boxes, it is, what is it, less than a quarter of a percent of rent. So I mean it is – if there was all gone it is really a nominal impact to Glimcher.

Rich Moore – RBC Capital Markets

Okay. And I think one of the ones I saw was Tulsa. I guess Tulsa doesn't have one is that right?

Michael Glimcher

Tulsa, I think it is on the same street as our mall but I believe it is a standalone location.

Rich Moore – RBC Capital Markets

Okay. Good. Thank you. Is there anything you guys are doing in Surprise. I mean, I see it alone sitting there. Is there that could that be revised or saying they may start good year after some point. I was wondering if that is beginning to be something that’s more lively and attractive.

Michael Glimcher

We had started some outparcel development which we are completing and we actually have new leasing activity on. We know it is a bank ground lease and pay way and some other things which we had anticipated doing prior to the larger development. We do not have any interest at this time in pursuing the larger development there. We are really in Arizona focusing all of our effort and capital on Scottsdale, really being at the bulls eye versus being on the outskirts of the market in the pattern of what was growth. So we’re going to finish up this smaller project. Once it is completed, it is probably something that we will likely sell and we probably won't go back out there for the foreseeable future.

Rich Moore – RBC Capital Markets

Okay. Good. Thanks. And then on the Starwood lease expense, I think you were saying the western headquarters and that sounds pretty impressive. Is that something that could get bigger? I guess, because they – it sounds like they are making a pretty big commitment there?

Marshall Loeb

It is an office they have had in Phoenix. It is down on camelback and it is their finance group basically. For whatever reasons always, the headquarter is outside New York and they are actually moving it to but they referred to this as their western headquarters. It is their finance group. It could get bigger as Starwood grows, obviously, I guess their accounting and finance function would grow and it could grow that way. So we’re excited to have them part of the project and they talked about having corporate events there and things like that so it is a nice addition to the center.

Rich Moore – RBC Capital Markets

All right. Great. Thanks, guys.

Operator

Your next question comes from the line of Ben Yang representing Keefe, Bruyette & Woods. Please proceed.

Ben Yang – Keefe, Bruyette & Woods

Hi. Good morning. I have got two questions on the co-tenancy at Scottsdale Quarter. First, are you having to offer the co-tenancy to maybe some of the more recent leases that you have done and then second is co-tenancy in place for the duration of the leases? Because when I think about the lifestyle center in general, I think, the key weakness was, you know, you have maybe two or three main core tenants leaving, suddenly that center is kind of path to ruling. Is that the case for Scottsdale and obviously, it’s good today but I’m just kind of wondering may be down the road if that going to be a concern.

Michael Glimcher

Ben, it’s Michael. It’s really not a concern at all. First, I would probably put the monitor of mixed used project versus lifestyle center. I think lifestyle center had this (inaudible) of a handful of mature women's apparel stores that are all tied together and one leaves and then they all leave. Understand this thing came out of the ground with no anchors and that, you know, even without the Peter [ph] deal being done and Apple signed on and Nike signed on, and Free People, Armani A/X and so on. I think the real issue is opening co-tenancy and rent kicking in. Once everyone is open, we will have satisfied the majority of this language and we should be in really great shape.

So you have got people signing up without department stores and so on that are all relying on the other one being there. So the opening co-tenancy was really important. Let's also remember we leased up this project to some of the premier retailers in the nation at the absolute worst possible time. So I think it was a matter of them getting some protection as we came out of the ground. So had the time been different, had the project maybe they configured a little different, it would have been a different outcome. But like I said, tenant by tenant, deal by deal, we have a clear path and we can lay out, we are not going to have less granular level of detail but we are very comfortable, we will get there and once we get there, we will move on from it.

We are just really excited about the quality of tenancy there, the quality of restaurants and apparel and the sales that are coming out and the customer reaction. It has been tremendous. Yet I wouldn't think about it like you think about some of these little couple of hundred thousand foot lifestyle center that have been many cases houses of cards. This is a substantial 600,000 square foot mixed used project and frankly being across the road from the (inaudible) Project that serves as another anchor to the project. So it’s just a lot of density and it is one of the best retail submarkets and it fits the largest city in America.

Ben Yang – Keefe, Bruyette & Woods

So, I guess, it sounds like it is there but just a very small risk to think about, right?

Michael Glimcher

Yeah, yeah, it is a risk but we see a clear path to satisfying it.

Marshall Loeb

And just once again, it is opening co-tenancy, so one should not…

Ben Yang – Keefe, Bruyette & Woods

Okay. So it is not in place for the duration of the leases.

Marshall Loeb

You got to get the names, you got to get the occupancy to a certain level, once you reached that, it really gets into rent commencement when they start paying full rent. So right now, (inaudible), they are typically paying percentage rent. Once you get there you got a full rent.

Michael Glimcher

Yeah. May be think of it more as a waterfall, it’s a better way to think of it.

Ben Yang – Keefe, Bruyette & Woods

And then just taking Scottsdale, obviously the sales were pretty good that you reported. Obviously, the apple helped that. I recall that the pro forma or your expectation was that Scottsdale would do about $600 to $700 per square foot. Does that mean that we could see your sales productivity dipping a little bit as that thing continues to stabilize and get to that 600 to 700 per square foot level. Are you calculating it to be 371 per square foot in sales.

Marshall Loeb

That is correct. What you need to understand that as Mark gives, that you do have the apple and you have probably two or three other stores that are reporting those are stores that have 12 months worth of sales activity. So really is being driven by apple. We still think we’re going to be in that $700 per square foot range, once we fully stabilize and you will see that number come down but it’s certainly not a negative from our perspective, still talking about a pretty small pool of sales. So when you actually get that into our overall portfolio, I mean it helps but it’s not a huge driver of our growth right now.

Michael Glimcher

And again when you look at the strong restaurants, we have and the performance that they are putting up, when you look at things like Lululemon and Free People and their average sales, it certainly is better than an average location. We are real comfortable with that number but when you put a subset of a handful, kind of, there was an apple, it’s going to be a distorted number.

Ben Yang – Keefe, Bruyette & Woods

Sure. And I just want to make sure because I guess, I don’t want people – I don’t want to be surprised that the sales are going to deep a little bit but probably not that much given kind of the fair comments that you made.

Marshall Loeb

This is where we are, this is your report, we decide to put the numbers in but to your point, just to be clear, I mean, it will drop but when you have $700 per square foot of a much broader pool reporting that will continue to drive sales growth for the overall numbers. So even though, it’s a higher number right now, we are not talking about an arrogate of whole lot of sales when you talk about a whole center being at $700 per square foot, now we even have a more positive impact of what you’re already seeing in $371 per square foot.

Ben Yang – Keefe, Bruyette & Woods

Once you kind of get to that 700 stabilized, do you have – is it you expectation that your total productivity could be over 400 or maybe you need one or two more joint venture acquisitions kind of move to that plateau – to that level?

Michael Glimcher

Look, there is a couple of pieces, you had an old Scottsdale, Pearlridge, certainly helps on the average putting an Apple and Polaris plus the leasing that will be associated with that on the 10-year anniversary. So it is a couple of factors but it’s very much tangible and has a very clear path and I know Marshall, TJ and the leasing team, they see a very clear path to get these sales up over 400 and we're also excited about it.

Ben Yang – Keefe, Bruyette & Woods

Okay. I was just curious if you already had that kind of baked into the pie but whether you needed to do more acquisitions and it sounds like you could potentially already be there once all this stuff kind of settles.

Marshall Loeb

But if your – this all settles then you have a little bit of nice organic growth in the portfolio, you will get there.

Ben Yang – Keefe, Bruyette & Woods

Okay and then just final question, I think, Michael, you said there was a mid-prized small portfolio in the market. Can you tell us, you know, A, if you are bidding on that and B, what the portfolio is exactly?

Michael Glimcher

There was a portfolio out there, that with properties that I think were really taken back by servicers and or by private malls out there. They are more moderate to lower quality malls. There seems to be not from us but we’re not interested because they really, we’ve been real clear about acquisitions. If it doesn't jump to middle, if it is not better than our average sales and if it’s not better than our average occupancy, we probably shouldn't be looking at it and that portfolio certainly doesn’t jump in the middle here – minimum, there should be a minimum threshold for us but there is about five malls and we looked at it and we said this doesn’t make sense for us and we moved on.

Ben Yang – Keefe, Bruyette & Woods

Great. Thank you.

Operator

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

Cedrik Lachance – Green Street Advisors

Thank you. Just going back to the short-term leases and thinking not about temporary space but really the one to three year type leases. As you roll those leases, what kind of rental rate uplift are you expecting?

Marshall Loeb

Cedrik, it is Marshall. I mean, I guess one nice trend we did. When we talk about the short-term leases, if this helps that’s probably ‘08 leading into ‘09 that actually last year and the bigger jump was in our renewals in terms of term. So our lease term as a whole what came to our – this is through our pipeline, not signed leases so even more real time than that was up about 15% last year. So we went from call it a five-year average to a six-year average and a lot of that usually the shorter term were not the new leases. Those always stayed kind of 7 to 10 years, it was renewals that it dropped.

So we have seen an increase in our renewals from call it little over three years or little over four years, kind of approaching five again. And again, I think to me the uplift you’ll see and it varies back category in terms of where they are comfortable in their occupancy cost but using broad strokes, I would get to that 12.5% occupancy cost after 14% is we moved those guys. And I think the other thing is just at 95% full, I think the other thing, you should see is do more new leasing. In ’09, about a third of leasing activity we did was newly leases and last year, it climbed back up into the 40%, over 40%. So that number should keep climbing and so I think that is the other thing.

Some is that embedded growth and then the other thing is just swapping out categories that are not performing with better performing stores. I think that’s why we get excited with no new supply and then some of that supply is out there actually getting weaker. If it’s a private owner, that’s not well capitalized, we are chasing some of that movement from weaker centers into our center. So I think that’s – maybe I haven’t given you an exact answer but that 12.5 to 14 and then it is going to be playing offense for 95% full, we should be able to think strategically about each of the spaces that rolls and we want to renew that tenant or we better off chasing someone else and moving them down the street or near the market.

Cedrik Lachance – Green Street Advisors

Okay. So, on the short-term leases basically you don't see an unusual amount of upsize. You can see them being roughly 12.5% occupancy cost and your goal is to move them up in line with other tenancy in the portfolio that perhaps have performed better in the past?

Michael Glimcher

Probably so and some of those to be honest, we’re probably, usually the guy that near the store were not by and large but it’s usually the weaker stores. So someone was performing they were, yeah, so they maybe a little more than that, just because they were hanging on and we kept them there until we could play off.

Mark Yale

I mean the best way to realize upside is by replacing them, not by pushing their occupancy.

Cedrik Lachance – Green Street Advisors

And your ability to replace them is improving?

Michael Glimcher

The new open to buy is improving. It’s not dramatically up but it’s up. When we go from retailer to retailer everybody, they’re going from five stores to 10 stores or eight stores to 15, so it’s heading in the right direction but it’s not that the pipeline is opened yet, and maybe the good news about that we’ve said is that should trend that in the debt market, should forestall any new development for awhile longer, so slow recovery isn't necessarily bad for us.

Cedrik Lachance – Green Street Advisors

Okay. And then on capital allocation, obviously, one very successful outlook project in your portfolio. Do you ever contemplate expanding a little more in the outlook space?

Michael Glimcher

From an outlook standpoint, you touched on Jersey Gardens. It is probably one of the premier outlet or hybrid type centers in the country with such exceptional sales and occupancy. Our SuperMall property is also a hybrid, it’s a mix between outlet and traditional retail. I think, with the demand from the outlet side we are seeing what level of interest and how much growth can we see in that particular asset.

But, a lot of people are jumping on that bandwagon. We had a strategy to be in these with – for lack of a better term mills type assets. We got the two of them. One, is more moderate, one is probably off the chart successful. But we’re not currently looking at anything in that category. But if the right site came up over the next handful of years would be consider an opportunity like that? Sure, something, we think, we’ve been able to do well.

Cedrik Lachance – Green Street Advisors

Okay. Thank you.

Operator

The next questions comes as a follow-up from the line of Ki Bin Kim representing Macquarie. Please proceed.

Ki Bin Kim – Macquarie

Thank you. I'll be quick. Just maintenance when you talk about lease, mark-to-market on lease leverage, is that fully escalated cash rents or straight-line?

Michael Glimcher

Cash.

Mark Yale

Yeah. Cash to cash.

Ki Bin Kim – Macquarie

Okay.

Mark Yale

So whatever was expiring to whatever they’re going to pay initially on the lease term.

Ki Bin Kim – Macquarie

Okay. And apples-to-apples by your portfolio was the peak tenant sales per square foot…

Michael Glimcher

The tenant, I mean, the $371 per square foot is at a record level for the portfolio. I think we were somewhere right, maybe in the high $60 – $360 something, but $371 is a record level for us.

Ki Bin Kim – Macquarie

Okay. That’s it. Thank you, guys.

Michael Glimcher

Thank you.

Operator

Ladies and gentlemen, with no further questions in queue. I would now like to turn the call back to Ms. Lisa Indest for closing remarks.

Lisa Indest

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

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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