Good day, and welcome to the CBI Properties third quarter earnings conference call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Katie Reinsmidt, CIO. Please go ahead..

Thank you, and good morning. Joining me today are Stephen Lebovitz, CEO; and Farzana Khaleel, Executive Vice President and CFO. 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.We direct you to the company's various filings with the SEC for a detailed discussion of these risks.

A reconciliation of supplemental non-GAAP financial measures to the comparable GAAP financial measure was included in yesterday's earnings release and supplemental that will be furnished on Form 8-K and is available in the Invest section of the website at cblproperties.com. This call is being limited to 1 hour.

In order to provide time for everyone to ask questions, we ask that each speaker limit their questions to two and then return to the queue to ask additional questions. If you have questions that were not answered during this call, please reach out to me following the conclusion of the call.I will now turn it over to Stephen..

Thank you, Katie, and good morning, everyone. This quarter featured several notable accomplishments for CBL. As I have said previously, our primary strategic goals are transforming our properties for long-term success and strengthening our balance sheet.

We are now seeing tangible results from our redevelopment program as we are celebrating the openings of the first wave of the anchor replacement projects. We are proud that we have successfully sourced replacements for 27 anchor spaces, which are either open, under construction, or committed.

Not only do these projects add new and diverse uses to our centers, they also stabilize and grow revenues.It was a highlight for me to celebrate 2 weeks ago the grand opening of the new Movie Tavern by Marcus Theatre at Brookfield Square in Milwaukee and to experience the brand-new Whirlyball entertainment and dining complex.

Brookfield Square is a prime example of how we are transforming unproductive anchors across our portfolio.In this case, Sears was redeveloped into a bustling entertainment-driven, mixed-use project. We are bringing together successful retail with fitness, entertainment, restaurants, and other mixed uses.

We are creating value from underutilized parking lots with new restaurants, medical office, and the city-owned Hotel Convention center, which will drive additional traffic.Based on the initial results, the project has been well received in the market and will be a great success.

Another highlight for me is watching the day-to-day progress on the redevelopment of the Sears at Hamilton place here in Chattanooga. Dave & Buster's and Dick's Sporting Goods are well under construction and on track to open next spring.

The Aloft Hotels and self-storage project, both of which are joint ventures, recently started construction as well, and we have plans for additional restaurants and office space as part of the project, another great example of our vision for the future of our assets.

We added several new commitments to the list of anchor replacements this quarter, including Von Maur taking the former Boston store at West Towne in Madison, Wisconsin, which will be a key addition to that center.We are also using joint venture and third-party partnerships to further our redevelopment program.

Three of our Sears-owned locations are under contract to be acquired by a third-party developer with plans to complete future redevelopments.

This is a great outcome from our point of view, delivering transformational projects, while at the same time allowing us to retain capital to allocate to other projects.Our self-storage and hotel joint ventures are another example of how we are successfully realizing value from our assets and maximizing our return on capital.

We are diversifying the uses at our centers, which will provide a more stable base of revenues. Overall, 74% of new mall leasing and 60% of total mall leasing, including renewals this year, has been nonapparel.

Adding nonretail and mixed uses is another focus, and we are currently under construction, have agreements executed or are in active negotiation on 2 multifamily projects, 15 entertainment operations, including 2 casinos, 9 hotels, 31 restaurants, 8 fitness centers, 8 medical uses, 2 self-storage facilities, and several other nonretail uses.The market-dominant locations of our properties are driving this strong interest.

These uses complement our existing tenant base, drive new traffic to our properties and strengthen the overall project.As outlined in our earnings release, adjusted FFO per share for the quarter was $0.34 with portfolio same center NOI, down 5.9% for the quarter and 5.5% for the year.

We are not satisfied with the decrease in FFO and NOI, but we are pleased to be on track to hit the mid- to high-end of our firm guidance range, despite the challenges we have faced from retailer bankruptcies, store closings, and restructurings.We are seeing important improvements in certain operating metrics.

Sales for the third quarter built on the previous positive trend with a 3.2 increased to $383 per square foot. Portfolio occupancy increased 30 basis points sequentially.

However, the impact of bankruptcy-related store closings caused a 150-basis-point year-over-year decline to 90.5%.We are adding innovative and local users through our specialty leasing and pop-up shop programs, while our leasing works to bring on longer-term users.

New leasing spreads were strong, increasing 18% as we make progress on these replacements. We are also focused on various strategies to bolster our balance sheet.

We're utilizing free cash flow, which is estimated at $200 million this year to fund the redevelopment projects and supplementing this with joint venture equity and construction loans on select projects.Another source of liquidity for both redevelopment and debt reduction is disposition proceeds, which has totaled $161 million year to date.Before I hand it over to Katie, I want to touch on two additional items.

This morning, we announced an agreement with Exeter Capital led by Michael Ashner, a highly respected veteran in the real estate industry.

As part of the agreement, Michael as well as Carolyn Tiffany are joining our Board of Directors.As we stated many times over the years, we are and always have been open and engaged with our shareholders and our announcement this morning is the latest example of this.

Michael has a nearly 6% ownership interest in the company, which next to management represents one of CBL's largest common shareholders.

With this strong alignment of interest, we are all focused on unlocking the value we see in CBL.We've had the opportunity to spend a significant amount of time with Michael as well as Carolyn and believe that there's substantial experience with public companies and financial background will bring a fresh perspective and add value to our board discussions.

Carolyn will join our audit and compensation committees. Her more than 25 years of experience in commercial real estate investment, operations, and management will be an asset to these committees.We are also establishing a new capital-allocation committee that Michael will chair. Richard Lieb and I are -- will also be members of the committee.

Many of you may already be familiar with Richard, given his more than 30-year career in real estate investment banking and finance. This committee will serve as an advisory committee to the Board, reviewing our financial plans, strategies, and capital commitments.

I have no doubt that Michael's perspective and ideas will help further our plans to strengthen CBL and maximize value.We are pleased to welcome both Michael and Carolyn, and look forward to their contributions.

Finally, as stated in the earnings release, we will be reviewing our taxable income projections prior to year-end to determine and announce our dividend policy for 2020.As we stated, our priority is preserving cash flow for use in executing our broader corporate strategy, which will ultimately allow us to create more value for shareholders.

With this in mind, we expect to pay the minimum required common dividend, if any, to distribute taxable income.At this time, we are still reviewing projections and we'll provide more information once our analysis is complete.I will now turn the call over to Katie to discuss our operating results and investment activity..

Thank you, Stephen. As our results indicate, we had a productive quarter in many respects. Our leasing team completed 713,000 square feet of total leasing activity, including 240,000 square feet of new leasing and 473,000 square feet of renewals.

On a comparable same-space basis for the third quarter, we signed approximately 400,000 square feet of new and renewal leases at an average gross rent decline of 5.5%, spreads on new leases for stabilized malls increased 18%, and renewal leases were signed at an average of 11%, lower than the expiring rent.

Same-center mall occupancy continues to be impacted by bankruptcy-related store closures, declining 200 basis points to 88.7% compared with 90.7% in the prior year period.Portfolio occupancy declined 150 basis points to 90.5%.

Bankruptcy-related store closures reduced third quarter mall occupancy by approximately 400 basis points or 720,000 square feet, including closures from Payless, Gymboree, Charming Charlie and Charlotte Ruse. As has been widely publicized, Forever 21 filed for bankruptcy in October.

We have 19 stores representing approximately $9.5 million in gross annual rent, and we anticipate that most, if not all, stores will remain open.We've incorporated the impact of any rent reductions in our guidance for this year. Destination Maternity also filed Chapter 11 in October.

We have 27 stores, representing approximately $2 million in gross annual rent, and currently, we anticipate 2 store closures that the bankruptcy plan is still pending.We are encouraged that same-center sales for the quarter increased 3.2%, bringing the trailing 12-month sales to $3.83 per square foot compared with $3.78 for the prior year.

Across the portfolio, we had strong traffic for back-to-school in tax-free weekends. Categories that performed well include fast casual dining, electronics, children's and family shoes and sporting goods. With sales year to date up almost 2%, we are well positioned for a healthy holiday sales season.

We have a lot of exciting events planned across our portfolio as well as a number of new anchor and store openings that will drive additional traffic. Our anchor replacement program has made great progress with the 27 locations committed, including a dozen already open and another 4 set to open within the next few months.

And we are making progress on the remaining spaces with active negotiations or LOIs for several others.You can find a complete schedule of our projects underway in the supplemental, but I'll touch on a few recent updates. As Stephen mentioned, we just celebrated the grand opening of the redeveloped Sears at Brookfield Square in Milwaukee, Wisconsin.

The project includes the new Movie Tavern by Marcus Theatres. Whirlyball entertainment center, Outback Steakhouse and Uncle Julio's. Construction is progressing on the new city-owned Hotel and Convention center, which will open next year.We have opened an Orangetheory Fitness studio, and we'll be adding medical office as part of the redevelopment.

At Mall del Norte in Laredo, Texas, we downsized Forever 21 and our opening entertainment is our main event in early 2020. Construction is progressing on the series of redevelopment at Hamilton Place here in Chattanooga.

The project includes Dave & Buster's, Aloft Hotels, Dick's Sporting Goods, additional restaurants and office space, all joining Cheesecake Factory, which opened last December. The hotel is being developed in a 50-50 joint venture with a well-regarded local operator.

We contributed land as our portion of the equity, which allows us to realize value from our assets and the share and future upside. We also recently started construction on a joint venture self-storage facility on a parcel outside the Ring Road at Hamilton Place.

And this project is a similar structure to our previous storage projects, and we contributed the land as our equity. The opening is expected in early 2020.We have two casinos that will replace anchor locations at malls in Pennsylvania. At Westmoreland Mall, Stadium Live! Casino will be taking the BonTon location.

Construction is commenced with an opening expected in 2020. At York Galleria in York, Pennsylvania, Penn National Gaming will open a Hollywood Casino in the former Sears location. Regulatory approvals are underway. Construction has commenced with an opening anticipated in 2020.

At our 50-50 joint venture property, Kentucky Oaks in Paducah, Kentucky, Burlington and Ross opened in the Seritage-formed -- Seritage-owned Sears. HomeGoods also opened in mid-October to replace a portion of the Elder-Beerman store.

Additional value retailers are under negotiation.Entertainment operator Tilt is under construction in the Sears location at CherryVale Mall in Rockford, Illinois. We lost both Bon-Ton and Sears at this property. The Bon-Ton is replaced with Choice Home Center, which opened in late 2018, and Tilt is expected to open in early 2020.

These replacements required minimal investment. At Laurel Park Place in Livonia, Michigan, Denim Sports is in our construction in the Carson's spot. The opening is expected later this month.We announced that fashion department store Von Maur will open in Boston store location at West Town Mall in Madison, Wisconsin.

The Boston store will be raised later this year to make way for the construction of the new store. As one of the most requested names by West Towne customers, this will be a terrific addition to the property. At Frontier Mall in Cheyenne Wyoming, the Sears location will be replaced by JAX Outdoor Gear, which is expected to open by year-end.

This location is owned by a third-party.In addition to the anchor replacements and redevelopments I've just walked through, we have a lot of activity and LOI in negotiation stages, and we'll make announcements as deals progress.I will now turn the call over to Farzana to discuss our financial results..

Thank you, Katie. We are executing on our key financial goals of maximizing free cash flow, supplementing our liquidity with other sources such as dispositions, extending our maturity schedule and reducing leverage.

We are pleased that we have addressed our major loan maturities for 2019.We have a $4.5 million loan secured by the second phase of Atlanta Outlet Center that we anticipate refinancing, extending or retiring prior to year-end. We also have two secured loans that mature in December, Greenbrier Mall and Hickory Point.

These loans were previously restructured, and we are in discussions with the lenders to determine next steps.Our primary focus is on secured nonrecourse loans that mature in 2020 and beyond.

Generally, these properties have high debt yields and strong locations in their markets.While the secured financing market is selective, we have several available avenues that we are continuing to explore to address these maturities. Our total pro rata share of debt at the end of September 2019 was $4.3 billion.

We have reduced our debt levels by $125 million sequentially and nearly $400 million from September 2018. At the end of the third quarter, we had $380 million available to draw on our lines of credit.Third quarter adjusted FFO per share was $0.34, representing a decline of $0.06 per share compared with $0.40 per share for the third quarter 2018.

Factors that contributed to the variance included lower property level NOI of $0.04 per share and $0.02 per share of dilution from asset sales. Third quarter same-center NOI decreased 5.9%, and same-center NOI for the 9 months declined 5.5%. During the quarter, we recognized an $82.6 million impairment on Mid Rivers Mall in St. Charles, Missouri.

The mall has been impacted by a number of factors, including several tenant bankruptcies, a Sears closure and significant rent reduction on lease maturity for certain major tenants.We've also sold several income-producing parcels around the property over the years, generating significant proceeds but reducing NOI.

You will note we also recorded a $22.7 million reduction to the litigation settlement expense accrued during the first quarter. The reduction is largely related to past tenants that did not submit claims pursuant to the terms of the settlement agreement.

Future reduction of this expense will be evaluated as we are relieved of the liability as provided in the agreement.Based on results to date and our expectations for the rest of the year, we are reaffirming FFO guidance for full year 2019 in the range of $1.30 to $1.35 per share, which continues to assume a same-center NOI decline in the range of 6.25% negative to 7.75% negative.

At this time, and assuming no additional major bankruptcy activity, we anticipate reaching the mid- to high end of the guidance range. We currently expect to utilize approximately $8 million to $10 million of the $5 million to $15 million reserve.I'll now turn the call over to Stephen for concluding remarks..

Thank you, Farzana. As I mentioned earlier, we are excited by the progress and impact of our anchor redevelopment program. We are making improvements to our properties, which is critical to stabilizing income and creating long-term value. We are focused on ending 2019 on a strong note and executing on our key strategies as we approach 2020.

We have a great team of experienced professionals, both here in Chattanooga and at our properties, and I appreciate all their hard work and dedication to CBL's success.Thank you for your time today. We will now open the call to questions..

[Operator Instructions]. The first question today comes from Christy McElroy of Citi..

Just on the Exeter announcement, a three parter here.

What's the relevance of forming a capital-allocation committee separate from the executive committee? How much control will that committee have, the capital-allocation committee over sort of the day-to-day and longer-term decision-making at the company? And with Ashner going on the executive committee, will someone come off or will there be four members?.

Hi Christy, good morning. So first of all, I want to reiterate what I've said in my comments that we're really pleased with the way -- with the outcome that we've reached with Michael Ashner and also having Carolyn Tiffany join the board.

The capital-allocation committee is an advisory committee, and it really is a great mechanism for us to tap into the experience that Michael has had with other companies, his ideas for what we should consider, can consider at CBL.

And also, we have Richard Lieb as part of the committee, and Richard has a wealth of experience, and we've been able to benefit from Richard on the board, but this committee just will bring some additional focus. And so, we view it a positive. It is advisory. So, it's not like an audit committee or compensation committee or a standing board committee.

And it'll just be a new means for us to focus on financial strategies and other financial priorities, which we've been doing, but we can always do more. So, the executive committee, we're just adding Michael to it. And it's -- so it will be myself, my dad, Kathleen, Nelson, and Michael.

And the executive committee plays an important role really in recommending projects for full board approval for the most part. So, it just gives a chance to vet some of the projects and some of the different transactions in a smaller group setting.

I think that answers your questions, right?.

Yes, it was. And then just on the dividend. I know you expect to clarify later this year. But your comments in the release suggests that there may not be a dividend at all when determining taxable income for the year. I think you said, if any.

Is your plan to move to an annual dividend assess closer to year-end rather than a quarterly? And with the impairments that you've been taking, where do you stand in terms of NOLs that could be applied to reduce taxable income?.

Like five questions in one..

Sorry. You only allow two, so....

But you don't follow our two limit anyway. So, we're -- there's a lot of moving parts in the taxable income projection. And so, we're still, obviously, for 2019, we have a really good sense of where that's going to end up. So, most of our transactions have been completed.

But as we look to 2020, we're still finalizing our projections for our property-level budgets. We are making assumptions as far as transactions and looking at all the other factors that go into taxable income. So, like I said, we're going to definitely take the next 30, 60 days before we announce anything for 2020.

Doing it on an annual basis is certainly a consideration, but we haven't made any decision on that, but that is something that is a possibility. And if any, it was intentional. That wasn't something that we just tried to slip in there because like we said, our primary goal is to preserve cash flow to invest in the properties and in the business.

We're seeing good returns from that investment, both financial and also in terms of the impact on the properties and stabilizing income. And also, we want to reduce debt, and we want to strengthen our balance sheet.

So, to the extent that we can preserve cash flow, which is our cheapest source of capital to accomplish those goals, that's what we plan to do. I didn't -- I don't -- the NOLs, by the way, that's something we'll look at. But I don't think we have significant NOLs from the impairments.

It's really kind of two different factors that go into the analysis there..

The next question comes from Todd Thomas of KeyBanc Capital Markets..

First question, Farzana. Looking ahead to 2020, you commented that you're focused on secured nonrecourse mortgages.

Can you just elaborate on that a little bit and maybe comment on the maturities of Burnsville, Parkway and Valley View? What the plans and expectations are for those specifically?.

Sure, Todd. Yes, you're right. We have Burnsville, Parkway Place, Valley View, and a couple other smaller ones that's coming up. We are in discussions with several lenders within the market well ahead of the maturity. We are also in discussions with the current lenders so to make them aware of our progress.

So we'll continue our efforts in working with the current lenders as well as exploring other opportunities to get the financing done. So we're not there yet, but we will, of course, keep you posted as we make progress..

Okay. And then in terms of the outlook for leasing and the leasing environment in general.

As we think about 2020, I'm just curious if you can discuss sort of what your early thoughts might be, I guess, around how are you thinking about the reserve next year, how are you thinking about that just maybe in light of your current tenant watch list? How that might be turning and sort of your conversations with tenants? Can you provide any thoughts on that?.

Yes, Todd. So I mean, it's still. I can't say we are finalizing budgets for 2020 and trying to get a better hand on exactly what it's going to look like, but we do have the bankruptcies from this year. We'll have the full year impact from that and also the restructuring. So that is a hole to dig out of.

Forever 21, it looks like they're going to be able to keep most stores open, but they aren't rent reductions involved as other companies have said and has been publicized. And the others that we've had this year, like Katie talked about, the 700,000 square feet and the 400 basis points in occupancy. I mean that takes time to call back.

So we have that hole to dig out of. Our new leasing spreads are good, but the volume of that is, we still have ways to go, and we've been filling the gap with specialty leasing and pop-ups and all other sorts like that. But it's still going to be, I'd say, a tough year, and we've got a lot of work to do..

(Audit Start 27:45)Okay.

But a lot of this year's activity, that wouldn't be factored into next year sort of on budgeted reserve, right? So I'm just curious, based on the current environment and sort of how you're monitoring your tenancy, if you can -- how are you thinking about that unbudgeted reserve, just given where it's shaking out this year? As you look ahead, how do you think that might look next year?.

Yes. I mean it's too early. I can't tell you. I mean if we would have tried to do a reserve number a month ago, we would have handled Forever 21 and Destination Maternity different. But now they filed, and we have a lot better clarity.

So as we get close to year-end, we'll -- or even February when we announce it, we'll do our best job at that point of estimating the reserve. I mean we have our watch list that we monitor closely. We look closely at all the different sources out there on retailers to try to get a sense for what their plans are.

But on the other hand, there's a lot of things that we don't control, and we don't know. So the more current information we can use by just waiting, I think will be better for everyone in the market. And we did that this year.

And we have -- even though we've had a lot of bankruptcies and a lot of activity, our team did a great job internally of setting a range for NOI that we've been able to hold, and it looks like we're going to be in the mid- to high end of that range despite all the factors. So, we spend a lot of time.

We've honed that process, and this year, I think it served us well. (Audit End).

The next question comes from Craig Schmidt of Bank of America..

Looking at the negative 11% renewal spread. I'm just wondering -- I'm assuming the lease modification restructuring is a big part of that drag.

When you think about the cadence, are we seeing the rent restructuring flow or are we staying as strong or actually increasing?.

Yes, so I mean -- we were definitely disappointed to be as negative on the renewals. But our goal is to retain income and preserve occupancy.

So that does involve being flexible in the restructurings, and that is the biggest contributor, especially where retailers are on the brink, and we're trying to help them without having to go into a chapter 11 or any type of filing where the consequences can be a lot worse. So that's the biggest contributor.

As far as the cadence slowing down, the improved sales definitely helps. And there's a number of retailers who weren't doing as well early in the year that are now seeing better results. And so that's encouraging. H&M is up across our portfolio this year. And so that's really good to see.

And then you just look at some of the other retailers that are doing well. rue21 is another company that has had really strong sales growth this year. And in the past, it has had -- they've had their issues. So we're seeing some progress there. But then on the other hand, there's companies out there that are still having challenging sales.

So it's still, like I said earlier, it's a tough environment out there..

Okay.

And then just in the restructuring process, are you able to get greater control over the leases?.

Yes, it's -- no, I hear you. It's a give and take. And I'd say for the most part, the lease terms are shortened, so that does give us an opportunity to bring in someone else at a better rent. And we have the option as part of a restructuring to not cherry-pick, but to take certain locations out if we feel like there's a better opportunity.

And we've definitely done that as part of these..

The next question comes from Rich Hill of Morgan Stanley..

I wanted to come back to the capital-allocation committee, and maybe follow-up on some of the questions Christy asked. Michael, obviously, has a reputation, a really strong reputation in the debt markets.

So I'm curious, does that mean you might be willing to be a little bit more aggressive in renegotiating debt? I know Farzana in the past when we've chatted about this, you've said that it's a little bit more challenging.

But I'm wondering if Michael being involved in a more significant way changes your approach to the right side of the balance sheet?.

So I mean like I said, I mean, Michael will definitely be more involved on the board, and we welcome his input and his thoughts. But we have been dealing with the maturities, I think, in a really smart way and doing the best we can in all the various scenarios. And we'll have the benefit of his experience and his knowledge, and that'll help us.

But I don't see any significant change in our strategy as we approach those. And we've been aggressive, but we also feel like there's a lot of opportunities in properties going forward that we want to make sure we can take advantage of..

I got it. And so maybe just to drill down on that specifically, your bonds, I think, are trading at a yield, maybe a little bit higher than where developed yields are.

I mean how do you think about that capital-allocation decision?.

Yes. No, we've said that our focus is investing in our properties and the redevelopments. And there is the math, and we certainly run the math on everything. But there's a lot of intangibles when you look at investing in the properties and a lot of ancillary financial returns that aren't captured in the pure returns that we publish in our supplemental.

So we take it all into account. I mean, one of the things that we've talked about it, we didn't talk about it as much in our script is the way we've been able to accomplish a dozen of the redevelopments with less than $5 million of investment.

The joint ventures that we've done on the hotels in self-storage, ground leasing of outparcels, so there's lots of different strategies that we've come up with to manage our capital, to preserve our capital and maximize the returns.

Buying back bonds is not something that we've talked about -- what I'm sorry, we've talked about, but it's not something that we've indicated that we're doing at this time..

The next question comes from Caitlin Burrows of Goldman Sachs..

Farzana, you mentioned the two maturities that are coming up in December, which is just a few weeks away now and that you're in discussions with the lenders to determine next steps.

So I guess I'm just wondering, any sort of comments you can give in terms of could this potentially mean refinance, extend or some other options? You did mention that the line of credit capacity that you guys have.

Just trying to figure out what could be happening in the next month or so there?.

Yes. In terms of Greenbrier and Hickory Point, those are the two maturities that were previously restructured. So generally speaking, we are still in discussions with the lenders as to a restructure -- potential new restructure, but that's less likely. So next year, we are not intending to pay these two loans off from our lines of credit.

So we'll continue to work with the lender early part of next year and either have a another restructure that makes sense to us and them, or we will probably return the properties back to the lender. Those are the two options..

Got it. Okay. And then also just for 2019 on the same-store NOI guidance. I agree you guys have done a good job of forecasting that this year and last year. So that is noticed. It does, though, imply a deceleration into 4Q, but you did mention that the high to midpoint could be attainable.

So I guess, just thinking about that deceleration, do you think it's due to conservatism? Or are there specific headwinds that we should keep in mind? Is it just the kind of rents that you've put in place leading up to this point?.

No, it's just the bankruptcies and the fact that we're getting in fourth quarter, really, all the bankruptcies so far for the year. And the backfill rents that we're getting for specialty income or temporary income helps, but it doesn't offset the losses that we've had.

So it definitely implies a deceleration in the fourth quarter to get to that range..

The next question comes from Haendel St. Juste of Mizuho..

I wanted to go back to your comments on reducing the litigation reserve and understanding it's a sensitive topic. I just want to make sure I'm thinking about it correctly. You had established a $90 billion fund, I think, 1/3 was for returning fees, $60 million for, I guess, tenant credits.

So when you mentioned the $28 million reduction, is that simply reducing the tenant piece, the $60 million down to about $32 million? And then I'm curious if there's any impact on the income statement itself..

Yes. So we took down $22.7 million this quarter. This is -- this was primarily for the past tenants that did not file claims in a timely manner. So that amount is no longer -- we are not liable for that amount. So we have been relieved of that liability. So we've reduced our past tenant bucket by about $22.7 million.

So there's approximately another $10 million or so remaining that as time progresses and as we are relieved of the liability or we have to make a payment, we'll make that adjustment to the expense. As to the balance, it is in the future.

So we have to wait until we know exactly how the rent credits will work and how the claims would work in terms of what is owed and what they owe us. And based on that, again, it's year-by-year that we will be taking that reserve down to the extent we are relieved of the liability..

It's the $60 million that gets reduced kind of for the -- for the question..

Okay. Appreciate that. And then maybe a little bit more on Forever 21.

Can you maybe talk about the range of reductions for the rents there and impact to 2020 same-store?.

Yes. I mean we -- like we said, we started with $9.5 million, 19 stores. I don't think we can give a specific amount as far as the reduction. It does vary in different cases, depending on the productivity and depending on the center and depending on the size of the store.

We are -- we actually had 1 Forever 21 that we downsized and just opened at Mall del Norte in Laredo, and that had been a former Mervyn's, where they occupied about 75,000 square feet. Now their new stores around 20,000 square feet, and that opened in August. We had 2 others that were rightsizing that opened in August and are performing well.

So we feel good that they'll emerge from this, and we'll be able to give a better indication of where we end up financially once the -- all the restructurings are finalized..

The next question comes from Michael Mueller of JPMorgan..

And I appreciate you probably aren't going to be able to give an exact number for this, but the bankrupt -- the unidentified bankruptcy reserve this year of $8 million to $10 million, when you think about everything going on heading into 2020 and Forever 21 is kind of unknown at this point, does your gut tell you that, that reserve heading into next year is going to be similar to this year? Do you think it would be better? Do you think it'd be worse? I mean, just how are you thinking about that and the landscape for closures next year?.

I think you answered your question. No. I mean -- so when we do the reserve, there's some of the income that's projected that we take into the budgets, especially where we know that we're going to have a lease expiring or we have, in some cases, renewals that are negotiated and in place, but the lease have been signed.

So we try to take as much into the budget as possible. And that's why our reserve for this year was lower than it was the previous year, was that we were able to incorporate more into the budget. So I can't tell you, really, my gut, one way or another.

All I can say is that, like I said earlier, I think we've -- we're doing a better and better job of forecasting and trying to get a sense for this, but there still are things that we don't control. So as we get closer, we'll give our best estimate to the market for both our same-center performance and our reserve..

Next question is a follow-up from Christy McElroy of Citi..

It's Michael Bilerman here with Christy.

Did you guys -- I don't think I heard it, the costs that you have, I guess, with your advisors, that will be expensed in the fourth quarter for the agreement that you had with Michael?.

Yes. No, we didn't disclose that. But I mean, we had a very collaborative process with Michael over the past two months in terms of working through our agreement. So I mean, of course, we have expenses, but we were able to keep those down to the point where it's not significant.

I mean we've had -- just overall, we've had some additional legal and other costs for the year that have pushed our G&A higher, and that was disappointing because we had done some salary reductions and other measures to try to reduce G&A. But the Exeter settlement really isn't a significant amount. And we did take the legal into this quarter.

So we don't anticipate anything as the fourth quarter -- as we go into the fourth quarter..

Like Goldman is typically not inexpensive activism defense firm, and so we've seen other companies, specifically in your sector, have some pretty large activism defense success fees.

And so you're telling me it's not like a $10 million, $15 million expense in the fourth quarter?.

Fortunately, not. And Goldman did a great job, and our whole team did a great job. And the best thing about it is we settled it really on an expeditious manner, very friendly, very collaborative, and these things can go really bad, and we're really happy with the way it worked out.

And we had a great team and learned a lot, but now I think it's a win-win for all of us and all of our shareholders..

And just thinking about Michael, the press release this morning says that he's agreed to standstill on voting agreements through 2020 Annual Meeting or for as long as he's on the board.

So is it the later of, i.e., if he's not happy up until the board meeting, he can relinquish his seat and then start a campaign with a new slate? Or are you protected from him doing that at the 2020 meeting?.

Yes, we're protected....

And I recognize that you want to -- it wants to be positive. I just want to make sure I understand..

Yes, we're protected for the 2020 meeting. So the earliest if he gets unhappy would be the '21 meeting. And if he stays on the board, then it goes beyond..

Okay. And then in terms of -- I'm just going back to the executive committee. The board's nine members, this executive committee is not going to be -- I take it, it's 4, right? Yourself, your father, Kathleen and Michael.

I mean, is that efficient where you're able to have half the Board on an executive committee versus something -- rotating some people off, either met yourself or your father or either Kathleen to make it a little bit more manageable?.

No, it works well. I don't -- it's not significant from a cost point of view. And I think that the executive committee really plays a role making recommendations to the board and approving projects that have a more limited scope. So I mean, everything significant really is a board vote. And that's the way we've operated.

And whether it's 3 or 4 on the executive committee, I think it'll still be a very streamlined format..

All right. Just last one on sales growth and operations. You talked in your comments that sales growth is making your leasing easier.

But I was wondering how much of that is sort of survivorship biased, right? So a lot of the weaker stores that are filing for bankruptcy or closing having below average sales productivity or lower growth versus increasing sales at the existing, what I would call sort of same-store basis?.

Yes. No, that's a good point. It's both. I mean there's definitely some addition by some traction with the weaker retailers, but we're also getting strong organic sales growth from a lot of our core retailers. And then we're seeing some retailers that are still working through challenges. So it's both. But it's consistent also across the portfolio.

It's not like we're seeing one geography or one type of center different than the others. It's pretty consistent. And so that's why I was more optimistic in my comments earlier. By the way, you've totally blown away Christy's effort to stay within two questions..

I thought that we were like, you said an hour or so, I figured if we were second up that there wasn't that many more questions in the queue and typically last anyways..

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, again, everyone, for your time this morning. We'll be at NAREIT in a few weeks. So look forward to seeing everyone who's out there for that. And in the meantime, feel free to reach out with any questions. Thank you..

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