Ladies and gentlemen thank you for standing by and welcome to the CBL & Associates Properties Fourth Quarter and Full Year 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 on Wednesday, February 4, 2015. I would now like to turn the conference over to Katie Reinsmidt, Senior Vice President of Investor Relations and Corporate Investments. Please go ahead ma’am.

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties Inc. conference call to discuss fourth 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 disclosure 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 website at cblproperties.com.

Thank you, Katie and good morning everyone. 2014 was a tremendous year across the board for CBL as we reached and exceeded the lofty goals we set out for our company. We surpassed the top end of our increased guidance range for same center NOI with growth of 2.4% for the year and 2.9% for the quarter. FFO was at the top of our guidance range at $2.28 per share representing a 3% increase for the year. We progressed our balance sheet strategy by growing our unencumbered goal as well as decreasing our percentage of secured debt as we initiate our second bond offering in October. We invested heavily in our core portfolio opening several successful redevelopments and expansions as well as new projects that added substantial value. We made headway on our disposition targets selling one mall to non-core centers and entering into new contracts which I’ll discuss in more detail shortly. NOI growth in 2014 was generated from properties across all tiers indicative of the strength of our market dominant strategy. Throughout the year we discussed new storage restaurants and boxes that have opened in our portfolio. A few examples include Kate Spade, Tumi and Gucci at the outlet shops at the Bluegrass, Williams-Sonoma at the outlet shops of El Paso. J. Crew and Hamilton Place, [indiscernible] Gallery and Fayette Mall, Burlington at Northgate Mall, T.J.Maxx and College Square, DICK'S Sporting Goods, Randolph Mall and Ross Dress for Less and Hickory Point. We also opened seven new H&M stores across the portfolio. All of these leasing activity help drive the growth we produced in 2014. We saw stellar result in our lease spreads on both new and renewal leases with an average increase of 12.6% during the quarter and for the full year. Spreads on renewal leases were…

Thank you, Stephen. We’ve started construction on the redevelopment of the former JC Penny stores of Janesville Mall and Janesville Wisconsin and Hickory Point Mall in Forsyth, Illinois. Janesville Mall will welcome ULTA and DICK'S Sporting Goods to the center in the fall at 60,000 square foot Hobby Lobby will join Hickory Point in the fall as well. Fueled by healthy retailer demand we added nearly 30 boxes and over 20 restaurants through our centers in 2014. As Stephen mentioned earlier we added seven H&M stores in 2014 and have more than a dozen of their stores on tat for openings in 2015 and 2016 across our portfolio. Additionally we’ve leases executed with ULTA, DICK’S Sporting Goods, T.J.Maxx and other boxes to open throughout this year. For those of you that joined us on our tour [indiscernible] you may recall seeing the expansion sites that are now underdevelopments. We’ve a 33,000 square foot phase 2 expansion that will bring gap, Banana Republic and other great retailers to the project. These new stores will start construction next month for an opening before the holiday season. We’re also adding 96,000 square foot outparcel location which will open later this year. During the fourth quarter we celebrated the grand opening of Sears redevelopment at Fayette Mall and Lexington, Kentucky. Cheesecake Factory and other moved in the market stores such as Oakley, Clarks, Aveda, H&M, Albert [State and Vera Bradley opened to a fantastic reception. Additional shops and restaurants including Pink, Nukes and [Juvenia] Italian Kitchen are currently under construction with the spring 2015 opening. We will still celebrate the opening of the Sears redevelopment at CoolSprings Galleria. Cheesecake Factory opened in November and American Girl, H&M, Belk Home and additional shops and restaurants are set to open this year. [Indiscernible] our open air…

Thank you Katie and good morning. Before I begin, I’d like to take a moment to congratulate Stephen on his nomination for the ICSC Chairmanship. It’s quite an honor to be chosen and I know I speak for the entire company when I say how proud we’re of this recognition for Stephen and CBL, congratulations.

Thank you, Farzana.

Now for our recent balance sheet achievements. During the quarter we retired three secured loans totaling $165 million and for the year retired four loans totaling $285 million adding $464 million of growth asset value to our unencumbered pool. We also completed the conveyance of Columbia Place to the lender in lieu of foreclosure reducing outstanding balance by $27.3 million and recognizing a gain on extinguishment in the fourth quarter of approximately $23 million. We ended 2014 with a decline of more than $160 million in our total debt balance compared with the prior year. As we look forward into 2015, we have $465 million of loan secured by consolidated properties maturing at a weighted average interest rate of 5.6%. Our plan is to unencumbered these high quality assets using availability under the lines of credit and then convert to long term fixed rate unsecured debt based on market conditions. We also have our shares of $231 million in joint venture loans maturing this year which we plan to refinance at lower rates. We used the proceeds from our $300 million bond issuance in October 2014 to pay down balances on the lines reducing our exposure to floating rig debt to 14.6% of total debt at year end. Our line availability of 1.1 billion gives us tremendous [indiscernible] to execute our plan to convert secured debt to unsecured borrowings. Our financial covenants remain strong with our fixed charge coverage ratio of constant from the prior year at 2.2x and then interest coverage ratio 2.9x. Secured debt to gross book value improved to 37% at year end from 41% at prior year end. The consolidated unencumbered NOI has increased to 36% at year end compared with 28% at prior year end with the significant payoffs of secured debt, we expect consolidated…

Thank you, Farzana. Thank you again for joining us this morning. We’re pleased to deliver such strong results for 2014, but even more importantly we are looking to achieve successful 2015. Retail demand is strong and our entire company is focused on executing on the initiatives we have set forth. We are now happy to answer any questions you may have.

Thank you. [Operator Instructions] And our first question comes from the line of Christy McElroy. Please go ahead.

Hi, thank you, good morning. Stephen, on the three malls under contract did you mention the contracted price and can you disclose which three malls?

Good morning, Christy. No, I didn’t mention the price and I can't mention the names right now. Like I said, during our comments, these three are all subject to lender assumption and we really have just started that process, so we feel like it's premature to announce those kinds of details at this point. Triangle is not subject to lender assumption which is why we are comfortable going ahead and announcing that. And also one other factor Triangle is with an institutional investor, the three malls are really more of a regional buyer, so there will be more of a process in terms of getting the loans assumed in that case.

So, when should we expect to hear more details on it and what would you date as the probability of closure at this point?

Well, we wouldn't have signed the contract if we didn’t think it's got a good chance of going forward and the buyer has a track record of other successful acquisitions. So, we are optimistic on that front. The loan assumption process has taken anywhere from 60 to 90 days to 5 to 6 months. It just depends on the nature of the assets, the servicer, how much - who has been there in doing that. But, as soon as we have any information we will share it. Also the way the deal is structure, if one of the assets clears faster than we can close on each one individually so it's got better, I have to close together.

And can you comment on whether or not you are open to doing acquisitions at this juncture is there anything that you are working on currently, what sort of cap rates are you comfortable with and as you start to generate more proceeds from assets sales how do you weigh the use of those proceeds in terms of acquisitions versus redevelopment versus debt pay down?

Sure. We look at acquisitions, we continue to look at acquisitions and we are open if we found an opportunity that we felt like would fit with our strategy, a tier 1 mall that would have growth potential going forward and that we see either redevelopment expense potential going forward. So that's the kind of property when we look there is a lot of property out there although I can't say that there is much that we’ve found that attractive. Cap rates it really just depends on whether there is debt in place on the assets or it's free and clear, what the growth potential is, whether it's a redevelopment or a relatively new property. But cap rates have continued to compress and we saw just this morning that we’re still in transaction and the cap rates are very attractive on that deal. So, cap rates are not going up. They seemed to be going down and that would definitely be a factor in any acquisition that we would consider. How to use the proceeds from the dispositions, I am sorry. So, we are - I mean, we still think redevelopment is the best use of proceeds in terms of the returns that we are generating. This standalone returns they add, we got that up to an 8% and we have been in the 7% to 10% range on the redevelopment, some even higher depending on the nature of the project and that's just standalone. I don't even give credit to what benefits it causes in the mall from the redevelopment increased sales, traffic other leasing we can do. So that's our number one priority from the capital deployment point of view and we are constantly looking at opportunities. It’s part of the anchor redevelopment strategy which we think is, it can really drive opportunity in sales of properties if we can accomplish more of those. So that's the big priority for us.

One last question on retailers if I could. We have been hearing that a few retailers are experimenting with converting some of their stores in C mall into outlet concept. I am wondering if you have seen this in any of your C mall and what are your thoughts around that idea?

Yes, we have seen that Christy essentially you would ask and there are several retailers that have been doing that. We actually had Abercrombie do that in one of our malls, tier 2 mall few years ago and sales have improved. The J. Crew store in Chattanooga is a factory store and it's doing really well and that’s not a C mall. So, it's not just C mall it's opened to dozen across the country and I am sorry they’re open not a dozen, they’re open right across the country and so that's something they are testing, but they have done phenomenal here and we’ve added in a couple of other malls where retailers have done that, that kind of conversion. And what I understand the logic is that just looking at their price points in the market, they feel like it allows them to be more competitive with other either other retailers that are operating and to offer their merchandise a more compelling price and drive more value with the customers. So I think it's probably something we will more of.

Thank you so much.

Okay, thank you Christy.

And our next question comes from the line of Todd Thomas from KeyBanc Capital Markets. Please proceed with your question.

Hi, thanks, good morning. Just the first question regarding Triangle Town Center, I was just wondering if you could talk about what the go forward plan is there with regard to operating the assets and handling the $175 million debt maturity that's coming up in December and sort of what CBL’s remaining capital exposure is going forward?

Hi, Todd. I will answer one part of your question and Stephen can answer the second part of your question. The loan is coming due. This is open to par date in September so our expectation is that we will be refinancing and the loan amount will be less approximately 125 million. So, there will be some equity infusion from our end done and that equity infusion is somewhere around $8 million on a gross basis and on net basis for because the sale of this transaction will generate us about $4 million net proceeds.

And then Todd, what I did speak not accurately, there is a loan assumption but it is a very short term loan assumption because their loan is delayed this year, so we expect that to go very quickly and smoothly. And then, as far as why we want to stay in the mall, Triangle is in Raleigh-Durham, it’s a strong market, sales are around 320 a foot, but they are growing, it has very strong anchor sacks, an anchor there and their business has been growing nicely over the last three years. So, it’s a very attractive asset, the demographics around the mall planned out, but now they started to show improvement and there is also redevelopment opportunity. There is an outdoor part of the center that really needed capital and because of loan amount, that ownership as in the venture with Jacobs were in a position to, if that’s capped onto we could figure out a new strategy for the property. But, this redevelopment now under the new ownership will go forward and should really drive more success in that outdoor area and create more value at the center. So, we view it as an outlet that where we think fits well with our strategy and we will have good growth going forward.

Okay. And the question then for Farzana, the $10 million provision for closures and bankruptcies, you mentioned that the annualized gross rent for the average retailers totals about $15 million, I guess its offset by leasing in new commencements, but how much of the $10 million is already spoken for if you will, and how much is allocated for unknown, unanticipated closures that might still take place from here, I guess what’s the cushion look like that’s build in from here?

I think we feel comfortable with the $10 million reserve that we have established, we have taken into consideration the store closures, some backfilling that already will be occurring and with the momentum we have in our centers with strong demand from retailers, we should feel pretty good about this $10 million reserve. Now, our goal is to really beat it, not really even have the $10 million fully be baked in, we hope that we can recover this and come away with a high end of our guidance range.

Just one other thing Todd, we just don’t know of that $15 million, not all the retailers have told us which stores they are keeping and which they’re closing. So, we just said we would put the total amount out there, and you are exactly right, we’re going to offset that that’s not a total loss number that’s just a total number of gross rents and not all the stores we’re going to close and it will have replacement in place and specialty leasing to pick up, so we’ve got sources to offset and that’s why we used the $10 million number. But, it’s a tough start to the year given these bankruptcies and like I said it’s more than we have seen in quite a number of years, so it does make our job harder this year to get to everyone to be.

Okay. And then just one last question, I think last quarter you alluded to there being a potential new outlook project something that might open in 2016, actually I believe that there was a possibility that two projects could potentially open in ’16 that you’re sort of looking at, any comments on that anything that’s new in the pipeline that you can discuss?

Well, we stopped the two projects, we’re not ready to announce and as I think you have seen our other projects, we don’t go forward with them unless the preleasing reaches certain levels, it’s been 60% or more for all the projects before we have actually made the announcement. So, we are pushing the preleasing but it’s not there yet and hopefully in the near future we will have more churn out on those.

Okay, thank you.

Thanks Todd.

And our next question comes from the line of Jane Wong from Bank of America/Merrill Lynch, please go ahead.

Hi, thank you. I’m here on behalf of Craig Smith. I was just wondering if you could talk a bit about the challenges or the lessons learned so far from the dispositions that you have planned and if you have any targets or goals of how much you want to sell this year and also if the environment has changed for the buyers?

Sure. Good morning Jane. Well, the environment really has not changed, it’s been steady, interest rates have stayed low and that helps us because most of the buyers do use some kind of leverage as part of their strategy and we are talking to the same universe, the combination of institutions, private equity groups, regional buyers. Some come in new, some go out so there is always transition there, but I would say it’s a pretty consistent flow in terms of the debt that we’re working with. As far as targets, we have not announced any specific targets for the year. We announced last year the 21 mile program across the 4 miles with the lender transactions and we said we plan to do that into the three year timeframe and we are pushing to do it as quickly as possible and that still our plan and we are working on as I’ve said in my comments, really the vast majority of the mall we are having discussions either maybe being marketed by brokers or having discussions off market and so as quickly as we can get this done that's better for us, that's better for the market. So that's our priority. And lessons learned I would say it's good to have backups, the mall that we announced under contract we really went through a process with the original buyer but we had backups in place and then we got another buyer that we don't have the contract signed yet, so we can't announced details but we feel confident that they will - that it will move forward. And so, we are working on all fronts. We are working very hard at it. Like I said we are confident that this is going to be a good year progress for us.

Great, thank you. And have you disclosed which community center is under contract to be sold for $23 million?

No, not yet, but we will when it closes.

Great and then just one last question for the 2015 guidance of same center NOI flat to 2% how much do you think the store closing and bankruptcy is impacting that?

We mentioned it's about $10 million reserve that we have taken so at the low end of the guidance with 0% and had we not had this reserve we would have been around 1.5% at the bottom end of our guidance. So right now that's our estimate.

Got it. Thank you.

Thank you.

Our next question comes from the line of Nate Isbee from Stifel. Please go ahead.

Hi, good morning. Just going back on the guidance issue, the flat 2% same store guidance as you mentioned it include $10 million of reserve of loss based on the increased closure, like you mentioned Cash A filed this morning, I guess how many more bankruptcies on closure to guidance assume and what point do we assume even flat NOI might be a challenge?

Well, the $10 million guidance which we - the stores that we know are closing some of it has already been considered and this $10 million additional bankruptcy guidance reserve that we have used we have given ourselves some room for additional bankruptcies to come into play. However, we also have made the assumption that we will have specialty leasing, we will have other leasing activity that will push us to reduce that guidance or at least maintain that $10 million reserve. So at the bottom end we should - we are comfortable at this point.

Yes, I mean the Debt, Wet Seal and Body Central they not only filed, but they closed their stores almost immediately with few exceptions. There are couple of debt that’s open a few Wet Seal, so that's why those are the three primary ones that we felt like we needed to account for in terms of the reserve and then there is some other realm in the reserve for others like we are worried about cash A, we knew it's just matter of time, although cash A we don't think it's going to close the majority of their stores and RadioShack, there is rumors everyday about who is out there, the latest I read this morning in Amazon and spread looking to buy their stores. So, who knows what will happen with them. But it's - other than that we don't see a lot of exposure, [indiscernible] has had a few tough years, everyone has been talking about. They closed down [indiscernible] in January, but we had budgeted for that. So, we knew that was coming and from a credit point of view we look at almost at the other retailers and this really clears a lot out of our watch list that companies have evolved this year.

So, just to clarify what’s in debt shops, was that included in $10 million?

Yes.

That's right.

Okay. So I guess then just taking the step back, you said in -- do you think $3 million additional reserve is enough for this year to account for --?

Nate, I think $10 million provides us with the non bankruptcies that we discussed and some additional closings that we are aware of that is included on our budgets and some additional cushion that we think is necessary because remember it's not just - we know the stores are closing, but we are also making the assumptions that we are going to back filling some of them with specialty leasing. We are not going to let them just sit vacant so a lot of it had been baked in and this $10 million so we, unless a major, something major happens that's outside our consideration right now but for the non bankruptcies and what we know about RadioShack or Cash A, we feel comfortable.

Okay. Thank you. Then just one last question, this Triangle Town Center, would you say that one of the original mall that you contemplated selling last year when you laid out your 20 mall active sale plan?

It was one of the four that we said when the lender bucket, so 21 plus four 25 total so it's one of the four.

Okay, alright, thanks.

Thanks Nate.

Our next question comes from the line of Jeremy Metz from UBS. Please proceed with your question.

Alright, good morning. Just going back to the three malls you said you had under contract, I understand you are not giving the names, I was wondering if you could at least try to provide with some goal posts here, are we talking about $50 million or is this $150 million worth of asset just so we can give shareholders little information of potential impact here to earnings getting into the individual mall information and then the second part of that would be if you can talk a little more about the process there was it a broker package, how big was the potential buyer pool and you talked about 9 plus percent yield there and just how did that pricing end up versus your expectations?

Yes. Well, just to give you a rough idea it's under $100 million kind of in $75 million to $100 million gross value and so that includes the debt and these were malls that we were working with a broker. It was part of the off market group. We are talking to a limited number of buyers and but it was something that the broker representing us talked to a number of buyers and this buyer emerged as the most aggressive and the pricing is consistent with really what we have been saying that this portfolio that we are looking to sale should trade as an average high single digits so this is in the low 9% range. So, we feel very good about where we are ending up on this and we are hoping we can get through lender assumption process as quickly as possible and move forward.

And comparing these assets just to the remaining 17 you have left, is this I mean is this sort of pricing, is it fair to assume for the remaining bucket or are there assets that you sold out there those are little worse quality and pricing correction move up from there?

This is representative, some of the rest are going to be lower Cap, some are going to be higher but this average is right about where we see things going.

Okay. And then just one last one just switching gear, in terms of the same store guidance, come back to that 0% to 2% can you just give a little bit color on the growth between the three tiers here, if you were assuming the tier ones are going to be in that 3% to 4% range does this mean you are going to thinking that the two or three malls are going to be somewhere on a negative 5% range or just whatever color you can rely them on, how that breaks down?

Yes, I think our tiers are, as we said in the past more linearly our tier one generates around 4% growth and as we move down on the ladder it’s going to be progressively less. However, I don’t think that the tier 3 will have a negative 5% growth, we perhaps believe that that’s going to be around flat growth and so as you see the 0% to 2% range it’s just going to vary but our tier 1 should perform well and tier 2 should also follow through with a flat growth for tier 3.

Jeremy, one of the think actually in ’14 that drove our NOI growth higher than we had budgeted and higher and we had guided early in the year was tier 2 and 3 and leasing, the lease spreads actually were better than we had expected. So that was just a factor in last year that really helped us.

Okay, great, appreciate the comment. Sorry to go back but one other one, I don’t know if I missed this earlier. Did you give a yield on the 181 Triangle sale or can you provide the yield on that one?

Yes, we said it was in the mid 7s.

Okay. Great. Thank you.

Thanks.

Our next question comes from the line of Lina Rudashevski from JPMorgan, please go ahead.

Hi, thank you. I was just wondering, do you think the level of bankruptcies will normalize back to the 5 million to 7 million level you quoted going forward like in 2016. Do you see kind of heightened bankruptcy level from retailers?

Well, I wish I knew but I think this year, this is definitely going to be a higher year than we have seen in the last few. In ’11 and ’12 we were kind of down in the $2 million to $3 million range and so hopefully after this year it will go back down and the five to seven is average over except for OA, which was a lot higher it’s kind of a average that we’ve seen over the long term. But, there is some volatility in that number and I think getting, clearing this group of retailers out will help us not necessarily short term, but long term we are out there working with replace of retailers and just given the high occupancy rates in the portfolio, we are seeing good demand and so we feel like we will be better off down the road replacing these retailers it will just take time with down time and backfilling.

Thank you.

Thank you.

Our next question comes from the line of D. J. Busch from Green Street Advisors. Please go ahead.

Thank you. Stephen just talking a little bit about the core portfolio, have you seen an increase demand or even approached for some of your malls outside of the disposition properties in the core portfolio and what would be given maybe the west field transaction last night, what will be your willingness to sale some of those properties this pricing has in fact or gone higher?

Yes, hi D.J. We get approached, I would say not a lot but every once in a while with other assets in the portfolio but we have been clear that our priority now is really executing on the program that we announced last year and we feel like we need to make progress on that and then that will get us to a place where we can evaluate what makes most sense going forward. Remember we did the TIA joint venture with some of top tier malls back in 2011 and that makes sense at the time given what the demand was in the market but our tier one malls we see good opportunities that redevelop and can grow them going forward and that's what we need in the company so our inclination is isn’t to sell those properties but to sell the ones that we have announced.

Okay and then going back to Christy's first question on use of proceeds on the dispositions, can you talk about your willingness to buy back shares and based on the unsecured rating is even possible can you explain that process and if you can use proceeds to buy back some of your shares out at current level?

Well, what we said it really hadn’t changed but in the event we with the dispositions we generated significant cash. We would look at our share price at the time and see if the buyback made sense given how our stock has moved up. So, it doesn’t make much sense now as it did this part of last year but it's something that’s on the table and we will evaluate it at the time just depending on proceeds we raised and where the market stands. So, it's definitely an option and something we will evaluate as well at the same time as the redevelopments in the acquisitions that might be out there.

Okay. Great. Thank you.

Thanks D.J.

And the next question comes from the line of Jim Sullivan from Cowen. Please go ahead.

Thank you. Good morning. Stephen on the sale of the Triangle property can you just share with us first of all whether there was any preferential return provided to the new partner there and number one and number two, whether the decision to retain an equity stake as well as manage the asset was whether that was how the asset was marketed or whether that was something that was just kind of the mutual agreement between yourself and the new partner?

Sure Jim. Good morning. First of all it wasn’t marketed, it wasn’t marketed transaction we were approached by the institutional group about the asset just from our announcement that we intended to try to work with the lender on it and they saw an opportunity to redevelop it and some offsets so they came to us and wanted to get our sense for that and there is no preps in the deal it's a straight up structure based on the ownership split that I talked about 85:15 and we are really excited to be able to stand as they’re going forward. We see a good future and good opportunity. Also the partner we can't announce yet but it's a great group to work with. So we are excited about being able to work with them and hoping that will lead to other deals going forward as well.

Okay secondly, in terms of the store closure provision that you made the $10 million, I wonder if you can share with us, if we think about your portfolio, leaving aside the associated centers for a moment and to kind of your core malls that you are planning to sell and then your outlet centers, is the - should we assume that disproportionate level of the store closure or in the assets that are for sell or is it pretty evenly pro-rata spread across those three kind of distinct segments of the portfolio?

Yes, it's really spread across the portfolio. And it's spread across all mall owners. These companies Wet Seal and Debt and Body Central have presence across the industry in most malls and they weren’t differentiated between tiers at all.

Okay, and then finally for me, in terms of the factory center business, this has obviously been a very profitable development experience that you had and I want to know if could help us with couple of respects kind of get our arms around the value creation opportunity here. First of all whatever you can share with us regarding where you think cap rates would be for the type of asset that you have been developing, number one and number two as you think about the potential performance in terms of internal growth for your outlet center portfolio versus kind of your core mall portfolio. Can you expect the growth rate going forward to be comparable or is one going out from the other in terms of internal growth?

Well, first yes I mean it’s been very lucrative area for us and we are very pleased with our results. Our return on equity on an outlet center projects is over 30% and the most recent one to [Tanger] because of the financing that we were able to do so it’s very profitable, I don’t know what cap rates are, we are not trying to sell these assets at all and but you can just look at where I guess Tanger is trading and see that they continue to move down for their stocks done so well and with their growth potential. So, there is huge value creation, we opened both Atlanta and Bluegrass at over 12% unleveraged returns and so you can do the map based on whatever you think the cap rates are. As far as growth going forward, the outlets are really are specialist stores they are large anchors, it’s a function of sales growth. They opened pretty highly leased, so it’s not so much releasing, but we see good consistent growth there and it should be pretty much at both same levels either tier 1 of our other centers. So that’s something that we feel good about and we think they’re good assets to keep in the portfolio. We’ve also been able to expand the outlet centers, we did two last year, we have two this year. So, with the demand that we’re seeing from retailers to come into the centers, we have looked at any land that we have as part of those and built that out as well so that’s the opportunity going forward in the portfolio.

And then, finally from me on the outlet centers and I know at some points in the past you hesitated to kind of put a percentage on it, but given that those kind of returns and that kind of relative growth, do you have a target in terms of how much of the company you would like to have to be allocated to the outlet center sector and when you complete the sale of the assets, you would like to sell?

I mean, we don’t really have a target it’s about 5% now and we obviously want to grow it and its comparative area as far as starting new projects and we have a great partner Horizon Group and they are working on other opportunities and we’re going to be smart about the new projects that we do to make sure that that have attractive returns and we don’t jump the gun and start before there is the right level preleasing. But, if we can find projects that meet the criteria and are consistent with the ones we’ve done so far then we’re happy to continue to add more and have these growing percentage of our overall asset base.

Okay, great. Thanks guys.

Thanks.

Our next question comes from the line of Carol Kemple from Hilliard Lyons, please go ahead.

What quarter this year do you all expect to have the rest of your litigation getting received in?

Can you repeat your question Carol just to be sure?

Yes, what in your guidance you all have an adjustment for a litigation settlement what quarter do you expect to receive that settlement in?

It will be in the first quarter this year.

Okay.

We have already received that. So we will book that.

Okay. And then, what happened to your conversation with Sears as far as them either selling their boxes back to you or leasing their boxes to other retailers?

We talk to Sears all the time and they are focused on lot of different initiatives, they continue to look at REIT, which for some of their stores they announced last year and we know pretty much what everyone else knows which is what they say publicly and we have worked with them to try buy more stores and sublease more stores as a follow up to the deals we have done last year and we haven’t got anything to the point where it’s moving forward, but we have ongoing conversations, we have got really good working relationship with them and so hopefully as they move forward we will see more opportunities to the similar redevelopments to strengthen that we are able to do last year.

Have they leased any of their space out in any of your malls to other retail tenants?

Yes, they’ve done, they’ve done on a couple of cases, they did a whole third at friendly center and we actually sublease from them about 30,000 square feet at one of our centers that we have under redevelopment Brookfield Square and Milwaukee. So, it's something that and I know they had conversations with other retailers as well. So, it's something that they are continuing to evaluate and for them I think it's really financially driven and how that transaction is compared to how much money they are making from the store on operating basis.

Okay. Thank you.

And our next question comes from the line of Rich Moore from RBC Capital Markets. Please go ahead.

Hi, good morning guys. I just want to make sure I understand Farzana, so for the first quarter should we put $10 million provision for doubtful accounts, our operating expense number is that right?

No, that’s for the full year. Full year we are assuming that we will have about $10 million in losses from the tenants closing. So that's for the full year. So it's not going to all happen in the first quarter. It should be ratable because if you compare period to period, that's how the rent come in.

Okay. So each quarter we should put $2.5 million of additional operating expenses, is that right as we estimate going forward, is that the way to do that?

Well that’s a pressure on - that’s the reduction in revenue. So, the way we see it it's not really a reserve that we - we have just built in a guidance what the revenue line item will be. The revenue line item will decrease because we are losing the rent that we had before. So that's really what we mean when we say $10 million reserve. Not so much there will be bad debt expense because the revenues are not going to be booked. So therefore there is not a bad debt expense.

Okay, so you I mean your provision for doubtful accounts has been fairly low is that going to go up this year and in addition to the $10 million that you are thinking?

Well, the bad debt reserve fluctuates based on the receivables the revenues we have booked and then we have not collected. Therefore we will write it off. But if we never book the revenue for these tenants that are already gone, then we are not going to book it. So it's just the pressure that we are going to experience under revenue line item that's the reserve we are talking about.

No, no I got you but then in addition to that will you have more on the bad debt line on the production for doubtful accounts because that’s been somewhat low historically - from a historical basis, so you just raise that sort of a general view of the tenant environment, I guess we do that too and in addition to the $10 million?

No, I don't think you should do that because our bad debt expense for the full year has been around $2 million last year was a similar so I don't think you should do anymore than what we have given you the guidance.

Okay. Great. Thanks. And then on interest expense, the $3 million for the default interest expense, that was in interest expense is that right?

That's correct. That was relating to Columbia Place mall we had to book default interest but once we return the property to the lender, actually it's a non-cash interest expense so therefore we don't have a pay back so we have net of that against our gain on extinguishment of debt so that was in the full interest expense number.

Okay. So then interest expense for the quarter, the actual interest expense net of that kind of came down, what are you thinking about for interest expense we go for, do you have number in your guidance for annual interest expense that you are thinking for the year?

Well, I don't have broken down for the full year what that interest expense number would be. However, it will be less than a full year number, annual number we have for 2014 primarily because we are going to be paying off 400 and some million dollars in secured debt that has 5.16% weighted average interest rate and we will refinance it through lines of credit. There will be a short term benefit from the lower interest rates from the lines of credit and then once we clear the bonds that will have an impact of going back up but we also have a joint venture loan at mall that has a 5.85% interest rates. We know that that will be refinanced and we should have at least 150 basis points savings on that loan. So generally I would say the overall interest expense will come down.

Okay and so just the curiosity for the first quarter are you getting any benefit in the fourth quarter from running balance in your line that kind of thing or should the first quarter interest expense sort of mirror what we saw in the fourth quarter or at least somewhat in mind that are some of the changes you make obviously during the quarter?

That's correct. The first quarter should be similar as the fourth quarter it will be higher but as we - because these loans that we will be paying off will not happen until third quarter which is starting July.

Okay, good. Got you. Thank you and then the last thing guys there is 25 malls in the territory bucket and Stephen I think you have got 21 for sale. Are there a handful in there I guess that are salvageable that will ultimately make their way up in the tier 2 is that kind of the thought process?

Yes, there is several I mean first of all the 21 also include the tier 2 malls so it's not all the tier one and I mean the tier three. So some of the tier three we see sales growth to move sales growth to move them in the Tier 2 and redevelopment opportunities which is why we have put them on the disposition list.

Okay. Good, thank you guys.

Thanks Rich.

And our next question comes from the line of Andrew Johns from [indiscernible] please go ahead. Mr. John your line is now open, please proceed with your question. Mr. John we are not hearing your question, please check your mute button. And Mr. Lebovitz we have no more questions at this time, I will now turn the call back to you.

I think they’re in queue, although they did kind of already ask Q1, answered Q1 refi NOI growth.

If you have any further questions and you can contact us after the call we’d like to thank everyone for taking the time this morning, we’re excited, again a better results for the year and looking forward to seeing all of you shortly. Thank you.

Ladies and gentlemen that does conclude the conference call for today, we thank you for your participation. All of you please disconnect your lines.