Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

General Growth Properties, Inc. (NYSE:GGP)

Q4 FY07 Earnings Call

February 12, 2008, 9:00 AM ET

Executives

Timothy Goebel - Director, IR

John Bucksbaum - Chairman and CEO

Robert A. Michaels - President and COO

Bernard Freibaum - EVP and CFO

Analysts

Louis Taylor - Deutsche Bank

Jay Habermann - Goldman Sachs

Craig Schmidt - Merrill Lynch & Co.

Benjamin Yang - Green Street Advisors

Ambika Goel - Citigroup

Michael Bilerman - Citigroup

Michael Mueller - J.P. Morgan

David Harris - Lehman Brothers

David Fick - Stifel Nicolaus

Jeffrey Donnelly - Wachovia Securities

Christine McElroy - Banc of America Securities

Jeffrey Spector - UBS

Frederick Taylor - MJX Asset Management

Michael Dimler - UBS

Rich Moore - RBC Capital Market

Operator

Good day everyone and welcome to the General Growth Properties' Fourth Quarter 2007 Earnings Conference Call. Today's call is being recorded. With us today from the company is the Chairman and Chief Executive Officer, Mr. John Bucksbaum; the Chief Financial Officer, Mr. Bernie Freibaum; and the President and Chief Operations Officer, Mr. Bob Michaels.

At this time for opening remarks, I would like to turn the call over to the Director of Investor Relations, Mr. Tim Goebel. Please go ahead sir.

Timothy Goebel - Director, Investor Relations

Thank you. Please note that this conference call and webcast will contain forward-looking statements, including guidance for 2008 core FFO. Actual results may differ materially from future operations suggested by these forward-looking statements due to various risks and uncertainties.

Please consult documents General Growth Properties, Inc. has filed with the SEC, specifically the most recent forms 10-K and 10-Q for a detailed discussion of these risks and uncertainties. The company disclaims any obligation to update any forward-looking statements. GGP has furnished its quarterly supplemental information to the SEC in 8-K filed yesterday, as well as posted it to our website, ggp.com. During the Q&A, we respectfully request that you limit yourself to two questions or one with a follow-up.

With that, I will turn the call over to John Bucksbaum, our CEO.

John Bucksbaum - Chairman and Chief Executive Officer

Thanks Tim. Good morning everyone and thank you all for joining us. Also with me this morning are Bob Michaels and Bernie Freibaum. During the fourth quarter, we produced core funds from operations of $0.92 per fully diluted share. As we previously reported in the fourth quarter, the company recognized non-recurring litigation provision. Excluding this non-recurring item, core FFO for the fourth quarter increased approximately 11%.

For the full year 2007, core FFO per fully diluted share was $2.97. Again, excluding the non-recurring charge, core FFO increased approximately 11% for the full year as well. Our quarter retail real-estate business delivered very solid operational results in 2007. The quarter was highlighted by comparable NOI gain in our consolidated properties of 5.9%, while unconsolidated properties increased by 5.3%. In aggregate, GGP comparable centers produced a very strong 5.1% overall NOI growth for the full year 2007.

Occupancy ended the year at an all-time record high of 93.8%. This marks four consecutive years of record setting occupancy. Total sales per square foot increased to $462 versus year-end sales of $453 in 2006. Total sales in all malls increased by 4.3%. Indicative of the strength within our portfolio is the performance of our 50 most productive United States Centers. These properties generated average sales per square foot of $635 in 2007. Not only did these 50 centers produce tremendous sales per square foot, but they also represented approximately 50% of our total mall NOI, which is just one more example of the quality of our portfolio and quality will be very important, more important than ever as we move forward in 2008.

During the quarter, we signed leases totaling approximately 2.5million square feet of space. For the year, we completed new and renewal leases involving approximately 8.8 million square feet. The majority of these lease signings will be reflected in 2008 store openings.

During the past quarter, we also opened over 315 stores which shows that despite the softening in retail environment, retailers are continuing to expand. It's my belief that slowing retail sales won't necessarily translate into an increase in mall retail bankruptcies during 2008. Retailers today are in a far better financial shape than any years past. The reasons for this includes consolidation, greater expense control, enhanced inventory management, greater operating margins and stronger balance sheets. It's also important to note that those retailers that have announced our closings tend to have very good locations and various strong properties, making releasing an attractive alternative for GGP.

Also, the economics associated with these terminations... lease terminations, are very favorable given the healthy financial conditions of the retailers. If one looks at past recessionary periods, please don't interpret this remark as my opinion that we are in a recession. So, you would see that our operating performance either remains constant or did not suffer appreciably. It was generally agreed that from 1990 to 1992 with the collapse of junk bonds and the credit crunch in the United States, that we were experiencing a recession. While there was not two consecutive quarters of declining GDP and therefore it was not deemed in official recession from its statistical perspective. The general consensus was that it was a recession. During this three-year period, 1990 through 1992 our occupancy actually increased as the comparable sales.

From 2001 through 2003, well again it's not officially a recession, it's certainly was a very difficult period as we endured the collapse of the dot com bubble, September 11th and corporate accounting scandals throughout all industries. The confluence of these events produced a contraction in the North American economy that brought fear and uncertainty to investors, financial institutions and the consumer. But once again, during this period GGP experienced three consecutive years of 91% or greater occupancy and comparable sales decreased shift slightly by approximately 0.7% during this time.

We're not trying to be pollyannish about our present economy, pioneers are as concerned as anyone as we face an abundance of issues, arguably some of the toughest we as a company designation have ever encountered. But if history is any indicator, I feel it is important to stress how predictable and stable our sales, occupancy and retail operating cash flows have been.

The primary reason for this is because we always had an operating plan and today is no different. Difficult times require difficult decisions, and we're not afraid to make them. Bob will share more details regarding this approach to asset management while Bernie will be giving you an update regarding our financial plans.

We are evaluating all departments of GGP, whether it is asset management, development, accounting, finance or legal. We'll delay the commencement of a number of redevelopments. We're exploring the disposition of certain properties. We're redrafting our leases to be more efficient. We've restructured our central marketing efforts to better relay to today's changing consumer. We continued to reduce energy demands within our centers, thus saving money that goes straight to the bottom line. We're working with local and state governments to create public and private partnerships. We are continuing to develop new malls in Brazil and Turkey, where the markets are robust. In fact, the equity we've invested in Brazil has more than tripled in value. Our specialty leasing remains strong.

There is big demand for lease space on a temporary basis, as space becomes available due to store closings. We continue to analyze department storage space for remerchandising opportunities. We now determine the best use for the property as apposed to only thinking of the best retail use as we've done in the past. Our plan is to always do what is right. We will make the right decisions as we move forward. Over the last 54 years, we have implemented different plans during different cycles. Everyone at GGP is focused on executing the current operating plan in the most efficient, realistic and profitable manner.

I have mentioned many accomplishments both past and present. I have done this because it highlights the fact that we are constantly looking for ways to improve. These improvements touch all aspects of our business, not just the obvious ones. We are improving as a company and the keyword to note here is company. Yes, we own assets in many marketplaces but we are a company runs with them. We are not just a collection of individually-managed assets, we are in a lead team of many of the best and most talented people in the shopping center industry.

You will find that in an environment of increasing difficulty, the company with the best properties, the best talent and the best plan will be the most successful. We expect a lot from ourselves and I know you expect a lot from us as well. I remain very enthusiastic about our business. The world we live in today has changed dramatically from just six months ago and we've recognized this change and we are adapting to it.

Do we expect it to be easy? Of course not. Do we expect to be successful at it? Of course we do. This company is blessed with great properties and great people. Certain external challenges do exist, but I promise you, that just as we have done in the past, we will meet every challenge within our reach. The strength in this company and its people will endure.

I would now like to turn the call over to Bob Michaels, who will discuss the past, present and future performance in the area of asset management.

Robert A. Michaels - President and Chief Operating Officer

Thank you John. As John said the fundamentals in our business remain very solid, as is evidenced by our very strong increase in NOI for the fourth quarter and for all of 2007. Also our year-end occupancy of 93.8% is an all-time record high. Our total sales increased 4.3% for the year, and our releasing spreads remained very strong. All of these reflect the solid core business at GGP, and the very high quality of our portfolio.

I always find it interesting that when business is great, it is probably not quiet as good as everyone thinks, and when the economy softens, business in my opinion is not nearly as bad as the media would make it out to be. I think that is the environment we are in today.

While 2008, will certainly have its challenges, demand for space our retail partners remains strong. And while we believe there will be more store closings in the first quarter of 2008 than in 2007, most of these closings are from established retailers. Either closing certain divisions, such as Talbot's with our men's and children's division or Tucson, which is closing their demo division.

These are two examples where the retailers will have to negotiate lease settlements and termination payments in order to exit these leases. This is not a LIFO we typically go through during the first quarter of each year and allows us again, to replace less productive retailers, with new and exciting retail concepts.

Also I would add these closings are for the most part in very good centers, where there is strong demand for the space. On the issue of retail bankruptcies based on what we've seen to-date, we did not expect this number to be any greater than what we experienced in 2007.

We've completed approximately 80% of our leasing for 2008 and are now working on 2009 and 2010 deals. And while some retailers will scale back some openings, other retailers both domestic and foreign, will use this is an opportunity to secure space in our centers. We're optimistic that our occupancy at the end of 2008 will be approximately the same as our record-setting 2007 year-end occupancy of 93.8%. And as we look forward at 2009 and 2010, retailers are still for the most part holding to their planned store openings. In fact this morning, I had an email from one of our retail partners who is scheduled for our portfolio review meeting with us next week, saying that they have just determined that they will open an additional 20 stores in 2008, if they can find suitable locations.

Our portfolio review meetings continue to reflect demand for new space from all segments of the retailers' spectrum. In 2007, we held approximately 1000 portfolio review meetings and will hold approximately the same number in 2008. One metric that we've never mentioned previously is our weekly deal flow or leases approved by our lease committee, which meets every Monday. As I review these numbers for December 2007 and January 2008, our approved deals are almost identical in terms of numbers and square footage to those deals approved in December 2006 and January of 2007.

While the focus over the last several months has been on the negative side of retail, I'll tell you that most of the retailers in our centers today had managed our inventories extremely well, they are lean and they are in good shape heading into the spring-selling season. Their balance sheets are healthy and if we've minimum sales increases for two or three quarters or even longer, they are prepared to handle this. And while the focus over the last few months has been on retailers that are struggling or closing stores, I would remind everyone that even in this slow environment there are a number of retailers who continue to do very well, as is evidenced by their publicly-stated holiday and January sales numbers.

In addition, the number of new mall concepts continues to grow, including Gilly Hicks which is a new concept from Abercrombie which opened their first store this January at Natick, WAU from South Korea, Crazy 8 from Gymboree, Crewcuts from Williams-Sonoma, Cuts from Neiman Marcus, Lululemon, Seven for All Mankind, True Religion RE from American Eagle are also new concepts that we are doing a lot of business with. Each of these new retailers I have mentioned are 100% mall concepts.

While 2008 will be challenging, we are up to the challenge having already anticipated many of the announced store closings and either completed or started the process of releasing the spaces.

I would now like to turn the call over to Bernie Freibaum, who will discuss our financial results for the fourth quarter.

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Thanks Bob. For calendar year 2007, core FFO per share was $2.97 near the high end of the updated $2.95 to $2.98 range that we provided two months ago, on December 10, 2007. Excluding the non-recurring $89.2 million litigation provision, 2007 core FFO per share would have been $3.28 or approximately 11% above core FFO per share of 296 for calendar year 2006.

We are especially pleased with the 11% increase in recurring FFO given that certain 2007 non-cash revenues and expenses included in FFO as detailed in the schedule of our earnings release totaled approximately 73.9 million in the aggregate versus approximately 95.6 million in 2006, causing a comparable year FFO reduction of $21.7 million. This $21.7 million aggregate non-cash decrease and comparable FFOs resulted in more than a $0.07 drag add on 2007 FFO per share compared to 2006 FFO per share.

Comparable total portfolio net operating income increased by 5.1% for the full year 2007. Despite current weak economic conditions, we continue to expect a comparable net operating income will average 5% or better during the three-year period from 2007 through the end of 2009. Both sales productivity and occupancy ended the year at all-time record levels.

No one knows when the economy will improve, but the vast majority of retailers are still profitable. Most of the merchants that have announced store closings or reduced expansion plans have had struggling or unpopular concepts that preceded the beginning of the current downturn in sales.

Despite the already announced and anticipated additional reduced store counts and curtailed growth plans, we believe we can offset the majority of the potential loss revenue with greater operating efficiencies and increased specialty and temporary rent income. With respect to near-term occupancy risk, approximately 80% of our 2008 lease maturities have already been renewed or leased to others.

Most important of all, the popularity and desirability of high-quality mall venues for entertainment, restaurants, sales of merchandise and services, or for socializing purposes has not diminished. The psychological attitude and outlook of people that work in the financial industry is disproportionately influenced by the current impact of short-term economic challenges.

Although it is entirely anecdotal as we observe people in our malls, it appears that the typical mall shopper across America does not share the irrational fear that the financial world as we knew it, will never again be as it was. Our Q4 and full year 2007 provision for doubtful accounts was significantly below typical levels. Two of our malls sustained storm damage which necessitated temporary store closings in order to make repairs.

We filed insurance claims including request for both property damage and business interruption protection to cover loss rents. Even though we fully expected to collect our loss rents claim, accounting rules require a 100% reserve against the accrued rental income, until such time that we actually collect both the property damage and business interruptions claims.

A year ago, we introduced our initial estimated quarter FFO guidance of a range from $3.17 to $3.23 per share. At that time, we anticipated collecting the majority of our claims in 2008. That is in fact what occurred. Accordingly the reduced levels of provisions for doubtful accounts were anticipated. And therefore we are not non-recurring.

Looking forward we expected our full year 2008 provision for doubtful accounts will return to a more typical level. General and administrative costs were also substantially higher than typical levels, in both Q4 and for the full year 2007. Most of the sizable increases are attributable to non-recurring expenses from larger than normal non-cash incentive compensation charges in Q1 and significant non-recurring legal fees incurred throughout the year.

While we expect to incur additional non-recurring legal fees in 2008, total general and administrative costs for the full year should return to more typical historical levels. Total 2007 FFO per share, which is core FFO plus FFO from master planned communities and the provision for income taxes increased to $3.71 from $3.06 in 2006.

Income from full year land sales declined to $56.1 million from $130 million in 2006, due primarily to significantly diminished demand for production housing in Summerlin in Maryland. While we recorded $127.6 million pretax impairment charge attributable to our land holdings in Columbia and Fairwood, the current estimated fair market value of our land in Houston and Summerlin exceeds current book value.

We do not anticipate further impairment charges at any of our master planned communities. Offsetting the total 2007 master planned communities operating loss after impairment and the approximate amount of $71.5 million was a net tax benefit for the full year of approximately $291.3 million. Accordingly the net $219.8 million or $0.74 of non-core FFO per share when added to $2.97 of core FFO produced FFO per share of $3.71.

The average price for residential acreage sold in Summerlin in 2007 increased to $1.25 million from $1.07 million in 2006. The majority of the increase is due to the fact that 2007 land sales were primarily for custom homes, while 2006 land sales included many lots for production housing. There is still no current demand for production loss in Summerlin. However, Summerlin remains the most desirable community in the Las Vegas Valley and it does not currently have the same imbalance of demand and supply that exists in most other parts of the greater Las Vegas metropolitan area.

As we previously disclosed in out Form 10-Q for the period ended, September 30, 2007. On July 6, 2007 pursuant to their put [ph] right, we were obligated to acquire the 50% interest in the GGP/Homart I portfolio that was previously owned by New York State Common Retirement Fund. In subsequent discussion we learned that the funds are... we should have used a different method to calculate the total purchase price. On November 1, 2007 the Fund filed a request with the American Arbitration Association to arbitrate issues relating to the purchase price.

On our September 30, 2007 balance, sheet we've reflected an additional $200 million of purchase price, which was the amount we offered to settle the disagreement. Prior to commencement of the arbitration proceedings, both parties agreed to attempt to resolve the matter through non-binding mediation. I am pleased to report that the mediation produced to settlement agreement and the arbitration proceeding was cancelled. In addition to the $200 million of additional acquisition costs that we previously recorded, we agreed to pay the Fund an incremental $54 million. None of the additional $254 million of purchase price will have to be paid out of our current working capital. The fund, which remains our 50% partner in the GGP/Homart II portfolio has agreed that GGP/Homart II will obtain new mortgage loans on two presently unencumbered malls owned by the joint venture.

All of the proceeds from the new loans will be distributed equally to GGP and the Fund. We will retain an amount equal to our 50% share of all approved 2008 and 2009 GGP/Homart II development expenditures. The loan proceeds distributed to us an excess of our 50% share of development capital for the next 24 months, will be paid to the Fund and applied towards the $254 million of additional Homart I acquisition price. After that payment any portion of the $254 million that remains unpaid will be common interest-only note, commencing on March 1, 2008. The note, unless voluntarily prepaid at an earlier date in whole or in part, will be due in full five years later on February 28, 2013.

To summarize the financial impact of the transaction, the final gross purchase price paid to the fund for their 50% share of the Homart I properties, less 50% of the networking capital in place on July 6, 2007 was approximately $2.175 billion. For the next 12 months, we expect 50% of the net operating income from the GGP/Homart I portfolio to be approximately $147 million. This represents a 6.76% unleveraged cap rate on the $2.175 billion gross purchase price. We look forward to continuing our positive and productive relationship with the New York Common Retirement Fund in the GGP/Homart II portfolio. Unlike the case in GGP/Homart I the Fund does not have any future right to put their 50% interest in GGP/Homart II to general growth.

Our total portfolio interest coverage ratio for calendar year 2007 was a solid 1.67 times and we generated approximately $67.7 million of operating cash flow after all recurring tendered allowances capitalized lease costs and all common and preferred dividends and distributions. As of December 31, 2007 our 2008 and 2009 debt maturities amounted to $2.622 billion and $3.344 billion respectively. This is $390 million less than the $6.356 billion of the aggregate 2008 and 2009 debt maturities as of September 30, 2007.

Our supplemental financial information package which is currently available on our website contains a detailed schedule of debt maturities and interest rates for all of our loans. We told you last quarter that the weighted average interest rate and our total portfolio debt will probably not increase during Q4 of 2007. In fact, the interest rate declined to 5.70% as of December 31, 2007 down from 5.77% as of September 30, 2007.

Even though we have a number of fixed rate loans with very low coupons that will be refinanced in 2008 have much higher fixed rates and proceeds levels, we currently estimate that the weighted average interest rates on total portfolio debt will nevertheless remain close to 5.7% throughout the year, due to declining interest expense on variable rate loans.

The substantial majority of our 2008 loan maturities occur in the second half of the year. All four loans with maturity dates between January 1st, 2008 and February 1st, 2008 have been repaid. Of course, we also expect to repay every existing loan on or before its maturity date.

During this period of tighter credit, virtually all reads that typically obtain the majority of their debt capital from the public unsecured bond markets are currently utilizing bank loans or other sources of financing, to repay their maturing bonds. For as long as the supply of traditional CMBS funding remains constrained, we can and will obtain new mortgage loans from so-called balance sheet for portfolio lenders. These lenders include certain banks, insurance companies, pension plans and other types of financial institutions.

While these balance sheet and portfolio lenders are not willing to make loans to all borrowers, we are getting at disproportionate share of their allocations. In part, because we are seeking only conservative loan to value ratios up from 50% to 60%. Even more importantly, during these difficult times, these lenders place a very high intangible value on our unblemished default and sponsorship records, our deep retailer relationships and our substantial management and operating experience and expertise.

Mortgage amounts maturing in 2008 represent less than 30% of the current underwriting financing values of the properties. And we are not encountering any resistance or reluctance to provide us with new conservative debt service coverage loans. We've never failed to repay any loan in the last 54 years and we will continue to repay all loans as they come due.

In addition to ongoing discussions with numerous balance sheet and portfolio lenders, we will continuously consider and evaluate raising other types of capital to the extent that the form of capital is both prudent and consistent with creating an enhancing long-term value. Some examples of new capital include the proceeds from the possible sale of some office buildings and/or certain retail strip centers. New or expanded joint ventures at the asset level and various other forms of entity level capital. The most important takeaway for stockholders is that numerous and ample sources of capital are available to us and in fact are currently being offered to us. We are in absolutely no danger of not being able to repay any loan when it matures. Those that say otherwise are probably short sellers of our stock that are talking their book.

We've decided to temporarily defer the commencement of a number of non time-sensitive small redevelopment and/or expansion projects, until such time that both economic and credit conditions improve. We will however complete all projects that are underway. They are all value-enhancing developments and most of them are either substantially pre-leased or committed or are well ahead of anticipated leasing velocity in the case of those projects that are not scheduled for completion until over a year from now.

Through year end 2007, our $988 million of cumulative development and progress expenditures have been funded entirely from working capital. We currently have no construction loans. On average, we have already funded approximately 35% of the cost of all new and redevelopment projects that are scheduled to open in 2008 or 2009. Although we may not actually obtain construction loans for all of our ongoing projects, we will definitely utilize some construction loans in the future. In our current discussions with numerous potential construction lenders, loans for well conceived projects equal to 75% of total development costs are readily available. Given that we have already funded 35% of aggregate project costs, we could conceivably obtain new construction loan funding from more than a 100% of the remaining 2008 and 2009 development costs that have not yet been incurred.

Looking to the future, our earnings crystal ball is not as clear as it usually is at this time of the year. As I previously mentioned, we have continued to address lease rollovers well in advance of expiration and we've already completed approximately 80% of our 2008 lease maturities through renewals or with new or expanded merchants. It is also extremely difficult at this point in time to accurately estimate 2008 overage rent and specialty leasing revenue.

That said, our current guidance for 2008 core FFO per share is in the range of $3.58 to $3.61 or approximately 21% to 22% above 2007 core FFO per share of $2.97. Excluding the recurring $89.2 million litigation reserve, 2007 stabilized core FFO per share was $3.27 compared to 2007 stabilized core FFO estimated 2008 core FFO per share, in the range of $3.58 to $3.61 then represents a very respectable year-over-year increase up from 9% to 10%.

As in the past, we will continue to report actual total FFO in future quarters, which is core FFO plus the results for our Master Plan Community segment and our income tax expense, as these components are extremely difficult to accurately estimate in advance. In addition we believe that FFO is a less meaningful supplemental measure for our Master Plan Community's business segment, as our goal is to develop and sell land in a manner that increases the value of the remaining land and not necessarily to maximize FFO in the near or intermediate term.

At this time, we'd be happy to answer your questions.

Question And Answer

Operator

Thank you. The question-and-answer session will conducted electronically. [Operator Instructions]. Our first question will come from Lou Taylor from Deutsche bank.

Louis Taylor - Deutsche Bank

Hi thanks, good morning. Bernie can you expand a little bit on the guidance and tie-in that comments regarding percentage rent and temporary tenants. What's your general assumptions for that in your '08 numbers; similar to '07, down form '07, can you just expand on that a little bit?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Lou in general, as we have always said, we have got a dozens of variables that we estimate in the range when coming up with our full year guidance. But I can tell you that we do expect actually in dollars, probably some additional temporary leasing revenue which will come from having some additional inventory available as a result of more store closings as Bob and John mentioned and we typically experienced. In addition, as other forms of specialty revenue which aren't related to occupancy, such as advertising, promotion events and things like that continue to ramp up, that number should grow as well. The comment about overage rent was simply that, for those tenants that pay a significant amount of overage rent, a number of our restaurants for example, it's just very difficult at this point to estimate that. So, our internal range for that number is a little wider than usual and that was the point of the comment.

Louis Taylor - Deutsche Bank

Okay. And then second question for Bob. Bob in terms of the store closures in 08, I mean what kind of either formats or specific tenants do you expect the greatest number of closures. Whether it's the Talbot's Men or Bombay or where are you seeing your biggest closures?

Robert A. Michaels - President and Chief Operating Officer

Well, I think we were... we've seen the data certainly in divisions that certain retailers have had like Talbot's and Pac Sun, that are closing divisions. Actually, in going through all of our numbers to-date our closings are not any higher than they were in 07, but we do expect that there will be a few more closings. Also I think you will see some closings from some apparel retailers possibly that have been on the... on our watch list. They will close a few stores but, overall I think it's pretty much the closings from established retailers, where we will be able to secure lease termination settlements.

Louis Taylor - Deutsche Bank

Great, thank you.

Operator

Our next question will come from Jay Habermann with Goldman Sachs.

Jay Habermann - Goldman Sachs

Jay here with Tom Baldwin as well. John, in your comments sort of curious to hear at the end you've mentioned sort of exploring all options and talked about possible asset sales. Bernie expanded a bit more and talked about joint venturing and obviously, selling the office portfolio which has been talked about for sometime. But I'm just curious about possibly the size and magnitude of such joint ventures or asset sales. I mean obviously with debt coming due not just this year and next year, but over the next several years.

John Bucksbaum - Chairman and Chief Executive Officer

Yes, the asset sales while to-date haven't been large and we have the industrial portfolio that was sold. We've done some office buildings and there are a number of other office buildings that we have in various marketplaces and again, just looking at all of these not big numbers if we do move forward. But I think there are things that we determine whether or not they really fit with some of our future plans and so everything is open for exploration and its going to depend upon kind of pricing that we feel that we can receive for certain assets and then we'll make those decisions. But it's more of an analysis and see what the market has to offer and then we'll make those determinations. We're not going to do anything that we don't feel is in the best interest or at the best pricing, but if it works you might see us do some things.

Jay Habermann - Goldman Sachs

Okay now just switching to the land business. I guess Bernie can you talk about this business, the outlook for 2008. You mentioned obviously the volumes and the deceleration you've seen but, you've certain expectations for achieving break even this current year?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

We don't estimate, Master Plan Community FFO as you know. It's extremely volatile. I think any attempt to estimate it is pretty futile in our opinion. The people in the home building business have various opinions but in general it seems that they don't expect any new interest in new land, throughout the entire year. And we are certainly not expecting any in general ourselves. There are still, very good interest in our two Houston communities, in part because of the energy boom. Houston has got more employment growth if not perhaps the highest employment growth anticipated in the country. Summerlin continues to be a very desirable community. We continue to sell many lots for custom homes as well as land for the use of development of commercial usage as opposed to residential.

So we don't expect any huge improvement, if any. But I would remind people that the land business, the master plan community land business is not the same as the single-family home business. We don't have any build homes that are in inventory that we have to get rid of. It's a very, very long-term business. The objective is to increase the value of the unsold land over a long period of time and we still remain very confident that that's what will happen in the case of Summerlin Houston and Columbia as well.

Jay Habermann - Goldman Sachs

And how much capital are you investing this year?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

A very nominal amount. I would say that when you consider that we will be getting capital from the cities that are something called special improvement district payments that we get as a reimbursement of previously funded infrastructure. When you consider that I think that will be very little, if any net capital invested in infrastructure across the portfolio.

Jay Habermann - Goldman Sachs

Right. Thank you.

Operator

Craig Schmidt with Merrill Lynch has a question.

Craig Schmidt - Merrill Lynch & Co.

Thank you. I was wondering with the softening of sales in casual dining and your current track record with successful lifestyle additions, was that having any impact on your redevelopment schedule?

John Bucksbaum - Chairman and Chief Executive Officer

Craig, can you repeat, you said the contraction in cash... something about lifestyle?

Craig Schmidt - Merrill Lynch & Co.

Ye, you've been successful with these lifestyle additions to your malls, but we've heard that casual dining is soft in sales and they often seem to be a part of those lifestyle additions. I wondered if that figures in some of the scaling back of your redevelopments?

John Bucksbaum - Chairman and Chief Executive Officer

It does and it depends on the property. But those restaurants that are key to so many of the redevelopments and/or villages that we've been attaching via PF Chang, Cheesecake, Maggiano's, they are great restaurants and they're very popular and while there may be some contraction in terms of business, they are still going to be I mean they are key players, key anchors to these properties and we'll continue to put them in. It's probably properties that don't have some how that type of attraction that will see us holding back on and its matter of priorities. And where we have those wonderful restaurants as the catalyst for something that might well still go forward.

Craig Schmidt - Merrill Lynch & Co.

And I just wondered, in terms of other plan ground up projects, it seems that Cannery and Okedee Crossing, have fallen out, I see they are further-out projects. But what were some of the thinking of removing those on your plan ground up projects?

John Bucksbaum - Chairman and Chief Executive Officer

Yes, The Cannery here in Chicago is with an urban project, many of you have heard me speak about of our desire of the urban initiative and what we are trying to accomplish that, they are difficult to begin with and slowing retail environment. It's a place where the retailers that's probably the first type of property that you are going to think twice about and we want to make sure that we can do it successful not only from merchandising and leasing perspective but most importantly from the profitability. And so we continue to analyze that and it's a property I talked about the public-private partnership. It's something we may have to go to back to city of Chicago on and work even harder in terms of making the economics work. But we by no means have given up on it. It may not happen, it's quickly and ...

Robert A. Michaels - President and Chief Operating Officer

Yes, the only thing that I would just say that we are delaying that. It probably will happen down the road but we want to make sure that if we go forward with it, we can totally pre-lease it and be in a position to open it in a high 80s, low 90s on a percentage basis. And so we are pushing it back.

Craig Schmidt - Merrill Lynch & Co.

Okay, thanks a lot.

Operator

We'll move to Ben Yang with Green Street Advisors.

Benjamin Yang - Green Street Advisors

Hi good morning. Just going back to land business, it looks like your salable acres at Summerlin increased pretty significantly since the last quarter. Talk about where you are getting that land. Are you buying it back from the home builders?

John Bucksbaum - Chairman and Chief Executive Officer

No we didn't purchase any land at all. It has to do with entitlements and land being, the amount of land being determined in salable versus not usable. But we bought no additional land in Summerlin whatsoever.

Benjamin Yang - Green Street Advisors

Okay and then secondly, you kind of alluded to there being interest on some foreign retailers opening up shops in the U.S. and you specifically cited a concept from South Korea being one of them. Do you have any idea how big this segment could be given, the fact that the fundamentals in the U.S. retailers are weakening?

John Bucksbaum - Chairman and Chief Executive Officer

I think it can be quite large, actually. I mean there has been a number of foreign retailers that have come in the U.S. over the last few years and had been very successful, people like H&M, Mango, Zara. I think that WhoAU, the South Korean retailer I mentioned is a large retailer in South Korea. They've made it very plain in their public announcements that they would like to be a 400 to 500 store chain in the U.S. So I think that is big, I think Uneeglo from Japan which is a very large and very successful retailer in Japan that now opened in New York and they have made it known that they want to expand rapidly in the U.S.

What's your seeing is firstly in Europe is that most of these retailers have run out of expansion opportunities. Both Zara and Mango are close to a 1000 store chains and so in order to get their growth they have to come to the U.S. And I think it takes them a little longer to be successful. H&M is certainly a good example of that. They've been here about ten years now, the first few years it was very tough for them, but now they are very successful. So I see this group of retailers and it also has a herd mentality. When one comes, the others also want to follow. But I see this group as being a growing group that are going to continue to open stores in the U.S.

Benjamin Yang - Green Street Advisors

Alright. Thank you.

Operator

Jon Litt from Citi has a question.

Ambika Goel - Citigroup

Hi. This is Ambika with Michael Bilerman and Jon Litt. On lease term deals, they were high in the fourth quarter. Are they related to the closures that were announced to the public in 2008? And then can you review the economics of the lease-term fees given that they were from well capitalized retailers. For example, like what period of rents do the lease-term fees cover?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

As we've always said, lease terminations are a part of our business, they are recurring. I think for the full year, lease terminations for 07 were about 10% above lease terminations for 06. They are by definition and by character very lumpy. They're not paid monthly like regular rents. And in fact, as most people don't seem to focus on in the retail world, a lot of the payments represent income that would have otherwise been reported in a different period. Because it's very rare that we can put a new tenant in the day after another tenant moves out, because this place have to be retrofitted for the new use. So there was nothing unusual. Every situation is in fact unique and it's negotiated with the retailer based on all sorts of variables. But we will always collect what we believe is an amount that should at least cover the downtime any cost of new tenant fit-out that we would fund and hopefully have additional income after that.

Michael Bilerman - Citigroup

It's Michael Bilerman. I had a quick question. You've talked a little bit about pushing from the redevelopment, development projects out. It sounded both due to conserving some financing, but also given the backdrop of the economic environment. Is there any change that you are making sort of on the core strategy given what's happening and any changes that you maybe dealing?

John Bucksbaum - Chairman and Chief Executive Officer

Well, Michael I think, I made the comment that we strictly are looking at what's the best use for the property as opposed to only what's the best retail use for the property. So if there is, one statement which sort of summarizes the change and that's not brand new here. In sense you've heard us talk about bringing greater intensity to the properties, greater density but that is different, in years passed when it was only retail related and today if it's residential, hospitality those are the two primary alternative uses to retail. But back to the earlier question, with be it restaurants, entertainment, all of these different uses factor into those decisions that we are making and... but it does change the dynamics. But I think very much for the better.

Robert A. Michaels - President and Chief Operating Officer

Michael we had over 60 small redevelopment projects averaging $5 million. Now, all of which were at existing centers, they are either redevelopment or expansion and clearly you can create the most value from a very successful ground development, if you can build it at an unleveraged return in the high single-digits or even 10% and create an asset that's valued at 5 or 6 cap rate, you create a lot of value. But and the projects that we're deferring are primarily small projects, which in the aggregate amounts to a fair amount of money but individually none of them are significant projects to any of the properties that they are associated with. They are small in nature, some are a million or two, others are $7 million or $8 million. But in all these cases there isn't any time-sensitive reason to proceed with a number of potential additional projects that have been discussed in those strained areas, many of those are not proceeding. So there isn't any particular reason to hurry up and do something.

But that said, I can tell you that, what we've been seeing for the last five years and what we'll continue to do is to reinvest and improve our existing properties. We are getting great returns over many, many years after the improvements open with respect to being able to increase rents and other revenue from the property as a result of making it better. So that will continue but what we deferred is primarily a large number of small non-time sensitive projects.

Michael Bilerman - Citigroup

Thank you

Operator

We've a question from JP Morgan's, Michael Mueller.

Michael Mueller - J.P. Morgan

Yes, hi. One question about the residential sales or the cumulative development sales. In Columbia in the fourth quarter, looks like the pricing was very different and granted a lot of acreage, but much lower than what it was earlier in the year. Can you just talked about what's happening there? Was there anything that's atypical, what you see going on?

Robert A. Michaels - President and Chief Operating Officer

Look there's very little land left in Columbia. The acres are not a margin as they are not commodities. Some land is more, dramatically more than other land given the limited amount of sales the land that we did sell was the lesser in value as compared to either the average or what some of the more valuable land is worth. So I wouldn't read anything into that whatsoever, that said we took a write-down in Columbian Fairwood, it's very soft there. But after the write-down, we are very confident that our book value is going to remain below the fair market value in the environment and we are still looking forward to, which we don't have in our numbers or are projected upside at this point, any potential benefit that could come from any type of rezoning in the Town Center area of Colombia, where we have either undeveloped land or buildings with very low amounts of SAR which could be potentially turned into buildings that are larger. That's the incredibly exciting part of Columbia as the almost 500 acres of the Town Center that we are currently working with the community on the entitlements and the long-term future of that Town Center plan.

Michael Mueller - J.P. Morgan

Okay thanks.

Operator

We will go to David Harris with Lehman Brothers.

David Harris - Lehman Brothers

Bernie, I wondered if you could just sort of discuss in at least broad terms, what you think the pricing is on whole loans in the sort of 50% to 60% LTV and also connected with that is, could you give us an idea of what your any joint venture partners might be looking for in terms of un-leveraged returns?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

On the first one David, the pricing is not at a very tight range for all the different suppliers. They have got different objectives and those that hold on their balance sheet or expect to sell have slightly different pricing objectives. But I can tell you that that all the loans we are getting have all in rates that are still under five. With the reduction in the treasuries that translates into spreads of anywhere from 175 over to 250 over maybe in some cases. But the good news is that the money is available. I think we do get kind of special treatment, given the historical credit quality of malls, the low loans to values and the very high debt service coverage.

So, the economics of these loans will all-in rates in the fives is still working very well for us. So, we expect to do most of them in the fives, based on the current environment and it's not causing any dilution whatsoever, because the low rate loans that we are repaying, that were done in prior years, despite being redundant rates in the fives will be offset by a significant amount of reduction in floating rate interest expense, based on our loans.

The returns that people expect for JVs is even more of a range than what lenders expect is their spreads for whole loans. They are very, very different types of investors, we've spoken with some that have a 20-year horizon and are willing to accept what are initially very, very low yields on their money because of the high quality and stability of our assets. We've got dozens of wholly-owned assets with very high sales productivity that anybody who wants to make a long-term investment in the mall sector in the U.S. would be happy to do. So, it's all across the board but to the extend we do any new JVs or expand existing JVs, the returns... the current returns that they will get will be accretive relative to our other choices of capital that we're considering at this time as well.

David Harris - Lehman Brothers

Okay just to be clear on the question with JVs, are we talking only stabilized product or would you contemplate development JVs?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

I know it may... it should go without saying, but we contemplate virtually everything. We've at least a plan A, B and a C for everything that we're trying to do in this environment. Maybe we often have a plan D, E and F as well because of the uncertainty with respect to capital commitments. But we're speaking with some people about coming into new developments and not just talking about JVs on stabilized properties.

David Harris - Lehman Brothers

Okay, and I have a quick question for Bob; Bob actually it's two part if I may, One is could you identify any sort of sources of geographic stress? Would you identify certain parts for the country where they are exhibiting weaker trends than the other? And secondly, obviously your spreads remained very wide. Can you discuss what your discussions are like with your retailers around revenues? Are you getting push back from any sources?

Robert A. Michaels - President and Chief Operating Officer

First on the geographic question, I think that the parts of Southern California and parts of Southern Florida probably have been the weakest over the last three to four months and also during the holiday season the Inland Empire area of Southern California has probably been hit harder by the housing crisis than most areas. I would say those two areas probably have suffered there more than most.

The pushback question, I think that the answer really is no. I think that the retailers that have committed to deals for 2008, 2009 are moving forward with them. Where you're seeing some changes if you are talking to a specific retailer and all of a sudden they determine that they're going to wait and see how the first quarter goes or the first two quarters go, there is some pushback on those kind of deals. But certainly on deals that are signed and or even fully negotiated, I would say there has been virtually no pushback. As I mentioned earlier today, I have an email from a retailer this morning early that's coming in next week for a portfolio review. That really had surprised me, but they're looking for twenty additional locations for 2008.

One of the reasons is, they sense that there might be some opportunities where there were not opportunities, maybe previously. So I think that as we go forward, I think most of the retailers are holding to their open-to-buys for 2009 and 2010 because we're actually leasing out into those areas. So we have not seen any significant pushback.

David Harris - Lehman Brothers

Okay, thank you.

Operator

David Fick with Stifel Nicolaus. Please go ahead.

David Fick - Stifel Nicolaus

Good morning. Bernie could you just review your total capital needs, net capital needs for CapEx, excluding reimbursable CapEx, development redevelopment including your overseas projects and your redevelopment projects in the U.S. over the next year given all the adjustments that you've made here?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

David, its all I believe very clearly laid out in our supplemental. If you look at the back portion that deals with developments and projects, at least to the $1000, the total amount of development in progress what we've already spent and what's to be spent. And as I hopefully communicated clearly, we've already spent out of our own working capital about 35% of the total estimated completion cost of the projects that we will open in 08 and 09 and constructions loans are available from lenders who today are seeking 25% equity or whole they are willing to lend 75% of the cost were maybe a year or two ago, you could have borrowed 90%. But because we've already funded in the aggregate more than 25%, a very viable reasonably priced sorts of capital, if we choose to use it for all of it or part of it will be construction loans.

So, the projects that we have going in Brazil and Turkey are not requiring any capital investment from the REIT at this time. We've got financing in place from those countries for all of that development. And in Brazil for example the coupon is high, it's 9% or 10% but the unleveraged returns are 15% to 20%. And as John mentioned, the equity investment that we've made to-date in Brazil is I believe very conservatively at least tripled in value and the new mall we opened in Eskisehir in Turkey a few months ago is totally full and doing substantially better and we've just started our second one in Istanbul, which is going to be a very exciting project and two new malls in Brazil will open at the end of the year and all of these is as I said, have already been financed with local currency.

So the point that we hope we are getting across today is that because we have such high-quality assets and because there are so many different types of capital available either at the asset level from sales or financings or at the entity level that are despite the diminished supply of capital there is ample capital for us to handle our maturities as well as our development expenditures for the next couple of years.

David Fick - Stifel Nicolaus

And free cash flow more than handles your normal recurring CapEx load?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Yes, absolutely. As we pointed out, we have significant cash flow after what we report very clearly is 100% of tenant allowances and capitalized lease costs and obviously it's critical to generate enough cash to fund the dividend and the distributions and all the operating partnership units.

David Fick - Stifel Nicolaus

Can you give us a little heads up on where you think the dividend will go this year?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

I don't think we can do that. It's obviously a Board decision and the Board has a very robust conversation every year in around October I believe, or September. If you look in your crystal ball David for what you see in September, my guess is it will be something that other people don't necessarily agree with. So I think it's pretty mature to be contemplating or guessing what our dividend might be in the future.

David Fick - Stifel Nicolaus

Thank you.

Operator

We will go to Jeff Donnelly from Wachovia Securities.

Jeffrey Donnelly - Wachovia Securities

Hi, good morning guys. Bernie, I'd like to stay with the balance sheet for a second. Could you derive that capital roadmap for 08 and 09, while GGP has the capacity to handle maturities that come your away I think in the foreseeable future that percentage of your assets by value or number that is encumbered is going to continue to rise. How are lenders reacting to that in this credit market and have you rolled that capital roadmap analysis forward for your lenders to look at how you're going to handle 2010-2011 maturities?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

The maturities other than the Rouse bonds are all mortgages and the lenders that have mortgages on those properties are very familiar with cash flow and those properties. What isn't obvious to people, a lot of people have done very shoddy inaccurate analysis and put numbers out there. They have talked about what they believe are cash flow from our properties and what they represent relative to loan amounts. What they don't know is, there are lot of things they don't know, but many of our properties for example as I said, we've been funding expansions out of working capital for the last ten years, not using construction loans because they were more expensive.

So many times we'll put a mortgage on a property with a five-year maturity and our own projections anticipate that the NOI five years later could be 50% or 60% higher than the NOI that was in place when the loan was originated. I think what's interesting and I don't want to project anything, because we don't get paid to do that, but it does appear that in dealing with the things that led to this credit crisis that rating agencies and other people that analyze things, interestingly enough are coming back to basics and by that, I mean why wouldn't somebody prefer a mortgage loan and a high-quality mall producing stable cash flow and actually lean on that property with those long-term leases with a loan of 50% to 60% of value as compared to an unsecured loan to a company that could have issues and that's why the mortgage market has been as huge as it has been for hundreds of years and that's why we used it, but more importantly because it provide us with cheaper debt, that was I might add non-recourse, which is also something that many people seen lots of value, which confuses us a little bit. Because if you have bonds and you have a default, it's not possible to give the company back to the creditors and still keep the company and where we don't envision, emphasize as much as I can in 54 years, we've never had a default, we don't expect to but should condition turn into whatever horrible things, you would like to contemplate. Non-recourse debt at that time is better than recourse debt.

So, what is interesting is that I think that whenever the current credit crisis starts to resolve itself and whatever the new normal is that in my opinion it's likely to be even more conducive to borrowing money through mortgages, which are secured by high-quality malls with stable and increasing cash flow.

Jeffrey Donnelly - Wachovia Securities

That's helpful and if I could just ask the second question to Bob. And I think just some of your comments, concerns of retail demand for space out there is heightened I think in part because of concerns for near-term bankruptcies but mainly I think because many retailers have highlighted on their conference calls and expectations for slowing unit growth and even plans to net closing source over the next two to three years, which could extend into that 2009-2010 period, where you expect I think some confidence of return to normalcy. Is your optimism, because you feel retailers will not touch GGP and instead hit other landlords or is it just that retailers are really just talking about it at this point, but not making any hard decisions on pulling back their 2009 plus unit growth?

Robert A. Michaels - President and Chief Operating Officer

Well I think the retailers will certainly look at the quality projects and always want to be in the quality projects. I think that they are talking rather than acting at this point in time. I think that if you look at, what I said earlier that, a lot of the retailers are looking at the first quarter, second quarter and we will make some decisions going forward as to how their business plays out during the first and second quarter, may be in the third quarter this year, as they look at 2009 or 2010.

The thing that makes it different is that if you look at probably 80%, of our retailers, especially retailers, in our centers they are made up of probably 30 of the top retailers in the country, all with multiple concepts, and I would use Abercrombie as an example. Abercrombie has five concepts. They take up a lot of square footage of the center. You know Gymboree has four concepts, American Eagle has four concepts. So if you look at those kinds of retailers, I don't think you are going to see a lot of pushback on store openings going into '09 and '10.

A lot depends on what happens obviously, here in the next few quarters, but I am optimistic because the quality of the retailers in the centers have never been higher. Their balance sheets are in good shape. Their inventories are in good shape, and we talk to them every single day. And I think have a pretty good handle on, what their growth is, where they are cutting back, if they are cutting back. Ann Taylor announced that they were cutting back and we expected that. But I'd say for the most part of that the retailers that we're talking to and dealing with are not, at this point anyway, altering very significantly their 2009-2010 plans.

Jeffrey Donnelly - Wachovia Securities

It looks they are going to lower their own investors expectations, but haven't necessarily decided to make good on it until they see how the year progress?

Robert A. Michaels - President and Chief Operating Officer

Yes, I thinks it's very possible.

Jeffrey Donnelly - Wachovia Securities

Thanks.

Operator

Deutsche Bank's Lou Taylor is next.

Louis Taylor - Deutsche Bank

Thanks. John can you give us the status on the Palazzo sale and the expected closing of that.

John Bucksbaum - Chairman and Chief Executive Officer

Yes, we continue to move forward on Palazzo and it's been... it's a complicated project because it's built by one party and being acquired by another. The final aspects of that are being worked out and our expectation is that we expect to be able to close by end of this month.

Louis Taylor - Deutsche Bank

End month, okay great. And then Bernie also just in terms of... as the yield curve steepens are you considering getting any more floating rate debt to the debt mix issue either through swaps or other types of loans?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Lou, you know what we have never use the yield curve. Our personal guess is with respect to where rates are going, to do financial engineering if you will. We've only have floating rate debt when it makes sense to have it, which is in the past when we acquired assets. By definition today because the number of our best assets are being financed in near term with floating rate debt, because we're very confident that these assets, some of them are $1000 a foot in sales productivity will generate much better proceeds and long-term mortgages in the future. So we are using some floating rates. So just because of that, our floating rate debt will probably climb to $4 billion or $4.5 billion, which is something like 17% or 18% of our total debt. We've historically had floating rate debt much above that range, but I think just in the due course of the way we're financing today, that floating rate debt will increase and it's not purposeful because of the yield curve. It's just the right thing to do at this point.

Louis Taylor - Deutsche Bank

Great. Thank you.

Operator

We'll go Christine McElroy with Banc of America.

Christine McElroy - Banc of America Securities

Hi. Good morning. With regard to your tenant sales growth, haven't you seen a distinction between Class A and Class B? So it was one type being impacted more by the current slowdown, more than the other and is there a difference among tenant types like for example luxury versus bridge versus moderate?

Robert A. Michaels - President and Chief Operating Officer

I mean the luxury has performed Christine very well over the last few years and it continues to do well. But I would say really not because I mean if you look at one of the top performers not only in 2007, but certainly in the holiday period and also in January, it was a retailer call backhoe, which is based in County, Nebraska and is in all types of centers certainly in our portfolio and many other developers portfolio and if my memory serves me correct, they had 19% comp store sales increase in January, high double-digits in December and November. So it's... I mean we really haven't seen except for what I would call the luxury segment you mentioned much, much difference in many of the retailers who are in all of these centers and so, it's hard to say that one group of centers outperforms other. But I would say with the exception of the luxury, it's been pretty consistent across the board.

Christine McElroy - Banc of America Securities

Okay and then just following up on some of the prior questions on development. Given the current environment, is there still a possibility that you could delay some of the larger projects in your pipeline or have you done kind of wholesale review of your pipeline at this point, such that you're comfortable with the feasibility of all your future projects?

Robert A. Michaels - President and Chief Operating Officer

Yes we continually evaluate these projects and as we've mentioned earlier there has been some minor shifting around projects but of the major ones, Summerlin in Las Vegas, we continue to move forward. On Summerlin and Elk Grove in Sacramento it goes forward. That may have been pushed back, at all. So it's really... anything that has begun, there's no change at all. But as we said, at Hilton Head there's a project that you don't need to act on that project today. So we will look at it on a going forward basis. But and anything that has been shown in the supplemental generally speaking is still right on track.

Christine McElroy - Banc of America Securities

Thank you.

Operator

We've a question from Jeffrey Spector with UBS.

Jeffrey Spector - UBS

Hi, just actually my questions have been answered. I was just going to ask about the sales versus your peers, we've seen that your sales increase a little slower, and so that it appears. So, just asked about the quality... you mentioned the quality the portfolio I guess, if you have any additional comments?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Well, sales are always driving for the long term our rents. But the most important thing for paying the bills and the dividends is the net operating income. In our 5.1% comparable NOI growth, I think last year was six something percent and our expectation that will average at least 5% for the three years, 2007 through 09 I believe that is the most important metric ultimately. Obviously, we'd like to see higher sales, increases, but total sales have been increasing, and I think perhaps our portfolio is changing a little more dramatically than some of the others. It's not quite as static and that means there are fewer comp retailers in the mix. So as we've always said over the years we have tended to look primarily at total sales, not that we don't care about comp sales, but I think when you look at total sales and you look at our NOI, those two metrics indicate a very high-quality portfolio that continues to grow.

Jeffrey Spector - UBS

Great, thanks.

Operator

From Jakes Asset Management and Fred Taylor. Please go ahead.

Frederick Taylor - MJX Asset Management

Yes. I think most of my questions have been answered. Just on the mortgage financings or refinancings you are going to do and if you said it, I apologize. Do you have a target for excess proceeds? There was a notion in years passed that you can actually re-up at higher values, even up 50% and what those proceeds might be used for, I assume. Repay some Rouse bonds et cetera?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

You happen to own any Rouse bonds.

Frederick Taylor - MJX Asset Management

From time to time.

Bernard Freibaum - Executive Vice President and Chief Financial Officer

We have historically never, we anticipate, like we do lots of other things, ranges of proceeds. But we absolutely expect to be getting new mortgages that exceed the maturing amount, because our mortgage maturities represent only 30% of current underwriteable loan value. So we will definitely be getting bigger loans. The most recent example is fashion show mall in Las Vegas. We put a new loan of $650 million on it and the maturing loan I think was $320 million or $330 million.

Frederick Taylor - MJX Asset Management

Right.

Bernard Freibaum - Executive Vice President and Chief Financial Officer

So, we will absolutely be getting excess proceeds that it will be... because money is kind of fungible, it will go into the silo and we'll use it for all sorts of things. Generally speaking, working capital and that's why, that component of future capital raising is the largest and that's why we remain so confident that, we'll be able to handle all of our debt maturities and all of our capital development requirements without skipping a beat.

Frederick Taylor - MJX Asset Management

Right, would you fathom I guess, I know it's early in the year what that excess number might be?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

No, I really. I don't think it's appropriate. I mean, things will change. I don't... we are not guessing when the credit markets will improve. But it does seem that when they start to get better, lot of people are suggesting that they'll remain under severe pressure for many years and I hate guessing about any thing, but it does seem to me that with all the money being raised by hedge funds to purchase paper that's been heavily marked down by financial institutions. Once those pieces of paper start getting sold, it does seem to me that with all the capital on the sideline that it'll happen much more quickly. And one thing I can tell you is we don't anticipate that these tighter credit conditions will be in place for years to come.

Frederick Taylor - MJX Asset Management

Thank you.

Operator

We'll go to Michael Dimler with UBS.

Michael Dimler - UBS

Hi. Thanks, good morning guys. I just wondered if you would provide a little bit of color on where you revolver balance is as of 1st of February. And whether or not any of the drawings of the year-end represented a refinancing of 08 mortgages kind of bridging before the refinancing?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

I don't know how we can get so precise. If you want to issue financial statements on a daily basis, of course we can try to do that. But as I've said we do lots of refinancing that generate significant proceeds and the reason we have the revolver is that there is a place to put the proceeds on the day we get them and the revolver then is available for capital needs. Our revolver has gone from zero up to 500 and down again and back up again and that's the purpose of it. So the important point is that we've got a huge number of unencumbered assets, talking about mortgage loans and all of them and that's the source that will fund future requirements more so than the revolver.

Michael Dimler - UBS

I guess, let me rephrase that. Is your balance less or more than it has been...

Bernard Freibaum - Executive Vice President and Chief Financial Officer

I don't think. We're not going to give our daily balance or current balance of our revolver. It's just one small piece of our total capital. We have $27 billion of debt and we have $650 million revolver. With all due respect that's not a significant piece of our capital base.

Michael Dimler - UBS

Okay. I have a follow up, if you could talk a little bit in terms of color and the loans that have been refinanced, what you are getting in terms of maturity, the lending cap rate on that?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

As I said, an answer to an earlier question. The spreads are ranging from 175 in some cases to 250 in others. Terms are typically five years, but in some cases we are talking about longer terms depending on the asset. Now, these balance sheet and portfolio lenders don't operate in the same way that the CMBS market, did which was very much commodity like. They are all unique and have different issues. But I think the key point is that the all-in rates have been in fives and if that continues, which we think it will, that's very conducive to continuing to grow our FFO.

Michael Dimler - UBS

And any comment on lending cap rate ranges?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

I don't even inquire what the lenders use, because it's across the board. But in general based on what they tell us, they perceived the coverage, there has been no increase.... no discernable increase in the cap rates that they use to value malls. They are still clearly for the best malls in the fives and in general, I would say in the sixes for malls as a group.

Michael Dimler - UBS

Thanks.

Operator

RBC Capital Markets, Rich Moore has a question.

Rich Moore - RBC Capital Market

Hello, good morning guys. Hey Bernie could you talk a little bit about where you feel you are relative to any of your debt covenants. How comfortable you feel that those are still safe?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

We feel as comfortable as anybody could possibly feel. We are not in any danger. I don't know why you and others think that we're. But we're very solid there's no issue there and there won't be any issue in the future.

Rich Moore - RBC Capital Market

I'm not sure that I do... I think you appreciate answering your question. That's great. Also on the land, are you guys going to provide an updated appraisal in the supplemental coming up in the first quarter, is that when you do that?

Bernard Freibaum - Executive Vice President and Chief Financial Officer

Yes every year that... we continue to run our accounting model on a quarterly basis. So it's not technically an appraisal, it's the number that we used in our model. But its vetted by what we think is the foremost land appraisal in the country and that process is currently underway and we'll report that number, when we release our results for the first quarter as we do every year.

Rich Moore - RBC Capital Market

Okay. Good thank you and if I could real quick Bob, it sounds like the tenant environment is, seems pretty strong which is what we heard from others as well. Are you seeing any evidence of in place tenants looking for concessions and is there, anybody coming basically saying, we get a break because we're struggling that kind of thing?

Robert A. Michaels - President and Chief Operating Officer

No absolutely not Rich, I mean we've not see any of that and I don't expect to. It's not been part of any discussion or any portfolio review that we've had.

Rich Moore - RBC Capital Market

Great. Thank you guys.

Operator

And we've a question from David Harris with Lehman Brothers.

David Harris - Lehman Brothers

Yes thanks. John could you just talk about what you think the acquisition opportunities are going to be over the next six-twelve months and how might you think of this period compared to other periods that you've been through in your long career?

John Bucksbaum - Chairman and Chief Executive Officer

Well, we're not anticipating any acquisitions at the moment. Haven't seen anything and we are not looking for anything. I don't know yet that owners of high-quality malls with high sales productivity and high potential for income growth are not anxious to sell them in this environment. The last mall that we noticed that was highly productive. Any buyer is most likely want to put some reasonable amount of debt on the asset and because of those conditions today, I think most people that own the highest quality malls I think you can safely say, none of those people or entities are under any financial directs whatsoever and it's hard for us to imagine why they would want to sell any of those assets in this environment.

David Harris - Lehman Brothers

You're not aware of anybody running up against refinance issues or alternatively...

John Bucksbaum - Chairman and Chief Executive Officer

We are not of aware of the owner of any mall that has sales of $500 a foot or higher that's at risk of not being able to handle their maturity. That not to say there isn't one or two somewhere in the United States but we're not aware of anything. Part of the point that Bernie is making there is that of the quality malls and that's the only thing that we'll be interested in at this point in time.

David Harris - Lehman Brothers

Okay. Thank you.

John Bucksbaum - Chairman and Chief Executive Officer

Thanks David.

Operator

That concludes the question-and-answer session. I'll turn the call back over to our speakers for any additional or closing remarks.

John Bucksbaum - Chairman and Chief Executive Officer

I appreciate all of you joining us this morning and if you need any follow up, you can talk with Tim. Thanks for joining us and we will see you soon.

Operator

One again, thank you all very much for joining us. That does conclude the presentation. Have a great afternoon.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: General Growth Properties, Inc. Q4 2007 Earnings Call Transcript
This Transcript
All Transcripts