Katie Reinsmidt – SVP, Investor Relations and Corporate Investments Stephen Lebovitz – President and Chief Executive Officer Farzana Mitchell – Executive Vice President and Chief Financial Officer.

Todd Thomas – KeyBanc Capital Markets Craig Smith – Bank of America/Merrill Lynch Jeremy Metz – UBS D. J. Busch – Green Street Advisors Rich Moore – RBC Capital Markets Lina Rudashevski – JPMorgan Carol Kemple – Hilliard Lyons Jeffrey Donnelly – Wells Fargo.

Ladies and gentlemen thank you for standing by. Welcome to the CBL & Associates Properties Inc. Third Quarter 2014 Conference Call. During the presentation, all participants will be in a listen-only-mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions).

As a reminder this conference is being recorded today Thursday, October 30, 2014. I would now like to turn the conference over to Katie Reinsmidt, Senior Vice President, Investor Relations and Corporate Investments. Please go ahead..

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties Inc.’s conference call to discuss third quarter results. Joining me today are Stephen Lebovitz, President and CEO; and Farzana Mitchell, Executive Vice President and CFO.

I will begin by reading our Safe Harbor disclosures and then I will turn it over to Stephen for his remarks. This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties.

Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the Company’s various filings with the Securities and Exchange Commission, including without limitation, the Company’s most recent Annual Report on Form 10-K.

During our discussion today, references made to per share amounts are based on a fully diluted converted share basis. During this call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G.

A reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in today’s earnings release that is furnished on Form 8-K along with the transcript of today’s comments and additional supplemental schedules.

This call will also be available for replay on the Internet through a link on our Web site at cblproperties.com..

Thank you, Katie and good morning. Last quarter we reiterated that same center NOI is a top priority for CBL in 2014. This focus led to outstanding improvement in the third quarter with a 3% increase in the overall portfolio and a 3.3% increase for the malls.

As a result of the strong performance we are increasing both FFO and NOI guidance for the full year. Improved NOI growth in our tier 2 and 3 malls was a major driver of this quarter’s successful results.

In recent calls, we’ve emphasized the significant opportunities within our existing portfolios to generate growth through anchor redevelopment, expansions and upgraded merchandising mix. A great example is at Monroeville Mall in Pittsburgh, a tier 3 property which was a strong contributor to same center NOI this quarter.

Lease spreads were strong as well with an average increase of 17.6%. Renewal leasing in particular showed improved results with an increase of 15.5% as [indiscernible] a number of below market deals to full rents. New lease rates continue to be very healthy with an increase of 23%.

Pushing new and renewal lease spreads is a major component of our focus on improving NOI and results are translating into top line revenue growth. Overall occupancy in the portfolio declined slightly by 10 basis points and 93.7% from the prior year period.

Occupancy in the same center mall pool increased 40 basis points from the second quarter and declined 30 basis points year over year to 93.3%. The decline was primarily a result of the timing of store openings.

We have several malls in the tier 3 portfolio where boxes under 20,000 square feet were not yet an occupancy at September 30 but we will open ahead of the holidays beginning in the first quarter.

Sales improved as well with an increase of approximately 1% in the quarter bringing our rolling 12 months sales to a decline of 1.9% or $358 per square foot. Many retailers posted healthy retail through the back to school sales season.

The same results were mirrored in our portfolio with our athletic footwear, highwear, home furnishings and jewelry performing well and junior, children and women’s apparel still struggling. September sales were particularly encouraging with most of our malls posting their best month of growth this year.

Most predictions for the holidays are optimistic with projections in the range of 2% to as high as 4%. Our expectations are closer to the lower end of the range which should result in encouraging improvement in their sales, margins and balance sheet this year.

Despite this progress we continue to anticipate a limited number of store closures in 2015 and have three specific lease stores that we’re targeting for redevelopment with strong retail demand for these locations.

Sears recently announced two store closings in our portfolio, Cary North Carolina and Forsyth, Illinois both of which we had anticipated and we have been actively working our redevelopment plans.

As we have shown in numerous locations, redevelopment of low productivity anchors is a major opportunity for us to attract new retailers, increased traffic and sales and generate accretive returns at malls in all tiers of our portfolio.

A great example is a college square in Morristown, Tennessee, a Tier-3 property where earlier this year we replaced Sears with the new T.J. Maxx and Longhorn Steakhouse, driving additional sales and traffic. Finally, I would like to spend a few moments with an update on our strategic portfolio transformation.

We have several transactions that are in various stages. We closed on the sale of a community sale in Dexter, Mississippi for $2 million. Discussions are continuing for the mall and associated center that we announced were under contract last quarter. This is a mall that involves a significant redevelopment which has extended the due diligence period.

We are also working on a contract for the sale of community center and expect to have that executed this week. We anticipate 2015 closings for both. These transactions are not binding until the diligence is complete so there is risk, that they may not come to fruition. We will provide additional details as they are available.

For the remaining malls we are marketing. Investors are in various stages of underwriting for portfolios ranging in size. The recent publicity regarding Sears has made underwriting buyers more challenging.

In certain cases, we have delayed the marketing properties and our disposition portfolio to finalize leasing with retailers replacing vacating anchors. We continue to receive interests from several new potential investors which is encouraging. We are also in early stages of exploring potential joint venture opportunities for several assets.

While our preference is to sell 100%, a joint venture could provide benefits to a strategic partnership as well as fee income. As we pursue our portfolio transformation it’s important to note that these are stable properties generating healthy levels of free cash flow. We are investing this cash flow back into our portfolio to generate growth.

While the market is eager for us to complete the disposition as quickly as possible and we are as well, the NOI from these properties is still improving and we are managing the portfolio to generate additional growth as we move through this process.

I will now turn call back over to Katie to provide an overview of our redevelopment and development pipeline..

Thank you. As Stephen discussed, some of our best value creation opportunities are within our existing portfolio. The progress at Monroeville Mall in Pittsburgh, Pennsylvania that was previously mentioned is a perfect example.

The property produces a Tier-3 sales level, however, with the recent repositioning completed it is well situated to become a Tier-2 property over time. In total since 2011, we’ve opened more than 370,000 square feet of new shopping and entertainment options including H&M, Forever 21 and a 12-screen Cinemark theatre.

The latest happening was the 86,000 square feet Dick's Sporting Goods which celebrated its grand opening in August. This project is a great example of the types of opportunities we report our top tiers of our existing portfolio.

We’re making solid progress replacing JCPenney stores that closed earlier this year confirming our emphasis on redeveloping underperforming anchors as a means to significantly revitalize our centers. In St. Joe, Wisconsin we have executed leases with Alta and Dick’s Sporting Goods to replace the former JCPenney location that closed in May.

We are working with one additional junior anchor retail and expect to have that lease signed before year end. Construction is expected to begin in early 2015 for our fall opening. In Hickory Point Mall in Forsyth, Illinois, Hobby Lobby executed a lease for 60,000 square feet in the former JCPenney location and will open in 2015.

We recently opened Ross Dress for Less in also at the mall and are in discussion for the number of other junior offices for the few store redevelopment. Hickory Point is a prime example of our market dominant strategy. The redevelopment of the JCPenney and Sears boxes has reinforced its position as the location of choice for retailers in that market.

We are actively adding H&M stores at many malls including our recent new store opening Asheville Mall in Asheville North Carolina and the new store that will open just ahead of the holiday season at Burnsville Mall in Burnsville, Minnesota.

Earlier this year, we have H&M at three other malls and we’re working on several additional H&M leases for openings in 2015. We recently celebrated another grand opening with Wellington 63,000 square feet stores adjoining Northgate Mall here in Chattanooga.

We’re also continuing construction on the Street’s Gate project in Northgate with Old Chicago Pizza & Taproom, Old Navy which opened earlier this year. So far in 2014 we have opened 19 boxes and 14 restaurants across the CBL portfolio. We have made significant progress on the redevelopments on the two Sears stores we purchased last year.

This week Cheesecake Factory celebrated their grand opening at Fayette Mall and Lexington, Kentucky. Next week, a number of new stores will join them opening in former Sears space including Eddy Bower, Oakley, Clark, Aveda, H&M, [indiscernible] State and Vera Bradley.

Additional stores and restaurants such as Pink, Nukes and [indiscernible] Italian Kitchen are under construction with an early 2015 opening. Construction is also underway on the Sears redevelopment at CoolSprings Galleria.

Cheesecake Factory is opening in November and American Girl, H&M, Belk Home and additional shops and restaurants are set to open in 2015. Turning to new development activities, our outlook program has become a major driver of growth that is enjoying tremendous success.

On July 31st we celebrated the grand opening of the outlets of the Bluegrass between Louisville and Lexington, Kentucky. The [indiscernible] opened 100% lease and is enjoying strong sales and there is an absolute homerun financially with initial unleveraged return on goods cost over 12%.

During the quarter, we opened expansion projects at two of our outlet centers. At the outlet shops El Paso, the 45,000 square-foot expansion includes Nautica, Motherhood Maternity, new working company with H&M joining in November. Our expansion of the outlet shops at Oklahoma City includes Forever 21 and Lids, Toys R Us.

We’re also expansions at our Dilanta and Bluegrass projects. Phase 2 of Fremaux Towne Center in Lafayette, Louisiana is under construction and will open in October of 2015. The 265,000 square feet project will be anchored by Dillard and will include a great line-up of fashion-oriented shops.

I’ll now turn the call back over to Farzana to provide an update on financing as well as the review of our financial performance..

Thank you, Katie, and good morning. Since the last call, we have accomplished a number of significant goals as we execute our balance sheet strategy. On October 8th, we polled on second senior unsecured notes raising $300 million at a 4.6% interest rate, a 65 basis point improvement from our inaugural offering one year ago.

But the notes maturing in October 2024, we have maintained our well-laddered maturity schedule. We’ve recently paid a $130 million loan secured by one of our best properties Mall del Norte in Laredo, Texas adding to and upgrading the quality of our unencumbered pool of assets.

During the quarter, we completed the conveyance of Chapel Hill Mall in Akron, Ohio to the lender in lieu of foreclosure. An $18.3 million gain on extinguishment of debt partially offset by non-cash default interest expense of $1.5 million was required. The $68.6 million debt balance was extinguished.

This week, we completed the covenants conveyance of Columbia Place Mall to the lender in lieu of foreclosure. We anticipate the quarterly gain in the fourth quarter of approximately $27.1 million and our debt balance was reduced by $27.3 million. Consistent with the practice we will exclude this gain from adjusted FFO.

On September 30th, variable rate debt presented 18.7% of our total debt and we had approximately $940 million available on the lines of credit. We used the proceeds from a $300 million sale of bondage issuance to pay down balances on the lines thereby reducing our exposure controlling the debt.

The increased availability of 1.2 million allows us to retire secured debt maturing over the next 12 months. Our financial covenants are sound with a fixed charge coverage ratio of 2.2 times compared with 2.9% at quarter end. Our bond covenants are well in excess of the minimum required and we expect continued improvements over time.

Adjusted FFO in the third quarter increased 5.8% to $0.55 per share compared with prior period. Adjusted FFO excludes the $16.8 million net impact from the gain on the extinguishment of debt and default interest.

Rental growth in our existing wholly-owned [enjoyment] properties as well as income from newly developed properties expansions and redevelopment contributed approximately $0.04 to FFO in the quarter. This was offset by approximately $0.02 of loss income from sold properties. FFO also benefited from slightly lower operating expenses and G&A.

While our debt balance declined by more than $200 million year over year, interest expense net of the non-cash default interest was slightly higher as a result of the bonds issued in the fourth quarter of 2013. G&A as a percentage of total revenue was 3.7% for the quarter compared with 3.9% in the prior year period.

G&A declined slightly from the prior year as a result of a onetime reversal of region expense allocation. Our cost recovery ratio for the third quarter was 99.8% compared with 94.9% in the prior year period. Same center NOI growth in the quarter was 3% for the total portfolio and 3.3% in the mall portfolio.

As previously discussed, our growth this year is primarily driven by improvements in rental rates on new leases as we replaced underperforming retailers, increased renewal -- lease spreads and revenue contributions from completed redevelopments and expansions.

On a same center basis, minimum rents grew $3 million, percentage rents turned positive in the quarter increasing $0.1 million and tenant reimbursements were up $2.2 million. Property operating expenses and maintenance and repairs were down roughly $0.8 million despite a rise of $0.5 million in bad debt expense.

These improvements were partially offset by $0.2 million increase in real-estate taxes. Our strong year-to-date performance places us just above the high end of our previous guidance range. We anticipate a modest increase in interest expense in the fourth quarter from our recent bond issuance.

However, as we look to our projections for the fourth quarter, this should be exceeded by higher income from new properties, new stores and rent growth and renewals. We are increasing our adjusted FFO guidance for 2014 to a range of $2.24 to $2.28 per share.

Our guidance range includes a 25 basis point increase in same-center NOI to a range of 1.25% to 2.25% for the year. We continue to anticipate a flat to positive 25 basis point increase in occupancy at year end. Our guidance does not include any future unannounced asset sales or acquisitions.

I will now turn the call over to Stephen for concluding remarks..

Thank you, Farzana. Thank you again for joining us this morning. We’re pleased with the third quarter’s significant improvements in same-center NOI growth and lease spreads and the strengthening of our balance sheet. As we move into the fourth quarter, our focuses are continuing the positive momentum we have built throughout the year.

We look forward to visiting with many of you next week at Atlanta and are now happy to answer any questions you may have..

(Operator Instructions) Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead with your question..

Hi, thanks. Good morning. Stephen, you commented that the recent activity from Sears makes underwriting a little more challenging and that talks with buyers have been delayed to some extent.

Can you just talk about what exactly has changed as you have discussions with potential buyers and does that change the way that you think at all about these assets maybe as you think about potential leasing opportunities or redevelopment if you were to get back a box?.

Sure, Todd. Good morning and thank you. I think everyone has read the proceeds about Sears has definitely gotten more negative in the past few months and while we are confident in Sears’ abilities to go forward as an ongoing entity and to continue in their business and staffs they take and to store their liquidity have been positive.

A number of buyers that we had been talking to had been more conservative as far as Sears. And so in a couple of cases, for example, there were two stores that they announced that were going to be closing right. After the first year, I talked about those [indiscernible] North Carolina and Hickory Point Mall in Forsyth, Illinois.

In those case, we found that is better to go ahead and put our redevelopment strategy in place and that will allow the buyers to underwrite the cash flow going forward to not have any co-tenancy concerns and it just allows for a more stable process.

And so that’s been the major factor that we’ve been encountering and we work closely with these buyers in terms of talking about centers, talking about the redevelopments, but in some cases they don’t want to take the risks and we’re confident in our abilities to do these redevelopments. We had good success.

They make the center stronger, but we’ve got to put the pieces in place to allow a few of these assets to move forward in the distribution process..

Okay. And then also regarding your comments on JCPenney, it actually sounded like you have some insight into potential closings for 2015 in your portfolio.

So, I was just wondering if you could maybe also elaborate a bit on those comments and specifically any color on the free stores that you expect to target for redevelopment next year?.

Well. JCPenney hasn’t made any announcements about stores closings in 2015. So I wanted to be clear about that, but we’ve had a less of stores we’re watching. We talk to them regularly.

And so we’re trying to be conservative for payer for the worst and there is three that we targeted that we think have the highest probability that something might happen and now it’s where developing this redevelopment plans so that we will be ready if something happens..

Okay. And then just a quick question for Katie, the yield on the two Sears redevelopments, CoolSprings and Fayette. CoolSprings was up 60 basis points. Fayette was up also slightly.

I’m just wondering what’s driving that increase?.

Yes. Mostly they are just better -- they’re kind of in actual than what we perform it..

Okay. Great. Thank you..

Thanks, Todd..

Our next question comes from the line of Christy McElroy with Citi. Please go ahead with your question..

Hi, it’s Michael Billeman [ph] with Christy. Stephen, I wanted to go back to your comments you made about potentially exploring joint ventures for some of these assets that you outlined in April. And I’m just curious as you take back to that April call where you talked about the 25 malls.

It was really a strategy of those malls that you want to enhance the growth profile of the company by selling or foreclosing on those 25 assets because they were lower sales productivity, there were lower growth and I know you’ve decided you want to raise the capital and the fee income would be good, but to me it sounded more like this was hiding these assets off.

You want to get good execution, get pricing, but you didn’t want to continue managing them. You don’t want to lower your growth profile. So I guess I’m confused a little bit with the JV comment..

Sure, Michael. Good morning. Well, like I said in my comments our first choice is to sell 100% of the mall and we’ve been consistent and that continues to be the case.

We have been approached by some different parties that have an interest in purchasing several properties that it’s more of a portfolio type transaction where they would like us to continue with management on leasing considering we feel like if we can execute at an attractive transaction, that itself is consistent with the goals that we outlined in our April call, our primary goal we set is to allow us to increase the growth rate for the remaining properties in the portfolio and so we would view this as a majority sale and not getting them completely out of the portfolio or hiding them off as you said, but it would allow the other properties in the portfolio to defer from the higher growth rates that we have.

And also it’s not really the fees that we’re after. We think showing some flexibility in this process can allow us to accomplish more sooner. When we did the sale of community centers back in early 2000s we sold off a large portfolio of community centers to [Galileo], an Australian REIT.

We did over a two-step process and we still hold the majority interest. We gained 10% and then over time sold down and well off the management and that was successful from our point of view in terms of the way it was executed.

So we’re still considering different options and like I said we want to sell 100% and we have groups that are looking at portfolio in combinations of properties also to buy 100%, So that’s I don’t mean to imply all, that’s not an opportunity we are pursuing..

And then maybe just from topdown if you go back to April you talked about 1.35 billion to 1.6 million in aggregate size between the assets you wanted to sell and the assets you wanted to foreclose on. It sounds like you have a $2 million community center that’s been closed. I think you had one foreclosure as part of that already also.

I can’t remember what the amount of that was. And then the only other two things that are really active are these one mall and associated center that you’re continuing to deal just within one of the community center.

Can you just walk through some of the size of that just so that we can benchmark sort of progress relative to that 1.3 billion, 1.6 million goal?.

We sold Lakeshore Mall, we announced that, and that was an earlier in the year as well for $14 million. But we said this was going to be a 2 or 3 year process. We didn’t say this was going to be a 6-month process and realistically that what is going to take.

In a lot of cases their loans have to be assumed, the malls are complex as moving pieces, there is anchor redevelopments and we never expected this to happen quickly. We were very clear in April that was going to happen over that timeframe and we feel very confident with where we are in the process.

We only want to announce things that have reality to them where we have signed documents, but that doesn’t mean we’re negotiating and in discussion with a lot of different parties on a lot of assets which is what we’re doing.

So we feel like we’re on track and we’re very comfortable like I said we’re committed to it executing the plan and we’re comfortable on where we stand..

Right. I think back in April though you had four assets that were already on the market for a little while and you talked about negotiating the private sales of stuff and assets. So I think that the market place and I recognized what’s changed and I recognized as you look at what [indiscernible] it had on the market those 13 assets.

They didn’t get a bid on 5 assets and 6 assets were not at price that they wanted to execute at. So they really, really had to recognize the market place and I recognized the difficulties, but I do think the messaging in April was that even though the 2 to 3 year process you had 11 that you felt more comfortable on while moving through the process.

That’s all..

Okay. Thanks, Michael..

Our next question comes from the line of Craig Smith with Bank of America. Please go ahead with your question..

Thank you. Now that you seem to be further long on the anchor repositioning and kind of things, I think like you have been continued to want pursue.

I wonder how your discussions with some of the anchors particularly Sears and Penneys are going in that to suggest that they are willing to work with you on this process?.

Hi, Craig. Well. We met with Sears recently coincidentally it was the same day that they announced their deal with Primark for 7 locations and Sears’ priority right now is dealing with K-Mart which is where a majority of their losses are occurring and with improving their businesses there.

So they haven’t indicated a willingness to show more of their source like we’re able to buy last year and we bought the two at Fayette and CoolSprings. We continue to talk to them on a regular basis about opportunities, about joint ventures, about things we could do together to redevelop their stores or purchase their stores.

They are depending on what’s happening. If they are on a corporate basis, then that will determine their receptivity, but right now it didn’t appear that they are inclined to sell additional stores. JCPenney has made market improvement in their business. They are not looking to close stores.

Like I said, we think there is a few vulnerable locations, 3 that I mentioned in my comments. But they are headed in the right directions in terms of preserving their operations and generating growth going forward..

And then with regards to the outlet business, you’ve opened 5 so far.

How many do you think you’ve got to happen let’s say in the next 3 to 4 years?.

Yeah. We’re really happy with our centers like Katie said. The one between Louisville and Lexington just had a fantastic opening and a good return. We’re working on expansions and reopen two expansions and we have expansions at the other our centers. They were continuing to take advantage of the demand and success.

And then as far as new projects, nothing really different than what I have said in the past. We’re looking at a project every 12 to 18 months.

We don’t have one that will open in 2015, but we have one that we should be able to announce after the first of the year that would open in 16 and we’re hoping that there could be a second project in 16 as well and we continue to work closely with Horizon. They’re doing a great job, they are great partner and we appreciate that relationship a lot.

It’s competitive of their, the Simon [Tanger] and other private companies are very active taking advantage of development opportunities in the space. So it’s competitive and we feel like we’ll get our share, but it’s that kind of face I have outlined..

Okay. Thank you..

Thanks, Craig..

Our next question comes from the line of [Ross Nosbaum] with the UBS. Please go ahead with your question..

Hi. Good morning. Jeremy Metz on with Ross. Just follow up on Michael’s questions earlier, if you’re desired to sell 100% of the malls you’ve identified? And I respect you had said it would be a 2- to 3-year process.

So I’m wondering what the delta is between your pricing expectation and where the market is such that you just haven’t been able to get first show better traction yet on some of these sales..

Yeah, Jeremy. It’s certainly not a pricing value or a doubt that it’s holding things up. It’s just the process and the length of time that it takes and getting feed. A group is underwriting multiple malls. You think about most malls have 100 or at least 100 tenants and temporary tenants and other types of incomes that underwrite in markets.

So it’s just a time-consuming process where we said in the past that we’re not holding out for top half dollar. We’re not price insensitive , but our plan is to sell these properties based on market pricing and we’re responsive to where that is..

Okay. So it sounds that you’re looking for aids in the markets, say these things are 12 and they are just huge discrepancy between the two sides. I think Ross also had a question..

Sure..

Yes. Hi, guys. Good morning. If I would go to same-center NOI group this quarter, I’m looking at a spreadsheet that tells me that with the exception of one quarter back in 2011 this is the highest same store, dragged down a same store number a year ago.

Or were there any true-ups on the expense tax front this quarter that made this quarter’s number perhaps just a tad bit better than perhaps with the run-rate might be?.

Well. This is Farzana. Good question. But I much say that this quarter it was topline revenue growth. All the way round random growths were strong, our recoveries were strong, percentage of ends turned positive. We did have some improvement on operating expenses, but it wasn’t the driver. The driver was totally topline growth..

Okay. It’s a reasonable question because you cut short of the run-rate over the last six quarters and it’s sort of between -0.5 and 1.5% and all of a sudden it jumps up to north of 3 and the business doesn’t move that quickly. So I guess it’s not only surprisingly to see it moved that much but –.

Well, I doubt so. I mean notes of leasing and the boxes have kicked in.

I think there was a lot of comments last year that there is a disconnect between positive lease spreads and positive leasing in our results and it’s kicked in as this year it’s progressed getting better and better and we’re seeing the results of those openings and a continued strong leasing environment where we had some fallout earlier in the year, but other than that that’s been muted because of the lack of supply in the market.

So thank you for the compliment and we’re pleased as well with the improvement. Next..

Our next question comes from the line of [indiscernible] with Morgan Stanley. Please go ahead with your question..

Hi. Good morning. Thanks for taking my question. I wanted to take a different approach to the question that was just asked. On the same store NOI of course you talked about for then about $2.2 million of tenant reimbursement.

What’s driving that increase? And then the fact you had some lumpy tax reimbursements where there were perhaps a little bit accrual one quarter which was subsequently reversed.

So any color could you provide on that and then how should we think about that line item going forward?.

Yes. It’s gross rent. When we negotiate leases it’s combination of base rents as well as common area and tenant reimbursements, real-estate tax recoveries. So if you look at gross to growth, that’s really where we have to look at on a combined basis.

So the revenue growth from all line item and additionally percentage rents in another line item which in the past has been a strong one, but this year it has been not as strong as we would like for it to be. So definitely topline growth includes gross rent.

So therefore going forward you should anticipate based on our strong leasing activity as Stephen pointed out both from new lease sales as well as renewals, it will continue to add to the topline..

Okay.

Couple of follow-ups, first on your JV comments earlier, have any of your JV discussions to date involved selling pieces of your better assets in conjunction with some of the lower tier malls that you use at the market and would you be opened to perhaps jading some of your better assets like say Mall de Norte that still take the process or will it just extensively focus on jading your lower tier assets?.

No. We have been focused on the properties that we announced that were part of the disposition program. We did a $1.2 billion JB with teachers on three of our top properties two years ago and three years ago and right now we’re focused on Tier-3 and few of the Tier-2 properties for the disposition and any other discussions..

Do you have a target proceeds at [indiscernible] for this JV or is it too early to talk of it?.

It’s too early..

And then last one, if I may, question on the CMBS financing of our for B and C malls given your presence in the market. We understand that LTVs for larger established sponsors prods 60% to 70%.

I’m wondering what the LTVs for local private guy is, What can they get? I mean we think it’s closer 50% – 60% and I wonder if you think that has been an alleviating factor for some of your lack of progress on the sale of your lower assets?.

The CMBS loans are continuing to be active and they are back again and they have gone through that cycle. So definitely for strong assets there is no shortage and even for this lower productivity malls, CMBS loans are available.

I think it’s a matter of leverage and it’s a matter of pricings and spread and if someone is buying in a loan in the 9 cap rate to 10 cap rate, they still able to find CMBS loan and that’s 5% range. So they have really strong positive arbitrage. Now as to our potential purchases, if they’re having any issue, I don’t think that’s an issue at all.

When they want to get the financing at CMBS whether it is private financing, they will be able to get it and also banks are available to provide financing. So last year when we sold 6 properties we sold different cash and then they were now at input about 20% financing on it and they were successful in getting financing.

So there’s plenty of moneys out there. People are looking to purchase in different pockets for this equity whether it’s debt mandate. So I don’t think that’s a limiting factor at all..

Okay. Fair enough. Thank you..

Our next question comes from the line of Lina Rudashevski with JPMorgan. Please go ahead with your question. Lina, your line is open. Please go ahead..

Just play to the next question..

Okay. Our next question comes from the line of R.J. Mulligan [ph] with [indiscernible] & Associates. Please go ahead with your question..

Hi. Good morning everyone. Stephen, I just want to follow up on couple of questions from the Q&A.

On the two Sears are closing announcements – were those lease explorations or they closing before the explorations?.

One is a lease exploration that will occur next year, that’s theory. The other one is a [indiscernible] actually. So that one they have more term. That were working with Sears on purchasing the [indiscernible] for that. So we have no building where we can pursue with the predevelopment plans that we have..

Okay. I guess the same question for the 3 JCPenneys that you’re preparing for redevelopment.

Would that be lease explorations or are there still term left on those leases as well?.

Those are leases where they’re expiring either within the next year, the next two years. I can’t tell you so it’s difficulty. But I can pretty tell term left is relatively short and so that’s we’re looking after that..

Okay. And to follow up on Todd’s question about the malls sort of being more difficult to underwrite given the increased news on Sears or chatter about potential store closures. I’m curious if the malls you guys have decided to hold off on marketing are only exquisites once where you’ve already got announcements.

Where there is going to be a closure or have you seen less interest in sort of lower productivity malls that include either a Sears or JCPenney in general?.

It’s certainly not and it’s not – these are long delays that were putting in place. For example, we had a mall in the market earlier this year where one of the anchor is that a lease exploration. Next year they had noticed they had four.

So we needed to go ahead and get some clarities to their plans before we could really go ahead with the full blown marketing of that one. So it’s those times of situation -- like we said JCPenney closed in May. We’ve got the Dicks also signed. We have one more junior box that should be signed very quickly. We’ll start construction next January.

So now we can go ahead and have discussions with the buyers that there’s leases signed, they can underwrite, they understand what the costs are going forward. So it just makes our --.

…thought process specifically only for the assets that were previously earmarked for dispositions or now this discussion is inclusive of some or maybe the other productivity malls..

I feel like this joint venture discussion is getting a lot more focus and – maybe I should just go back and reiterate that the majority of the discussions that we are having on selling properties, and so that’s really the focus and if everything we are doing is a portfolio that we announced in April, it’s not – it’s primarily tier 3, with certain tier 2 properties, like I said a few minutes ago.

And so the joint venture comment I wish that I never made it, because that’s really not where our primary focus is..

Our next question comes from the line of D. J. Busch with Green Street Advisors..

Just a follow up on Hickory Point, so you’ve gotten both the JC Penney and Sears boxes back this year, mall of this productivity it’s been reasonable to assume I guess that, that would have been beginning of the end.

What is it – what are the characteristics about Hickory Point that make you confident to continue to put capital into it and redevelop, and is the yield we get there does that warrant the investment communities talk a little bit about it as a case study?.

Yeah, I mean it’s a good question, in that market the malls had some to the location of choice, for not just mall retailers but also for the boxes.

And that type of market give them the location and the demand, we’ve had tremendous interest, we added Roche and Alta, into mall, we signed Hobby Lobby to replace, we have other boxes that have come to us that are of interest and [indiscernible] on to the JC Penny box and going out into the outparcel – we have been able to out-parcel activity, we’ve got a couple of prospects for this Sears building and the returns are attractive.

So it’s the type of property where we look it alone and the investment that we are making is for the redevelopment and we feel like it makes sense to continue to own the property and then at some point we can position this solid, once we get the redevelopment in place, and we feel like it will have been an accretive investment for us..

This hasn’t been a little bit different as those closings or announcements would have come closer together and more growing to be or are there any co-tenancy issues?.

No, we look at co-tenancy and there is minor co-tenancy impact that will be cured with replacement, and we have – has been struggling for a while, we anticipated that there would be something in terms of their closings. So it’s been on our looks for a while and we also knew that it was a weak store for JC Penney.

So it’s something that we’ve had our eyes on, we have been working on redevelopment plans and that’s a lot of risk, a lot quicker and it’s having projects in that market..

Our next question comes from the line of Rich Moore with RBC Capital Markets..

On the expense recovery discussion that was going on, I am curious about this more specifically the third quarter, Farzana, this year was almost 100% on the recovery ratio versus 95% last year.

Second quarter this year you were 101%, so are we going to see more like that going forward or do we – did back down to more of an average annual sort of recovery percentage?.

I think our average recovery ratio for the whole year is going to be somewhere in the mid to high 90s.

And as we continue to negotiate gross leases, and part of the gross lease includes the recoveries, we should continue to be in – you might see dips in the quarter but at the end of the day for the full year we should be in the 98% rate, approximately..

Okay, which would be pretty similar to most other years, so this third quarter over third quarter that you had this time was a bit unique –.

Yes, a little bit because we had a little bit lower expenses, so and we had a little higher recovery. So the combination of the two we had a higher equity ratio..

And that could revert a bit..

That could revert, it will normalize, yes..

And then Stephen, I think one of the things that’s a little hard for me to get my hands around on this whole discussion about sales and Sears, it seems like Sears has kind of become more of an issue recently as you pointed out. There is a lot of local buyers most likely that are looking at the assets that you have for sale.

And if it doesn’t go away quickly even if you guys do somethings near term to make it easier a little more palatable to think about – I mean it seems like we have a pretty good delay in terms of these sales, if it involves any of your assets with the Sears boxes which would be most of the assets you probably have for sale, isn’t that true? I mean don’t we – isn’t this pushing down probably substantially the timing on the sales?.

No, at all, most of the Sears in our portfolio actually do well, we know their sales level, Sears customer is our market, their markets, that’s where they do the best, that’s where they make the most money and so for the majority of the properties, that we want to sell, we can show anyone who is interested to Sears sales, and also Sears owns two thirds of their stores, so there is fewer leased stores in our portfolio and they indicated for their own stores, that’s where they see the value and they were looking at sub-leasing in those locations.

So it really isn’t a major delay at all. There are the situations where – they have announced their closings or where there are risks that we have to work with buyers to often through the redevelopment opportunities and how that would work and that’s the short term delay..

So you don’t think the broader Sears talk is scaring potential buyers away just the corporate series talk as opposed to individual assets that have a Sears at them?.

There are few people that is scaring away but we are still seeing plenty of other people that would love to get the Sears back and say gosh, we can get you more of these assets better, because it’s a redevelopment and upside opportunity..

We’d now like to go back to Lina Rudashevski for her questions..

So we are wondering – how many malls were being marketed a quarter or two ago and how many of those that you fall to reposition for –.

We were marketing really 10 malls and of those 10, we closed two, to do the anchor redevelopments..

Our next question comes from the line of Carol Kemple with Hilliard Lyons..

It seems like the Forever 21 and H&M are doing really well in signing leases, are you seeing any of your tenants particularly the juniors or the value oriented not be excited when these retailers come to the mall and give you pushbacks for fear they’re stealing their customers?.

Hi Carol, that’s a good question.

I think we are – the juniors is no question competitive but H&M and Forever 21 – it’s not new phenomenon, they have been coming for a couple years and Aeropostale, American Eagle and Abercrombie have had to respond and competition, turning their business around and have sales growth – little variation of it but it again is competing through that junior customer, so there is a continual evolution of retailers in the mall in terms of who is doing well, who is not, where we are growing, where we are shrinking, today we are doing a ton with H&M, we’ve done a lot with Forever21, and it will continue to change.

There will be new retailers that will be looking at our markets, will be expanding as well, and that’s just the way the business works and we see it continuing to do so..

And are you starting to see the yogurt retailers come into the middle market malls?.

We are doing our first – so yes, we are doing some deals with Athleta [ph] but with Victoria Secret, they have added their BS Sport, and they have rolled out – that out more within their stores, so we are seeing some new retailers but we are also seeing existing retailers capitalize on that trend..

And our last question is a follow up question from the line of Christy McElroy with Citi..

Hey it’s Michael Billeman [ph] again.

First on few question on debt and balance sheet strategy as you ahead into next year, so you did the $300 million notes, you retained Mall del Norte probably leasing about 185 million of excess proceeds, you look towards next year, you have about $700 million of mortgage debt between the consolidated and the unconsolidated assets at your shares, how should we think about whether you are doing to seek new mortgages on the secured side or seek to do a larger unsecured issuance as we think about what equity you need to raise into next year?.

Hi Michael, next year we have to separate between consolidated and unconsolidated debt, so we have about 450 million consolidated debt that comes up next year.

So we expect when we use our line of credit to pay those off, and then as we have done just recently go out and issue another bonds during that timeframe, when we get the line of credit kind of built up a little bit.

As to our unconsolidated debt, we have – that comes up next year, that’s a big loan and that will be – that as you had mentioned between us and [Sears], so we will be looking to secure debt, it could be institutional, it could be CMBS, at this time we haven’t – we are not there – enough to go out to the market.

So those steps are basically what we have left to do..

And then Stephen, on the mall, the center that you continue on to build just with and the one – can you just share a least goal post in terms of buys, I think you talked about the 2 million that you sold Lakeshore 14, I am just trying to get at least the near term sense of – those seem to be more imminent potentially in terms of what sizes are?.

They are not huge at all, between the two we are looking in the 30 million range, 30 to 40 million..

And then I guess Stephen, as you step back – are you thinking a broader strategic alternatives at all and I say that – as you went for with the April presentation, I wasn’t sure if something had pre-dated that process to say that this is the route that we want to go, we’re going to sell off 25 assets and just be a little bit of a smaller company and we’re going to rotate the asset into development and redevelopment, and become a stronger company whether you thought of other ways and certainly with the things that have happened in the mall space, over the last few months, I just didn’t know if that has heightened interest at all, do you think about other ways to maximize shareholder value of which the family obviously is a large holder?.

What you say we are always evaluating strategic alternatives that’s a big part of our core discussion.

There have been an bigger news in our states in the last month or so, so no question, these are discussions and – but that’s an ongoing process and we are always working to find the best way to maximize shareholder value and returns and that’s [indiscernible] change going forward..

Did you find that the buyers that were looking at the assets, the 13 that they had on the market, did that – has that now come back again, and stopped, has that changed any of the discussions that you are having, was this more buyer pools or are these predominantly just local guys that wouldn’t be competing with each other for those assets?.

We’ve had discussions with certain people that we are looking at – assets but the fact that does after its own on the market now hasn’t really changed. We’ve continued to have discussions that where maybe one or two parties that had a – they were looking at Glenshare [ph] so they put us off a month or two, it hasn’t changed anything at this point..

And just lastly on same store NOI growth, the one quarter 225 for the year, how should we be thinking about the growth drivers for the fourth quarter, and do you expect that to fall within that range or do you expect it to be closer to what was experienced in the fourth quarter?.

You should see very similar results, however we have – we are paying particular attention to percentage rents and any bad debt expense. So hoping that percentage rents will be strong, then you can expect similar – for the fourth quarter. However if percentage rents don’t come in and we have more bad debt expense that might be as a result..

We do have one final question from the line of Jeff Donnelly with Wells Fargo Securities..

I heard financial buyers having difficulty signing management on leasing infrastructure, since there really isn’t a third party mall management business, I recognize that it’s a minority situation to encounter.

But do you think the reasons some buyers are asking for JV – is it necessarily because they need the capital, maybe they do but it’s because they really need the infrastructure support?.

Yes, that’s a part of it, the buyers are groups that are financial, they don’t have the platform and we’ve gotten a lot of credit for our ability to operate the malls in these markets better than anyone else and today we want to continue to have as part of the equation going forward. And so I think that is a part of it..

I am a little surprise that the headlines – are sort of spooking buyers because you would think that the uncertainty there is ultimately what’s giving rise to their investment opportunities, if it was easy – they probably wouldn’t be looking at it, so I guess can you talk about the character and maybe the depths of the buyers for malls, maybe or six or 12 months ago, I am just curious, these are sort of local buyers or real estate fronts, more maybe financial buyers?.

It’s still a combination of private groups, regional groups, financial groups but they are not living in the states every day as close as we are, so it just takes time for us to talk them through what the redevelopment opportunities are, what the costs are, to get them to comfortable with co-tenancy and impacts like that, so like I said it’s more – the process that we have to go through in terms of more hand holding, but to your point it is something that people view as a positive down the road because it brings in strong usage and energizes the mall, so we think it’s a selling point, we just have to give some more clarity to how it’s going to unfold..

The same store NOI this quarter was strong and wasn’t based on anything one time in nature, is it fair to say we should generally see that growth to repeat in Q4 and if so I guess Q4 same store NOI is kind of divide by annual guidance seems –.

I gave you two components as [mike mute the] – one being percentage rents and the second being bad debt expense.

Other than that, if everything flows like we had flowed in third quarter, we should have similar results and – we just need to be conscious of some of the things that might happen weather related, whether it’s unusual that we didn’t anticipate..

Mr. Lebovitz, there are no further questions at this time, I will turn the call back to you..

Okay. I again like to thank everyone and we look forward to visiting with you at NAREIT in Atlanta next week and at any other opportunities that you would like. Thank you very much..

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines..