Welcome to the CBL and Associates Properties Third Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Scott Brittain. Please go ahead..

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss third quarter results.

Presenting on today's call are Stephen Lebovitz, President & CEO; Farzana Mitchell Executive, Executive Vice President and CFO and Katie Reinsmidt, Senior Vice President of Investor Relations and Corporate Investments. This conference call 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 the comparable GAAP financial measures will be included in today's earnings release and supplemental that is furnished on Form 8-K and available in the investing section of the website at cblproperties.com. I will now turn the call over to Mr. Lebovitz for his remarks. Please go ahead, sir..

Thank you Scott and good morning everyone. We are pleased to continue our strong performance this year with excellent results for the third quarter. Portfolio same center NOI growth of 2.6% and adjusted FFO growth of 1.8% to $0.50 per share put us squarely on track to achieve the high end of our guidance ranges.

Demand for space in our malls remains healthy with occupancy moving up 110 basis points to 93.5% for the portfolio and 90 basis points to 92.5% in same center malls. In total we leased approximately 800,000 square feet during the quarter.

As we anticipated, stabilize mall leasing spreads have improved as the year has progressed averaging 10.2% in the quarter. This improvement was led by an increase in renewal spread to an average of 7.3% while new leasing continue to be strong at 19.7%.

We have finalized our negotiation with the new owners of Aeropostale as previously planned we closed several stores during the third quarter and sold also properties with Arrow exposure ending the third quarter with 58 stores.

All 58 stores will stay open until the end of the year and in January 9 additional stores will close and rents at certain locations will be reviews. The total gross rent impact of 2017 from these additional closures and modifications is roughly $3 million. Sales growth has moderated as we have moved later in the year.

For the rolling 12 months sales in our portfolio were down 50 basis points to $370 per square foot. Tier 2 and three generated slight increases while tier 1 declined modestly primarily driven by two properties located in energy markets.

Holiday sales forecast for ICS NRF are in the three to 3.5% range so we're optimistic that sales will end the year in a more positive direction. Our disposition program has made major progress this year both were tier 3 malls and non-core properties.

We recently closed in the assignment of our 50% ownership interest in High Point comments for $16.9 million. We also sold out office building in Greensboro North Carolina for $2.4 million and have additional non-core asset transactions in process that we hope to announce over the next few months.

As we announced in yesterday's release we have a binding contract on our portfolio of tier three assets $32.25 million. We anticipate closing that transaction and the fourth quarter. We have closed or have in process 17 mile transactions as part of our portfolio transformation program identified in April 2014 representing a value of over $700 million.

We have additional promising activity underway and hope to bring this program to a closed next year. Last quarter's call we reviewed some of the target metrics we had set forth in our investor call in 2014 and discussed how we already succeeded number of those targets.

While I won't go through the fullest, it's worthwhile to note that our tier 3 in July is not just 7% of total mall NOI compared with 22% when we started on this path and it will continue to decline. It's important for you all to take a fresh look at CBL. We are not the same Company that we were just two years ago.

The progress we have made an hour portfolio transformation strategy is substantial and this program has yielded tangible results in our performance. I am excited to see is approaching the end of this program. We have successfully transformed our portfolio as well as our balance sheet creating a stronger and much stable Company.

Our ongoing investment in redevelopment expansions and select new development projects has been a meaningful contributor to the strengthening as well.

Over the past few years we have refined our expertise in departments redevelopment and have been successful in using these opportunities to bring new retailers restaurant and entertainment uses to our malls. As you are aware Macy's recently announced this foreclosure plan that will go into effect after the holidays.

We have been in discussion with Macy's regarding terms and timing and while the list is still being finalized we expect to gain control of five to seven locations in early 2017. We are already working on plans to retenant these spaces to be ready to move forward quickly early next year.

Getting the stores back what allow us to upgrade the offerings at the malls, driving higher traffic in sales and attractive high single to low double-digit returns on investment. Our job is a major mall landlord is to make sure our shopping centers evolved to meet changing consumer preferences.

Our portfolio of market dominant properties occupies the best commercial real estate locations in their markets and being able to recapture underperforming box is an ideal way to bring new excitement to our shoppers and long-term success to our properties.

I will now turn the call over to Katie to discuss our current redevelopment and new development pipeline in more detail..

Thank you Stephen. Since 2013 we have completed or under construction over 20 redevelopment projects in representing an investment of roughly $250 million at our share and generating average return at 8.5%. We are also pursuing certain expansions at our malls as well as select new developments.

As a result of these projects we have been successfully offsetting the dilution from our position program containing EBITDA and growing FFO. This quarter we commence construction on a couple of new redevelopments including the addition of TJ Maxx at Hickory point mall in Forsyth Illinois which will open in the fall of 2017.

At this time all in Madison Wisconsin where we developing shop space to, accommodate a planet fitness which will open by year end. Several redevelopments are on track ahead of the holidays including a new H&M it York Galleria in York Pennsylvania and form of the JCPenney.

Exporting goods will open replacing JCPenney at college square in Morristown Tennessee as well as a denim sports and a former Shopko at North Park mall in Joplin, Missouri. We are proactively working with department stores to recapture and line of replacements.

We have one ground-up development in process the outlet shops at Laredo our 65/35 with horizon. The 350,000 ft.² center features a terrific retail lineup including Michael Kors Brooks brothers Nike under Armour and Puma. We are nearing 80% preleased and look forward to a strong opening in spring 2017.

We are exploring other opportunities to continue our partnership with horizon given how successful it has been and will evaluate each new opportunity individually as it's presented. I will now turn the call over to Farzana to discuss our financial results..

Thank you Katie. We are pleased with our financial results for this quarter. Adjusted FFO growth of 1.8% to $0.57 per share was fueled primarily by topline improvements including growth and rent and occupants in the same tenant pool as well as contributions from new developments and interest savings.

This growth was offset by dilution from asset sales completed year-to-date. D&A for the quarter was $12 million net of $1.2 million in nonrecurring legal and professional fees representing 4.8% of total revenue for the quarter consistent with the prior-year period.

During the quarter we had recorded an impairment of $53.6 million related primarily to the pending sale of the three malls under binding contract. We also recorded a $7 million gain on the sale of our joint venture interest in High Point comments during the quarter. Either item was included in FFO.

Our cost recovery ratio for the third quarter was 98.1% compared with 100.8% in the prior-year period for the nine months to cost recovery ratio was flat from the prior-year period. Same NOI in the quarter continued our streak of strong results this year with an increase of 2.6% for the total portfolio and 2.3% in the mall portfolio.

Growth in the same tenant pool was driven by occupancy increases in rental growth with revenues improving by $3.4 million and savings in operating expenses of $1 million.

Based on third quarter results the impact of announced transactions and our current outlook for the remainder of the year we are maintaining our FFO guidance in the range of $2.36 $2.30 $6-$2 40 part of this year. And anticipate reaching the high end of this range.

We also anticipate achieving the high end of our guidance range for same center NOI growth of one of 1.5 to 2.5%. We are projecting a 75 to basis point improvement in stabilize mall occupancy from prior year and.

Guidance includes anticipated dilution from the sale of the three malls that are under contract but does not include any unannounced transactions. We have made significant progress improving our balance sheet and our total debt balance continues to decline.

We have lowered total debt by more than $460 million since the prior-year period and $380 million since year end. We anticipate further improvement of $190 million as the three malls in receivership are returned to the lender.

September 30, our rolling 12 month net debt to EBITDA multiple of 6.6 times compared with 7.1 times at the end of the prior-year period. The unencumbered property pool continues to grow and improve. Year to date we have retired 172 million of secured debt.

We utilized disposition proceeds to fund the payoff of the $55.2 million loan secured best Dakota scare eight tier 1 mall as well as two loans to $17 million at our shared that were secured by two unconsolidated properties. At the end of the quarter we retired the $38.3 million loan secured our open-air property Southaven town center.

All four loans had very high debt yields and made sense to retire them. We have reduced our secured debt by over $420 million year to date in 2016 through net proceeds and debt assumption from dispositions as well as amortization and extinguishment of debt to lenders.

Just a middle model and Wausau center with an aggregate balance of $190 million were placed into receivership during the quarter. We expect these foreclosures to be completed before year-end or in early 2017.

We are in discussion with the service to extend the maturity of the $17.8 million loans secured by Green Briar Mall and hope to finalize on negotiations shortly. Our next long maturity is in March of 2017 for $46.5 million loan secured by Cary town center.

We are currently documenting our agreement with the lender to restructure the loan lowering the 8.5% interest rate to 4% interest-only and extending the maturity date by up to four years. This property is well located in the market and we are pursuing a game changing redevelopment anchor by very recognizable and in demand retailer.

We will announce more details as we make progress on the redevelopment plans. The remaining $273 million of 2017 loans secured by wholly-owned properties will be evaluated closer to maturity and we will determine whether to retire the loan to refinance.

We plan to refinance that $81 million of maturing joint venture loans CBL maturing loans of approximately $440 million Cary weighted average interest rate of 6.1% so we have a terrific opportunity to reduce the borrowing costs and generate additional interest savings adding to our FFO.

The progress we have made over the past 24 months in reducing our debt balance improving our operating performance and growing through redevelopment gives us tremendous flexibility with our balance sheet as we look to our business.

Our priorities going forward are to continue the progress we have made to enhance our metrics growth EBITDA and reduced debt. I will now turn the call over to Stephen for concluding remarks..

Thank you Farzana. As I mentioned in my comments earlier, our portfolio is stronger and our balance sheet is more stable and flexible today than at any point in our Company's history.

Our properties are positioned well in their markets to evolve to meet changing retailer trends and customer preferences as we add more dining, entertainment and experiential uses. We will continue to execute on the clear path we have outlined.

We have exciting opportunities for growth on the horizon and look forward to ending the year by generating further success. Thank you again for joining us this morning. And now we will be happy to take questions..

[Operator Instructions]. Your first question comes from D.J. Busch with Green Street Advisors. Please go ahead..

Stephen regarding the three malls under contract is there any financing contingencies in order for those to close?.

There is not. No financing contingencies and like we said we've got a binding contract with a substantial deposit. Just a little more color on the dispositions in the three mall package. I can assure you it's not a 20+ cap rate. We don't give cap rates and the transaction has enclosed.

So I can't give any more detail at this time but I can certainly say that that's not close to where we are making this transaction.

It's a market transaction that we have we did source through brokers and went to various parties and I think as everyone knows when you get into a calculating cap rate there's a lot of factors that go into it in place NOI projected NOI capital expenditures that might be deferred or might be coming down the road.

So there are a lot of different considerations go into it but we are pleased with the progress we have made with dispositions this year and we are really getting towards the latter stages of our overall disposition program..

Going back to some of your comments I think you made a little over a year ago you specifically address the need to redevelop brand off mall in order to sell the asset and appeal to buyers.

Just looking back on that decision are you satisfied with the outcome of Randolph? Did you see a change in the buyer perception or change in the demand for that property given that you took on some of the redevelopment risk for that to get it across the finish line?.

Yes, absolutely. The decision to go ahead and redevelop Randolph and add Ross and ULTA and the former JCPenney is really what enabled us to sell it and similarly with Regency, we replaced the former Sears, JCPenney building was bought by another party and we developed.

So that really allows the buyers to have enough comfort to go ahead with the transaction and it did involve an investment, but it was recaptured as part of the purchase price..

Okay. And then just one last one on the five to seven potential Macy's closures.

I know you are not ready to give locations certainly but are any of those closures potentially at malls that are still for sale and if so would you undertake a similar redevelopment endeavor that you did at Randolph to kind of do the same strategy?.

Yes, I mean I can't get into any of the details on it and like I said it's not we don't even though the final list yet.

We met with Macy's so we wanted to give the market a ballpark sense of where we think this will end up, but they own a lot of their stores so that's a consideration and that still has to get work out as far as having control of this space.

If depending on how these go the redevelopment of the boxes is really an opportunity for us to increase the value of these assets by bringing in other users and we've got a game plan for the assets that we think we are going to get back as far as who we would put in and as is the case with the every developments that we have done over the past three to five years some of them involve more capital than others.

It depends on the property and it depends on where we want to go with it, and that's the way we will approach these as well..

The next question is from Christy McElroy with Citi. Please go ahead..

Stephen regarding the additional closures and modifications from error [ph] that you mentioned, just to make sure I heard it right, it sounds like the $3 million impact reflects both closures and lease modification.

If that takes effect in January, will those modifications flow-through the Q4 releasing spread number or was there anything in Q3 and anything into Q3 spread numbers reflect of that..

It did not -- it was not in the Q3 numbers because we were still finalizing the negotiations so they hadn't been signed by the end of the quarter and it also will not flow into the financial results for Q4 because it doesn't take it doesn't start until the beginning of the year.

They are keeping the stores opened through the rest of this year, so the $3 million will impact 2017. We are taking that into account in our budgets and when we issue guidance for next year than that will obviously be factored in..

Just to be clear so on the releasing spreads numbers presumably the impact will flow through the Q4 executed numbers on page 27 when we see this up next quarter but then they were also flow through the 2017 commencement numbers on page 28 is that fair?.

We are still in the process of documentation so just depends on when those get executed to the timing of how that all flows through..

And then just sort of given all the nuances in the releasing spread numbers these trends are for the under 10,000 square foot stores and that only represents about 350,000 square feet this quarter of your roughly 800,000 square feet of total leasing volume.

Can you give me a general sense directionally what kind of market trends you are seeing on the other half of the space lease for larger stores?.

Sure. There is several boxes that go into the 800 that wasn't included in the under 10,000. It's really hard to say I guess in terms of a trend because we are taking space that had been vacant.

We are taking some difficult spaces and we are also taking some former anchors, we evaluate those in the redevelopment pipeline from a return on investment point of view and we have gotten high single-digit returns on those low double-digit returns, sorry I keep stumbling on that, so that's been a positive financial results for us..

The next question is from Todd Thomas with KeyBanc Capital Markets. Please go ahead..

Just a follow up on arrow. So the $3 million annualized impact from the closures and rent modification that you expect to begin early next year, you had $2 million budgeted for Arrow in 2016, I think a $10 million budget in total for rent loss from closures and modifications for the full year.

I am just wondering if you layer in the $3 million now that you’re expecting 2017 and maybe what you expect typically at the beginning of the year, how does that sort of stack up to the year historical budget for what you would look at for closures and maybe rent modifications..

Sure. Just to be clear, the $2 million is the impact for 2016 from the closures that happened earlier this year and also for any rent adjustments that happened prior to the bankruptcy and so that is in our numbers for this year.

The $3 million will go into our budget for 2017 and the $10 million really is just I mean that was a totally different number that we talked about earlier in the year, we were trying to get a handle on what the combination of Arrow and PacSun, Sports Authority in some of those other bankruptcies could mean to us over the course of the year and now we've got better visibility on that.

Arrow ended up not being as bad for '16 just because they are keeping the stores open for the year. PacSun, the impact was what we had said last year. I mean last quarter, I'm sorry which was about $1.5 million, Sports Authority is about $1 million on an annualized basis.

So when you put it all together we ended up being a little bit better this year and then our budgets for next year will take all this into account..

And then just regarding the Macys, the five to seven stores, any sense on where they might fall in the portfolio in terms of tearing and do you anticipate any of those closures could trigger any co-tenancy issues in the portfolio?.

Yes, like I said it's just too early to give any more details, Todd. We just wanted to give the market a sense of the number of stores.

We have been really successful with the redevelopment and the replacements of department stores and we feel that will be the case again after next quarter once the list is finalized we will be able to give more details..

Okay. And just last question for Farzana, sorry if I missed this. Any visibility around the timing to convey the interest in the three lender malls Chesterfield Midland and Wausau..

Yes, we are continuing to work with our lender the foreclosure process is just has a timing of its own, so we are hoping to get them back by the end of the year or early part of January. Naturally the timing we have now from [indiscernible] so we are working with them, our goal is to return it as quickly as possible.

They are not in our control anymore anyway they are with the receivership. So it's a matter of just extinguishing the debt which is imminent..

The next question comes from Caitlin Burrows with Goldman Sachs. Please go ahead..

I just had a question. One of the thing that's been talked about on your call and your peers call has been releasing spreads and this quarter your renewal rates seem to be much stronger than in the past couple of quarters.

So I was just wondering if this is something you thought would continue or if it just happen to be something with the leases that were expiring in the old rate happen to be particularly low or not?.

Sure. We will probably have some pressure in the fourth quarter as the Arrow deals come through because likely those will come through during the quarter given the timing of signing the new deals.

Just in general, the first two quarters the first quarter was the weakest and we did signal that we felt like it would get stronger over the course of the year and we have seen some good momentum in terms of renewal leasing spreads this quarter. We are pleased with the overall results being back into the high single digits and that's our goal.

We feel like we've got good demand. We're making good progress on bringing up our occupancy levels to recapture the bankruptcies from 2015, gives us more leverage in the negotiation with retailers. So in general we are positive about leasing spreads. Although like I said fourth quarter could have some pressure because of Arrow..

Okay. And then also just on the Rado I was wondering if you guys could comment on -- I know Katie gave some example of retailers that were going to open there but just the amount of demand you have had for those spaces versus maybe some of the outlets you did a year or two ago and how it might have increased, decreased or stayed the same..

Sure. Now Laredo is going great. The outlet sector has stayed strong, demand by retailers is good at our existing portfolio. We have replaced [indiscernible] with stores like North face and some other good retailers and so we have seen good momentum and the leasing is strong.

Laredo we had a delay in the schedule which slowed down leasing a little bit but now it's on track to open next spring. We've got good leasing demand and we are really positive about where that's going to end up..

Our next question is from Richard Hill with Morgan Stanley. Please go ahead..

I just wanted to get a little more color from you about Kentucky Oaks Mall versus Green Briar Mall. Your decision process to pay off Kentucky Oaks Mall six months early. I think it might still be encumbered on your balance sheet and on the other hand Green Briar Mall I think you had disclosed in your 10K that you were looking to extend the maturity.

But maybe that's still ongoing with the special service. Any color that you could provide in terms of how you thought about paying off Kentucky Oaks Mall early but still in the negotiation process with Green Briar Mall would be helpful..

Sure, Rich. It was really a very easy decision for Kentucky Oaks and Governor square. The debt yield was like probably North of 60%. It was really low leverage. If you note $17 million was our share of the two loans that we paid off combined they had a six point interest rate on our weighted average.

It was a no-brainer so we pay that off and our partner also wanted to pay that off and not secure additional financing. That was a mutual decision and an easy one.

Green Briar Mall on the other side has some really good tenant ting opportunity and the loan matured and we are in discussion with the lender and hopefully we will announce our restructure very soon.

It will be a good restructure both from our point of view as well as the lenders interview gives us the time to bring in the new tenant, use the property cash flow to fund the tenant allowances and get it to the level we would like for the center to be. We have some exciting tenants coming in. That was a decision we made and will be very successful.

We will announce that very soon..

Just one quick thing and Green Briar. It looks like a pretty stable Mall. I thought maybe around eight I thought maybe around 10% to 11% debt ratio which look like it should of been refinancable.

Any reason why you maybe wouldn't have focused on why you would have chosen [indiscernible] instead of just looking to refinance?.

Yes. Again the reason for it is his to give us the time to stabilize it again and get to a point where we think the debt yield should even be higher and get even a better refinancing on it or pay that off. It gives us the opportunity we should have a three or four year extension option new extension with the lender.

So that will give us the time to like I said increase the cash flow increase the NOI and then make a decision whether we want to pay it off or we would like to refinance it and it is a very good mall. It is a very stable mall and a solid mall..

The next question comes from Tayo Okusanya with Jefferies. Please go ahead..

Most of my questions have been answered but I was curious as we start to ramp up into the holiday season what you are seeing out there and if you are concerned about potential for more store closures are bankruptcies postholiday season?.

Like I said in the call in my script the sales forecast are in the 3% to 3.5% range. That would be a positive from our point of view and we are looking forward and having good and are optimistic as far as where the holidays are going to end up. There are good signs in the economy.

The GDP growth today is certainly a good read so there is a lot of tailwind in the economy getting the election behind us will certainly be a positive. So we are encouraged about where we will end the year. As far as bankruptcies, with arrow and PacSun behind and at least we know where there's are going to end up.

There's always retailers in our watch list. We feel good about the outlook for next year. There's going to be some continued rationalization I certain retailers but we are also seeing growth by others in categories such as beauty and cosmetics , athletic footwear, and the Elle brands are still strong.

We are seeing good demand and those just a shift in the tenant mix of the properties and juniors and apparel you have the fashion like H& M is taking more space and then retailers like Abercrombie are taking less, that's a natural transition that's occurring..

And then just a quick update on Sears and the situation there. Again last quarter tough results, you see [indiscernible] company.

Are you feeling better or worse about the Sears situation and how you are gearing up in case you do end up with a retailer that has to go through a decent amount of restructuring ?.

I don't really have anything new to say about Sears. They haven't given any indication whatsoever of giving back or closing Sears stores. They have been much more focused on Kmart in terms of where their losses are. We talk to them regularly. We will see with their results are when they announce them for the third quarter.

But at this point, we are anticipating just a continuation status quo with them we will learn when you learn when they come out with their next quarter..

Our next question is from Michael Mueller with JPMorgan. Please go ahead..

Couple of asset questions.

First Stephen, I think you could give a cap rate on the transactions that are closing, but I was wondering can give a ballpark range for the 2016 mall sales as a whole?.

I can give you just low double-digit as the range. It's definitely a range and that's a little squishy but that's at least something..

That's definitely helpful. And then also be set hopefully you can wrap up the program in 2017. Can you give us hearing another range like just a rough range dollar amount of how much is left to actually wrap up the program. Is it several hundred million dollars? $200 million? Some color would be helpful..

Yes it's probably $200 million-$300 million if you include debt and equity. I will say there are a few properties that are on our original list where we've got redevelopments that our game changer transformative to the property type redevelopments and so we're going to pull this off the list.

One for example is that I talked about on the call where we can announce that the retailer is but it would be a complete change in the property in terms of its trajectory and its opportunity going forward. We are not going to be selling all 25 before we bring the program to a close..

Next we have Jeff Donnelly of Wells Fargo. Please go ahead..

Stephen, you've done a good job restoring that two to three basis points lost over 2015. I think the portfolio today is running about 70 basis points or so below where it was prior to that. You’ve been much more aggressive selling those three malls.

I was just wondering as we look out to 2017, do you think we should use your 2014 occupancy levels as the goals where you'd like to get occupancy back to next year or do you think it's possible to even suppress that level down the road just because the average quality of the assets is better?.

That's probably fair. We will announce when we do guidance what our occupancy assumption is for 2017 but I think what you are seeing makes sense. As we go forward we do have a better quality portfolio.

We have taken up some of the tougher space with boxes and some larger users so that will help our overall occupancy and we should be able to get some traction and be above historical levels as long as we don't have that in currencies that come along and set us back. We are looking at ongoing gains in occupancy going forward..

I am just curious as far as asking rents or sort of rents, it's not so much what you are actually not leasing spreads per se but the actual trend and what's getting in the marketplace.

How has s that trended over the last 6 to 12 months? Has there been much change, has it gone lower, has it gone higher, I'm just curious what you think retailers perspective is on where asking rents has gone?.

Yes there's always a negotiation retailers as you know. They are trying to push down their occupancy cost. You see it in our releasing spreads improvement that we have made there in our average rents increase consistently so we are able to get good gains in our rents across the portfolio.

It's supply demand driven and as we have less vacancy it allows us to bring in better retailers and high-performing retailers.

The restaurants have been a bright spot and the restaurants there has been some publicity recently about difficulties in the restaurant business but if you are dealing with the right restaurants, there's been there's definitely good demand there. We're seeing continued strong demand in fast casual and some other categories.

I think we are encouraged about where we are heading and like I said we are not a retailer, we are in landlord and we have the flexibility to bring in different categories. You look at a retailer like altered, 40% comp store increases and we are doing more with them and others in that category.

We can pick the hot categories and bring those into the properties and focus on them..

Maybe just one last question on the disposition I was just curious and I apologize if you said this earlier, can you give a little color on the depth of the demand for the assets you have been putting under contract? I mean where there multiple bidders or were in close proximity and I guess where you finding some of the prospective bidders looking for seller financing or trying to keep you guys involved in the deal in some way?.

Yes , I haven't answered that but I'd say it's consistent in terms of the buyer pool and there has been some success in terms of getting financing on these assets which helps the buyer pool. I wouldn't say it's super deep in terms of the number of buyers but we also have multiple buyers that we are talking to one different assets.

I see that being consistent. It's private regional type buyers it's not we are not selling quality properties in the malls. Non-core in the strip centers is another story. That's more institutional buyers and cap rates on those have been really attractive. Mid-single digits. That we continued to make good progress there.

That's been a great way for us to raise capital, pay down debt, reduce our debt balances over where they were and Farzana talked about how much progress we made on the balance sheet. We don't seem to get credit for that we really lowered our debt to EBITDA our total amount of debt and hopefully the market will recognize that..

The next question is from Carol Kemple, Hilliard Lyons. Please go ahead..

Do you all know what your same-store sales growth would be if you took out the energy markets properties?.

Not off the top of our head, it would definitely help and we are down slightly for the quarter. So in the Tier 1 malls those were where we had the couple that impacted us the most, that would have push us back into positive territory there..

And then regarding your decision not to open your malls on Thanksgiving day, what's been the feedback from your retail partners regarding that?.

The retailers have been really positive. We actually talk to them before we made that decision we wouldn't make it without getting their input and they were supportive of that.

Like we said in our release, they feel like the business just gets spread out over two days over the weekend instead of being concentrated more on Black Friday and it's a great opportunity to make Black Friday a more exciting and energetic shopping day and bring back the excitement there and the retailers have been very supportive and I think they wish everyone else would do it..

Next is [indiscernible]. Please go ahead..

A question on the disposition program. You said it would likely end by 2017.

Does that imply that you are content with the portfolio at that stage and there will be no further dispositions?.

Not at all and I appreciate you bringing that up. It's just that the 25 malls that we announced in 2014 we will bring that program to a close. But we are going to continue to look at the portfolio to sell properties on the basis that it makes sense.

On a normalized basis and not have a big announcement of a number of properties that we're going to sell I think it's really important for us as a disciplined and also it just makes good sense to read cycle certain properties as either a source to improve our overall quality to give us proceeds to reinvest in new developments or other new projects and it's something that we will definitely continue even after we bring the portfolio group of sales to a close..

And for a follow-up question in terms of redevelopment spend. Just to make sure $250 million debt was mentioned earlier that is what you spent to date on your properties? I believe.

What do you expect to be spending on an annual basis going forward and redeveloping or strengthening your assets?.

Just to clarify, the 250 was over the last three years. The redevelopments that we have done somewhere department stores, somewhere expansions, summer adding boxes. It's about 1.5 million square feet average a 0.5% returns. You look at the average.

It's in the $12 million range per project and we have been doing those $50 million to $75 million on the redevelopments. It was a little higher when we did the two Sears at Cold Springs and [indiscernible] because we cut those up into smaller pieces. Those were more capital intensive.

We created a lot of value through those and that's a good run rate going forward..

The next question comes from Haendel St. Juste with Mizuho. Please go ahead..

I guess first I was hoping maybe you could give us some insight into the debt financing side. The debt available for private group like the whole property group line malls here. Can you talk about maybe the lending appetite perhaps a local regional banks.

The cost of debt financing providing LTVs and then how does that compare perhaps to the debt availability [indiscernible]..

As to your question in terms of financing on the disposition side , previously the transactions we closed the wires had the opportunity to get financing from the local banks and other sources in that respect.

Typically banks I don't know if they have gotten financing but they have been able to assume one of the financing that we sold a property fashion Square Mall that had a loan they were able to assume it. In terms of new financing, CMBS is very selective of course.

Again, it's not necessarily that they are making financings on higher productivity centers. It depends on what type of center it is the sponsor is what's the story so it's a property by property financing. So we cannot be generalizing it. So I would say it is available.

We do see in our centers where we were not financing CMBS taking an active role in providing us with quotes. But again we can be selective but the we go through institutional or CMBS or through banks.

You saw us doing that in the last several months where we had financings through two banks , different banks that gave us the loans on and then they send thereafter converted to CMBS execution. It's different for each property so it's hard to generalize..

Okay. Certainly appreciate that really just trying to get a sense what broadly that could look like. Maybe that's not the question you had a lot of clarity on but what certainly appreciate the color now perhaps off-line. Maybe then a question on the development opportunities that you're looking at only horizon.

How many projects are you looking at there? Your growth appetite, your return threshold and I guess I'm assuming funding would come via asset field.

Had you look at that opportunity that capital allocation versus say debt reduction and stock buybacks?.

Sure. Well, there's a lot of components to the question. Horizon has done a good job of sourcing projects. Every year to 18 months they seem to bring us a good opportunity.

We've had great results in terms of the returns that we have seen in the past and we look at each one individually and evaluate it in terms of the return, the value in terms of the creation that comes about through that. The strength of the market the growth prospects. There's really no one factor.

I think like we said, redevelopments in terms of capital allocation of capital spend is our priority but on a selective basis we have had good results for new development and it makes sense. And we are also trying to continue and are continuing the progress on our balance sheet.

So dispositions like you say are a source of the equity and also free cash flow. We've got over $250 million of free cash flow that we generate as a Company and we reinvest that in the redevelopments and again paying down debt and that's a source for new developments as well..

So maybe you could flesh out a little bit maybe minimum return requirements for those type of outlet developments that you have and maybe how that’s changed at all given the volatility in stock prices here and rate that maybe on the rise?.

Yes, I mean we evaluate each one individually. We look at that AR, we look at growth potential, the opening pre-leasing in terms of how strong that is. I don't want to box ourselves in to a certain number. You can look at the past projects. We have had them as high as 12%. Those have been really attractive. We create a lot of value there. Those are nice.

We don't expect them all to be at that level. We can still make a lot of money for our shareholders on the outlet program like we have shown and there's a lot of demand from retailers for that sector and it's been a real successful program for us..

Ladies and gentlemen, 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 this morning. We wish you a happy Halloween and we will look forward to seeing you in Phoenix at NAREIT's in a couple of weeks. Have a good day..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..