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CBL & Associates Properties, Inc. (NYSE:CBL)

Q4 FY07 Earnings Call

February 8, 2008, 10:00 AM ET

Executives

Stephen D. Lebovitz - President and Secretary

Katie Reinsmidt - Director of Corporate Communications and IR

John N. Foy - Vice Chairman, CFO and Treasurer

Analysts

Ambika Goel - Smith Barney Citigroup

Jay Habermann - Goldman Sachs

Thomas Baldwin - Goldman Sachs

Christeen Kim - Deutsche Bank North America

Jeffrey Donnelly - Wachovia

Craig Schmidt - Do you have a total cost and expect return on that project

Tony Howard - Hilliard Lyons

Michael Mueller - J.P. Morgan Securities, Inc.

Paul Morgan - Friedman Billings Ramsey & Co.

Nathan Isbee - Stifel Nicolaus, Inc.

David Fick - Stifel Nicolaus, Inc.

Louis Taylor - Deutsche Bank North America

Benjamin Yang - Green Street Advisors, Inc.

Rich Moore - RBC Capital Markets

Operator

Good day ladies and gentlemen. Thank you for standing by and welcome to the CBL & Associates Properties Incorporated Conference Call. Today's call is being recorded and will be available for replay, beginning today at 11 Eastern Time, running through February the 15th at midnight Eastern Time, by dialing 303-590-3000, and entering the pass code 11106058.

At this time for the opening remarks, I'd like to turn the call over to the President, Mr. Stephen Lebovitz. Please go ahead sir.

Stephen D. Lebovitz - President and Secretary

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss fourth quarter and year-end results. Joining me today is John Foy, Chief Financial Officer, and Katie Reinsmidt, Director of Corporate Communications and Investor Relations, who will begin by reading our Safe Harbor disclosure.

Katie Reinsmidt - Director of Corporate Communications and Investor Relations

This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the company's various filings with the Securities and Exchange Commission, including without limitation, the company's Annual Report on Form 10-K and management's discussion and analysis of financial condition and results of operations included therein for a discussion of such risks and uncertainties.

During our discussion today, references made to per share are based on a fully diluted converted share. A transcript of today's comments, the earnings release and additional supplemental schedules will be furnished to the SEC on the Form 8-K, and will be available on or website. This call will also be available for replay on the Internet through a link on our website at cblproperties.com. This conference call is the property of CBL & Associates Properties, Inc. Any redistribution, retransmission or rebroadcast of this call without the expressed written consent of CBL is strictly prohibited.

During this conference call the company discuss non-GAAP financial measures as defined by SEC Regulation G. A description of these non-GAAP measures and a reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on Form 8-K.

Stephen D. Lebovitz - President and Secretary

Thank you Katie. We want to start off the call by acknowledging that we are disappointed with the earnings result for 2007, we announced yesterday. Foremost, we are displeased that after a nearly uninterrupted 13-year track record of solid FFO growth, we have posted negative growth in 2007 and we are not able to reach first call numbers. However, we want you to know that we are more determined than ever to achieve better results in 2008 and reestablish CBL's credibility with analysts and investors. In addition, we feel that 2007's disappointing results coupled with fear to a potential recession have fueled a fire sale on our stock. In 2007 our stock declined 45% to a three-year low.

There is no doubt that the state of the economy had an impact on consumer spending in 2007, with sales flat for the year versus the 3% to 4% increases we experienced in recent years. Retailers are off to a slow start in 2008 based on January sales, and we are certainly taking a more guarded approach to the business. However, retailer growth plans in the retail real estate business have always had a long-term perspective, and we as well continue to have a long-term perspective.

It is true that some retailers have reduced their growth plans for 2009. Also, some retailers have announced store closures or bankruptcy this year, and it is possible we may see additional announcements. All of these are part of the normal ebb and flow of the retail real estate business.

Store closures and bankruptcy enhanced the overall credit quality of our retailers and provide us with an opportunity to increase the productivity on our malls both in terms of ramp and sales. As we have previously stated, we see great opportunity when capital is constrained. The limit on capital availability also tends to reduce new development competition in the marketplace. Retailers will start to reallocate a larger portion of their open device to developers that are proven and have ready access to capital like CBL.

That said, we are realistic in our expectation for 2008 and maintain a conservative approach to new development. We will continue our discipline on not starting construction on new ground up development projects and so, we have the anchor in place with roughly 50% of the space committed. For each project that is currently under construction, including every project that is listed in the development table included in our supplemental package, as well as those that started construction after 12/31/07, we have funded our equity and have a committed funding source.

Let me take a few minutes to review our recent project announcements and completions during the fourth quarter. In October, we celebrated the grand opening of The District at CherryVale, an 84,000 square foot lifestyle addition to CherryVale mall in Rockford, Illinois. Barnes & Noble, Chico's Coldwater Creek that other retailers opened in the expansion which just had a very successful start.

We announced two new Barnes & Noble additions at existing centers. Barnes & Noble, we will be relocating from an existing store in the market to join Asheville Mall, in Asheville, North Carolina in a larger 40,000 square foot store. Barnes & Noble will also anchor our redevelopment project at West County Center in St. Louis. We are redeveloping the former Lord & Taylor location into a 90,000 square foot lifestyle wing, with a 30,000 square foot Barnes & Noble, 20,000 square foot of small shops and four premier restaurants. This redevelopment represents one of the many opportunities we are capitalizing on from the St. Louis transaction and we look forward to sharing more with you as projects develop.

We've recently commenced construction on the third phase of Gulf Coast Town Center. The third phase well it should include a 70,000 square foot of sporting goods, along with 9,000 square feet of small shops, they actual hold it's grand opening in October.

We have two great joint venture projects with The Benchmark Group of Amherst, New York under construction in Florida. The first is Hammock Landing, a 750,000 square foot open-air shopping center to be built in West Melbourne, Florida. This center will be anchored by Marshall's, Linens n Things, Michael's, and Petco, as well as two major anchors who will be announced soon and will offer shoppers a great selection with more than 120,000 square feet of small shops and restaurants. Construction on the 460,000 square foot, first phase of the project has started with a grand opening planned for spring 2009.

The second joint venture project with Benchmark is the Pavilion at Port Orange, a 550,000 square foot open-air development in Port Orange, Florida. The project will feature Belk, a 14-inch screen Hollywood theater, Barnes & Noble, circuit TV, home goods, Marshall's mega store and Michael's and about 190,000 square foot of specialty stores and restaurants. The opening is scheduled for fall 2009.

In 2007, we had very good results, both in terms of the quality and quantity of our leasing. We set a new record for leasing, the most square footage in a single year in our company's history. We signed a total of approximately 6.6 million square foot of leases, including approximately 3.3 million square feet of development leasing and 3.3 million square foot of leases in our operating portfolio.

The 3.3 million square foot in our operating portfolio was comprised of 1.3 million square feet of new leases and 2 million square feet of renewed leases. This compares with a total of 4.8 square feet of leases signed in 2006, including 2.1 million square feet of development leasing and 2.7 million of square feet completed in the operating portfolio. Of the 2.7 million square feet in the operating portfolio, 1.1 million square feet were new leases and 1.6 million square feet were renewals.

For stabilized mall leasing in the fourth quarter on a same space basis, we achieved an average increase of 10.1% over the prior gross rent per square foot. In 2007, for same space stabilized mall leasing, we achieved an average increase of 9.7% over the prior gross rent per square foot. We've reported occupancy numbers for the year excluding the properties acquired in the fourth quarter, since we did not have the benefit of ownership for much of the quarter.

Total portfolio occupancy was 94%. Stabilized mall occupancy declined 30 basis points to 94.2% from 94.5% in the prior year. Total mall occupancy at the end of the quarter declined 40 basis points to 94% from 94.4% in the prior year. Occupancy in the associated centers increased to 95.9% from 93.6% at year end.

There has been several recent announcements regarding retail bankruptcy and store closures. Fortunately, so far there has been more smoke than fire. And Taylor announced last week, they will be closing above 100 underperforming stores over the next three years as their leases come up for renewal. We have been told that only one of our stores should be impacted by this. Talbot's announced that they will be closing their kids and men's divisions. We have two Talbot kids' stores and we are currently in negotiations with replacements. Friedman's filed bankruptcy last week. We have 23 stores representing 34,000 square feet and $1.7 million in annual base rents. Average occupancy cost for the Friedman's stores is very reasonable, at around 12%, so we don't anticipate a material impact.

In October, Bombay announced that they would be entering Chapter 11 and closing their stores. We currently have 14 Bombay locations representing 59,000 square feet and $2.1 million in annual gross rents. We have retailers lined up back fill over third of the space and have significant interest on the reminder.

Same-store sales growth was flat in 2007 for reporting 10,000 square feet or less in stabilized malls at $346 per square foot. The holiday sales season was mixed with healthy sales in November and disappointing sales in December. Occupancy costs as a percentage of sales was 12.3% for the 12 months ended December 31, compared with 12.1% for the prior year.

Now, I will turn the call over to John for our financial review.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thank you, Stephen. During the fourth quarter 2007, excluding the non-cash write down, we achieved total FFO per share of $0.99 compared with $0.97 per share in the prior-year period.

In 2007, we reported FFO per share excluding the write down of $3.26 versus FFO per share of $3.34 in the prior-year period. Our core portfolio NOI growth for the year was 1.7%, well within our projected levels of 1% to 2% excluding lease termination fees. Same center NOI in the fourth quarter increased 9.9% [ph] excluding lease termination fees. Earlier this week, we made an announcement regarding the items impacting our fourth quarter results. We felt that it was important to communicate these items ahead of our earnings announcements.

These items included $18.5 million non-cash write down of marketable real estate securities to reflect the year-end market value of 21.3 million, related to a decline in their market value. From time-to-time we may make investments in company whose businesses are related to our own and which businesses we understand. These investments are noted in our 10-K filings in the notes to the financial statement, as well as in the cash flow statement. We think that these are good investments and we expect to continue the hold them for the foreseeable future.

While the market value of these investments like virtually all real estate securities has been materially and adversely impacted by the recent market turmoil, we believe that their underlying asset valuation, economic fundamentals and our investment thesis remain sound. However, GAAP requires that we record a non-cash write down due to the material decline in the value of these securities at year-end.

We also made the decision to delay the recording of $7 million of fee income receivable from affiliated center as a result of uncertainty. We have previously indicated that this would amount to $0.04 of our FFO per share net of the income tax provision. Other non-operating items impacting results, included lower than anticipated gains from the sales of out parcels and lease termination fees. Results were also impacted by $1.3 million of the brand and project expense, higher interest expense due to an increase in rates as well as an increase in our borrowings and lower fee income.

Additional highlights include, our cost recovery ratio for the quarter ended December 31, 2007 was 98.1% compared with 104.4% in the prior-year period. For the 12 months ended December 31, 2007 the cost recovery ratio was 101.1%, which is inline with our estimates compared with 104.2% in the prior-year period.

G&A represented approximately 3% and 3.6% of total revenues in the fourth quarter and 12 months ended December 31, 2007 compared with 4.2 and 4% of revenues for the quarter and 12 months ended December 31st, 2006. G&A declined in the fourth quarter primarily due to adjustments for state tax reserves.

As a result of our lower stock price our debt-to-total market capitalization ratio was 64% as of the end of December compared with 47.6% as of the end of the prior-year period. We feel that this is important to note that all of our debt covenants are tied to gross asset value tests and not to market capitalization. Variable rate debt was 14.1% of the total market capitalization as of the end of December versus 10.6% as of the end of the prior year.

Variable rate debt represented 22% of total debt compared with 22.6% in the prior-year period. Our EBITDA to interest coverage ratio for the quarter and year ended December 31, 2007 was 2.22 times and 2.31 times respectively, compared with 2.9 times and 2.6 times respectively for the prior-year period.

The EBITDA-to-interest coverage ratios for the fourth quarter and year ended December 31, 2007 were impacted by the non-cash write down. We are issuing guidance for 2008 of $3.46 to $3.56 per share, which represents a 6.1% to 9% increase over 2007 FFO per share, excluding the impairment charge. The guidance assumes NOI growth of 0 to 2%, excluding lease termination fees for both periods. The guidance also assumes out-parcel sales of $0.12 to $0.16 per share and does not include any new acquisitions or lease termination fees. We believe that our guidance represents realistic expectations for 2008, based on the information we have today.

In November, we completed the acquisitions of the Friendly Center and the shops at Friendly Center in Greensboro, North Carolina as well as eight community centers and 18 office buildings located throughout North Carolina and Virginia. We formed a joint venture with Teachers' Retirement System of Illinois, replaced the Friendly Center the shops as well as six office buildings in the joint venture. Subsequent to the quarter end, the joint venture completed the acquisition of Renaissance Centers in Durham, North Carolina. The remaining eight community centers and 12 office buildings are wholly-owned by the company. We are continuing to explore potential sales of these non-core properties.

As we announced last quarter the Board of Directors approved a 7.9% increase in the regularly quarterly cash dividend for the company's common stock to $2.18 per share annually from $2.02 per share. This increase was effective with our fourth quarter 2007 dividend. When management considers proposing an increase in the dividends to the Board, we review our current net taxable income levels and our forward estimates to ensure that we meet or exceed compliance requirements. This analysis includes our cash flow and projections of capital needs.

We continue to believe our dividend is well covered. Our FFO payout ratio in 2007 was 63%, excluding the impact of the non-cash write off. We've been pleased at our ability to readily access capital despite the turmoil in the markets. We were able to secure over $500 million in commitments within 48 hours for the Starmount transaction.

Our credit facilities all have extensions that are available to us and we have only about $380 million of non-recourse debt coming up to refinance in 2008, and have had positive discussions and reactions with lenders for each of these loans. We are cautiously optimistic going into 2008. Our results should benefit from the expansion and enhancement we made to our existing portfolio in 2007, as well as new development projects. In addition, contributions from centers acquired in the fourth quarter should enhance the overall growth profile of our portfolio. While we are keeping a watchful eye on the state of the economy and retailers health, we will continue our focus on running the business in a sound and prudent way in executing for long-term growth.

We appreciate your joining us today, and would now be happy to answer any questions, you may have.

Question And Answer

Operator

Fine, thank you sir. And ladies and gentlemen, we will begin our question-and-answer session at this time. [Operator Instructions]. Our first question comes from the line of Jonathan Litt with Citi. Please go ahead.

Ambika Goel - Smith Barney Citigroup

Hi, this is Ambika with Jon. Could you give some more detail on how your expectations for store closures relate to your guidance for occupancy in 2008?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Sure. Good morning, Ambika. We are looking at occupancy for the year being flat to a little down, and the reason it's down is because the occupancy of the malls we acquired in the fourth quarter, St. Louis and Friendly is lower than our portfolio average. So when we include those in, it will bring it down somewhat. But in terms of the malls where we are today, we are anticipating flat for the year, and like I said in my remarks, we haven't really had that much of an impact, only a few stores from announcing that have come out so far, and we continue to watch the retail world very carefully, and are obviously sensitive to it. But the credit quality of retailer on the whole is pretty good. And so, I think there are some difficult results out there, but we don't see the store closing is picking up and we don't see bankruptcies from the national is picking up that much more, It will definitely be the locals who are going to get it harder.

Ambika Goel - Smith Barney Citigroup

And one, could you give more color on any potential bankruptcies from local tenants what your exposure is and then also your exposure to Charming Shoppes, given that they also announced store closures?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We talked to Charming Shoppes and again they said that there is one store that they anticipate closing. It's not till January '09. So we don't have anything in '08 from them that's coming up and that's when that lease expires. So, we don't really see an impact from them. And as far as locals, it's not that higher percentage of the portfolio and in terms of the... it really impacts specialty leasing more than permanent leasing and that business had stayed strong, we had good growth last year in specialty leasing and we are budgeting continued growth in this year. Another retailer we are watching is Goody's. They have gone private, so there is not public information, but that is some one that we have on our watch list.

Ambika Goel - Smith Barney Citigroup

Okay, great. And then, Steve, you all have the exposure to the lifestyle development. Given that we have seen a pull back in expansion plans for some key lifestyle center retailers. I guess what makes CBL comfortable that you can get the in-line lease for those new developments?

Stephen D. Lebovitz - President and Secretary

Well, I think one that we have done from a strategic point of view with our lifestyle centers is includes department store anchors in them. So Pearland which is opening in August, has both Macy's and Dillard's as anchors, and that's allowed us to have the project be attractive not just to the large scale retailers but to a broad mix of retailers really comfortable to what we have in the malls. So there has definitely been a pull back from Chico's and Ann Taylor and stores like that, but we have a broad array of retailers that we are going to. like I have said, we don't start to project until we have good pre-leasing done. We have got Barnes & Noble, we have got restaurants in the tenant mix, we have got the mixed use of Pearland with the apartments in the office and the Marriott courtyard. So when you put it all together, we are disappointed if we loose a couple of lifestyle guys. But we feel we will be able to backfill that very readily.

Ambika Goel - Smith Barney Citigroup

Okay, great. Thank you.

Stephen D. Lebovitz - President and Secretary

Thank you.

Operator

I think your next question is coming from the line of Jay Habermann with Goldman Sachs. Please go ahead.

Jay Habermann - Goldman Sachs

Hey, good morning. Here with Tom Baldwin as well. I guess, Stephen, just starting with your comments on the stock price; you mentioned the sort of fire sale on the stock of late. I'm just curious, I mean you guys seem to be focusing a lot on acquisitions and development at this point, but not a lot of share repurchase, are you starting to rethink that?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Jay, this is John. How you are doing?

Jay Habermann - Goldman Sachs

Doing well.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Good. What we have done is we did announce a $100 million stock purchase last quarter. We did no acquisitions of stock in the fourth quarter. We continue to look at the best use of our capital and did not buy any stock back. But our management teams has bought back significant amounts of stock over that period of time as well as our directors had bought stock as well. We look to see what we can basically do with the utilization of our capital and want to maximize the returns on that capital. A good example is that is what we did in Gulf Coast, where we were able to 100% finance that project and still have a positive cash flow of $3 million to $4 million. So if we can do that, we think that that's a best utilization of our cash and follow a very conservative approach in underwriting in each of our pro forma.

Jay Habermann - Goldman Sachs

A: Okay now can you give us sense on I guess the pre-leasing in the development pipeline in this point? And maybe specifically some of the larger projects where you are?

Stephen D. Lebovitz - President and Secretary

Yes, Pearland is the largest one opening this year. It is opening August 1. It's roughly just under 80% that's leased and committed at this point, and that's where we are targeting opening at the 80% level. The other projects that are under construction, of the larger ones Port Orange, West Melbourne, are spring and summer '09. So those are on quietest far along.

Jay Habermann - Goldman Sachs

Okay and then following up on something in the quarter. Percentage rents down a little bit and then also, you mentioned a lower recovery rate. Was that really a function of the weaker sales productivity?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes. The percentage rents are definitely the result of the lower sales, and the...

Jay Habermann - Goldman Sachs

Segment there you saw a growth there?

Stephen D. Lebovitz - President and Secretary

And snow renewal was a bigger item side and with us going more to fixed CAM, because we are roughly 70% fixed CAM than that will have more of an impact on us quarter-to-quarter.

Jay Habermann - Goldman Sachs

Okay, and I ask one more question, what was the cap rate on the office properties?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We didn't split out that cap rate.

Stephen D. Lebovitz - President and Secretary

We didn't split the cap rate for the whole transaction.

Jay Habermann - Goldman Sachs

Okay, can you break it out though for the office?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I think because there is such a variation as to what's going on as far as how you allocate the cost and what went into the venture cost, I am not so sure we could basically do that and I am not so sure our partners want us to do that.

Jay Habermann - Goldman Sachs

Okay.Tom has a question as well.

Thomas Baldwin - Goldman Sachs

Hey guys, just turning back to the Starmount transaction, is it fair to say that if you could have structured the transaction differently you would have just purchased the retail and not the office?

Stephen D. Lebovitz - President and Secretary

No, I mean we thought that there was good synergies across the portfolio and it helped us in terms of the negotiation with Starmount and there is value that we are going to be able to create at a number of the properties. Some of them were solved quicker than others, but the office buildings most of them are right around friendly centers. So, that's not our core business, but Starmount have been managing them and we are comfortable with that and over the next 12 to 24 months we think we will end ahead of the gain the way we structured it.

Jay Habermann - Goldman Sachs

Is that your intention longer term to dispose of all 18 office assets or is it possibly you might keep some of those in your operating portfolio.

Stephen D. Lebovitz - President and Secretary

Six of them are part of the venture with the Teachers Retirement System. So those will stay in, and the other 12 we anticipate over a period of time selling those.

Jay Habermann - Goldman Sachs

Thanks a lot guys.

Stephen D. Lebovitz - President and Secretary

Thank you.

Operator

Thank you. Our next question is coming from Christeen Kim with Deutsche Bank. Please go ahead.

Christeen Kim - Deutsche Bank North America

Hey, good morning guys.

Stephen D. Lebovitz - President and Secretary

Good morning.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Hi Christeen.

Christeen Kim - Deutsche Bank North America

Hi. In terms of the NOI growth, I've obviously struggling a little bit. I mean if you have under performing assets, why not you sell them?

Stephen D. Lebovitz - President and Secretary

Well I think we do look at that Christeen and one of our lowest performing assets is Del Rio, Texas, which was the first mall we built and the sales per square foot there like $175 a square foot. We've looked at those assets and basically we've been able to refinance that... take out more cash than we could have if we've sold it. That's not to say we have partners in that and we might ultimately sell that asset. We did, we sold Twin Peaks in the fourth quarter of last year, when we looked at that. It was in the third quarter of last year. When we looked at the assets and what we could get for versus what we could redevelop it, we made the strategic decision to do so. And I think, we will look and continue to look at our portfolio to do the same with that.

As I think you will recall, when we started the company in 1978, we built community centers and sold those to basically own the regional malls and today, we do that same thing, develop those to pay down debt. So, I think we are not adverse to selling the lower performing assets and we continue to look at that to make certain that we can maximize the returns.

Christeen Kim - Deutsche Bank North America

Okay. And in terms of your financing plans, could you just give us a little color on what your financing plans are for 2008?

Stephen D. Lebovitz - President and Secretary

Yes, we have approximately four or five malls that we will refinance this year. Those have an average interest rate on those is 6.46%. It involves five malls, and all of those are non-recourse debt on those malls. Some of those will be able to finance and take out some excess proceeds on them. Others, we basically have to put a little more money into those or we always have that ability to give that back to the lender if we don't like what type of situation we are being given by the lender as to those specific assets.

But, as you can see, we have that approximately $380 million this year and about the same amount next year. And we are comfortable with that. We've had discussions with all of those lenders and continue to negotiate on those and we think that even in the capital markets today there is availability of capital to do so. We just financed $100 million in the Starmount transaction with an insurance company. So, that will pay down some of our debt as well for that joint venture.

Christeen Kim - Deutsche Bank North America

What sort of rates are you looking at now?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

The rate on the $100 million was 5.33% interest-only rate. So, it's a very favorable rate. It's a five-year loan. So we think that the market is there for good quality assets. As we mentioned we were able to access tremendous amounts of capital to complete the Starmount transaction and have seen no reluctance by the banks to basically work with us for other capital needs that we have as we can do.

Christeen Kim - Deutsche Bank North America

What about your line, it seems like you are nearly maxed out on that. I know you probably have accordion features, but what are your thoughts on paying that back?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes, the lines basically are out, the earliest line I think 2009 discussions with them, we normally start now to basically welcome those, we will probably increase some of those lines. We also will have some excess financing proceeds with these refinancing that we will pay down. We can sell assets and we think that from a capital structure standpoint, we feel very comfortable with where we are today.

Christeen Kim - Deutsche Bank North America

Okay, and my last question is just, you've touched upon some of the investments you made in that kind of marketable securities bucket and it sounds like you are investing in other people stock, but not your own. Could you talk to about maybe the valuation discrepancy, and is your stock not quite cheap enough yet?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We think our stock is incredibly cheap and the management thing here, as I mentioned has been buying it back and so are our directors. But again when we review things, we look at what we can see as far as a return on capital and also what we can see as far as long-term growth. So when we did this acquisition of some marketable securities, we saw an opportunity there. We still think that opportunity is there but we can't... because our securities lawyers, et cetera, telling us that we need to keep that confidential, that's as far as we could really comment on that. But we still are convinced that there are good opportunities for us and the investments that we made should prove to be very good for us.

Stephen D. Lebovitz - President and Secretary

It also wasn't an investment that we made yesterday, I mean it was made several months ago, so

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Well we filed it in our '06 K. So, it was in our financials all along.

Christeen Kim - Deutsche Bank North America

Okay, great. Thank you, guys.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thank you.

Operator

Thank you. Our next question is from the line of Jeff Donnelly with Wachovia. Please go ahead.

Jeffrey Donnelly - Wachovia

Good morning, guys. How you are doing, John?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Good.

Jeffrey Donnelly - Wachovia

I think some of this was touched on in a response to an earlier question, so I apologize. But concerning the Starmount portfolio, what specifically is in your guidance for asset sales in 2008? And what are your expectations around just going forward timing and pricing of the office asset sales? I'm curious how you guys think about those prices today versus your original underwriting?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

In our estimates and our guidance for this year, we anticipated no sale of those assets. And we think that as we get into each of these specific assets and we spend a considerable amount of time reviewing those in our due-diligence, we felt comfortable at that time and we feel as comfortable today with that. We think the market area where we bought the Friendly Center is a great, great market area. I wish having a social occasion with a big restaurant owner who basically said that they wanted to go into the Starmount portfolio, especially into the Friendly Center that is unquestionably the best retail property in that region. But we said to him you don't overlook the Haines Mall, which we own there as well. Greensboro has been a good market area for us and we think that we should see great growth and great opportunities there.

Jeffrey Donnelly - Wachovia

How is the tenancy in the office portion of Starmount holding up? My recollection at the time the guys bought it was that there was a decent amount of service users like including banks and other offices, is there anything that is concern for you guys?

Stephen D. Lebovitz - President and Secretary

It's very stable. We haven't... there is always little fallout but we pickup as well other deals and we haven't had anything material in terms of fallout. These buildings are... there are smaller buildings some are only worth less than $5 million and some are worth than maybe $20 million to $30 million. So, that size investment we still see on fires and there is a lots of locals that were interested during the process because of the size of the overall transaction, and them not being retail players and they really couldn't pursue the office. So, we are actually seeing pretty decent interest. The overall occupancy in the office is 87% and like I said that's stable.

Jeffrey Donnelly - Wachovia

Just because it's not in your guidance to sell this year, doesn't mean you are necessarily not trying?

Stephen D. Lebovitz - President and Secretary

That's correct. It's going to take time. I mean, things take time and we just closed at the end of last year. So...

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

And we are comfortable with the buildings and we think that there is possibly some lease up there that couldn't achieve us some additional income on the sale. So we are comfortable with them, if on the other hand we can find somebody who is willing to pay us a good profit on these building we'll sell those as well.

Stephen D. Lebovitz - President and Secretary

Although that wouldn't go into FFO.

Jeffrey Donnelly - Wachovia

And just last question actually on out-parcel proceeds in your guidance John. It isn't too difference from what you guys experienced last year, I think in out-parcel proceeds, but again I was curious how are you guys thinking about pricing this year as it relates to what you put in your guidance. So, is it comparable are you expecting higher cap rates or just may be a longer time to get deals closed?

Craig Schmidt - Do you have a total cost and expect return on that project

.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We'll announce that at the end of first quarter.

Craig Schmidt - Do you have a total cost and expect return on that project

Okay. And beyond Bravo, do you know the three other restaurants you are going to be putting into the lifestyle addition?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We are still under negotiation with them, and so we've got a good idea, but we are just not at the point where we are going to announce them yet, and also different companies have different philosophies about announcing themselves, and some don't want to announce until a month or two before they actually open. So, I mean we'd love to announce more, but we are working and respecting with their wishes on that as well.

Craig Schmidt - Do you have a total cost and expect return on that project

And in terms of other St. Louis properties that might get touched from a redevelopment standpoint, is that your way or further?

Stephen D. Lebovitz - President and Secretary

Well the decks, it's under construction at Mid-Rivers, and that will open this year. Those are the only... Tudor and West County are the only two for '08 and we are still trying to figure out the timing on the others.

Craig Schmidt - Do you have a total cost and expect return on that project

Okay. Thanks a lot.

Stephen D. Lebovitz - President and Secretary

Thanks Craig.

Operator

Thank you. Our next question is coming from the line of Tony Howard with Hilliard Lyons. Please go ahead.

Tony Howard - Hilliard Lyons

Good morning to everyone.

Stephen D. Lebovitz - President and Secretary

Hey Tony.

Tony Howard - Hilliard Lyons

Couple of clarifications; on the G&A expense, you said there was a recap of some reserves. So what's apples-to-apples comparison?

Stephen D. Lebovitz - President and Secretary

Tony, I think that basically, we have been doing historically in the 4% range, and we think that that's the appropriate one. The G&A number, as we mentioned, was down because we were able to take some money out of our state tax reserves, and that's the reason why it was down this quarter.

Tony Howard - Hilliard Lyons

How much was that?

Stephen D. Lebovitz - President and Secretary

It was about $2.3 million.

Tony Howard - Hilliard Lyons

And a good run rate going forward for 2008?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We think that it's a 4% of gross revenues number.

Tony Howard - Hilliard Lyons

A similar question though on that kind of reimbursement, so going for fixed CAM. What is your expectation for 2008 to be around 100% or less?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes, we think it's the 100%, maybe just a little lower and what happens as you basically move people out of pro rata CAM and the fixed CAM. There is little fluctuation there. So, we think that the recoveries will be 100% could be just a tad low, or it could be a tad higher as well.

Tony Howard - Hilliard Lyons

Okay, and a follow-up on the capital raising. Are there any preferred stocks that are going to be closed to be incurred or redeemed in 2008 or 2009?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We have a preferred C and it's trading at this rates. But I don't know, we will review that as the markets go along and see what happens with capital markets to see if want to redeem that. There has been no decision at this time on that.

Tony Howard - Hilliard Lyons

Would that be financed by another preferred or are you just thinking on that?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Well I think it depends upon what the markets are today, whether we sell some assets or whether we do another preferred. I think that's what we look at to see what we would do on that.

Tony Howard - Hilliard Lyons

Finally, on these... back to the stock buyback also we would rather comment as far as I am not sure... given that your buying back stock has 34, why you are not buying back now at 24?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Well I think at that time we brought back some, because we had some excess proceeds and now what's happened is that we see that as the capital market is tight and our competitors in this business more likely small developers having capital needs and needs for equity. We foresee that there is a possibility and opportunity for us to basically come in and be joint venture partners and access properties that they have ready to go under construction with great leasing in place and the opportunity to take those over and therefore, we want to preserve our capital for that reason.

I think as an example, the JCPenney Company store program is very significant, but a great many of those stores are basically being developed by first-time developers, who basically are going to see that the banks are going to require 20% to 25% equity, whereas they in the past have been seeing 10% equity. So we are getting calls already and we think, we will get even more calls and for that reason we didn't buyback any stock in the fourth quarter and we will look at that each quarter and each day as we have capital and determine the base use of that capital.

Tony Howard - Hilliard Lyons

Okay. Thank you very much.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thanks, Tony.

Operator

Alright. Thank you. Our next question is coming from Michael Mueller with J.P. Morgan. Please go ahead.

Michael Mueller - J.P. Morgan Securities, Inc.

Hi. Couple of guidance questions; first is the '08 guidance factor in any of the fee income coming in from Galileo?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

No.

Michael Mueller - J.P. Morgan Securities, Inc.

Okay. And then in terms of lease termination income, traditionally you haven't provided the number. Last year you did put out a number, this year you didn't put out a number. How should we read that? Should we read it that you are not expecting lease term income or it's just really up in the air at this point?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I would say that it's probably up in the air, Michael. Because I think we basically wanted to take a realistic approach with regard to the guidance we gave and things that we can control is what we've attempted to put into those numbers. I think we've learnt from last year that the things happened that you can't control that we had put into our guidance, and so this year we want to be much more cautious with regard to those guidance numbers and that's the reason we backed those out. We've never included out acquisitions in those and we will continue not to do so. But we think we can control better out-parcel sales on the items that we've included in there and that's the reason. And in fact, if you look at our guidance with regard to NOI growth, we are being cautious there as well.

Stephen D. Lebovitz - President and Secretary

And also the lease termination fees come with the costs. I mean, we have the vacancy. So we see those really as washing out. We might have the immediate infusion, but then over the rest of the year with the vacancy, if we're not able to lease it up, it washes out.

Michael Mueller - J.P. Morgan Securities, Inc.

Okay. You mentioned out-parcel sales, any sense as to the timing of those this year? Should we think in terms of being evenly throughout the year or back end loaded?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I think it's evenly throughout the year.

Michael Mueller - J.P. Morgan Securities, Inc.

Okay, thank you.

Stephen D. Lebovitz - President and Secretary

Thanks, Michael.

Operator

Thank you. Our next question is coming from the line of Paul Morgan with Friedman Billings Ramsey. Please go ahead.

Stephen D. Lebovitz - President and Secretary

Hi, Paul.

Paul Morgan - Friedman Billings Ramsey & Co.

Good morning. Hi. First thing with the guidance there, how should I think about the way you are looking at your variable rate interest, is it basically consistent with the LIBOR curve at this point or is it something more conservative?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We have left a little room in that number. I think we've always been cautious in our pro formas, as well as in our budgets to make certain that we have some flexibility, because we think that their interest rates are going to be volatile. We also announced that we did fix about $400 million of our debt. So, we will look at swaps, needless to say, we're probably not going to hit bottom of the market, but our whole thought process is to make certain, is to minimize risk with regard to interest rates. So we will watch those and we do have room in our budgets for some increases in those interest rate costs.

Paul Morgan - Friedman Billings Ramsey & Co.

Okay. And then going back to development, I mean, I tried to be clear hear about the amount of lease [ph] space you have in these projects. I guess the Florida joint ventures and the Pittsburgh development, where are you there in terms of commitments, are all three of those past that 50% threshold that you mentioned, or no?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes.

Paul Morgan - Friedman Billings Ramsey & Co.

So, committed but not actually a signed lease?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes, most of those are signed leases, in excess of the 50%.

Paul Morgan - Friedman Billings Ramsey & Co.

So, that's 50% of the small shop space?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

It's 50% of the total combined, and on the small shop space where it's moving along fairly well there as you got the --.

Stephen D. Lebovitz - President and Secretary

Yes, it really depends on the project in terms of where we are on the small shop leasing, but the Port Orange is roughly 40% of just the small shops, and West Melbourne is a little bit lower than that, probably closer to 30%.

Paul Morgan - Friedman Billings Ramsey & Co.

I mean, does the change in their kind of tone of retailers about their... not so much store closings, but about their store growth expectations giving you any pause about going after these sort of joint venture projects that are out there?

Stephen D. Lebovitz - President and Secretary

Well, I think we have always been conservative in terms of the amount of small shops that we build in our projects. I mean West Melbourne, it's a 120,000 square feet. So, it's a percent of the total project, it is less than a lot of other developers will do, and we just learned that in the last cycle that the business is cyclical, and you've got to be conservative and it is better to have a center that is 95% to 100% lease than 80% to 85% lease.

So, I think that we feel comfortable with what we have and there is still even though with all the press about Florida and the residential, there is still solid growth in the markets that we are in and good incomes, and we're still getting good interest.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Paul, with regard to those ventures that we would do in the joint venture with the local developers, small developer, I think our criteria there is that we would require that at least 50% of the small shop space would be leased. On the projects that we are doing or sales, we feel very comfortable with our leasing efforts and our ability for our team to basically lease up their space, but in turn, we want to be cautious with regard to any joint venture we do. And likewise, before we'll enter into any joint venture with anybody, our leasing and development team has got to look at it and tell us that if this guy stumbles, that they can basically put it back together and we can make the numbers that are there.

So, we are going to pursue those joint ventures in a very cautious and conservative way. And as far as our own inline small shop leasing, I think Stephen has alluded to that, we feel comfortable that cut back on the small shops square footage and other things that we can do with that square footage, we should be able to achieve those numbers.

Paul Morgan - Friedman Billings Ramsey & Co.

Okay. Last question on cap rates, I mean your stock is implying a very high cap rate for the portfolio. So maybe you can comment on where, what you've seen happen to sort of B quality cap rates over the past six months?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I don't think there has really been that much in the way of transactions to confirm or deny all the talk about cap rates moving. And with the capital markets the way they are, I don't really see anything happening in the near term, one way or another. So, it's really hard to answer that question.

Stephen D. Lebovitz - President and Secretary

And basically, Paul, I think it as a fact that we were able to bring in the Teachers Retirement System of Illinois joint venture partner Starmount, basically confirmed what we had paid as basically a good price for that asset and also that they saw upside potential under this well, because they are not loose with their cash. I can tell you that.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I think that the transactions that we are going to see are probably going to be distressed. So I think you will probably see cap rates higher than what we have been seeing over the past few years, but that might be more indicative of the selling and than the actual market.

Paul Morgan - Friedman Billings Ramsey & Co.

I mean can you put a rough sort of bracket on where you think cap rate will account $350 million foot mall will be now?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I think it depends upon where it is and why you sell it or as Steven pointed out, why you sell it. Is that because your partner wants out, and things such as that. So, I think it's going to vary.

Stephen D. Lebovitz - President and Secretary

It's lower than what our cap rate is.

Paul Morgan - Friedman Billings Ramsey & Co.

Right. Okay. Thanks.

Operator

Thank you. Our next question is coming from Nathan Isbee with Stifel Nicolaus. Please go ahead.

Nathan Isbee - Stifel Nicolaus, Inc.

Hi, good morning. I am here with David as well. What was the year-over-year comp sales growth if we just look at the fourth quarter?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

I don't have that right now, we can get it for you, whatever.

Nathan Isbee - Stifel Nicolaus, Inc.

Okay, thanks. And what was the cost basis described to just off the portion of the Starmount portfolio?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We didn't allocate that, because for real estate tax reasons our partners' reasons and things such as that. So, there was no allocation from the standpoint of what was office and what was retail?

Nathan Isbee - Stifel Nicolaus, Inc.

Okay, thank you.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thanks.

Nathan Isbee - Stifel Nicolaus, Inc.

I think David has a question.

David Fick - Stifel Nicolaus, Inc.

Yes, that confuses me a little bit. You are going to sell some of those assets. Isn't there a basis calculation that has to occur at some point?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes, there will be when we do those allocations for tax, but as far as basically announcing those numbers, David I think that's the reason why we haven't announced those. When we do for own books, we basically have done the allocations, but because of the partners desires that, that not be out there and also from the standpoint of not letting it out for real estate appraisal for tax purposes we basically didn't break those out or itemize those.

David Fick - Stifel Nicolaus, Inc.

Okay, thank you.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thanks, David.

Operator

And Lou Taylor with Deutsche Bank. Please go ahead with your question.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Hi Lou.

Louis Taylor - Deutsche Bank North America

Yes, hi John. I joined a little late here, but in your guidance what does it assume for an outstanding line balance?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

About where we are today.

Louis Taylor - Deutsche Bank North America

Okay.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

So debt level is basically staying the same, if we acquire anything that's not in our numbers. So the debt sector would not change or whatever?

Louis Taylor - Deutsche Bank North America

Okay. And how much capacity do you have in your lines?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We have approximately I think $60 million today, but we have availability under all the construction loans that we have. What we do on that is that we are pricing on our lines of credit or basically much more or lower than what they are on our construction loan. So what we attempt to do and have done successfully is to use our lines till we pull them down to a certain level where we feel uncomfortable and then we start pulling down under our construction loans.

Louis Taylor - Deutsche Bank North America

Okay. So you maxed at on your lines, yet you talk about your opportunity to fund other people developments. How are you going to pay for it?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Well, we have some excess financing proceeds that we'll get from other deals. We are also in the process of some other financings that will provide us with additional capital. On the Starmount transaction, it was about when we originally thought the transaction was going to occur was a $500 million transaction. So when we wanted to do the Starmount transaction, we contacted the lead banks that we've worked with and within, as I said within 48 hours they have provided us with that. So we think that they set opportunity to do that, likewise watching our debt levels to make certain that we're very cautious with regard to those. we've got plenty of flexibility under our bank covenants. So that is not an inhibiting factor as well.

Louis Taylor - Deutsche Bank North America

How much do you expect to pull out of the four mall refinancing you're planning this year?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We think anywhere from $50 million to $100 million should be the number.

Louis Taylor - Deutsche Bank North America

It looks like you are extremely capital constrained here, and you can't really make a whole lot in the way of new investments. So, your portfolio performed poorly last year, so why aren't you selling the underperforming assets to create some capacity to improve the portfolio?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Well, I don't think we are capital constrained. I think that we have plans that will basically show that any capital that we needed to raise for anything that we intend to do, we can do that do it fairly effectively and actively.

Louis Taylor - Deutsche Bank North America

Alright. I guess I am missing that. So, you're going to pull $50 million to $100 million out of the refinancing, you've got $60 million out on the line. Given the size of the company, that doesn't strike me as a whole lot of capacity. So, where is other money going to come from?

Stephen D. Lebovitz - President and Secretary

Well, you basically have construction loans that we are closing, there is development fee income, there is development fees in those specific construction loans, so that you draw down out of those. In addition to that, we have the ability to sell some assets and we do have two other assets that we'll be selling this year, then we have the put capacity too, assuming that our friends at Central come through on those. But if not, we have some other sales. We have out-parcel sales that will generate us significant amounts of cash. So, I think, and in addition to that we have other plans with regard to capital raises that don't impact our stock price or does not involve issuing any common equity.

Louis Taylor - Deutsche Bank North America

Alright. The land parcel sales, development fees, I mean those are small dollars. So, why aren't you selling a lot more assets to create a lot more room on the balance sheet? -- or to buy some stock?

Stephen D. Lebovitz - President and Secretary

We will look at selling those specific assets as the opportunity arises.

Louis Taylor - Deutsche Bank North America

Well, of course you going to look at them, we all know that. But why aren't you looking at it and why don't you have properties on the market?

Stephen D. Lebovitz - President and Secretary

Well, we are first and foremost. And we think that we have capital plans in place that basically will provide us with additional capital.

Louis Taylor - Deutsche Bank North America

Alright. Just to me, this doesn't sound like you have much cap to do much. So it sounds like your plans must be pretty modest. Is that fair?

Stephen D. Lebovitz - President and Secretary

I think what we will do is we will surprise you and show you that we do have that capital access.

Louis Taylor - Deutsche Bank North America

Okay. We will look forward to it. Thank you.

Stephen D. Lebovitz - President and Secretary

Thanks Lou.

Operator

Alright, thank you. [Operator Instructions]. Ben Yang with Green Street Advisors has the next question. Please go ahead.

Benjamin Yang - Green Street Advisors, Inc.

Hi, good morning guys.

Stephen D. Lebovitz - President and Secretary

Hey Ben.

Benjamin Yang - Green Street Advisors, Inc.

Just going back to the Starmount acquisition, when you announced that deal... it looks like there are some redevelopment in the works that was to at the Friendly and The Shops at Friendly, yet they don't appear in your development schedule at this point. Are you still planning to expand those centers?

Stephen D. Lebovitz - President and Secretary

Yes. Those are... yes, one building is actually already was built, and it's being leased up, and then there is an expansion to The Shops at Friendly that is under construction, that is opening later this year. Those are definitely occurring

Benjamin Yang - Green Street Advisors, Inc.

It's not a lot of place that you need to sell, but can you talk a little bit about how the leasing has gone for that center... that expansion that's opening later this year?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Yes, the anchors also were signed. DSW was signed and then there is like 20,000 square feet of shops that we are in the process of leasing up, that's the reason that was included in acquisition price. So, that was why we didn't split it out.

Benjamin Yang - Green Street Advisors, Inc.

Okay, great. And then, going back to the $0.05 FFO reduction regarding to the non-operating items, you kind of went through that a little quickly. Can you break that down a little bit more than what you did?

Stephen D. Lebovitz - President and Secretary

Out-parcel sales were part of it, Ben. We've lowered our estimates on those, the lease termination fees that would have been included in those, and the development fees are in there, as well as we think that there is higher interest cost in those numbers as well.

Benjamin Yang - Green Street Advisors, Inc.

Okay, thank you.

Stephen D. Lebovitz - President and Secretary

Thanks Ben.

Operator

Thank you. Rich Moore with RBC Capital Markets, please go ahead.

Rich Moore - RBC Capital Markets

Hi, good morning guys. What are you hearing from retailers in terms of new store openings and we've heard some of these guys saying they are pulling back. I mean what you guys hearing?

Stephen D. Lebovitz - President and Secretary

Well, I think some retailers are definitely pulling back. I mean there is no question, but then there's retailers that are continuing to do well, it just depends on who you are talking to. I mean we were with Abercrombie and they are just opening a new division that's had a good start, and so that's going to expand and their business is healthy. Buckle is doing very well and they are a retailer that we've got in a number malls and have some opportunities with. Aeropostale is doing well. So, that category is held up. The women's apparel, the Chico's and Talbot's, those guys will definitely cut back. Jewelry is soft.

So it depends on who you are talking to, but the 08 deals for the most part by retailers are done, and 09 they are cutting back maybe a little, but I think they also want to continue to have a program in place to take advantage of the economy when it comes out of the recession. So, and they have good balance sheet and good credit. So, I think we feel pretty comfortable where we are for now.

Rich Moore - RBC Capital Markets

Okay Stephen, so you don't see '08 cut backs, is that right?

Stephen D. Lebovitz - President and Secretary

Like I said there is a few fallouts of deals and some stores that are closed, and renewal in '08 that maybe we had thought would stay open. And that's why we are being more conservative with our occupancy projection and our NOI growth in our guidance.

Rich Moore - RBC Capital Markets

Okay, I got you.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Rich I think also you are going to see some retailers who are planning on stores that aren't going to be delivered to them, so that they are going to need to fill that '08 as well.

Rich Moore - RBC Capital Markets

Okay, good. Thanks John. And then in-place tenants, do you guys offer concessions. I mean are they asking for concessions. And these were guys who are in-place already coming to you saying, I can't make the payment, or can you cut me some slack, that kind of thing.

Stephen D. Lebovitz - President and Secretary

Well even when times are good if someone for whatever reason and doing that business they come to us for concession, that's part of the business. But I think we just deal with it normal every day. And we've got retailer with a good balance sheet and good financials, and they have a signed lease than we expect them to honor their obligations.

Rich Moore - RBC Capital Markets

Okay, so are you seeing more of that Stephen right now, more request for concessions?

Stephen D. Lebovitz - President and Secretary

Not really, now.

Rich Moore - RBC Capital Markets

Okay, and then on the securities guys, I know you can't say what they are but is there something strategic behind these, or you guys just investing where you think you can make a buck on some security.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Rich, I think we had basically have commented on that and you are going to give me a big trouble with my securities lawyer if I commented on that.

Rich Moore - RBC Capital Markets

Okay I don't want to do that John. Okay, so last thing is equity capital, I mean you guys have your joint venture partner. What do you think about the desire by other equity sources out there to do transactions? I mean has that come down over the past four or five months or is that... where it was before?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

No I think to the contrary and thank you for asking that question, because I do think there is great opportunities with joint ventures as well. We just did the State of Illinois features system and I think working with their advisors, they have indicated to us that they have tremendous amount of capital not only for existing properties but for new developments as well. So there is that opportunity to access that because of the comfort factor and I think that the State of Illinois Teachers have been great to work with, but there is other many, many others out there that have tremendous amounts of capital and other pension funds that have the same thing and I think, these advisors for these pension guys are stocked full of money. And I think that with real estate prices where they are and the need to balance their portfolios like real estates on the forefront of where they are going to put their money as well.

Rich Moore - RBC Capital Markets

So back to Lou's question that could be a source of capital as well as that right?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Definitely.

Rich Moore - RBC Capital Markets

Great. Thank you, guys.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We are just going to have surprise Lou.

Rich Moore - RBC Capital Markets

Yes thank you guys very much.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thanks

Operator

Thank you. And we do have a follow-up from Michael Mueller. Please go ahead.

Stephen D. Lebovitz - President and Secretary

Hi Michael.

Michael Mueller - J.P. Morgan Securities, Inc.

Hey real quick, I missed the last part of Rich's question so I hope this isn't what he asked but, going back to Lou's question as well, can you comment on the portion of the portfolio that's unencumbered from a debt perspective and then also I guess the number of assets that in your minds are clearly under levered, where if you really wanted to you could tap tem and any numbers about that?

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

We have... including in our lines of credit. We've got probably around a $1 billion worth of encumbered assets or may be even more so the mass because a portion of our assets are secured our lines are secured and then in addition to that we still have a significant amount of unencumbered assets that we have. And then what we have done over the years is we basically have remodeled and redone a lot of these centers with old existing debt in place and used our lines of credit to do that. So, when we go to refinance there should be great potential there. In addition to that, when we bought the Westfield transaction we paid about $170 million in cash out of our lines for the Chesterfield project. Its got debt on it which will roll over in 2012, but that asset basically is and the total overall portfolio is pretty underleveraged. So, when those come up for renewal we think there is a great opportunities there as well.

Michael Mueller - J.P. Morgan Securities, Inc.

Okay, thanks.

John N. Foy - Vice Chairman, Chief Financial Officer and Treasurer

Thanks, Michael.

Operator

Thank you. Management, there are no further questions. Please continue with any closing comments.

Stephen D. Lebovitz - President and Secretary

We would like to thank all of you for your support. We're looking forward to '08 and like I said, to reestablishing our creditability with everyone, and to moving forward in a positive direction. Thank you all.

Operator

Thank you, ladies and gentlemen. This does conclude the CBL & Associates Properties Incorporated conference call. You may now disconnect. Thank you very much for using AC Conferencing. Have a very pleasant rest of your day.

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Source: CBL & Associates Properties, Inc. Q4 2007 Earnings Call Transcript

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