Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Jeffrey Klinefelter – Piper Jaffrey
Jeffrey Klinefelter – Piper Jaffrey
Thanks for all the great information today, and congratulations on a strong start to the year. Couple questions on mall vacancies, if you could address that. We’ve seen the data coming out and accelerating every quarter, given your significant scale nationally across a couple of your chains, could you give us a little update on how you see this impacting traffic in some of those, more B&C type volume malls, can you give us an update on your options with respect to vacancy clauses in some of those leases and just your expectations going forward.
Robert Dennis
We are keeping a very careful eye on that and about a month ago we launched a program very focused on exactly this situation. We are auditing all of our mall vacancy both anchors and specialty stores and matching it up to what the leases say, which is a big task. You have to go through every lease, every lease is often different but we’re finding great opportunity there. So for example just yesterday we uncovered a mall where the Steve & Barry’s clothes that dropped them below the threshold for both Journeys and Hat World and they go from what their lease rent is down to percentage rent, either 6% or 7% rent.
Which is a major reduction for them, and the auditor due in this week or next week so over the next few weeks we’re going to get a lot of visibility what has changed out there and obviously that’s something we’ll have to keep updating as people like Macy’s continue to close anchors. Anchors is where the real opportunity is. So we’re very alert to it and we do have lease language in many situations that gives us relief before the mall becomes a complete disaster.
Jeffrey Klinefelter – Piper Jaffrey
What generally speaking is that vacancy rate or does it vary by mall.
Robert Dennis
It varies by mall and it can happen in a hurry. What the landlord worries about is a domino effect because once they start losing tenants, it can trigger the tenancy language and then store after store can start closing and in the mall that I just cited that seems to be the situation.
Jeffrey Klinefelter – Piper Jaffrey
So flipping that around though and saying you get lower rent, how much concern is there that these higher vacancy rates are just simply going to drag down traffic and that may not recover for a long time so do you run into the danger of having issues with potential impairment charges against your own stores because of lower volumes into the foreseeable future.
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