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Glimcher Realty Trust (NYSE:GRT)

Q1 2011 Earnings Call

April 29, 2011 1:00 PM ET

Executives

Lisa Indest – Senior Vice President, Finance and Accounting

Michael Glimcher – Chairman and CEO

Marshall Loeb – President and COO

Mark Yale – Chief Financial Officer

Analysts

Lindsay Schroll – Bank of America Merrill Lynch

Todd Thomas – KeyBanc Capital Markets

Nathan Isbee – Stifel Nicolaus

Jay Habermann – Goldman Sachs

Ben Yang – KBW

Cedric Lachance – Green Street Advisors

Quentin Velleley – Citi

Rich Moore – RBC Capital Markets

Operator

Good day, ladies and gentlemen. And welcome to the First Quarter 2011 Glimcher Realty Trust Earnings Conference Call. My name is Lucy, and I’ll be your coordinator for today. At this time, all participants are in listen-only mode. Later, we will facilitate a question-and-answer session towards the end of the conference. (Operator Instructions)

As a reminder, this conference is being recorded for replay purposes. 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 afternoon. And welcome to the Glimcher Realty Trust 2011 first 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 the first quarter supplemental information package are available on our website at glimcher.com.

Certain statements made during this conference call which are not historical maybe deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

For a more detailed description of the risks and uncertainties that may cause future events to differ from the results discussed in the forward-looking statements please refer to our earnings release and to our various SEC filings.

Management may also discuss certain non-GAAP financial measures. Reconciliations of each non-GAAP 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 Glimcher.

Michael Glimcher

Thank you, Lisa. Good afternoon, everyone and thank you for joining us on today’s call. Here at Glimcher, we are quite pleased with the start of fiscal year 2011. We delivered solid financial results for the first quarter supported by sound property operating fundamentals, while continuing to make meaningful progress on enhancing the company’s liquidity and balance sheet. We also continue to make tangible progress at Scottsdale Quarter, as we work towards the stabilization of Phase I and II and the finalization of planning for Phase III.

To start, our FFO per share of $0.13 for the first quarter came in toward the upper end of our guidance range driven by solid property performance in all of our key operating metrics.

Net operating income growth was positive again, up 1% over the first quarter of 2010, consistent with our guidance of positive growth for the full year. Both total mall and in-line occupancy increased over the prior year levels, up 150 and 100 basis points, respectively.

We have more good news on the sales front, as productivity continues to increase. Aggregate sales were up to $376 per square foot, which is another record for the portfolio and a 10% rise over prior year levels, the second double-digit increase in a row.

The addition of Pearlridge and another Quarter of Scottsdale along with solid growth experienced throughout the rest of the portfolio, were the key drivers of this performance. Additionally, we have experienced minimal fallout from tenant bankruptcy activity which has remained near historic lows within our portfolio.

Leasing activity for the year is off to a robust our, with positive leasing spreads of 5% achieved during the first quarter and we have an active pipeline heading into the May Las Vegas ReCON Conference. We do expect the continuation of positive releasing spreads throughout remainder of year, especially as we make progress at Polaris with this being the 10-year anniversary of the mall.

When considering Polaris and the role of shorter term leases executed over the last several years, our volume of lease expirations over the next 24 months are higher than where we have been historically. With the improving economy and leasing environment, we’re excited about the potential opportunity and upside associated with addressing these renewals over the coming months.

As it relates to the continued improvement of our balance sheet, we were able to successfully close on the modification and extension of our credit facility during the quarter. Support from our bank group was strong as we received over $300 million of commitments on the $250 million secured facility. This demand represents a great endorsement of the company from our key lenders.

Once again, the terms of the credit facility modification are consistent with the current market and reflective of the company’s improved balance sheet and overall risk profile. The final modification includes several key enhancements to the prior credit facility that will help support our business strategy going forward.

First, it increased the facility availability from $200 million to $250 million, second, included an additional one-year extension option, which would take the final maturity to December 2013, next, it eliminated the LIBOR floor of 1.5% and finally, it enhance our flexibility with respect to the use of proceeds to include investments and acquisitions, development and redevelopment

As it relates to the balance sheet, strategy going forward, we would like to continue with a solid progress made on the deleveraging front. However, with the January equity offering and subsequent credit facility modification completed, we have now stabilized our balance sheet. Accordingly, we will have more flexibility going forward with respect to deleveraging activities and can be much more sensitive in balancing further improvement with the potential earnings dilution.

Finally, we will continue to focus on finding the right opportunities to enhance portfolio quality primarily to the acquisition of highly productive properties. We are working hard and being creative in order to make this happen and are actively in the market today evaluating potential transactions.

We will be aggressive in looking for opportunities, but will remain disciplined and only moving forward with those properties that can enhance our platform and ultimately move the quality needle.

It appears that the [BM] mall market could be emerging after remaining dormant for several years. There appears to be lot of noise in the marketplace, so we’ll be keeping a close eye on whatever data points develop in terms of the pricing and potential buyers for these midmarket malls.

At the right pricing evaluations, it will certainly makes sense for us to also address portfolio quality through opportunistically turning from the bottom of our portfolio.

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

Mark Yale

Thank you, Michael, and good afternoon. The $0.13 of reported FFO per share for the first quarter did reflect approximately two pennies of previously announced non-recurring charges associated with the prepayment of the existing mortgages on our Morgantown Mall, Northtown Mall and Polaris Lifestyle addition during the quarter.

Remember, as part of the modification, the company improve the current collateral pool, securing the credit facility by granting first mortgage leans on these three properties. With respect to Scottsdale Quarter, the yield on the project was just below 1% for the first quarter, but we do expect it to grow to approximately 4% by year end.

Focusing specifically on our operating performance, comp mall NOI was up by approximately 1% for the quarter. Growth in percentage rents and short-term specialty leasing revenues drove the overall improvement in the net operating income over the first quarter of last year.

Turning our attention to the balance sheet, we did utilize $100 million of line availability during the quarter to fund the prepayment of mortgages on the three properties that were added as additional collateral to the credit facility. Accordingly, we finished the quarter with approximately $94 million of available capacity on our modified $250 million facility.

We also recently closed on our plan modification of the Scottsdale construction loan. With the anticipated timing of cash flows on the first two phases and the timing associated with Phase III, it was evident that our ability to earn out close to the full loan amount during the remaining term of the loan was remote.

Accordingly, in return for reducing the loan commitment down to $165 million, we were able to lock in availability at a minimum of $144 million, through May of 2012. This will give us another 12 months to get the project closer to stabilization, at which time we’ll replace the construction loan with the longer term financing or exercise the final one-year extension option currently in place.

With respect to our other remaining 2011 mortgage maturities, we have now executed a term sheet for the refinancing our Ashland Town Center property. The $40 million loan will be non-recourse, have a 10-year term and an interest rate we anticipate to be in the 5% to 5.5% range. It will replace a $22 million maturing loan, but there is interest at a rate of 7.25%.

But no guarantee that these favorable terms will remain in place especially with respect to interest rates, we have made a decision to pay off the loan now ahead of its maturity in November of this year.

Accordingly, we’ll incur a defeasance charge of approximately $800,000 to facilitate the early prepayment that we’ll be able to lock in today’s favorable terms. We expect to close on the loan sometime next month.

The other significant maturity involves the Tulsa Promenade joint venture property. The loan was originally scheduled to mature on March 14, 2011. The venture extended the maturity for 30 days and subsequently negotiated the term sheet providing for the loan modification that when executed will provide term through September of 2011, with the option to extend the maturity an additional six months to March of 2012.

However, to be able to exercise the final extension option, the venture will be required to market the property for sale. The venture is currently evaluating all options to address the upcoming maturity including the marketing of the property. If the venture decides to market the property for sale at the time of formal plan is committed to, an impairment loss in the range of $8 to $10 million is expected to be recognized by the company.

Finally, we did reaffirm our guidance for fiscal year 2011 and in FFO per share range of $0.64 to $0.68. We should note that this guidance does not include any impairment charge relating to the potential reclassification of the Tulsa Promenade as a held for sale property.

We also provided FFO per share guidance for the second quarter of 2011 in the range of $0.12 to $0.14 per share, key assumptions driving the guidance, including net fee income of roughly $1 million, lease termination income of $3 to $500,000, growth in core mall NOI of flat to 1% and $800,000 of defeasance costs associated with the early prepayment and refinance of Ashland mortgage.

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

Marshall Loeb

Thanks Mark. As discussed in our year end earnings call, the operating environment significantly improved throughout 2010. It increase sales, higher profits and minimal bankruptcies retailers began shifting from surviving to growing again.

The good news is we see these trends continuing into 2011, even after considering all the retailer headwind such as geopolitical events, rising gas prices and their impact on the consumer and higher commodity prices squeezing margins.

Comp mall NOI growth was positive 1%, aggregate sales increased again to $376 per square foot for the 12 months ended March 31, 2011, compared to $342 per square foot for the same time last year, driven by increasing quarterly comp sales which were up 4%. On the occupancy front, total occupancy including anchors was over 94%, as of March 31, 2011, up a 150 basis points from last year.

Small shop leasing volume continues accelerating up 60% over the same period last year. Through this activity we’ve now addressed about two thirds of our 2011 expirations and as Michael mentioned, we have an active deal pipeline heading into the Las Vegas Recon conference next month. The combination of virtually no new retail supply, and regional mall occupancy is generally over 90% is placing a growing of urgency on retailers in terms of their appetite for new space.

Re-leasing spreads were positive for the quarter up 5%, consistent with our guidance for the year. Additionally we still view portfolio occupancy costs as a more accurate predictor of embedded revenue growth. On this point, we are encouraged by a portfolio occupancy costs dropping to just over 12% at quarter end. Our goals are to reach 14% occupancy costs and portfolio sales of $400 per square foot, which will position us to drive rents for several years.

Accordingly, we remain cautiously optimistic about our near-term leasing prospects and our ability to drive positive NOI growth from our core mall portfolio. While our guidance for 2011 only calls for modest occupancy gains by year-end, we expect to have the opportunity to improve occupancy quality. As we’ve discussed over the last several years, we executed shorter term lease renewals and gave rent relief where appropriate. With an improving leasing environment, we have the opportunity to strategically plan, prone and upgrade tenancies.

With respect to Scottsdale’s Quarter, we currently addressed roughly 90% of the phase I and II retail and office space, through executed leases and/or Letters of Intent. In terms of current occupancy, approximately 65% of the retail space for phase I and two is currently open and operating, up from 50% at year end. Another key 2011 priority is finalizing the phase 3 planning.

We are 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. As previously discussed, our plan will most likely will involve selling a portion of the land of multifamily or hotel developers and then look to condos the first four retail.

In order to maximize value and pricing we are running a formal process which includes engaging a broker to fully expose the opportunity to the market. We are involved in dialog on all fronts and expect to have a more tangible update regarding plans including timing, cost and returns towards the second half of the year. There’ve been no significant changes regarding our expectations for overall yield or timing of the project.

As previously noted, we anticipate approaching stabilization of the first two phases sometime in 2012, and accordingly once we work through the final lease up and co-tenancy issues over the balance of the year, we see Scottsdale Quarter being a solid growth driver for the company.

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

Michael Glimcher

Thanks, Marshall. With our balance sheet now in order, and improving operating environment, and a clear strategy for the company, focused on quality, we are more excited than ever in terms of where we can take this company going forward. We’re off to a great start in terms of an execution of our 2011 business plan and will continue working hard to keep that positive momentum in 2011 going forward and beyond.

Now with that said, we like to open up our call to any questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question will come from the line of Lindsay Schroll with Bank of America Merrill Lynch. Please proceed.

Lindsay Schroll – Bank of America Merrill Lynch

Good afternoon. Can you guys discuss some of the trends that you are seeing at the trade area dominant assets? I am just wondering what tenant demand from the national retailers is like there?

Marshall Loeb

Hey, Linda, it’s Marshall. You know, it is picking up at the trade area dominant malls. Maybe a couple of stats to go your way, our sales were up or 4% within the -- just within that category and you just imagine its 14 malls. So each one is a little bit different within our category, but sales were up 4%. Occupancy out of those 14 were up and the good news is it really wasn’t any one or two drivers of that. Occupancy at about half of those malls is up year-over-year.

We are up in total on the category, a 140 basis points by about half of the malls are up in summer down, and then sales are up at probably three quarters of those malls and more. So, we are seeing a trend for those malls. There retailers who can go into a number of those malls and know they have less competition than in a larger urban market and really dominate that market. We’re also seeing big box activity, a fair amount of it, within our trade area dominant malls.

Lindsay Schroll – Bank of America Merrill Lynch

Great. And are any of those trade area dominant malls currently on the market?

Marshall Loeb

No. None we have listed. I mean, we would consider that at some point but nothing currently marketed.

Lindsay Schroll – Bank of America Merrill Lynch

Okay. And whatever serves as a signpost that we should be looking for if you were to get more active on the disposition side?

Michael Glimcher

Hi, Lind. This is Michael. We’re really watching what’s happening in the market. There is a number of portfolios that are for sale, and we are really watching to see where pricing comes in and who the buyers are of these types of assets. And assuming that market develops in the pricing is favorable, that would really be a catalyst to us trying to put in a little bit more from the bottom.

Lindsay Schroll – Bank of America Merrill Lynch

All right. Great. Thank you.

Operator

And our next question will come from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed.

Todd Thomas – KeyBanc Capital Markets

Hi, good afternoon. I’m on with Jordan Sadler as well. Just a quick follow-up on the B malls that are in the market out. I was just wondering if you could comment actually on pricing or what you are at least hearing from early indications? And also, what your sense is of the demand today?

Michael Glimcher

Hi, it’s Michael again. Obviously, there’s a big delta between buyers and sellers and whereas from a cap rate standpoint, obviously there’s things that we’re looking at. There’s opportunities out there. So I would want to necessarily state a cap rate, but there appears to be probably a 100 basis points or so difference between where the buyers and sellers are.

So it’s going to be interesting to see what trades and what doesn’t trade. Again, it’s a very active process now. There are properties that we are actively looking at. Sorry, I cannot really probably comment in more detail than that.

Todd Thomas – KeyBanc Capital Markets

Okay. What do you suspect the range is -- like a 6.5 to 7.5?

Michael Glimcher

Again, on our side the tip on hand -- I don’t know, necessarily some of the portfolios that are being marketed are being marketed based on book value or range of book value. Some of those book values are publicly disclosed, but again, when you are sitting on the other side of the table looking at opportunities you hate to tip your hand.

Todd Thomas – KeyBanc Capital Markets

Okay. And then you have a pretty good mix of market dominant and trade area dominant mall. So between the two segments, I was wondering if you are hearing anything from your tenants at the malls related to higher gas prices and driving cost in terms of traffic and sales at the malls?

Michael Glimcher

Our traffic, across the board, is either consistent to slightly up year-over-year. In fact, during the last downturn and we actually saw an increase in traffic at some of our trade area dominant malls. People not leaving the market and not wanting to spend extra fuel money. So they were staying in-market and actually helped sales, and some of the trade area dominant malls actually fared better than market dominant. So as of right now, we are seeing a direct correlation between gas prices and sales now and traffic is either flat or up across the board.

Todd Thomas – KeyBanc Capital Markets

Okay. And then, at pulse of promenade, I was just wondering if you could broaden your explanation about what profit all these actions to take place? Was it something in the loan docs or is this just separate negotiations within the partnership? I think I saw that at that Tulsa promenade, there was a new tenant going into an Old Mervyn’s box, and I was just wondering at year-end the occupancy there was about a 85%, so just kind of curious, if you can put some context around what’s happening there?

Mark Yale

Yeah. Todd, this is Mark Yale. As it relates to Tulsa, the reality is we have a loan that’s maturing. We probably over leveraged there I think between us and in our partner we were not in a position where we are looking to necessarily allocate capital to that property. As we’ve talked about, it appears that the market is emerging for those types of properties.

We think there is some positive momentum regarding some leasing we are doing inside the mall as well as some activity in the former Mervyn’s Box. And you know we think it’s an interesting time for us to test the waters and see if we can sell the property. I would say, if we didn’t have this impending maturity, we probably would continue to move forward.

We think we can drive some NOI growth, but the reality is, we do have to address the mortgage and when you start getting into capital allocation, as I said, between the two partners, we feel like this is a prudent step for us to see if we can go ahead and get the property sold and take care of the data and move on and it certainly is consistent with our longer-term strategy.

In terms of where that property sets in, and doesn’t fit in, necessarily going forward, in terms of upgrading quality of the overall portfolio.

Todd Thomas – KeyBanc Capital Markets

Okay. Can you give us a sense of what the current yield is at the center?

Mark Yale

You know, I think as it relates to yield, we basically, when we bought that property I mean, it’s interesting the NOI has stayed fairly consistent when we bought that property in 2007, and NOI has stayed fairly consistent. And it’s one where it will be interesting to see where the pricing for those types of properties lands.

Todd Thomas – KeyBanc Capital Markets

Okay. Thank you.

Operator

And our next question will come from the line of Nathan Isbee with Stifel Nicolaus. Please proceed.

Nathan Isbee – Stifel Nicolaus

Hi, good afternoon. Just focusing back on your comments, Michael, about opportunistic pruning and as it relates to Tulsa Promenade, if you look at out of your portfolio how many other assets do you think A, either you might not want to own long-term, it might be looking at an overall leverage distribution that you might be trying to worsening out with the bank over the next few years. How many of those -- I guess the 14 assets were falling to that?

Marshall Loeb

It’s probably two or three assets that you think long-term, I wouldn’t say it now, what happens is, when you sell or do something with the bottom (inaudible) as such you create a new bottom. So this portfolio is going to be fluid, we are actively looking at opportunities to add to the middle and to the top quartile and grow the portfolio, as was evidenced last year and taking on half of Scottsdale than on adding progress, one or two properties really moved the needle and significantly impact the portfolio.

So if there’s an opportunity to grow the top more and there is a market for the B malls, we may get a little more aggressive, but, what do we focus on -- there is probably to watch the fact that really more the needle or really important for us to move out in the shorter term. But, again, there all contributing and positive cash flow. So there’s not necessarily any things that that’s any issue which just -- how do we make the portfolio better are really the issues that we think about.

Nathan Isbee – Stifel Nicolaus

Okay. Thanks. And then just the next one next question your JV partner, Blackstone, obviously did a pretty big acquisition and there are some small assets sprinkled in there. Is there any chance that where -- have any talks getting closer or anything in terms of possibly taking up some management responsibility?

Marshall Loeb

There is really nothing at this point in the center of portfolio value , I bet you are referring to that that we thought -- I think make sense. They were negotiations on, we certainly have an active and fluid dialog with Blackstone and continue to look at opportunities with them.

But, again, it’s all want to be about the quality of the assets and if it makes sense for the portfolio. So, if it doesn’t answer the question, does this asset make our portfolio better? If the answer is not yeah, then there is not something we are going to look at.

Nathan Isbee – Stifel Nicolaus

Even just to prove as a third party measure?

Marshall Loeb

No, it’s really about our franchise and when we sit across the table with the retailer, whether we are on a 100% or half of an asset or 10% or none of it is still as represented the assets. So, if it was a portfolio then on the blended basis made sense. We would consider that, but one of asset or couple of assets that were inferior in quality to our average, we don’t believe it’s the right thing for us to do. We don’t believe its right for our franchise.

Nathan Isbee – Stifel Nicolaus

Okay. And Marshall, can you just addressing terms of your leases that you are doing now How many of them are shorter term leases versus full-term?

Marshall Loeb

The vast majority other than, especially leasing, which is going to held in and that’s remaining consistent, but we’ve seen our lease term growth of over the last couple of years. The one in volume, it shifted to more new versus renewal leases, that percentage is probably out from cold – it’s the low around the third to now back in the -- load to mid-40s, is the percent of our total leases and those are usually 10 years. And then it was use of the renewals, they got squeezed for people didn’t want to close stores.

But that they didn’t want to commit and those have gotten back off into that for, five year category pretty consistently. So we’re not – thankfully, not hearing that from retailers, that we want to relate and see, how things settle down, that we want it just to a one or two year renewal.

We’re back to kind of typically three to five year renewals, unless there is something unusual going on whether retailer, were they survive ability. There is survival that’s of a question mark. Some of those will be only year, but it’s really more that’s the exception and that’s retailer specific, not properties specific.

Nathan Isbee – Stifel Nicolaus

Okay. Thanks. And just finally, have you got any word from (inaudible) and in terms of how many other locations are closing?

Marshall Loeb

No. We’ve got 15 (inaudible) 13 of them are corporate to where franchise and its.

Michael Glimcher

Its miniscule in terms of our occupancy square footage and under 50 basis points of our revenues, so we’re -- the stores are still performing, it was more of a corporate that leveled the issue than an entity with our -- just Michael said what our traffic roughly flat to offset. Stores are still performing, so we’ve not heard of any closures yet, we had it filed and we’ll see how that plays out, but there is still open and operating is -- business as usual.

Nathan Isbee – Stifel Nicolaus

Okay. Thanks.

Operator

Your next question will come from the line of Jay Habermann with Goldman Sachs. Please proceed.

Jay Habermann – Goldman Sachs

Hi. Good afternoon. Michael, you talked about, potentially looking at some of these assets that might come to the market over time and I’m just wondering, can you compare potential return versus other type of investments that you might have whether it’s -- looking at future development or even, redevelopment of your existing portfolio.

Michael Glimcher

Sure, Jay. As we look at investing capital under the existing portfolio, obviously, it’s twofold, one is do we want to drive our return on that capital, yeah, also is it defensive or it is help strengthening and important asset for us. And we typically, look to get up into the high single-digits and if we can get to the double-digit, that will be really terrific.

I think if we look externally, you’re probably going to look going in at a lower yield, but the question is going to be how much growth opportunities during that asset, what is it due to the overall portfolio metrics, does it help, sales per square foot, does it help occupancy and then over a longer term.

We are going to help our growth profile. We may also as we’ve talked about looking at acquisition opportunity perhaps by something that’s got less leverage and the portfolio average and use that as an opportunity to deleverage well.

So, there is a number of factors that go into it, but clearly we have to take care of what we have and that has to be first and foremost and reinvest within in the core portfolio. But we also want to find external growth opportunities than can better us.

Jay Habermann – Goldman Sachs

And as you think of these opportunities that could emerge as the plan, so to use the joint venture partnership arrangements that you’ve talked about?

Michael Glimcher

I think generally that would – from our cost of capital standpoint and the opportunity of their own fee income as well. I think you should look for us to do a bulk of our acquisition activity in joint-venture versus wholly owned.

Jay Habermann – Goldman Sachs

Question back into occupancy, I know you mentioned maybe modest gains for the balance of the year. I know you registered about 150 basis points year-over-year, but can you talk about sort of our projections for occupancy is, as you move through the rest of the year, what sort of upside are you anticipating and perhaps even are you still talking about store closing?

Marshall Loeb

We don’t -- hey, Jay, this is Marshall. We will have some store closures, but we’re through the majority of that which is -- will hit us in the first quarter. I expect our small shop will end 92% to 93% and really when I think flat from the most, when we have two anchors that are under construction now.

So we will add those in, but a little over 94% first quarter, to me that feels about full and that we always have some moving parts and things like that. So we will fill up our small shop space a little more between now and year-end. We do have really three anchors in process, two will open later this year and one up will be signed in under renovation but we’re -- anchors were close to 96%.

So with that we’re about full and I really think – we talked our team about, the next 10 tenants that are really going to drive and differentiator your centers. So to me -- I think we’re about as full as we’ll get it call it 94%, 95%. It’s really about who -- can we keep on short-term places and replaced with better tenants now that things are full, to me that just kind of supply demand. So now that we’re out of supply and how do we increase the quality of the demand.

Michael Glimcher

And Jay this is Mike. I think this is really exciting time for us where the focus was on just holding occupancy and renewing tenants versus as Marshall said, every mall we have, we have a top 10 list, who would make the mall better and really aggressively pursuing those tenants and you’re seeing the shift with new -- more new deals and unless renewals in the mix and that means we are really rotating the tendency and we’re saying who is in the bottom quartile, as it relates performance within the mall, add more gross sales per square foot and we are looking at that and trade dominant and we are looking at market dominant. It’s really across the portfolio and in this improving environment with very little supply coming online, we are really able to turn space more often and better these assets so, hopefully, more expeditiously.

Jay Habermann – Goldman Sachs

Okay. Thank you.

Operator

And our next question will come from the line of Ben Yang with KBW. Please proceed.

Ben Yang – KBW

Yeah. Hi. Good afternoon, guys. Just another quick question on the (inaudible) and the partnership there. Given that, you, on the property with Oxford as well as with Puente Hills, you think that maybe what’s going on there might be (inaudible) to Oxford wanting to just exit U.S. retail real estate in general and if they do want to sell their interest in Puente, do you have an interest in buying it?

Michael. Glimcher

Hi, Ben. It’s Michael. Really, Tulsa because of the loan majority, it’s created an issue that you want to focus on immediately and so, I can’t speak for our Oxford as to what they want to earn or what they don’t want to earn will be in a position, where we -- we’re very possible will be marketing this and because of the debt maturities.

As it relates to Puente, it’s a great asset with a lot of opportunities for improvement and if we had the opportunities to put that into another venture, perhaps, that be something that we would certainly look at.

Ben Yang – KBW

I guess, I’m just curious as to -- driving the decision-making on what’s happening at Tulsa and I understand the mortgage, but is it their decision to kind of put what’s happening now or is that more of your call?

Mark Yale

Hey Ben, it’s Mark. I think we’re in step on that decisions, as we said, it really get down to cap allocation where do we want to invest. At some point, we have to right size that loan and if there is an opportunity for us to monetized the asset. We think that makes sense for us and we believe that,.

So, where Oxford is contrast and Puente Hills where we’ve made investments in that mall as partners, when you look at the round one deal we done, (inaudible) deals. We are talking up significant amount of tenant allowance and an improvement. So it’s really asset by asset and I would say at this point, we’ve been pretty much in step in terms of, the decisions for making.

Ben Yang – KBW

When you say, a right sizing, what exactly does that mean? I mean is there even a financing market for a mall that like Tulsa out there or is that just to expensive for you guys to?

Marshall Loeb

We’ve just been through a process with our excellent town centered, based on the high level of interest in the amount of close that we received and seeing who’s active in the market, that’s absolutely a market out there for it.

And I think as Mark said, every property is very different and it has a very stable asset, stable study, as we talked about the NOI really, has it gone backward or hasn’t gone forward, all it must have been very stable. In the case of [Frontier] we think it’s an asset that has a lot of upside potential. So, every property is different but there absolutely a robust financing market, at least when we saw, when we financed Ashland Center.

Ben Yang – KBW

Okay. Great. That’s good to know. Thanks guys

Operator

And our next question comes from the line of Cedric Lachance with Green Street Advisors. Please proceed.

Cedric Lachance – Green Street Advisors

Thank you. Just going back to short-term leases, what percent of your portfolio is currently under short-term leases?

Marshall Loeb

Cedric, it’s Marshall. Kind of on our short-term it would be a high single-digit number and it really, as you would imagine, as you work through our portfolio, it various by quality, there are some way make it up in the teams, so it’s a little bit higher, but on the whole portfolio it’s probably high single-digit number.

Cedric Lachance – Green Street Advisors

In a good market, what do you think a stabilize number for short-term leases as a percent of the portfolio?

Marshall Loeb

I think somewhere in the 5%, 6%, I think we’ll always have it and sometimes they come on as a placeholder, really until we can get the permanent deal done or basically combined a couple of space, something about couple of those where we have in mind, we can generate some income and so we get the next permanent deal lined up and maybe combining spaces.

But probably 5%, you’ll always have that even in malls the five, 10 odd lines base things like that, is where they ultimately should be and I -- we’re going to view, I think that we already own the mall, we may lease it and keep our occupancy as high as possible and keep the lights on, it feels better when you walk the mall and more importantly collect income from it.

Cedric Lachance – Green Street Advisors

Okay. And in regards to, Michael, you made a comment earlier on about your interest, of course for high productivity mall and being creative about it. What do you mean specifically about it, do you have an ability to find some Hyperactivity malls that are not necessarily marketed at this point or you thinking about perhaps some other retail type?

Michael Glimcher

That’s a great question. And it’s something that I’m personally spending a fair amount of time on. There are a number of high quality productive mall assets or we would call mall type meaning anchored with mall type retail that may or may not have a roof. There is assets out there that are still in private hands and there’s an opportunity we think in our case to buy 50% interest or 75% interest maybe not a – maybe some cases just now right purchased.

But there are some private owners that would like to maybe still stay involved in the asset, obviously from a tax standpoint with our currency of OP units. What we think we could be very competitive and probably the difference from them selling to a larger platform then us is the hands on idea, says someone want to sell half interest, they want to be involved in their asset but they also want to monetize it. We create a great solution for them.

So we have a number of situations where we’re in active dialogs with people, but as you can imagine these are owners and developers and probably a regional developers of some of this standards, it’s very personal decision it becomes in a state planning (inaudible) decision.

So these are discussions that take sometimes a year, sometimes it takes a few quarters, they don’t have in terms of weeks like something that’s probably marketed. So, again, I hope that we have some of these opportunities that bear fruit in the next 12 months or so. We’re optimistic about it, we’re going to look at those and then we’re also with our institutional partners look it what’s on the market and broadly market it.

Cedric Lachance – Green Street Advisors

Great. Okay. Thank you.

Operator

And our next question will come from the line of Quentin Velleley with Citi. Please proceed.

Quentin Velleley – Citi

Hi. Good afternoon. Just going back to Tulsa Promenade and Todd question earlier, do you have what the debt yield was or is on the mortgage?

Michael Glimcher

On the current mortgage Quen?

Quentin Velleley – Citi

Yeah.

Michael Glimcher

It is probably somewhere in the neighborhood of 12%, 13%.

Quentin Velleley – Citi

And as you sort of look across the trade area dominant assets, what’s the range of the debt yield across those mortgages?

Michael Glimcher

What for the trade area?

Quentin Velleley – Citi

Yeah.

Michael Glimcher

Yeah. It just ranges across the Board, I mean, it just depends on when we place the debt just how long ago, we have -- we probably on average I would say, the debt yield on that part of the portfolio is probably 14%, 15% but it’s going to range and it’s going to be deviation around that.

Quentin Velleley – Citi

Okay. And then just going back to the acquisition, your potential acquisitions. Mark, you’d comment that you only really liked to buy assets that increase the average quality of the portfolio. With that in mind, I’m looking at some of the bay assets that general growth in [phenomenon risk] of selling. Are there assets in that -- in your view would increase the average quality of your portfolio?

Mark Yale

Hi, Quen. It’s Michael. There maybe individual assets in some of those portfolios that ticked the box and do that, but as a portfolio, as you said, if we can buy all three of this portfolios would that make us a better company, absolutely not. So we’re more interested in individual assets or groups of assets at certain pricing and there’s probably the majority of what’s been marketed that we’re absolutely not interested in.

Quentin Velleley – Citi

Okay. Thank you.

Operator

And our next question will come from the line Rich Moore with RBC Capital Markets. Please proceed.

Rich Moore – RBC Capital Markets

Yeah. Hi. Good afternoon, guys. Property taxes in the quarter were lower than they were in the fourth or the first quarter of last year, is that, they are quite a bit lower is that something that is a new run rate or is it something interesting happen there?

Mark Yale

Hey, Rich. It’s Mark. The comp over the first quarter last year had to do with the deconsolidation of Lloyd and WestShore, so that transaction happen very late in the first quarter of 2010. So we had property taxes associated with those two properties and obviously in the first quarter of this year, we did not have that in place.

So that’s really the majority of the difference there. There was a drop from the fourth quarter to the first quarter and that mainly had to do with one property where we over accrued the property taxes, we booked it based upon an online bill and it end it up being incorrect. But by the time you work through it and you factored in the recovery that was about a $200,000 positive to the first quarter. So not significant and I think somewhere probably if you average the fourth quarter and the first quarter that would be a good run rate for the property taxes going forward.

Rich Moore – RBC Capital Markets

Okay. All right. Good. Thank you, Mark. And then to go back to Tulsa for a minute, there’s been a lot of question on Tulsa. But you guys extended through 30 days till April 14th, right?

Michael Glimcher

That’s correct.

Rich Moore – RBC Capital Markets

And that’s past, so do you have a new mortgage on that at this point?

Michael Glimcher

We have a negotiated term sheet that we are working on – closing as we speak. So we’ve been in dialogue and we think we have a solution that’s going to work for everybody and hopefully either later today or next week we’ll close on that or so.

Rich Moore – RBC Capital Markets

Okay. And so the $29 million mortgage would go down to probably what until September?

Mark Yale

No. It rolls at $29 million. We rolled that going forward, so.

Rich Moore – RBC Capital Markets

Through September?

Michael Glimcher

Through September and then there is an option for the term sheet that will give us another six months, but to get that six months that’s where we would have to market the property for sale.

Rich Moore – RBC Capital Markets

Okay. And okay, thank you. And then, it sounds like you guys, just from the decision have pretty much made the decision that you’d like to market it. So should we think about putting the impairment in the second or third quarter, like, what would the timing be on when, I guess, the decision would be made to market it or not?

Michael Glimcher

Rich, it’s Michael. I would say, we are strongly leading in that direction but we’ve not made a final decision and it something that would be a Board level decision. So I would say, we are leading towards recommending that and going in that direction, we’re not quite there yet.

Mark Yale

And as the ventures decision what, so we certainly with Oxford we’ll be making that decision here in the probably next 30 days.

Rich Moore – RBC Capital Markets

Okay. And certainly no later than September 14th, I guess, right?

Mark Yale

That’s correct.

Rich Moore – RBC Capital Markets

Okay. Very good. Thank you guys.

Michael Glimcher

Thanks a lot, Rich.

Operator

(Operator Instructions) And our next question will come from the line of Todd Thomas with KeyBanc Capital Markets. Please proceed.

Todd Thomas – KeyBanc Capital Markets

Yeah. Hi. Just a quick follow-up. There was a big increase in the straight-line rent in the consolidated portfolio about $1 million, is there anything one-time in nature there that we should think about making adjustment for?

Mark Yale

No. Todd, its Mark. It really relates to Scottsdale and as we are opening tenants especially the office tenants, there is rent abatement. So you’re going to see elevated level of straight-line. But over the next 24 months so probably we’re back into base rent as they start paying.

Todd Thomas – KeyBanc Capital Markets

Okay. All right. Thanks.

Operator

And, at this time, I show there are no further questions in queue. I would like to turn the call back over to Lisa Indest for any closing remarks.

Lisa Indest

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

Operator

Thank you for your participation in today’s conference. This concludes your presentation. You may now disconnect. Good day, everyone.

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