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Executives

Lisa Indest – Senior Vice President, Finance

Michael Glimcher – Chairman and Chief Executive Officer

Marshall Loeb – President and Chief Operating Officer

Mark Yale – Chief Financial Officer

Analysts

Craig Schmidt – Bank of America

Todd Thomas – KeyBanc Capital Markets

Quentin Velleley – Citi

Nathan Isbee – Stifel Nicolaus

Ben Yang – KBW

Carol Kemple – Hilliard Lyons

Rich Moore – RBC

RJ Milligan – Raymond James

Ki Bin Kim – Macquarie

Glimcher Realty Trust (GRT) Q4 2011 Earnings Conference Call February 16, 2012 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Glimcher Realty Trust Earnings Conference Call. My name is (Stacy), and I’ll be your conference moderator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions) As a reminder, this conference call is being recorded for replay purposes.

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

Lisa Indest – Senior Vice President, Finance

Good morning, and welcome to the Glimcher Realty Trust 2011 fourth quarter conference call. Last evening, a copy of our press release was circulated on the newswire, and hopefully each of you have had the opportunity to review our results. Copies of both the press release and our fourth quarter supplemental information package are available on our website at glimcher.com.

Certain statements made today 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. Reconciliations of each non-GAAP financial measure to the comparable GAAP measure are included in our earnings release and the financial reports we filed with the Securities and Exchange Commission.

Members of management with us today are Michael Glimcher, Chairman and CEO, Marshall Loeb, President and COO, and Mark Yale, CFO.

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

Michael Glimcher – Chairman and Chief Executive Officer

Thank you, Lisa. Good morning everyone and thank you for joining us on today's call. As we reflect on 2011, we are extremely proud of the progress made in the execution of our transformative strategy here at Glimcher and we are even more excited about how this positions us for 2012 and beyond.

In terms of accomplishments, we are particularly pleased to now have portfolio sales in excess of $400 per square foot. In fact, sales are up over 20% from the lows of 2009. In addition to achieving this significant milestone for the company, total mall occupancy is sitting at approximately 95% as of year end and we have experienced an acceleration in store leasing up approximately 25% over 2010 while generating positive releasing spreads of 8% for the year.

The improvement in real estate quality was not only driven by progress made within our existing portfolio, but also through the addition of new properties like Pearlridge acquired in the fourth quarter of 2010, and more recently, the purchase of Town Center Plaza in Leawood, Kansas during the fourth quarter of 2011. Leawood sales are well over $400 per square foot, and through the acquisition, we were able to add tenants like Anthropologie and Madewell to the Glimcher portfolio. Simply put, we are a better company owning Leawood.

We also made tangible progress towards the stabilization of the first two phases of Scottsdale Quarter during the year. Total occupied square footage increased from below 50% as of December 31, 2010 to approximately 80% as of December 31, 2011. Accordingly, the property is now positioned to be accretive to earnings in 2012 with the NOI contribution expected to more than double over the 2011 results. W also made substantial progress in firming up the vision for Phase 3 with plans to bring a fashion department store anchored to this site along with other complementary uses.

Finally, in terms of the balance sheet, we were able to efficiently raise net proceeds of over $250 million from common equity issuances in 2011 bringing our corporate leverage down to around 50%. Accordingly, we finished the year with over $170 million of capacity on our credit facility giving us ample flexibility to fund our current pipeline of committed investment opportunities. With another year of solid execution behind us, our goal is to maintain this positive momentum as we head into 2010.

Our strategy of focusing on quality remains the same and we are excited about what we can accomplish this year. With the $400 per square foot sales target now achieved, we have quickly turned our attention to new hurdle, a $450 per square foot in portfolio sales. We plan to pursue this not only through strategic acquisitions, but also by maximizing sales potential within our existing portfolio as we look to improve the quality of our current 95% occupancy and to execute on redevelopment initiatives throughout the portfolio.

As previously discussed, we see the potential to generate high single digit returns on a roughly $60 million of investment in our current outlet segment. At Jersey Gardens, we are currently working on enhancing the existing tenant mix by adding higher end luxury outlets to the offering at the center. These efforts will be coordinated with major interior and exterior renovations. The bulk of the work will start in the early part of this year with completion expected to occur in mid 2013.

We are also making progress on solidifying the outlet component at our SuperMall, which is located in the metro Seattle area. Based upon feedback from the outlet retail community, we believe there is an opportunity to improve this asset into a fashion outlet center serving the southern half of the Seattle market. In conjunction with these leasing efforts, we will be moving forward physical enhancements to the center as well.

The leasing pushes well underway and we would expect to begin the physical renovation works during the second quarter of this year with the targeted grand reopening of the mall in the fall of 2013. We believe investing in our core through this type of redevelopment along with smaller opportunity throughout our portfolio represents one of the best uses of our capital on a risk adjusted basis.

In addition to this redevelopment activity, we continue to focus on finding the right opportunities to enhance portfolio quality through acquisitions and development of highly productive properties. We are working hard to being creative in order to find other opportunities similar to Leawood. It’s not easy, but as we have said before, we only need a handful of the right opportunities to make meaningful differences and transforming the quality of our portfolio.

We have also passed on several opportunities, due to pricing as well as quality levels and while disappointed not to add some of the higher quality properties to our portfolio, we are proud of our disciplined approach to our capital allocation. From a capital perspective, we will continue to look properties to enhance our balance sheet and liquidity in 2012.

With the balance sheet now stabilize, we have greater flexibility in terms of execution, but we remain committed to our longer term goal of reducing overall corporate leverage even as we move forward with the funding in future investment opportunities. The capital rates through the ATM in the fourth quarter of 2011, will be used to fund our redevelopment activities throughout the portfolio.

In the future, we would like to over equitize acquisitions that we make as a way to accomplish two of our stated goals, but de-leveraging the balance sheet and improving our asset quality over time. We believe through sound capital allocation that any initial dilution will be more than offset by greater growth profile for the company going forward, any of the accretion and gradual de-leveraging of the balance sheet that will ultimately lead to a higher multiple and value creation for our shareholders.

Finally, in terms of Scottsdale Quarter, our focus for 2012 is fairly straightforward. We need to finish Phases 1 and 2 and firm up the development plans for Phase 3. With respect to Phases 1 and 2, the execution of the restoration hardware lease for the 20,000 square foot location that will anchor our home furnishing mix and support successful January opening gives us great momentum as we round out the final leasing for this project.

We should exceed the 80% retail occupancy milestone by the end of this quarter and we work hard to ensure other retailers will sign leases we will get open as quickly as possible. As we begin 2012, the path towards stabilization is much more defined than at the beginning of last year. Accordingly, we fully expect to make substantial progress towards stabilization during this year. In terms of Phase 3, our goal in 2012 is not only to finalize our plans for this phase, but also made tangible progress with respect to execution. Such progress would include walking down a commitment for a fashion department store deal.

As we have previously discussed, a portion of Phase 3 has been formally listed by a broker with extensive marketing occurring throughout the third quarter. We've been negotiating with several interested parties, but at this point have not executed the contract. We are also export several different scenarios, some of which don't necessarily incorporate residential on the site. We will keep you posted on the progress as appropriate.

As we've said all along, we've been clearly focused about making the right decisions for the long-term with respect to Scottsdale Quarter. This approach won't change whether we are ramping up the final leasing for Phases 1 and 2 or making decisions on Phase 3. Regardless, we see Scottsdale Quarter being a solid growth driver and value creator for the company here in 2012 and far beyond. Once again, we are proud of what we've been able to accomplish in the execution of our business strategy over the last year especially when considering the global macroeconomic issues that were at play.

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

Mark Yale – Chief Financial Officer

Thank you, Michael, and good morning. Our reported FFO per share for the fourth quarter up $0.20, now solidly within our guidance range going into the period, the biggest driver the performance was property operation or stabilized mall portfolio, which were modestly above our expectation supported by solid net operating income growth of 3%. With respect to the contribution from Scottsdale Quarter, the yield on the project for the fourth quarter was approximately 2%.

The Tulsa Promenade is currently under contract to be sold subject only to a financing contingency. Assuming financing is obtained we would expect the sale of the property to close sometime in April. The current $35 million sales price did result in the recognition during the fourth quarter of additional impairment not included in FFO and the net $500,000 partial write-off of the note receivable the company previously made to the Tulsa venture, which was included. On excluding this partial write-off of the Glimcher note and the $500,000 write-off of unamortized loan fees associated with our October modification of the company's credit facility, our FFO per share would have been $0.21 for the fourth quarter of 2001.

Now, let's quickly turn our attention to the balance sheet. As Michael mentioned, we are comfortable with our current liquidity position when considering our available capacity on the credit facility of $170 million as of December 31, 2011. To ensure that sufficient capital is available to fund our current redevelopment pipeline including the Jersey Gardens and SuperMall projects, we did issue $72 million of common equity during the fourth quarter under the company's ATM program.

As Michael mentioned, we'll earn a high single-digit return on these investments, but we won't see the financial contribution until 2013 into 2014. But clearly, we have the flexibility in terms of liquidity to fund our investment opportunities. Longer term, we remained committed to reducing the company's overall leverage. We currently have approximately $57 million of capacity remaining on our ATM program and we expect to re-up the program as we near completion, so it remains an available option for us.

We believe this is an efficient tool that will allow us to issue equity maturities and extensions to address in 2012. The mortgages on Dayton Mall and Puente Hills both mature around midyear. Accordingly, we will commence the marketing efforts on these financing opportunities within the next several weeks. With debt yields on both properties around 20%, we should be able to generate substantial excess proceeds from the refinancing. The $90 million mortgage on WestShore Plaza matures in September of this year. Once again with the manageable debt yield above 15%, we're not expecting any issues with our ability to at minimum roll the existing loan amount.

With respect to the supplies, $5 million construction loan which matured January 1 of this year, we are currently in discussions with the lender to provide us with up to 24 months of additional term, which will give us ample time to complete the leasing on the profit.

Our most significant debt extensions of all of the Scottsdale Quarter construction loan while we have a 12-month option available to us. We're actually working with the current bank group on a longer term extension that will push the maturity out to 2015. We are not interest in any material change in the current loan amount. Also at this point, we would expect to exercise the one-year extension option available to us on the Colonial Park mortgage.

Finally, we did introduce our FFO guidance for fiscal year 2012 in a range of $0.65 to $0.70 per share. The key drivers of the guidance include the full year dilution on common equity issue throughout 2011 including three pennies of dilution for the fourth quarter issuances direct FFO contribution in 2012 of $3.5 million to $4.5 million from Scottsdale Quarter driven by an average NOI yield of 4% for the year, and increasing Core Mall NOI of 1% to 2%. The other key assumptions that make up the guidance including and anticipate increase in G&A from 2011 levels to approximately $23 million mainly driven by compensation changes made during fiscal year 2011.

We anticipate level of lease termination income and outparcel sales gain is approximately $2.5 million, with net fee income forecast between $3.5 to $4 million for the year. Other than the sale of Tulsa in April, the guidance does not reflect any other property dispositions, acquisitions or material capital rises. We also provided FFO guidance for the first quarter of 2012 in the range of $0.14 to $0.16 per share. Key assumptions driving the guidance include net fee income of approximately $1 million, lease termination income of around $500,000 and Core Mall NOI growth of up to 1%.

So with that, now I' would like to turn the call over to Marshall.

Marshall Loeb – President and Chief Operating Officer

Thanks Mark. With the increased sales, higher profits and minimal bankruptcies, retailers continue shifting from stabilization to a growth mode. The combination of virtually no new retail supply and regional mall occupancies generally above 90%, we have seen a growing sense of urgency from the retailers in terms their focus on new stores both from big box users and more recently traditional mall specially tenants. Accordingly, new inline leasing activity continues to accelerating of 25% for the year even more encouraging that there we are seeing leasing activity throughout the portfolio not just at the top properties as evidenced by roughly 300 basis point increase in total occupancy in our Tier 2 portfolio.

With the strong pipeline of new deals and 2012 renewals are keeping pace with historical trends. As Michael mentioned our Core Mall operating fundamentals continued to improve, Comp Mall NOI growth was positive again. Total occupancy reach nearly 95% releasing spreads remain positive at 9% for the quarter; we experienced another strong quarter in terms of sales throughout the portfolio and finally we are encouraged by our portfolio occupancy cost fall into just above the 11%.

The combination of portfolio sales now over $400 per square foot, a low overall occupancy cost, the opportunity to prune and upgrade tenancies from the shorter term renewals and rent really granted over the last several years and no new competition positions us to drive growth for several years. Accordingly we are expecting 1% to 2% Core Mall NOI growth for 2012.

That said it's important to understand that our 2012 growth is somewhat muted by major retaining activity that's occurring throughout the portfolio including Jersey Gardens, Polaris Fashion Place, Dayton Mall and Lloyd Center to name a few. At each we are reworking space to accommodate new retailers that upgrade their tenant mix.

The short-term impact however is at the current year growth is negatively impacted by downtime and loss rents. We estimate 2012 growth would be approximately 100 basis points higher without such activity. With the majority of this retaining expected to be completed by October, we forecast an acceleration of the NOI growth rate to approximately 2% to 3% for fourth quarter. This also positions us nicely for 2013 growth as we receive the full year benefit from these new tenants.

As Mark mentioned, we expect positive contribution from Scottsdale Quarter this year as we continue making substantial progress opening stores and addressing core tenancies. We finish the year with 75% of the retail space open in Phase 1 and 2 and we will reach approximately 80% by the end of the quarter. We are pleased to announce additional restoration hardware; bill opened a 20,000 square foot store along Scottsdale road at the southern end of the project. The two level store will be their flagship Phoenix location and help solidify our home furnishing mix, which already includes Pottery Barn and the markets only West Elm.

In terms of the office space of Scottsdale Quarter, we finished the year over 90% occupied and have letters of intent on the majority of the remaining space. In total, we have approximately 95% of the Phase 1 and 2 retail and office space address to executed leases and/or letters of intent. With the January opening of Sephora, the recent restoration hardware lease and solid holiday sales from our current retailers, we are excited about the momentum in place as we work to finalize leasing for the first two phases.

Now, let me turn to the broader portfolio and with the recent focus on Sears in the marketplace, we thought it helpful to review of our relationship. When we exclude our Morgantown, Commons community center, loan Kmart and consider our pro-rata share of Sears rent from joint venture properties, Sears total base rent represents only 75 basis points of total annualized minimum rents are roughly $1.8 million. Also please understand our current occupancy cost at the leased locations in our portfolio remained very manageable. We have a longstanding and profitable relationship with Sears and have no reason to believe it won't continue. Once again, none of the announced Sears closings fall within our portfolio.

Finally, consistent with prior core presentations we segmented our portfolio based upon minimum sales per square foot number of $300. Using this metric, you will see that nearly 85% of our NOI is comprised of the Tier 1 portfolio achieving sales of $450 a foot with occupancy over 95%. The remaining 15% of NOI is comprised of the Tier 2 portfolio with sales of $250 per square foot and a 93% occupancy rate.

Generally, Tier 1 properties represent those that are longer term holds due to their stability and growth profile. With respect to Tier 2 properties these may be assets that over time we should opportunistically call, if we don’t see a clear path towards meaningful improvement and property fundamentals and growth.

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

Michael Glimcher – Chairman and Chief Executive Officer

Thank you, Marshall. Once again, we are pleased with the steady and solid progress made as we continue to transform the company including enhancing our balance sheet, strengthening our core, and pursuing strategic investments. Our core mall portfolio now sits at 95% occupancy. It generates $400 plus per square foot in sales with an 11% occupancy cost, while delivering 3% NOI growth during the fourth quarter.

We have also made significant progress in clarifying the path towards stabilization and increased value creation from Scottsdale Quarter. But this evolutionary process has not been without its challenges including short-term earnings dilution we are more excited than ever in terms of where we can take this company going forward over the long-term. It will continue to work hard and keep all of this positive momentum going as we move forward.

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

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from line of Craig Schmidt with Bank of America. Please proceed.

Craig Schmidt – Bank of America

Thank you and congratulations on bringing $400 a foot. I know you talked on Sears, but I wanted to hear maybe the company's contingency plan given your exposure to 11 Bon-Ton anchors in your malls?

Michael Glimcher

Sure, Craig. Thanks for the positive comments. And certainly something that people we thought maybe want to talk about. When it comes to Bon-Ton, they represent about $3.5 million worth of rent to us. The company did about $3 billion worth of sales last year and has almost $500 million of capacity on our unsecured credit facility. It doesn’t come up until 2014. So, we don’t view Bon-Ton as a near-term issue. December sales were down, I think 0.7%. So, we are watching them and we certainly are concerned. They have many really strong brand names. They do strong volumes within our standards. And I think if you think of them in conjunction with Sears and exposure we have both of them in our malls.

We have a depth chart for each mall and there is in any case 3 to 5 different key anchor tenants that you think would be good. So, our team is on a quarterly basis out meeting with major anchor tenants and we are really, I wouldn’t call taking reservations, but giving indications of interest, but we would like to take some of these locations. Again, with Bon-Ton's balance sheet and their capacity we don’t view this as a near term issue, but we want to be prepared. So, we've been able to absorb anchors base as it's turned. We've done a lot of things with Dick's Sporting Goods or the big-box retailers. There are certainly other retailers like Belk, Dillard's that could step into some of these boxes. And each mall has the different story, but we have clearly developed a depth chart and aware of it in case it becomes an issue. But I think in the short-term we don’t believe it will be an issue.

Craig Schmidt – Bank of America

And just the fact that the stores are a little bit smaller than traditional department store, is that making me easier to release or tougher?

Michael Glimcher

Well, it just depends on who the next candidate is. I mean, I think we saw, we had a number of small Macy's in some of our smaller market malls and there is 50,000 boxes really have worked out well for some of these Dick's Sporting Goods. So, depending on who you want to put in the space as smaller boxes do make it easier, if you wanted to accommodate maybe a target or maybe a Dillard's or Belk, then we would have to look at increasing that pad and adding some space, but again, that would be a positive problem they have to deal with.

Craig Schmidt – Bank of America

Okay, thank you.

Michael Glimcher

Thanks so much Greg.

Operator

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

Todd Thomas – KeyBanc Capital Markets

Hi, good morning. I am on with Jordan Sadler as well. Michael, you commented in your prepared remarks that you have passed on some deals due to pricing in terms of acquisitions, but is there anything out there at all that you are looking at today and how would you characterize the pipeline at this point just in terms of deal flow that you are saying?

Michael Glimcher

Yeah. We have passed on some opportunities due to aggressive pricing. I probably say the biggest change and what we are looking at with the successful acquisition of Leawood Town Center doing north of 400 a foot and north of 95% occupancy and a great tendency with its success we have seen in enhancing our tenant quality with Scottsdale Quarter. We really are liking the open air segment, and frankly, there aren’t a lot of the closed malls that we think will trade. So, I'd say more of what we are looking at are open air anchored projects versus closed regional malls. But again, for us the bar is doing $400 a foot isn't 95% occupied. And we are seeing quite a bit of deal flow. Our pipeline, I don't want to say, is robust, but there are enough opportunities that for our size company and the amount of opportunities that we need we can move the needle this year by picking up a couple of these centers.

Todd Thomas – KeyBanc Capital Markets

Okay. Do you expect that deals going forward could look more strategic in nature like Leawood did with the sale of – with the asset swap?

Michael Glimcher

That was the special circumstance and we talked about a real win-win, between us and DDR. If there are opportunities like that, sure, I just don't know that we have the currency of assets that we would trade out of, but again, we are trying to be creative, the Pearlridge opportunity that we found through Blackstone was great last year. A year before, Leawood was great last year. And again we'll be creative, one or two great acquisitions really move the needle for Glimcher and that's what's probably most exciting.

Todd Thomas – KeyBanc Capital Markets

Okay. And then question for Marshall, looking at some of the Tier 2 malls, it look like there is pretty consistent increase in occupancy throughout the year and then that segment ended almost 300 basis points higher at year end. I was just wondering if you can talk about what's driven those occupancy increases and maybe talk about your outlook for those assets? And also kind of curious what kind of retailers you are signing leases with at those centers?

Marshall Loeb

Sure. We are pleased with – yeah, again, we get a lot of questions about the Tier 2 at times that differentiator is there happening at those malls. So, hopefully 300 basis point jump last year helps prove that there is interest there. I know and I have kind of just said in our prepared remarks we talk about the lack of new competition and I think we are definitely seeing it and feeling it in those Tier 2 assets. We did a couple of Dick's Sporting Goods leases in those Ulta Cosmetics, Justice, which also is same parent company as (Morris') and Dress Barn. So, if you just say kind of the flavor of some of the bigger ones we have done, Old Navy is in one of our Tier 2 assets, that's a slightly older lease, but those are some of the names we have pulled in. And probably a few years ago, they had more options in more lifestyle centers and now we are focused on those assets as well and they continue to improve.

Todd Thomas – KeyBanc Capital Markets

Okay, that's helpful. And then just thinking about the issuance under the ATM program in the quarter, so you did about $70 million in your expected redevelopment spending on Jersey Gardens and SuperMall's $60 million which won't begin for a couple of months it sounds like, but can you just talk a little bit more about your plans with regard to issuance in 2012 whether or not you are getting to an inflection point where that might slowdown a bit?

Michael Glimcher

Sure, Todd, its Michael and I'll certainly let Mark comment as well. As we were at the end of last year, we had some reverse increase and we had some quality institutional investors that wanted to be in the name. We thought about what we wanted to do with SuperMall and what we wanted to do with Jersey Gardens and with all the volatility in the market and certainly the uncertainty over in Europe, we knew we had a great use that we could achieve somewhere around an 8% high single-digit return on the redevelopment to Jersey and Seattle generating about $3 million are the revenues. So, we really excited about that and we said here is an opportunity to bring the capital in, while at a short-term dilutive it will provide for great growth going into 2013 and 2014. So, it was more about having certainty and being comfortable. The capital was there to get things done. We think the redevelopment or reposition of SuperMall takes that asset and moves it from a Tier 2 into Tier 1 asset. That’s really exciting.

Jersey turns it from a Tier 1 to a Tier 1 plus and then the additional $10 million or $12 million in there. There are a number of big H&M's and Dick's Sporting has the moves we are doing throughout the portfolio. We didn’t want to be in a position, where we didn’t have the capital capacity to get this thing done. So, we took the opportunity of some reverse interest and said, let’s get it done its more about certainty, pricing perfection and if we leave half a penny on the table based on what we are trading today, maybe, but again it was more about certainty.

As we go forward and I’ll turn it over to Mark, we are really thinking about, where we are with leverage and we are going to be coupling equity raises with acquisition and Mark wants to comment on that a bit.

Mark Yale

Yeah, I think obviously with where our balance sheet is leveraged right around 50% debt to EBITDA, when you factor in kind of a run rate on Scottsdale was solidly seven times. We have made progress. So, we really believe we have the flexibility. We also feel like we are one step ahead and that’s where we want to be. So, I think you can look at that ATM. We have raised the $70 some odd million, but it really was the earmarked towards specific use and I think that how you will see us think about equity going forward. We have worked hard to get to the balance sheet to where it is and we think we are certainly going to be continue to be thoughtful and measured and continue to chip away and over time we hope to see that leverage come down. We also hope to see our coverage improve and that’s where we are focused on.

Todd Thomas – KeyBanc Capital Markets

All right, great. Thank you.

Operator

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

Quentin Velleley – Citi

Thank you. Good morning. Just in terms of Scottsdale Quarter a couple of things for the model. In the fourth quarter, how much, you know, how did you have coming through from Scottsdale and of that 80% occupancy, how many of those tenants were fully rent paying in the fourth quarter?

Mark Yale

Hey Quentin, it’s Mark. It was about $2 million roughly of NOI that was coming through in the fourth quarter associated with Scottsdale quarter. And I’m not sure the exact percentage of tenants, who are paying full rent. But it was I would probably say around 50% somewhere in that ballpark. So, the next big hurdle right now is the 80% threshold, which we are focused on. Marshall had mentioned that we will hit that here sometime during the first quarter and we also know that we did have a handful of tenants in the first quarter with Sephora opening. So, we just continue to chip away.

Quentin Velleley – Citi

Okay. And then just sticking with Scottsdale, I know in your formal disclosure the stabilized yield came down about 50 basis points the midpoint and I know you'd sort of alluded to that potentially happening, but I’m just wondering what happened over the quarter to pull that yield down with some of the leasing that you did lack Restoration Hardware or was it, you know, something else we should be thinking about?

Michael Glimcher

Quentin, it's Michael. This is always been about quality and we talked about doubling the NOI year-over-year. I think probably the shortfall of 100 basis point of return has to do with timing. Going into this year, there is an additional over I think $3.2 million that will get kind of going into 2013 off of the annualized effect of these high quality tenants. Scottsdale is the highest sales per square foot shopping complex in all of the state of Arizona. It’s always been about getting it right. So, we just did this big 20,000 foot restoration hardware that will be one in each major metropolitan market in America. We have it for here. We just opened up Sephora. We just recently signed another lease with (inaudible). Every deal is about getting the right tenant and if it’s a matter of getting the best tenant it will be the higher sales per square foot and hopefully we will get some percentage rent, which will make up for that, that little bit of the shortfall.

We are going to do the right tenant versus just leasing space. So, we have taken a long-term disciplined approach. I know this one taken a little bit longer than people have expected, but there aren't many properties otherwise it run $800 a foot. It’s still doing north of $1200, $1300 a foot now. It's a great mix. It's about getting up right, it's not about getting it done now, it's about – it's about building on what we've done so, hopefully you see some great growth coming out of that this year. You will see additional growth coming out of a next year and it will continue to be a great driver for the company.

Quentin Velleley – Citi

Okay. And then I guess lastly on Scottsdale, it sounds like you are much closer to getting a fashion anchor in there, sort of when should we expect to hit some additional news on that like in terms of timing this year. And then if you look at Phase 3 if you would to get a fashion anchor in there, what should we think about in terms of the CapEx spend and may be what kind of yield that you'd be hopeful of getting on Phase 3.

Michael Glimcher

Well, as far as timing, department store deals take a longtime and most of these companies are doing on average one deal per year. So, I wouldn't anticipate hearing anything until probably closer to the end of the year. The good news is we only have one department store location. We have multiple interested parties who would like to have the location, there is clearly a hole in the market and there is an opportunity for substantial sales to come out of here. So, in – I'd also add if we never did a department store, it's still the highest sales per square foot shopping center in the state. We just always look at every asset and we say what can we do to make it better. We think adding a department store would make the asset better. So, why wouldn't we want to do that timing of it opening is likely 2014 because it's a process to get these deals done.

Again the rest of the centers often operating I know you made some comments in your piece of how successful the restaurants are. There are effectively the anchor of the center a day that and certainly the largest Apple store in the state, things like that are the anchors today. Our theater which is performing at an exceptional level is an anchor. The Restoration Hardware at 20,000 feet becomes an anchor. And I'll let Mark to talk a little bit more about the financial side of it.

Mark Yale

Yeah, I mean, we – Quentin, we still need to finalize the specific plans as Michael alluded to in the prepared remarks. We are looking at different scenarios that could really take us different directions. I think also, I mean, we don't have to do a department store to just for Phase 1 and 2. So, if we do a regardless of what it does the yield, we are going to do it, because we think it creates value and it's going to lead to what a cap rate that's going to be more attractive and creates overall more value. So, that's all the calculus that goes into it and but it's not something we're going to be compelled to do, it's something that we're going to do because it's going to create ultimate value for the company and for the shareholders.

Quentin Velleley – Citi

Okay, that's great. And thank you for the NOI yield disclosure on Scottsdale throughout 2012, thank you.

Michael Glimcher

Thank you.

Operator

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

Nathan Isbee – Stifel Nicolaus

Hi good morning. Just quickly on the ATM, can you comment on whether you have issued anything in the first six weeks of '12?

Mark Yale

Hey, Nat, this is Mark. We are in a blackout as soon as we get to year end so, until we get our K-filed, we would have not issued anything under the ATM in the first part of the year.

Nathan Isbee – Stifel Nicolaus

Okay. And can you just talk and you talk about the different scenarios at Scottsdale beyond the multifamily. Can you just talk give a little more color as to what you might be looking end of the, are you revising the hotel?

Michael Glimcher

Nat, this is Mike, I will certainly let Marshall commented on it. We ran a through process and there is a very deep interest level here. I think for us the department store would be the cornerstone of the development. So as we – even though we have a tremendous amount of interest and again Marshall can talk about the different categories in the level of interest. We'd like to set the cornerstone first and then build around it so because that interest has been strong and there has been ongoing discussion. The thought was put the cornerstone in place and build around it and Marshall, do you want to comment on some of the others uses.

Marshall Loeb

Sure, I mean, we've talked to it when we hired CB Richard Ellis to kind of help us see what organized the interest that was in the market. It seems like the financing is definitely most prevalent in the multifamily market. So, that's where the majority of our interest is come again. We want to make sure we have the right location and spacing for the department store. So, that's really the – also the anchor the driver for Phase 3. We have several interested multifamily parties. We continue to have conversations with hotel groups is recently as last week sat down with hotel group likely more of a boutique like of four to five star hotel. And then thankfully with the success of the office we can turn in another letters of intent to a lease will be virtually done with it, but we've looked it the cost of delivering parking, we'll have ground floor retail, but we could add some additional office in Phase 3 as we're also hearing from the CB folks that we feel – we should be better off leasing office in Phase 3 with the wind in our backs versus where we started Phase 1 when we leased it. So we've got opportunities we just as Michael said I want to make sure we get a right and leave the right space for the department store.

Nathan Isbee – Stifel Nicolaus

Okay. So, we're in the past, you were expecting the multifamily or some other announcement sooner that they were going to the first announcement of Phase 3 will be the department store, is that correct?

Marshall Loeb

Probably yeah, you're right, that's true, we thought we probably move forward that we've decided to maybe what be cautious and make sure we do it right.

Nathan Isbee – Stifel Nicolaus

Okay. And just quickly on the yield issue once Scottsdale, there was the cost went up above $5 million, is that related to the restoration deal?

Michael Glimcher

Yeah that's the majority of it, yes.

Nathan Isbee – Stifel Nicolaus

Okay. And then on SuperMall, can you just talk about maybe some of the key tenants you might have signed already that would really give us a sense of where that project is going?

Michael Glimcher

It's Michael. I just wanted to reiterate, the center already has Nordstrom Rack and Banana Republic outlet and Tommy Hilfiger outlet, GAP outlet, Children's Place, Levis, Ann Taylor, Eddie Bauer, etcetera. So, we've got a great mix of outlet tenants today. We're really at the letter of intent stage right now with these tenants versus sign leases what we'd like to do is a group of them executed and then announce some as a whole and really gets some good momentum coming half of that.

But I will tell you when you think about how linear that Seattle market is the outlet center in the North side of the market is very successful, it's probably about a two hour drive from the North to South. We do have a strong core already build into our property, we're not one of these 50 speculative outlet projects that are being build around the country where existing operating center, we're going to put capital into physical plant and the kind of names that are the key outlet tenant names are the type of people we're talking to and we signed the letters of intent, we're putting – we're putting this letters of intent and converting them into leases. But again we'd like to get a critical mass executed before we do a broader announcement. But I would tell you we would be here talking about it if we didn't have very strong momentum.

Nathan Isbee – Stifel Nicolaus

Okay thanks.

Operator

Your next question comes from line of Ben Yang with KBW. Please proceed.

Ben Yang – KBW

Yeah, hi, good morning, just one question about Scottsdale Quarter specifically in the $140 million construction loan that matures in a few months? Mike, I think you said you're negotiating put to – push the maturity out a few more years. But fair to assume at this point that you're at least be able to extend the maturity for another year, if you don't if you still negotiating in May. And despite the fact that this project is leasing up a bit slower than you had anticipated?

Michael Glimcher

Yeah, Ben, I mean that certainly we definitely we'll have the year of term. But I mean we're pretty optimistic, we have a term sheet for the three years, I think our partners are working with us and just getting – just a matter of getting through the process and the three years are important on several aspects. One is gives us time to get Phase 1 and 2 stabilized. Two, it allows us to get Phase 3 nailed down and then also 2015 brings us to the maturity of the CMBS loan on the ground purchase that we did. So in 2015 the idea is that we would be able to term that out altogether and that's going to give us the most efficient and effective execution.

Ben Yang – KBW

I mean, is there any consideration to just taking out the construction loan entirely in case before it becomes an overhang on the stock, I mean you've done a lot on the ATM, you're going to re up it, just any thoughts on maybe clearing the headroom and taking that construction loan out completely?

Michael Glimcher

Ben, it's Mike. We've got a great group of lenders here, they believe in the project, we actually just had a bank meeting there in the last couple of weeks and everyone is thrilled with the project again it's taking a little bit longer, but the quality is off the charge, the tenant mix is second to nine, I probably said it five times, but the sales per square foot of the highest in the market and analyzed in a double this year to grow again in the following year. So, this is an asset that people like being around.

Mark Yale

It's good business for our bank groups. So, I mean they're not, this is going to be favorable for us in terms of where pricing is and it's a good business for our bank group. So, we think it's going to be a good execution and certainly shouldn't be an overhang.

Ben Yang – KBW

Okay. And then Michael, I think you've said 80% retail occupancy at Scottsdale is a hurdle where more core tendency is start to kick in. What's the final retail occupancy level where all co-tenancies are occurred for Scottsdale?

Mark Yale

Really, this is Mark, Ben it's really about 85%.

Ben Yang – KBW

85%. And when do you anticipate hitting that hurdle is that going to happen by mid year or by the end of the year, what are your thoughts on that?

Mark Yale

Probably, the first part of the second half of the year, the other thing is there are some name co-tenancies, so getting Restoration Hardware signed, getting Sephora open, getting that (indiscernible) leased. There is a number of key tenants that are name co-tenants and we keep on ticking away at that. So, we are getting to the occupancy threshold. Now, it's clicking off the name tenancy threshold, but we have made huge progress, and again, when you think about being sub 50% a year ago and about 80% a year later and double the NOI, this thing is heading in the right direction. We are all very pleased about it.

Ben Yang – KBW

Is it only those 3 to 4 name co-tenancies that you just identified or is it more than that?

Mark Yale

Every lease is different. I probably have to have another three hours to the call to go through each of them, but yet again it's very few names and we're just about there on all of them.

Ben Yang – KBW

Okay. And just final question on Phase 3 for Scottsdale, obviously, the plans are in fluffs, but there was a multifamily developer that had announced that they were selected and it sounded like they were entering due diligence, but now based on your comments, today, it sounds like they pulled out or maybe you pulled out. Curious, why that relationship ended at this point?

Mark Yale

We have several high-quality multi-family operators that would like to build here and we have a zone site in an area that's very difficult to get zoning for residential. We as a public company of a policy not to announce anything that has not been fully executed, some companies that have other philosophies like to announce deals that they are looking at. So, again, we have been talking to multiple parties and whether or not one party said something we have no executed agreement and we did not have an executed agreement with any party that has announced anything.

Ben Yang – KBW

Are they still there or are they not around at this point?

Mark Yale

I would say we have multiple high-quality options and probably don't feel good about people who announced deals that they don't have with us.

Ben Yang – KBW

Okay, fair enough. Thanks guys.

Operator

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

Carol Kemple – Hilliard Lyons

Good morning. How this fourth quarter sales compared to the fourth quarter of last year?

Marshall Loeb

Carol, this is Marshall, they were up about 5% comp sales and on a quarterly basis 5.6%, annual 5%. December was our best month that each month was kind of in that 5% to 6% range.

Carol Kemple – Hilliard Lyons

Okay. And then the retailers that are wanting space in your malls are you seeing them more from a specific segment, Children's Fashion, Women's Fashion, who is kind of wanting space at this point?

Marshall Loeb

Thankfully it's a mixed bag. I mean, the children's category has been active with Crazy 8 and Children's Place, so we have got a number of those in the portfolio, but then really as we talked about what’s a short-term step back, but long-term definitely step in the right direction has recently finished the year 95% and we've got just large chunks of space as we kind of take the line down and rework it. Let’s say if you put it in kind of the manufacturing terms, but we've got a couple of Ulta Cosmetics, where we are combining spaces throughout the portfolio in three different H&Ms as well within our portfolio. So, those are three large ones, the Jersey Gardens, Tom Hilfiger is consolidating a few locations into what was a Jeepers!. And then after that it's Puma, True Religion, Disney, G by Guess, it's a nice mix. So, I guess, the good news is we like our portfolio, our revenue stream, because it's so diversified and I am not being evasive in answering your question, but it really is just a mixed bag from categories. It’s certainly some retailers like H&M and Ulta and some of those we are doing all related this year and maybe its just a size of their spaces, but it's across the Board.'

Carol Kemple – Hilliard Lyons

Okay, thank you.

Marshall Loeb

Welcome.

Operator

Your next question comes from the line of Rich Moore with RBC. Please proceed.

Rich Moore – RBC

Yeah, hello. Good morning guys. The percentage rents you guys got in the quarter jumped more than they usually jumped in the fourth quarter was that anything in particular, was that Scottsdale or anything unusual?

Marshall Loeb

Hey, Rich, it's Marshall. Probably, the couple of primary drivers are as Michael mentioned our theater in Scottsdale is doing well, so that was a driver of that. Again, a few other tenants mostly restaurants and then Jersey Gardens, Jersey Gardens continues to perform well which I am excited. We are just below $700 a square foot and we haven’t started the renovation yet and a number of those retailers really did well in fourth quarter, well enough to put themselves into percent rents.

Rich Moore – RBC

Okay. So, do we see Marshall this sort of trend in higher percentage rents continue or do you capture some of this in base rents going forward and we bring that back down?

Marshall Loeb

I think over time you'll see the latter. I mean if we're doing our job, we should capture those in base rents for just when do we get a chance to have those lease discussions.

Rich Moore – RBC

Yeah, that’s true. It’s good point. Okay, now as far as redevelopment, you talked about the outlets and are types there. Is there anything else you guys would consider beyond outlet center type projects?

Michael Glimcher

And again we talked about things were doing in the portfolio with a lot of this big box retailers in our Dayton Mall we're doing a large Dick's Sporting Goods and then we are backfilling of former border space with the DSW. So, there is box retail Marshall mentioned we are doing several large deals in H&M. So, what I would say box is a larger form of retail that we're putting in our centers. It’s really driving a lot of the expense on the redevelopment and again we raise money that’s a bit dilutive, you’re spending the money this year and the revenues really not getting towards the end of the year until next year. But again we think about all other redevelopment and substantial return that’s a nice pickup built-in of about three pennies going into next year. So, we're excited about that.

Rich Moore – RBC

Okay. Are there any additional expansions Michael that make sense?

Michael Glimcher

We're looking at there is a couple markets that were in, where there is an opportunity maybe on an anchor in some small shop space with very little being built, people wanting to get into some of these markets. We've got number of discussions going on, but again nothing to formally announce. Yeah, I do think you'll see some expansions and redevelopments announced throughout the year and next year.

Rich Moore – RBC

Okay. And then last thing, what do you guys say exactly at the loan on Leawood? What is happening there?

Mark Yale

Hey Rich, it’s Mark. Loan on Leawood is $77 million. Its 15-year, 5% rate, we closed on it in January.

Rich Moore – RBC

Okay great. Good thank you Mark. Thanks guys.

Michael Glimcher

Thanks a lot Rich.

Operator

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

Quentin Velleley – Citi

Hi, just one quick one, in terms of Tulsa Promenade. How much interest income NOI and fee income did you have coming through Tulsa Promenade in 2011? I just want to sort of get to the bottom of what the loss in interest income and fee income is going to be?

Mark Yale

Yeah, I think the interest income you got to kind of net it out, our share of it. But it's probably $700,000, $800,000 on a net basis. I think fee income you can see our guidance is down a little bit from where actuals were and that relates to Tulsa that’s probably $200,000, $300,000, $400,000 of fee income.

Quentin Velleley – Citi

Okay, that’s great. Thank you.

Mark Yale

You're welcome.

Operator

Your next question comes from the line of RJ Milligan with Raymond James. Please proceed.

RJ Milligan – Raymond James

Good morning everyone. Most of my questions have been answered, but I was just wondering if you could give us a little bit more detail on the acquisition environment, in terms of the volume of opportunities you guys are seeing today and maybe what pricings looking like and even if you could separate that between say, the higher quality, higher productivity malls and the lower productivity malls?

Michael Glimcher

Sure, this is Michael speaking. We're seeing quite a bit of opportunity, but on and off market. We’re knocking on doors and we're trying to find off market opportunities that would be our preferred way of fining an acquisition. There is a huge separation and pricing as it relates to quality and the higher quality assets are probably hovering above and below in and around 6 cap range. The lower quality assets, as you've seen others, others of peers trying to sell B and C, there is really not much of a market there.

And I don’t know if its 300 or 400 basis points wide, but because it's really not any data out there to support the fact that there are transactions. We have one more actively working on in the case of Tulsa and hopefully we will be able to give you more color on that as we move forward and maybe that will be a data point. But there is just not a large amount trading in the more B base. So, people want to pay out significantly for quality and as you moved on the quality spectrum there are really just doesn’t seem to be a lot of depth of buyer.

RJ Milligan – Raymond James

Okay great. Thanks guys.

Operator

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

Ki Bin Kim – Macquarie

Hi, thanks. Just a couple of follow-up, on the Phase 3 for Scottsdale Quarter, it seems like you are having a lot of interest on different large anchor tenants, but what is the major hurdle to get somebody signed and announced. Is it just come down to how much CapEx, what kind of CapEx package you have to give them, is that a major hurdle?

Michael Glimcher

Ki Bin, its Michael. Department store deals take a longtime even in an environment when they are aggressively expanding. These deals move incredibly slowly again most of these companies are doing ADL per year. So there is a lot of thought put into it. There is outside the market research that's done. There are merchants we have to visit sites. There are construction people have to visit site. It's a long and arduous process. It's very clear based on our research that there is a significant amount of fashion department store business that could be done on the site. I think that all of the potential candidates would concur and now it's just a matter of trying to finalize a deal. But it just I can't say – I can't say at any other way then it just takes a really long-time to make these deals.

Ki Bin Kim – Macquarie

Okay. And I guess how many of those perspective tenants, how far are they into this process you just described?

Michael Glimcher

We've had them to the sites. We've had research done. So, we're pretty deep into it, it just – again it's the long process.

Ki Bin Kim – Macquarie

Okay. And just another quick question on your ATM usage, have your NAV at north of $12 and if you plug in at 9.15, where you issued your share that turns out to over an 8 cap. So, I mean that's fine if you making – are we deploying that capital higher levels, but my question is given that your stock looks still a cheap compared to NAV and at a 8 eight cap. What are the yield expectations and the risk around where you are redeploying that capital?

Mark Yale

Hey, Ki Bin, it's Mark. Good question and I think when we look at capital allocation we were focused on is the quality of the asset, the growth profile because we think that's important. We also look at what value can be unlocked by showing up the balance sheet is well and at some point we have to give a little bit to get and that's how we are looking at is relates to deleveraging and now you need enhance the value of the portfolio, the quality of the portfolio so, the biggest thing we look at we don't have a hard rate – hard hurdle rate in terms of what kind of cap rate we can pay. I think what's most important to us is what's the growth profile because that ultimately we'll lead to value for the shareholder.

Ki Bin Kim – Macquarie

Could you comment on what kind of value you're going to create in SuperMall or what are your initial yield expectations?

Michael Glimcher

Sure, what we talked about SuperMall in Jersey being high single-digit, 8% or so return so that matches – that matches up pretty well.

Ki Bin Kim – Macquarie

Okay, thank you very much.

Michael Glimcher

Thanks a lot.

Operator

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

Todd Thomas – KeyBanc Capital Markets

Hi, just a quick follow-up, on look like straight line rent came down quite a bit in the question, but few $100,000, I was just wondering that's a good run rate for 2012 or should we see that decline further as rate commences at Scottsdale Quarter throughout the year.

Mark Yale

Yeah, hey, Todd, it's Mark. And we typically see a little bit of a graph in straight line read around the fourth quarter so that was to be expected, I think that probably serves as a decent run rate may be a little bit higher at the beginning of the year. But that will progressively drop as the rents moved from straight line into base rent at Scottsdale.

Todd Thomas – KeyBanc Capital Markets

Okay, thank you.

Operator

Your next question is a follow-up question from the line of Ki Bin Kim with Macquarie. Please proceed.

Ki Bin Kim – Macquarie

Thanks. I just forgot one part. So given your – you mentioned that you want to over-equitize any kind of acquisitions, where is your longer term debt to EBITDA target, so, we get a sense of when the over-equitizing activity is kind of safe?

Mark Yale

Hey, Ki Bin, it's Mark again. I think we look at in two metrics, I think leverage, we'd like to get down to the mid 40s and debt EBITDA, we'd like to be give or take around seven so, that's kind of what we're targeting, but as we said I mean we're going to continue to be measured and thoughtful in terms of how we get there.

Ki Bin Kim – Macquarie

So, does that mean if you don't do any acquisitions, we shouldn't expect anymore equity coming out of the company given that you already have 7 times debt to EBITDA and if you get a full running for the quarter, you should get pretty close to being where we want to be?

Michael Glimcher

That’s probably right, but what I would tell you is acquisitions is hard for us to control in terms of what might flow, what might be available, but we still see a pretty robust redevelopment pipeline and I think the idea there is that we would like to fund that through equity and the other part of it is hopefully we are going to start seeing EBITDA. It’s certainly had nice growth in 2011 over 2010. We expect that to continue. So, your debt to EBITDA and as we enhance the value, your leverage will go down as well. Those are some other avenues we can get there in terms of meeting our targets without necessarily issuing equity.

Ki Bin Kim – Macquarie

Okay, thank you.

Operator

And at this time, I would like to turn the call back over to Lisa Indest for closing remarks.

Lisa Indest – Senior Vice President, Finance

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

Operator

We thank you for your participation in today’s conference. This does conclude your presentation. You may now disconnect and have a great day.

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