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Good morning, and welcome to the CBL Properties' Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Scott Brittain with Corporate Communications. Please go ahead.

Thank you, and good morning. We appreciate your participating in the CBL Properties conference call to discuss fourth quarter results. Presenting on today's call are Stephen Lebovitz, President and CEO; Farzana Khaleel, Executive Vice President and CFO; and Katie Reinsmidt, Executive Vice President and CIO. This conference contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risk and uncertainties. Future events and actual results, financial and otherwise, may differ materially. We direct you to the company's various filings with the SEC for a detailed discussion of these risks. A reconciliation of non-GAAP financial measures to comparable GAAP financial measures was included in yesterday's earnings release and supplemental that will be furnished on Form 8-K and that are available in the Invest section of the website at cblproperties.com. We will be limiting this call to one hour. [Operator Instructions]. I will now turn the call over to Mr. Lebovitz for his remarks. Please go ahead, sir.

Thank you, Scott, and good morning, everyone. As you saw from our earnings release yesterday, 2017 was a tough year for CBL. Results were in line with guidance issued in November with adjusted FFO per share at $2.08, and same center NOI declining 2.9% for the year. 2017 was an especially challenging year for many of our retailers with more than a dozen in our portfolio filing for bankruptcy. The related store closure and rent reduction activity translated into more than $24 million in gross annual rent loss impacting our portfolio. The majority of the store closings occurred in the second half of the year. We are in the early stages of backfilling these spaces and as we make leasing progress, the majority of the new rental come online in late 2018 and 2019. Our leasing strategies throughout the year were concentrated on mitigating rent loss and maintaining occupancy. New leasing efforts targeted a diversification of our tenant base towards nonapparel users as well as renewing and expanding with successful retail concepts. As a result of these strategies, 75% of our total new leasing in 2017 was executed with nonapparel tenants. We are adding a wider range of uses to our centers, more restaurants, more boutique and value retailers, more health, wellness and fitness, and more entertainment. Recently, we signed new leases with stores such as BoxLunch, Altar'd State, Attic Salt, Panera Bread, Metro Diner, O2 Fitness, Planet Fitness, Spring Pilates, Round1, Dave & Busters, Whirlyball and Marcus Theatres. These new users will enhance the experience at our centers, providing unique and differentiated reasons to visit the properties more often. We are also working to add hotel, medical office, multifamily and other users to our centers and are in active discussions for six potential hotels and two potential multifamily projects as part of our redevelopment efforts. We made significant progress on many of our other key corporate initiatives in 2017. The major disposition program we launched in 2014 was concluded last year. Through this program, we executed transactions on 20 malls and also several non-mall properties representing over $1.2 billion in value. The dispositions have weighed on our near-term results due to approximately $0.28 per share of FFO dilution on an annualized basis. However, these transactions contributed to debt reduction of more than $760 million since year-end 2013, and improved debt-to-EBITDA from 7.2x to 6.7x. In the past year, we lowered total debt by over $200 million, extended our maturity schedule with the refinancing of two unsecured term loans and lowered variable interest rate exposure with $225 million raised through an unsecured bond offering. This flexibility in our balance sheet as well as the significant free cash flow we continue to generate will be the primary funding source for our redevelopment pipeline, generating new EBITDA on a substantially leveraged neutral basis. We'll also continue to selectively dispose of assets where we see opportunity which will supplement our cash resources. As we look forward, we are focused on stabilizing income in 2018 and position the portfolio to grow in 2019 and beyond. 2019 the revenues will benefit from the releasing completed throughout this year as well as contributions from the redevelopment of JCPenney at Eastland, the Sear's Auto redevelopment, Evolution in Northgate, the JCPenney redevelopment at York Galleria and other projects that we expect to begin shortly that will open this year or in early 2019. We are disappointed to issue guidance for the year indicating declines in NOI and FFO. We are doing everything in our power to improve on these expectations and stabilize revenues in 2018. Our intent is to set conservative yet realistic targets and to be transparent about our assumptions. Several retailers have recently imported - reported improvement in sales and traffic, and the overall retail environment is more positive at this time compared to last year. However, several of our tenants are still adjusting their strategies and have too much debt on their balance sheet to actual costs that are not sustainable. We expect ongoing pressure this year as some closed stores right size rents or choose to reorganize. While this impacts rents in the near term, these changes allow us to reinvent our properties within the uses I described earlier. We are also accomplishing this through diversifying our new leasing as well as through our redevelopment program. We are excited about the success we are seeing in this area, and we are focused on accelerating the pace. These projects will be truly transformative and will position our properties for long-term success by diversifying our income stream, and meeting changing consumer preferences. We are confident that the strategies and initiatives we are executing will put CBL on track for growth going forward. I will now turn the call over to Katie to discuss our operating results and investment activity.

Thank you, Stephen. As expected, the retailer challenges that Stephen discussed weighed on our occupancy metrics. Portfolio occupancy at quarter end was 93.2%, down 160 basis points compared with the prior year. Same-center mall occupancy declined 190 basis points from the prior year and increased 50 basis points sequentially. Bankruptcy-related store closures impacted mall occupancy by 230 basis points or 433,000 square feet for the fourth quarter. These closures included 23 Gymboree and Crazy eight stores that were closed in October in conjunction with our bankruptcy reorganization. During the quarter, we executed over 930,000 square feet of leases in total. On a comparable same space basis, we signed roughly 500,000 square feet of new and renewal mall shop leases at an average gross rent decline of 10%. Spreads on new leases for stabilized malls were relatively flat and renewal leases were fined at an average of 11% lower than the expiring rent. Renewal leasing activity during the quarter was negatively impacted by 20 renewal leases fined with Ascena brands and six Eddie Bauer renewals. These 26 leases represented 430 basis points of the decline in renewals and 350 basis points in the overall decline. For the year, we executed over 3.8 million square feet of new and renewal leasing in the portfolio. On a comparable basis, we signed to nearly 2.1 million square feet of new and renewal leasing at an average decline in gross rents of 5.3%. Spreads on new leases were up 9% and renewal leasing was down 8.7%. As we stated last quarter, we expected renewal spreads to - we expect renewal spreads to remain negative for the next several quarters as we work through maturing leases with certain struggling retailers as well as retailers in bankruptcy reorganization where we are negotiating occupancy cost reductions instead of allowing stores to close. This expectation is incorporated on our guidance and outlined in the same center NOI bridge in the earnings release. Sales for the holiday season were flat, excluding the impact of one center where Apple closed. On a rolling 12 month basis, stabilized sales for the portfolio were $372 per square foot compared with $379 on a same center basis in the prior year. We are encouraged by the positive holiday sales reports from a number of retailers. This year, we again chose to close our properties on Thanksgiving to allow employees to enjoy the holidays with their families and emphasize the Black Friday tradition. This is very well-received by employees, retailers and shoppers. We've promoted Black Friday through doorbusters, special giveaways and D-days, which created a fun experience at our centers and generated stronger traffic throughout the day and carried through the weekends. With the more positive holiday sales season, we are optimistic that sales will continue to improve throughout the year. This should allow for a more constructive dialogue with retailers. We have a lot of activity to report on redevelopment projects with several commencing construction. At Eastland Mall in Bloomington, Illinois, we are replacing the former JCPenney location with H&M and Planet Fitness as well an Outback Steakhouse. Construction has commenced as an opening plan for later this year. We are also under construction to open a new Marshalls at York Galleria in York, Pennsylvania. The 2,100 square foot store replaces a portion of the former JCPenney location and will join the recently opened H&M and Gold's Gym. We exercised our right to terminate this year's lease at Brookfield Square in Milwaukee, Wisconsin, which is one of the stores we purchased last year through a sale leaseback and was included in the store closure list Sears released earlier this year. The projects will include a dine-in theater, entertainment centers, several restaurants and other attractions. We will announce more project details within the next few months with construction commencing in the spring. We will start construction shortly on two Sears Auto Centers we acquired last January. At Volusia Mall in Daytona Beach, we'll add Bonefish Grill, Casual Pint and Metro Diner. And here in Chattanooga at Northgate Mall, we'll welcome two new dining options with Aubrey's and Panda Express. Construction is expected to start next month with opening scheduled for later this year. We will have additional announcements to make another redevelopment projects over the coming months as leases are executed and plans finalized. As Stephen discussed, we are continuing to focus on nonretail uses. We have leases negotiated, letters of intent are in active discussions with new to the market restaurants, entertainment operators, hotels, apartments, self-storage facilities and are also exploring the potential to add medical office at a number of centers. I will now turn the call over to Farzana to discuss our financial results.

Thank you, Katie. Fourth quarter 2017 adjusted FFO per share was $0.56, representing a decline of $0.12 per share compared with $0.68 per share for the fourth quarter of 2016. Major variances included $0.03 per share dilution from asset sales, $0.04 per share from lower gains on outparcel sales and $0.06 per share from lower property NOI, offset by $0.02 per share improvement in G&A expense primarily due to lower executive bonuses. Fourth quarter same center NOI declined 6.7% or $12.5 million, with revenues down $10.8 million and expenses increasing $1.7 million. The decline in revenues was primarily a result of lower occupancy and rent reductions related to tenants in bankruptcy and a decline in percentage rent of $2.2 million. Property operating expense increased $1.4 million, which included a $0.4 million increase in bad debt expense. Real estate tax expense was higher by $8 million - $0.8 million, partially offset by a $0.5 million decline in maintenance and repair expense. For the full year, FFO per share, as adjusted, was $2.08 or $0.33 per share lower than 2016. The decline in FFO was largely driven by $0.15 per share of dilution from asset sales, $0.09 per share lower total property NOI, $0.05 per share higher interest expense and $0.02 lower gains on outparcel sales. Same center NOI declined 2.9% or $20.1 million during 2017, with the decline primarily in revenue. The majority of the store closures and rent reductions occurred in mid to late 2017, which means 2018 will be impacted by the full annual rent loss with the majority of the new leasing taking effect in late 2018 and 2019. We took a conservative approach to setting 2018 guidance for the year. Our 2018 guidance is a range of $1.70 to $1.80 per share, which assumes a same center NOI decline of negative 6.75% to negative 5.25%. As outlined, within our same center NOI and FFO guidance, we are incorporating a full year impact of 2017 bankruptcies, rent adjustments and store closures as well as budgeted new leasing activity. The details of the impact and contributions from these areas are included in the breakdown of same center NOI guidance in the earnings release. In addition, as noted, we have provided for top line reserve to take into consideration the impact of the future unbudgeted bankruptcies, store closures or rent reduction. This $10 million to $20 million range was derived based on an internal analysis of retailers on our watchlist. It is difficult to predict the impact of future bankruptcy activity, and we believe it is prudent to provide full reserve on the front end that contemplates a range of outcomes. This reserve is included in the same center NOI and FFO guidance ranges. While we recognize that our guidance number is well below this tree, we believe that incorporating conservative assumptions and outlining these in a transparent manner will help the market better understand our expectations for 2018. We may tremendous improvements to our balance sheet in 2017. We retired a number of loans secured by high-quality properties reducing overall interest expense and adding the assets to our encumbered pool. We accessed the public debt market, generating approximately $225 million in additional liquidity, and also completed the extension and modification of two major term loans. At year-end 2017, we had a total pro rata debt of $4.7 billion, a reduction of more than $200 million from year-end 2016. The decline was a result of asset sales and the conveyance of three properties partially offset by borrowing to acquire anchors of future redevelopment and increases in construction loans. We had an approximately $94 million outstanding on our lines of credit at year-end. In January 2018, we utilized $37 million of availability to retire the loan secured by Kirkwood Mall in Bismarck, North Dakota, adding the property to our pool of unencumbered assets. This property is performing well and carried a debt yield in the mid-20% range. We added the quarter with net debt - we ended the quarter with net debt-to-EBITDA of 6.76x compared with 6.50x in 2016. The increase was primarily due to lower total property level NOI. We anticipate improvements in the metrics in 2019 as we complete lease up throughout the year and redevelopment projects currently underway begin contributing to NOI. As mentioned in our earnings release, we were unable to reach an agreement with the special servicer to modify and extend the loan secured by Acadiana Mall in Lafayette, Louisiana. As a result, the property is in receivership. We anticipate the foreclosure process to be completed later this year. We have three loans secured by consolidate properties maturing in 2018. The $27 million loan secured by Hickory Point has an extension option that we intend to exercise, pushing the maturity to December 2019. We anticipate refinancing the $10.8 million loan secured by community center Statesboro Crossing, and the $6.6 million loan secured by the second phase of Outlet Center in El Paso. We also plan to exercise one year extension option for two unconsolidated secured loans totaling $58 million at our share, extending the maturity to 2019. We're in the process of refinancing a $49 million loan at our share secured by an unconsolidated property, CoolSprings Galleria in Nashville. We plan to exercise one year extension of - we plan to exercise the one year option to extend the maturity of our $350 million unsecured term loan to October 2019. Finally, we will utilize availability on our lines of credit to the address of the $190 million term loan paid down mid-year. As Stephen mentioned, the focus on improving our balance sheet over the last several years has CBL in a strong financial position to withstand the short term EBITDA decline as we reposition our properties. We have our 2018 maturities well in hand and have reduced our line borrowings to provide maximum financial flexibility. I'll now turn the call over to Stephen for concluding remarks.

Later this year, CBL will celebrate its 25th year as a public company and 40th year since its formation in 1978. Over four decades, our dominant properties have demonstrated a resilience and dynamism that is indicative of well-located real estate positioned to thrive over the long term. Our team has also always shown and unparalleled passion and dedication to the business and to CBL. While this industry is experiencing an evolution that has resulted in painful short-term setbacks, these challenges have only served to fuel our drive to reinvent our properties and our company for the better. We will now take your questions.

[Operator Instructions]. Our first question comes from Rich Hill with Morgan Stanley.

From my perspective, I think a lot of us would maybe feel a lot more comfortable if the debt load was lower than where it is today. So I guess, my question is what's stopping you from going back to maybe even the CMBS market and saying, "Hey, look guys, we need to modify these loans and maybe reduced our debt loads." I know that's easier said than done, but I'm curious if that's something that you'd consider and how you're thinking about that going forward?

Richard, so to answer your question, as the loans are maturing and as the loan, if they are CMBS loans or otherwise, to the extent, we are able to negotiate with them on a restructure, we are definitely pursuing those. However, a lender, a CMBS lender will not have negotiations with you or with the borrower unless the loan is in default or the loan is in imminent default. So there's a lot of rules to follow under the CMBS guidelines that these servicers will not engage with you, so long as these loans are performing. So we have performing loans. So unless it's not performing, unless it's - the maturity has come due, like Acadiana Mall, we just - they will not entertain it. So it's not that we haven't considered it, but it's something that - it's under the REMIC rules, they just don't engage with you.

Got it. Okay. That's somewhat helpful. And Katie, maybe just a little bit of clarity from you about the reclassification of the malls from Tier 1, Tier 2, Tier 3, and a couple moved up. I know there's one in particular that went from Tier 2 to Tier 3, but you also highlighted in your press release, that's going through a modification - or not modification, excuse me, a redevelopment right now. How are you thinking about those reclassifications? And are we supposed to read anything into it?

No. I mean, I think our overall sales performance for the year was down about 1.8%. So most of those malls that made tier changes were really kind of on the border of those tiers to start with. Brookfield, I think, is the one you're referencing that we have a redevelopment occurring at. And the redevelopment is pretty exciting there and I think it's going to be very transformative. So I think the sales are a misleading indicator of how successful that property will be over the long term. And I think that's probably going to be the case in a couple of other instances as well where we have some new exciting things, entertainment and different uses that are coming in that will bring traffic and new income and liveliness to the properties where sales performance are not going to be the number one metric to measure successful - how successful they are. So yes, I don't think there's anything to read into there. It was really just the sales decline's kind of tripped and over edge.

Got it. And just one more question. Just going back to Acadiana Mall for a second. I'm just trying to sort of get in the mind of the lender here as to maybe why the modification didn't go through. I can see it from two perspectives. The first perspective being the lender thought the property was actually somewhat valuable and therefore, was much more comfortable taking an REO, but I am a little bit surprised that they weren't able to come to the table and talk about the modification or a discount pay off or maybe some other a resolution strategy. So I'm not sure how much more color you can provide on that, but I'm just a little bit surprised that it turned out the way it did given your prior commentary about being a good property.

Sure. This particular property is one of the last property that's left in their REMIC pool and they wanted to wind down their REMIC pool. So what they - we wanted a longer-term solution and they wanted a short-term solution. And they were asking for investments on our - from us on a short-term basis, which did not make any sense to us. And we were not going to invest our funds or our efforts into this mall to revitalize this mall on a short-term basis. It just doesn't happen overnight. And that's what's the disconnect between the lender and us, they wanted a short-term deal and we wanted a long-term deal.

Our next question is from Christy McElroy with Citi.

Just as you think about the redevelopment into these nonretail other uses, you mentioned hotels, multifamilies, self-storage, potentially. Just combining that with the retail pipeline, what are you projecting? How should we be thinking about annual suspending commitments on development and redevelopment projects over the next 1 to 3 years? And are you doing these nonretail projects in JVs? Or are you selling the rights to third parties?

Christy, I guess, the short answer is all of the above. Primarily, JVs, if it's not something that's in our primary expertise like a multifamily or a storage project or hotels. We're also doing ground leases or pad sales in a lot of cases with the restaurants. So I mean, we're very focused on the capital allocation, managing that, keeping it as - giving the right returns and keeping it at a level that is something we can digest. So these redevelopments are - they're really important to the property, but we have a lot of flexibility as to how we structure especially when we bring in the mix uses.

So do you have a sense, at this point, for a sort of dollars committed or do you expect to spend as we think about the time line of sources and uses over the next couple of years?

Yes. I mean, this year, we're looking at kind of in the $55 million to $70 million, $75 million range. Historically, it's been closer to $100 million, but we're looking at how we can manage that as best we can.

Okay. And then just looking ahead to the $190 million of debt coming off of the term loan in the summer. I know, Farzana, you mentioned that you expect to pay that debt with the line of credit. Does your guidance range assume any permanent funding of that in 2018? Or what are your plans sort of beyond that for replenishing the line?

Yes. Christy. Well, we are looking at some secured loans that we will be getting the refinancing on, especially like CoolSprings Galleria, that's - we had the market on that so there will be some excess funding from that. And we will opportunistically look at a bond issuance, not today, of course, it'll be in the future. So we have the levers, and then we do have substantial availabilities still on our lines of credit. So we'll use some of those funds to pay down, for example, we have $190 million that we will pay down on our term loan. So - and then of course, we also have some sales that we are projecting, not anything that we can tell you about today, but that's also in the cards.

Our next question is from Craig Schmidt with Bank of America.

Great. I'm wondering why we're having year-over-year lower outparcel sales? Is it just that you've burned through the reserve of them, or is something else happening?

No. It's really just a - I mean, it fluctuates year after year, and a lot of it is driven by the redevelopments and the pipeline of that. And also, when we're doing more new developments, we're generating more outparcels that we would sell so that's also a driver behind that. And we're also doing ground leases, which - on the outparcels, which don't show up in the sales but is another way to monetize those. So it's really nothing other than just what we're looking at for this year and then we'll continue to give the projections on an annual basis as that evolves.

Great. And then what is your expectations from free cash flow in 2018 given the outline that you provided?

Sure, Craig. We still believe we have close to $200 million in free cash flow in 2018, and we'll be using that free cash flow to fund our redevelopments and CapEx and those types of things.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

First, just a question on the $10 million to $20 million reserve. You mentioned that includes future unbudgeted bankruptcy activity, does that incorporate your Bon-Ton exposure? Or is Bon-Ton outside of the reserve and part of your 2018 operating budget since they've already filed?

So the Bon-Ton, we know so far that they're closing two stores, and we also have a couple other discussions going on with them about some other stores where the rents are higher and need to be adjusted. So we incorporate what we know, but we also don't know how Bon-Ton is going to play out over the next few months. And so depending on how they play out, there could be a further impact. And that's - really, the purpose of the reserve, in general, is just - we know today, but there's a lot we don't know and when to provide for that. And as the year unwinds, we will continue to update that as far as what we draw down and what we have remaining.

Okay, that's helpful. Can you just walk through or remind us what your current Bon-Ton exposure is in terms of the store count? What's leased versus what's owned? And maybe what that exposure is as a percent of base rents?

Sure. So we had 16 Bon-Ton before they filed, 10 lease, six owned. Of the 16, two, they've said they're closing; one is at Stroud Mall where we actually have a lease offer signature for a replacement use. And then a second one is a mall that we actually own in joint venture with Cafaro, they own Kentucky Oaks Mall. So that will bring us down to 14. Our total rent pre-bankruptcy was around $7 million.

Okay. And then as you transform some of the malls in your portfolio and lease more space to non-apparel retailers, I was curious if you can comment how traffic's trending? Do you have evidence that you can share around traffic and as sort of those new uses come in and merchandising improves?

So we did put traffic counters in a couple of malls last year, we're just getting the results from that and that's really helpful. It's a little early to show trends. And also, where we have Wi-Fi, that gives us a good indication of how traffic circulates throughout the center. And what we're saying is that these nonapparel uses are still driving a lot of traffic, whether it's service or fitness, and the value type retailers are bringing in a lot of traffic as well. Our restaurant business is up and restaurants are a great indicator of traffic. So - and we feel like traffic was definitely up over the holidays. Like we said, sales improved this holiday over last year. So far, this year, the indication of traffic are good. And we feel relatively positive about how we are this year compared to last year in the trends that we're seeing.

Our next question is from Caitlin Burrows with Goldman Sachs.

So I guess, I was just wondering with the same-store results we saw in 2017 and the guidance allowing for further decline in '18, what do you think is the realistic outlook for stabilizing the same-store portfolio in 2019? I know you mentioned that, kind of as a goal, in the earnings release, just as you think about leasing progress and leasing spreads going forward? Or is it really too soon to know much beyond the outlook for this year?

I mean, like I said, we're encouraged and we're positive, but it's just too soon, and I think the results are going to speak for themselves as the year unfolds. And we've been conservative with our guidance and with the reserves, and we don't want to have another year like '17, where we're having to change our numbers midstream. So that was really important for us this year to avoid that. And I think when you look at the retailers that are filed, you look at our watchlist, we feel like we've hit bottom, and we're going to start to recover as we lease up those spaces. Like I said, we changed our strategy. We've actually restructured our leasing, teamed as it took focus on generating new leasing, generating new types of retailers, focusing more on regionals and locals as a way to backfill because the nationals aren't doing as many deals as they were in the past and the uses are different. So we've taken a lot of steps to move forward. And like I said in our remarks, stabilizing our results this year is goal number one, and that's what we're focused on but there's also some things that we don't control in terms of retailers. And so we're being mindful of that with our conservative guidance.

Okay. And then I don't think it's been talked about, just regarding the dividends. I know last quarter, you guys talked about resetting that. Just as 4Q results came in weaker than expected than the 2018 outlook the way it is, I guess, how does the $0.80 for the year that's expected compare to what you're required to pay as a REIT? And how confident are you now versus, say, three months ago that, that's still the right level?

So actually, fourth quarter results came in at the bottom end of the range, but they came in within the range from our point of view that we provided. So we took the step with the dividend at the end of the third quarter, anticipating where we were going to be this year. We firmed up our numbers and our budgets throughout the last few months and our dividend at the midpoint of our guidance is 45% payout ratio. Like Farzana said, we've got $190 million of free cash flow, so we're confident with the level that we reset, that it's the right level.

Our next question is from Nick Yulico with UBS.

First, a question on potential CapEx funding you have over the next several years in relation to the 16 Sears and Bon-Ton boxes, I think you own about half of those. How should we think about the cost to redevelop the boxes and if you got them back? And how would you plan to fund that relative to your $100 million of free cash flow annually? It just seems like you have a lot of potential funding as you get those boxes back.

Yes. So I'd say that there's a couple of ways to look at it, Nick. We've been doing this on a measured basis, three- to four-year that the capital spending has been in that $10 million to $20 million range. We've managed it. And that's sustainable on a going basis with the $100 million after CapEx and tender allowances that you talk about. So that's kind of one scenario. If something happened more significant with those companies that ended up with a lot more stores for us to work with, then we would adjust the strategy. And we would manage the spend. Like I said earlier, we can do joint ventures, we can do pad sales, we can do ground leases. So there's different ways that we can work with whoever we're dealing with in terms of the users to try to manage the spend and to make it work. And the challenge is, like, there's a big - with Sears, it's a big overhang. And no one knows the timing. And so on the one hand, it wouldn't be the worst thing just to get that overhang behind us and move on. And you're right, there is, within Sears, we've got 16 leases with Bon-Ton, like I said, we've got eight left. So we've got the between those two, about 25 different stores that we work with, and we would go ahead and work on backfills and manage the capital and do it within the resources that we have.

Okay. And then just last question is on your debt covenants. Can I get an update on where you're at on the debt to total asset value test for the unsecured credit line and the term loans and then the unsecured notes? Because - and then I guess, secondly, how should we think about the wiggle room you have there? Since I believe the way the calculation works is that, if your EBITDA gets down, which it looks like it's going down relative to your guidance this year, that would actually mean the asset value is going down. And hence, perhaps the debt to total asset value percentage is going up, unless - it wasn't clear if you're actually planning to deleverage this year.

Sure. I mean, I still think we have plenty of cushion. I mean, I don't think it has deteriorated that much. If you look at our bond covenants, we have - our secured debt has gone down, which is exactly what they wanted, it's at 23%. Our total debt to total asset is at 52%. We still have plenty of room. The lines of credit, similarly, we have plenty of room. So I don't - when we do add - when we pay off a loan and added to the unencumbered pool, it gives us more capacity. So I don't necessarily think that we have any concern that we are hitting any of these metrics, the top end of the metrics.

And sorry, just to be clear, though. I mean, is your overall debt level coming down this year? So for that ratio, would that number come down?

Yes. Our debt level has come down. We're at $4.7 billion. A year ago, we were at $4.9 billion. So yes.

But I mean, just a plan for 2018 is that the debt number comes down?

For 2018, the debt number will come down by the fact that we'll give back Acadiana Malls, that's $125 million. And amortization brings the debt level down. So it does come down, yes. And it will continue to go down, particularly with the amortization. We have all $50 million in amortization each year.

Our next question comes from Michael Mueller with JPMorgan.

Sticking with the dividend for a second, I'm curious, has there been any discussions to do what you did seven, eight years ago, and move to a stock dividend? And then when you take all the capital to fund your redevelopments, do even bigger debt paydowns? Just curious if that's come up at all.

Yes, we talk about our options on the dividend. I think that there's got to be still a pretty significant cash component to that. And issuing the shares is not something, right now, that I would say is high on our probability. Like I said, we've got $190 million of free cash flow. We've cut the dividend to maintain the cash flow. We're still at a conservative payout ratio, and we've got other resources, like Farzana said, that will help us to address the maturities coming up.

Got it. Okay. And then I guess, thinking about what you're expecting in terms of the reserve and just the 2018 incremental headwinds, do you think by the time you get to 2019, the NOI growth will be flat again or in the positive? Or do you think, what you're looking at, with the crystal ball here you showed today, is going to point you to another comp in 2019?

I mean, look, I'd love to say that but right now, we're just at the beginning of 2018. So we'll see how things go. We're certainly - when you put it on our list of goals and priorities, that's where we're planning to go. But we're going to have to wait and see. And like we said earlier, most of the stores that vacated with the bankruptcies occurred in the latter part of last year. So right now, we're starting to get progress on the lease up of that. So that'll kick in as we get more through this year, that'll help in '19. The redevelopments will help because we'll have the income from that. So we've got more tailwind as we head into '19. But on the other hand, we're a little scarred from last year, so we want to be conservative and cautious as we provide guidance at this time.

Our next question comes from Linda Tsai with Barclays.

In terms of your comment that there are more store closures in the second half of '17, as you continue to work through releasing these spaces in '18, which quarter would you expect to be the trough point from an SS NOI perspective? Or maybe the one where you'd see the highest pressure from an occupancy standpoint?

Well, first quarter's always the lowest from an occupancy point of view, and then we build back from that. So I mean, I think we'll - it's a little too early to say and most of the stores will be opening in third and fourth quarter. So in general, those are the trends that we see.

So from an SS NOI perspective, too, like, first quarter might be the bigger dip?

I mean, we don't really give guidance by quarter. So I'm kind of hesitant to answer that. I don't know. Do you...?

Yes. I mean, we have the reserve out there for a reason, and it's to incorporate a lot of the unknowns. There's some things that are on our watchlist that may occur. Still, a lot of it is really dependent on some of those activities. So we'd be hesitant to give you quarterly guidance because right now, we'd just be guessing, and it will really need to unfold as the year unfolds.

Okay. And then given the negative releasing spreads that will persist in '18, which retailers do you see as going through a rough period that you'll ultimately see as sustainable? Maybe like in Ascena where you've provided some rent concession?

I mean, I don't want to call out specific retailers, but it's pretty well-publicized about companies like that, that are going through a transition. I will say, you look at our top 25 in our supplemental and for the most part, they're solid, they're stable, a company like L Brands had some sales decreases last year, but they just came out with a really strong trend for January, and they - a lot of what they did was self-inflicted, but it's a short term paying for long-term gain. And then you just look through other companies, whether it's Foot Locker, Signet and American Eagle, Dick's, companies like that, that are our largest retailers are strong, stable companies that have viable plans going forward. And so I think when we look at that, we feel good about where we're positioned. And then with diversifying the leasing and bringing the new uses, that reduces our exposure to some of the categories that have had challenges.

Last one. What was the temporary occupancy that you're in?

Linda, we usually don't report that separately, but it's been pretty consistent over the years. There's wasn't a big increase or decrease in temporary occupancy.

Our next question is from Tayo Okusanya from Jefferies.

Just two questions for me. The first one is, again, I understand what - given all the tenants that are in transition, the negative impact that's having on your having numbers. But if I just kind of think about the rest of your tenant base, as you mentioned, the stable tenants, what's going on with them at these point? I mean, are they also - are you also having to give concessions to them? Are you seeing pressure on rents when the leases are expiring? I'm just trying to understand what's going on with your core tenant base that's meant to be stable.

I mean, there's always a negotiation dynamic with retailers, that's been the case forever. And there's - we look at a lot of factors when we get into a renewal, and so it differs by a different retailer. And I can't get specific because I just shouldn't do that in the context of this call. But I will say that the majority of the pressure on releasing spreads came from the retailers that have filed bankruptcy or were restructuring. And those are the ones primarily where we have negotiations, and like I said, we prioritize occupancy and maintaining NOI. Typically, we'll do short-term renewals in those situations to give us the flexibility to replace them and bring in other uses. But that really is - it's not the stable retailers that's driving the pressure on releasing spreads, it's more the bankruptcies and the retailers that were under restructuring.

Okay, that's helpful. And then the second one, just I hate to harp on the reserve. But as part of that reserve, I'm just kind of thinking through Bon-Ton and again, we're hearing that they may, rather than just reorganize - if they end up in a world where they have to liquidate, does that change how you kind of think about that reserve? Or is that all kind of built into that reserve number? And does that also change how you think about dollars you may need to redevelop space associated with Bon-Ton?

So I mean, that's why we put the reserve out there is in the event that something like that happens. And like I said, it's $7 million of total rent that we receive from them prior to bankruptcy. And then when you factor in the stores that are closing, that brings that down so much - I mean, not so much, somewhat. So - but that's the kind of thing that could happen. And I know that they are doing everything in their power to restructure, and they have a strategy going forward. But on the other hand, it's just not something we control, and that's exactly why we put the reserve in place.

Got you. And unless you're me, you're kind of thinking about that more broadly, not just with Bon-Ton but any 2007 reorgs that could potentially become liquidations in 2018?

Yes, I mean, for the most part, all the bankruptcies in 2017 have already gone through and either come out or gone into liquidation, if that was going to happen. So I think most of that is behind us. Other than Bon-Ton, I think we've had one other significant bankruptcy this year, A'GACI, where they're still in the process of restructuring but they've had good progress, and we've worked with them on some stores. They closed one of the five that we have. But other than that, that's the bankruptcy activity so far this year.

Our next question comes from Carol Kemple with Hilliard Lyons.

My question's on the dividend. When you, all in the board, have talked about it and said in October, was the our outlook for '18 the same as it is now? Or are you feeling a little more pessimistic about '18? I guess, I'm trying to figure, if things got bad with where guidance is, could you all cut the dividend?

So we anticipated where we're going to be on '18 when we did cut the dividend, that's why we cut the dividend because we had a good sense of where we were going in terms of NOI and FFO for the year. So like I said, we're at a 45% payout ratio on the midpoint of our guidance on FFO. We've got $190 million of cash flow. We've preserved our free cash flow by cutting the dividend, and we're comfortable and in a similar mindset as we were at the end of the third quarter.

Okay. And then just with your conversations with other department stores, how do you feel about your JCPenney and Sears exposure? And how do they feel like when you talk about - talk with them about leasing?

I mean, JCPenney has been a real positive story. They had a really strong holiday. Their sales were up, their focus is on improving their stores, support has been a very successful for them. They have other initiatives in terms of adding categories to their stores that have worked really well, appliances and improving their home and all types of areas like that. So we feel JCPenney is on track, and we feel really good about the future with them. And Sears, I think we all read the same thing, and we pretty much know what they're putting out there publicly and they've done a lot to keep things going and they're working in a very challenging environment. And we've got - we go through our stores, we look at what we would do if we got them back, and we're constantly updating our strategies. But in the meantime, they're continuing to operate and continuing to go forward, and so that's the way we're looking at it for now.

And then as far as share buybacks, I know in the past, you all have decided you wanted to use your capital on other spaces like redevelopments. Is there a price where it just gets too attractive to ignore that possibility? Or is it just not going to be a possibility with the redevelopment pipeline no matter where the stock goes?

I mean, you can never say never. So I don't want to say that, but like we said in the past, our priority is retaining our cash, investing in the company and when we cut the dividend, it will get us that capital to reduce debt, and our balance sheet's really important to us and managing our leverage and also having the source to invest in the properties and keep them successful. And so those are really the top priorities at this time. One other thing, just to get back to your other question about department stores, we have a lot of stores at Dillard's, a lot of stores with Belk, Macy's had a good holiday. So a lot of the narrative last year about department stores going away has really subsided. And like I said, JCPenney's done better. So I mean, department stores are an important aspect of our mix. And so we were really pleased to see the improvements that happened in the tail end of 2017 in that sector.

Our next question comes from Floris van Dijkum with Boenning.

Stephen, based on the reaction to the results today and some of the other questions regarding guidance and maybe bigger question regarding strategy, I know you're very low to put out anything out there about '19 numbers at this stage, but maybe can you talk to or give more color as to what percentage of your properties are - actually saw, experienced growing NOI in '17? And maybe what you think long term, not maybe this transition period that were going through for your portfolio in '18 and '19, but what's the amount of NOI that's sustainable in the business?

Well, I will give you credit, that's a tough question. And I can't say that we're 100% prepared to answer in that type of granular detail, Floris. But I'll just say, you look at where we are now, what our guidance is for the year. We try to be, like we said, conservative, realistic and transparent. And those are the things that we can do at this point, and it's just early in the year. And I can say all the things I want but the results are going to speak for themselves as the year unfolds, and we're going to know more as the retail environment unfolds. And so far this year, we haven't seen the level of bankruptcies, we don't - our watchlist is a lot less than it was a year ago in terms of retailers that are on the brink, doesn't mean we don't have other people on the watchlist. But we can't give any firm guidance for '19 at this time. And also, when you look at our properties, I mean, we've got so many levers at each property, and it's not just permanent leasing, it's specialty leasing, it's business development, which is the common area income that we bring in. We look hard at expenses. So I mean, our goal and our priority is stabilizing our income at the level that we're at, and then growing back from there. So we're certainly not happy or satisfied at any type of negative NOI. And we're going to do everything in our power, like I said, to build that backup, and that's just where we are.

Right. And I understand, it's not an easy question, but I guess, maybe if you - one other way to think about that is if you can talk about - because presumably, not all your properties are equal. And you have - I think, as we've written in the past as well, you had a number of your more valuable assets that are more highly rated, we call them A properties and - or the high B+ assets. As a - presumably, those assets might see stable NOI or maybe even marginally growing NOI whereas the bottom third is probably deteriorating more rapidly. And maybe if you can give more color around that, that might also get investors maybe more comfortable that the fact that it's not - everything is equal and that you have a larger drag in your bottom third or half of your portfolio.

At this time, we have time for one more question. Our last question for tonight will be from Haendel St. Juste with Mizuho.

So Steve, my question for you. A number of your peers have gone through asset disposition programs, have subsequently announced a series of cost cutting or rightsizing measures at the asset and corporate level. Can you remind us, I guess, how close do you study that and perhaps how much of an opportunity you have on that front?

So I mean, we've gone through dispositions like we said. And at the same time, over the past couple of years, we've right sized our staff based on the size and it's an ongoing thing. We don't look at it as a one-time thing. I can tell you we run very lean. We always have. And today, that's where we are. We've looked at opportunities a little more than a year ago. We had a regional layer that we didn't need because we weren't doing as many acquisitions. And so we reassigned people and also right-sized there. But today, where we're at, we're - we don't see, really, any opportunities along those lines.

Okay. And I think, Farzana, you mentioned potential asset sales you're considering. And I'm understanding you're not ready to set specifics. Just curious what the focus of these potential asset sales could be if it was focused more on your mall or perhaps if you're also looking at filling some shopping centers or potentially some outlets? And then maybe any color you could give us on perhaps the level of interest or the market?

Okay. So beyond the asset sales, we are obviously very opportunistic, and that's really the strategy we are pursuing. If we see a great opportunity to sell at a great cap rate, then we will be open to it. So that's what I mentioned.

Okay. And then one last one, I guess. What assumption for tenant retention do you have built into your guidance? I think, historically, 85% has been the level. Is that what's built in the guidance? And if so, is it too high? Have you considered lowering it a bit? Just curious on that.

So we don't do a top line tenant retention assumptions. So we don't just view 85% across the portfolio for renewals. It's really about lease-by-lease analysis. So I think the overall retention will probably be lower this year, just given the amount of bankruptcies and the business interruption that goes in there. But I don't have the average off the top of my head, but it is lease-by-lease.

This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Lebovitz for any closing remarks.

Thank you, everyone. We appreciate your time today. And like we said, we're available to answer any questions that you have. Have a good day.