Q2 2008 Ramco-Gershenson Properties Trust Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Greetings and welcome to the Ramco-Gershenson Properties Trust second quarter 2008 earnings conference call. At this time all participants are in a listen only mode and a brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star-zero on your telephone keypad. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Dawn Hendershot, director of Investor Relations for Ramco-Gershenson Properties Trust. Thank you. Ms. Hendershot, you may now begin.

DAWN HENDERSHOT, DIR IR, RAMCO-GERSHENSON PROPERTIES TRUST: Good morning and thank you for joining us for Ramco-Gershenson Properties Trust second quarter conference call. I am hopeful that everyone received their press release and supplemental financial package, which are available on our website at www.rgpt.com.

At this time management would like to inform you that certain statements made during this conference call which are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although Ramco-Gershenson believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be obtained. Factors and risks that could cause actual results to differ from expectations are detailed in the press release and from time to time in the company's filings with the SEC.

Additionally we want to let everyone know that the information and statements made during the call are made as of the date of this call. Listeners to any replay should understand that the passage of time by itself will diminish the quality of the statements made.

Also the contents of the call are the property of the company and any replay or transmission of the call may be done only with the consent of Ramco-Gershenson Properties Trust.

I would now like to introduce Dennis Gershenson, president and chief executive officer, Richard Smith, chief financial officer, Thomas Litzler, executive vice president of development and Michael Sullivan, senior vice president of asset management.

And at this time I'd like to turn the call over to Dennis for his opening remarks.

DENNIS GERSHENSON, PRESIDENT, CEO, RAMCO-GERSHENSON PROPERTIES TRUST: Good morning and thank you for joining us. First, it's always a pleasure to be able to announce that we have met or exceeded first call estimates. More importantly however, it is my mission this morning to reinforce the fact that we are comfortable with the trade areas of our shopping centers, which are primarily in in-fill locations with above average population and income statistics.

To demonstrate that we are confident of the ability, stability and future growth prospects of our core assets as seen in our leasing and operating statistics, that we are proud of the success we're achieving and our announced redevelopments and that we are optimistic about the progress that we're making with our new developments.

My confidence in Ramco's management team to move ahead with our 2008 business plan is not a denial of at best an unsettled economy, which has resulted in a challenging leasing environment and a debt and equity market that limits our choices to raise capital. However, we have been in this business long enough to know that these times will pass and that the companies with quality assets and excellent sites are well positioned to weather this period.

Let me briefly give you an update on the progress we have made on our redevelopment and development pipelines. During the first quarter of 2008 we have 11 shopping centers with significant value-add potential under redevelopment. As of the end of the second quarter we are increasing that number to 13 centers. Understand that at each of these assets we have either signed a lease with a new identified anchor or we are finalizing lease negotiations with the key retailer.

During the second quarter we signed four anchor leases, which includes Beall's Department Store in 62,000 square feet at Rivertowne Square in Deerfield Beach Florida, Hobby Lobby in 50,000 square feet at the Clinton Valley Shopping Center in Sterling Heights, Michigan, Burlington Coat in 71,000 square feet at our West Allis center in Milwaukee, Wisconsin and Plum Market in 37,000 square feet at the Old Orchard Center in West Bloomfield, Michigan.

Thus in the last 90 days we have leased over 220,000 square feet of new anchor space for our existing centers. This number, when added to the two anchor leases signed in the first quarter of 2008 brings our total new anchor tenancies for our redevelopment projects to 295,000 square feet.

These retailers will come online throughout 2009 as we complete our redevelopments. The sheer number of value-add redevelopments underway will be a significant catalyst for FFO growth in 2009 and 2010. If we take the new income generated from just these six anchor tenant transactions and subtract therefrom the rentals paid by tenants who previously occupied space demolished to make way for our new anchors, we will achieve a net minimum rent increase of $1.2 million.

In addition to these superior results, we expect that the 13 value-add redevelopments presently underway will produce an overall average return of 13% -- 13% return on cost net of all prior rents for displaced tenants.

Further, it's interesting to note that not only do these redevelopments and the anchors we have attracted validate the desirability of our trade areas and our shopping center locations specifically, but in these times of lower retail sales expectations, when smaller format retailers are having difficulty maintaining their occupancy, we're demolishing 62,900 square feet of small space to make way for larger destination-oriented formats. In essence, we're taking potentially more volatile, small tenant space and replacing it with stable, credit-worthy users while not sacrificing income, but instead achieving a superior return on cost.

One of the best examples of this transition is at our Rivertowne Center in Deerfield Beach, Florida. We are replacing an Office Depot and 19,225 square feet of ancillary retail space with the 62,000 square foot Beall's Department Store. We will also benefit from the relocation of several of the more desirable, small retailers who were displaced by the new Beall's store to existing vacancies in the center.

Even in these more challenging times our anchor lease accomplishments in the first six months of 2008 and especially in this second quarter sets the stage for earnings growth over the next 24 months.

The ability to identify opportunities to add value to our existing portfolio over and over again at times even when the centers are 100% leased speaks to who we are. That is, a company with the experience to continually improve the value and market position of its existing centers, the expertise to find additional value in acquired assets that was not recognized or executed by the previous owner and a management team with a track record of achieving double-digit returns on over 50 redevelopments since going public in 1996.

The bulk of our development pipeline consists of four projects. Our Northpointe site in Jackson, Michigan, is in the early stages of the entitlement process which we expect to complete by mid-2009. Presently we are in discussions with a number of anchors for this project. The land for the Jackson development is under option and the property will not be acquired until …