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Operator
Good day, and welcome to the Macerich Company second-quarter 2012 earnings conference call.
Today's call is being recorded.
At this time, all participants are in a listen-only mode.
Following the presentation, we will conduct a question and answer session.
(Operator Instructions)
I would like to remind everyone that this conference is being recorded and we would now like to turn the conference over to Ms. Jean Wood, Vice President of Investor Relations.
Please go ahead, Ms. Wood.
Jean Wood - VP, IR
Hi.
Thank you everyone for joining us today on our second-quarter 2012 earnings call.
During the course of this call, Management will be making forward-looking statements, which are subject to uncertainty and risks associated with our business and industry.
For a more detailed description of these risks, please refer to the Company's press release and SEC filings.
As this call will be webcast for sometime to come, we believe it is important to note that the passage of time can render information stale and you should not rely on the continued accuracy of this material.
During this call, we will discuss certain non-GAAP financial measures as defined by the SEC's Regulation G. The reconciliation of each non-GAAP financial measure to the most directly comparable GAAP measure is included in the financial -- is included in the press release and the supplemental 8-K filing for this quarter, which are posted in the investor section of the Company's website at www.Macerich.com.
Joining us today are Art Coppola, CEO and Chairman of the Board; and Tom O'Hern, Senior Executive Vice President and Chief Financial Officer.
With that, I would like to turn the call over to Tom.
Tom O'Hern - Senior EVP, CFO
Thank you, Jean.
Today, we're going to be discussing the second-quarter results, our capital activity, and our outlook for the rest of the year.
We continue to see strong and improving fundamentals in our business.
Retail sales had another strong increase and same-center NOI was positive for the tenth quarter in a row.
The releasing spreads show double-digit increases again.
In addition, occupancy was up 30 basis points compared to a year ago at a very healthy level of 92.7%.
During the quarter, we signed leases for 266,000 square feet.
Average starting rent of $45.64 and a positive releasing spread on a trailing 12-month basis of 16%.
The occupancy of 92.7% was up 60 basis points sequentially, compared to the March 31 occupancy level.
It was a strong gain for the quarter.
Occupancy costs as a percentage of sales came in at 12.7% for the trailing 12 months, that's down compared to 13.2% at June 30 of last year.
FFO adjusted, which excludes the impact of Valley View and Prescott was $0.74 a share.
The operating results for the quarter included same-center NOI excluding termination revenue in SFAS 141 was up 2.9%.
Management Company expenses were up for the quarter at $23.7 million.
However, that's got to be looked at on a year-to-date basis due to timing differences.
Year to date, Management Company expenses are $46.3 million compared to $46.7 million for the same period of last year.
Valley View Center had been in receivership since mid-2010.
It was sold in April and concurrent with that sale, the debt and all accrued interest was forgiven.
We booked an extinguishment of debt gain of $104 million.
In May, Prescott Gateway was conveyed to the lender in a deed-in-lieu transaction and a $16 million gain on extinguishment of debt was recognized.
Those gains on debt extinguishment of Valley View and Prescott are not included in AFFO.
Looking at our balance sheet, our debt-to-market cap at quarter end was 40%.
Net debt to EBITDA was 7.3 times, and our interest coverage ratio in the quarter was 2.6 times.
It continues to be a great financing market, with extremely low rates and a significant amount of capacity.
We are taking advantage of this market.
We began 2012 with an average debt maturity of 3.2 years.
As a result of the refinancing and debt reductions year to date, as of June 30, we have extended the debt maturity schedule to almost four years.
By year end, we are expecting the average debt maturity schedule to be closer to five years, the average debt maturity.
In addition, since the loans we're putting in place are long-term fixed rate loans, the excess proceeds are being used to pay down our line of credit, and by year end, our floating rate debt will only be about 20% of our total debt.
And I would expect that to continue to go down in 2013 as we move forward with our 2013 debt maturities.
Some of the recent activity includes a $200 million loan on Chandler.
That was a seven-year deal at a fixed rate of 3.77%.
That replaces the prior loan, which had a coupon of 5.48%.
We also closed on a $220 million loan on The Oaks that had been a floating rate loan before.
The new loan is a fixed rate 10-year deal at 4.1% interest rate.
We are also currently getting fixed rate quotes on Chesterfield and Rimrock, two currently unencumbered assets.
The proceeds from those two deals are estimated to be between $160 million and $180 million and that will be used to pay down floating rate debts on our line of credit.
We're also currently in the market on Kierland Commons, Westside Pavilion, and Deptford Mall.
We expect those transactions to close in the third quarter.
In this morning's earnings release, we maintained our adjusted AFFO per share guidance in the range of $3.06 to $3.14.
Our assumptions are largely the same.
So for now, we are not increasing our guidance range, but we will readdress that next quarter.
Looking at the AFFO split for the remaining quarters, the third quarter we estimate to be 24% to 25% of the total year and the fourth quarter to be 27% to 28%.
Looking at tenant sales, small tenant sales per foot on a trailing 12-month basis were up 12% to $513 a foot, for the 12 months ended June 30.
At this point, I would like to turn it over to Art.
Art Coppola - Chairman and CEO
Thank you, Tom.
As you can see, our sales trends, our leasing trends have been very strong, which is reflective of our industry.
The financing markets continue to be extremely attractive for strong regional malls, and we have been tapping into those with a lot of new activity going forward that will be reducing our floating rate debt, as well as extending our maturities, as Tom outlined.
On the disposition front, as Tom has mentioned, we have a lot of activity.
It doesn't add up to a lot of dollars, but it's a lot of activity, and it helps us to maintain and really prune and refine our focus, particularly in our Arizona markets.
We had assets in Arizona.
We had Hilton Village, small specialty center on Scottsdale Road, the Borgata, another small specialty center.
We had power center, Chandler Gateway, another power center Chandler Festival Center, another one Chandler Village Center, each of which we own 50% interest in.
We had a power center around SanTan Mall that we owned a 35% interest in that we sold all during the first six months.
In addition to that, we sold our 100% interest of a small specialty center in Carmel, as well as one of the old Mervyns boxes that we owned in a regional mall that we do not own.
So when you add it all up, we have eight operating assets that we sold.
They don't add up to a lot of dollars, but it does give us the opportunity from a timing viewpoint to keep our focus particularly in our important Arizona markets on our major regional malls in those markets.
On the disposition front, we do anticipate that we will exceed the total that we had put into our earlier year guidance of $300 million to $350 million.
Today, we've had total sales, our pro rata share of $180 million, but the total sales of the assets were significantly more valuable than that, because as I mentioned, we had partial interest that we were selling.
And we would anticipate that over the balance of the year, that we'll exceed total dispositions of over $400 million, with total equity raised being in the neighborhood of $240 million to $250 million.
We've currently raised net equity of around $126 million from the sales that we've had to date.
So we're on path in our pruning process.
It's always hard to predict exactly when dispositions are going to occur, and that's one of the reasons that in a year where you've got choppy dispositions, we didn't feel comfortable amending our guidance at this point in time.
Turning to development activities, we've really got two projects in the ground right now.
One is Chicago, Fashion Outlets of Chicago.
That project is doing terrifically.
If you happen to land in Chicago, you'll drive by the site there, you'll see the steel coming up out of the ground.
The project is extremely well positioned.
We have leases, 62% of the space are completely documented and signed.
Another 25% or so of the space is in lease comment, in negotiation right now.
The space is virtually 100% committed.
We anticipate an opening in August of next year.
It's on time and on budget in all respects at this point in time.
And again, we think it's going to be a great center.
As you may remember, we have a construction loan on that project, so the total equity that we'll be putting into the construction there is a little over $60 million to $70 million, give or take.
And we anticipate very large, good double-digit returns on the total project and of course on our equity component, it will be significant.
We've already funded a fair amount of that equity as it was used to prime the construction loan.
This week, some of you may have seen announcements on Tysons Corner, which is the other development we're in the ground on.
And I thought it would be a good time actually to reflect on where we are on Tysons, how we got to where we are and where we're headed.
You may remember that we bought Tysons Corner in 2005 when we bought the private company developer Wilmorite.
Immediately upon its acquisition, we were embarked upon an expansion of the center, which included the addition of an AMC Theater, an entertainment wing, a restaurant wing, the redemise of an old JCPenney store, and it really took the center to its next level of success.
That AMC Theater is their best theater in the US outside of New York City and it's in the top five movie theaters in the US.
It drives a very successful entertainment wing.
And as a consequence of that expansion we added $200 a square foot in sales to Tysons Corner, which already was a real power house.
When we bought Wilmorite in 2005, we became aware of the fact that this particular site was grandfathered in terms of the master plan, and that there was an opportunity to obtain entitlements to expand the center, that no other piece of land in Northern Virginia, Fairfax County was able to tap into.
And so we continued the efforts of our predecessor to perfect those entitlements, and after three years of effort in early 2008, we did perfect those entitlements, and obtained the right to add roughly 3 million square feet of space to the center.
At that point in time, the exercise was simply one of entitlement, and of course when the financial crisis in fall of 2008 hit, the idea of working on those entitlements obviously became moot for a period of time.
As time progressed, then the metro rail got legs in the Washington, DC area and it got funding.
And currently, that rail, which connects Tysons Corner to the capital and will connect Tysons Corner to Dulles is under construction.
If you drive by Chain Bridge Road or anywhere near that area, you're going to see above-ground monorail type of construction, and that rail is going to change the entire traffic patterns in Northern Virginia and in Tysons Corner.
The only complaint that people have about Tysons Corner today is that it's too successful and it's too difficult to get to, because there's too many people coming there.
This is going to open up the flow of traffic.
That, combined with a tremendous amount of off site improvements that we helped to sponsor and even fund in terms of hot lanes, new Chain Bridge Road bridge and improvements to Chain Bridge Road and literally seven different road systems around us are going to dramatically increase the accessibility of Tysons Corner.
The rail opens later next year.
It will be fully operational, we think, and open to the public in late 2013.
Current estimates are that about 8,000 people per day will use the rail system.
Now, the rail station itself is across the street from Tysons Corner, and part of, in looking at our expansion opportunity, part of the things that we wanted to tap into and one of the reasons that Fairfax County commissioners gave us the right to expand is that we were willing to cooperate with them and provide access to Tysons Corner from that rail station.
And together with them, we planned a bridge that would cross the road and bring passengers from the rail station over to our side of the street.
We provided some land area that would provide an opportunity for buses to drop off and pick up people on our side of the street.
And so we really opened up our front door to the rail station.
The work that we currently are under way with, we decided to move forward with the construction of an elevated plaza and bridge system that will connect us to the rail station.
And on top of that plaza, we have plans to erect an office building, a residential tower, and a hotel tower.
When we elected to move forward on this, a great deal of the motivation was to enhance the retail experience.
We think that by building these, this new urban environment at our front door of our center and connecting to the rail station and having this elevated outdoor plaza is going to create an environment that is unlike anything else in the district, frankly unlike anything else in the United States.
And we are fully confident that the addition of this mixed-use development and the creation of an additional 5,000 to 6,000 people per day in terms of foot traffic that will either work, live, or use the hotel facilities, should easily translate to dramatic increases in sales per foot.
It creates a new second level entry to the shopping center and we are extremely confident that this is going to help us take our retail asset and take it to the next level.
When we decided to pursue building the expansion on our own, it was a joint venture decision between ourselves and the Alaska Permanent Fund.
Alaska in looking at the numbers felt that the development returns were so attractive that we should build it ourselves, and we concurred with them and also decided to do it in this manner because by being the single-source developer, we can maximize the synergy of the traffic patterns between the residential, the office, the hotel, and the shopping mall.
Together, as partners, we and Alaskan can always decide after we have developed out the project if we want to monetize one of those elements of the project, but we felt it was important to build it on our own.
We also felt, though, that it was important to bring in best-of-class developers in each of those categories to deliver a best-in-class building and bring the strength of leasing that would come with their unique development expertise.
And so you may have seen earlier this week that we announced that we have signed development agreements with the Hines Organization to oversee the office development and they have been extremely involved in every aspect of that, value engineering, the leasing, as well as even the integration of the office to the overall plaza area and the master planning.
We brought in the Kettler Organization, which is a private developer in the Tysons district and in Washington, DC.
They are one of the most respected residential developers in the DC market.
They have over 20,000 units, and we brought in Woodbine to be our advisor on the hotel component.
Currently, we are building the infrastructure to support the plaza and to support a podium upon which the office building, the residential tower, and the hotel will be built.
The burn rate that we have is about $5 million a month, between now and April of next year.
And the way that we've designed the project is that come March or April of next year, we'll make a determination on each of the three components whether to continue vertical or to defer for a period of time the further construction.
We fully anticipate that all three elements will continue to be built, but if we don't like in particular where we stand on the leasing of the office building come April of next year, we have the ability to cap off the pad at that point in time and to not go vertical on the building until it is preleased to a level of satisfaction to ourselves and our partner.
So we feel that we have approached this perfection of the entitlement in a very sensible way.
We feel that owning and creating the expansion on our own was the most sensible way to enhance the retail experience and to create the most value for each of the components.
We brought in best-of-class developers I think on each of the three components to ensure its success.
And we're very bullish about the final impact that this is going to have on Tysons Corner.
The entitlements that we have on this project are worth -- are just worth -- they are invaluable compared to what it costs today to get entitlements in this district.
And again, a lot of this was driven by the fact that we did have the grandfathered right here, but it's really driven by the opportunity that was created by the rail coming to the area and by our appetite to tap into that rail.
So as we look at the funding of this at this point in time, Alaska and Macerich are funding this all cash.
You may have observed from looking at our financial filing that we have a relatively modest mortgage on Tysons Corner.
It's just over $300 million and it comes due in two years.
We could easily as a partnership, when we complete this project, with a very modest expansion of that loan, given the current income that comes out of Tysons Corner and the income that will be coming from the mixed-use development, finance out of the entire development cost that we have, that we will have expended.
So we feel we've approached this in a very conservative way.
We've looked at the idea of adding mixed-use elements at different centers across the US.
At this point in time, this is the only center that we feel that we will be participating in that in an ownership capacity, and we picked basically a center that has got a catalyst that is driven by the metro rail.
You're looking at one of the top five centers in the United States, in one of the best markets in the United States, and the best location within that market.
And we're very bullish on what we're doing there, but we're very cautious of the overall risks, but we're convinced that the NAV creation, we and our partner at the Alaska Permanent Fund is going to be dramatic, but most importantly, it's really going to further solidify Tysons Corner and set it up for generations to come.
And with that, I would like to open it up for questions.
Operator
(Operator Instructions)
Craig Schmidt, Bank of America.
Craig Schmidt - Analyst
The retail portion of Tyson that's going to benefit, it sounds like it's not from expanding the space but from let's say the raised traffic level, the enhancement of that entire shopping area, is that correct?
Art Coppola - Chairman and CEO
Yes, and absolutely, and what's really happening here is that right now, Tysons, it has a front door, which is really the porte-cochere underneath the AMC expansion wing, and that's a front door to the first level of the center, but it doesn't really have a front door to the second level of the center.
This is going to create a front door to the second level of the center and it's going to create a new entrance to the center.
More importantly, it's going to create an outdoor centre court that's not going to be unlike the activity that we experience on the third level of our open air Santa Monica Place in the dining deck up there.
It's going to be a public space.
It's 55,000 square feet of plaza area, and on that plaza area, we have the opportunity to activate it with retail uses.
They could be festival uses, they could be event-driven uses.
And I think that basically what we're doing is we're creating a public space that is unique to the entire district.
It's unique frankly, I think, to any regional center that we know of in the United States, and we're essentially creating an outdoor centre court to complement our indoor center courts, improving the penetration to the center, creating just another racetrack to the center, in an area where the center is very successful, but the anchors are not really heavily loaded either.
So we think that, when we first decided to do, to perfect the entitlement, our partners said something to us, they said let's just not forget that what this is all about is protecting the golden goose that lays the eggs here and that's the retail.
And we haven't lost sight of that and we think that's going to be the big win out of the entire project as we go forward with this.
Craig Schmidt - Analyst
And with rents that are rolling over between now and when you start to do this project, will you be able to get paid for it because they will be able to see that, or does it make sense to structure leases so that they roll over more after the event and you've made the improvements?
Art Coppola - Chairman and CEO
We've got -- we don't have any extraordinary rollovers coming in that center other than there probably are a fair number that are coming up in 2015 and '16 as a consequence of our 2005 expansion.
So the timing should be perfect, given that the new penetration is going to be in the proximity of the area where we did our 2005 expansion.
But other than that, the lease rollover that we have in the center is fairly normal and just day to day we get very solid rents there.
And we're very, very bullish on what we think the impact is going to be to the sales productivity, adding the hotel there when you think about it at that particular center, we think it's going to help generate a lot of good sales productivity and be complementary.
And I just when we added AMC, we essentially added around 2,500 to 3,000 visitors per day that came to the theater that weren't there before.
And it resulted in sales increases at the center that were quite dramatic.
By adding an office tower, the workers there and the residents in the residential tower and the users of the hotel, we're adding in excess of 5,000 to 6,000 people per day, between permanent and tourist visitors, that we don't have today.
And add to that the 8,000 commuters, and I think that's a conservative estimate, that are going to be using that rail station across the street and we're going to be the only facility that is tied directly into that rail station.
We just think that the ease of getting to Tysons is going to be enhanced and the number of bodies that we can run through there, even as great as it is today, is going to be added.
That always translates into better daytime business and greater sales productivity, and we think the big win here is going to be in the growth of the value of the retail asset.
We think we're making good money on each of the other components.
But we -- the eye on the ball is on the retail asset and keeping ourselves plugged into the metro rail and really maximizing the benefit of that.
Craig Schmidt - Analyst
Okay.
Thank you.
Operator
Quentin Velleley, Citi.
Quentin Velleley - Analyst
Just one quick one on Tysons.
Just given where office and hotel demand is currently, it's quite weak in that market.
What gives you the confidence to be proceeding with all three parts of the development at this stage?
Art Coppola - Chairman and CEO
Well, again, as I pointed out, we're proceeding with the infrastructure to support all three elements.
We're proceeding with the plaza, which becomes a podium upon which all three elements will be built, and as we get into it, really our go/no-go decisions on various elements really gets more serious in March or April of next year.
And our belief is that we will be preleased and we'll have demand opportunities on each of the three components that will cause us to continue moving forward.
But if we find that there are head winds and that we are not along well enough in terms of the demand that we have for each of the components, that we have the ability to cap off the construction on that component and to open up the balance of the plaza with the other, say, couple of components.
You take a look at the market, in Northern Virginia, Fairfax County has got 26 million or 27 million square feet of office space, and you've got, say, 7 million square feet of Class A office space.
But when you break it down, there is nothing even in the Class A office space that compares to the 500,000 foot of office space that we're going to be adding here.
There is not one building in all of the 26 million square feet of inventory or the 7 million feet of Class A office space that remotely has the amenity package, the access to, direct access to the metro rail, the entire district.
And that goes all the way out to Reston.
And all we have to achieve is the type of rents office wide that they get at Reston and we've got a big homerun.
And the product that we're delivering is so much better in terms of the amenity package, you have an office at Tysons Corner, you're going to have a hotel that your visitors can use, you're going to have a residential tower that some of your employees can live in, you've got the ability for your workers to be able to eat, to shop, play right next door, and then you have this outdoor plaza.
It's the best product by far.
We've met with a number of lead tenants that are interested in coming.
If you take a look at all of the office buildings within a mile or two of Tysons Corner, look at the name on top of that building, chances are they are talking to us.
We're not going to -- when we're ready to announce a lead tenant, we will.
And if we don't find that we have a lead tenant at the rents that we want, the thing that gave us confidence to move forward on the infrastructure was the ability to pause on the office tower if we weren't where we wanted to be.
And we will pause.
We and Alaska have made that decision.
And the same holds true on all three components.
Quentin Velleley - Analyst
Got you.
And so what kind of rent premium, given the higher quality of this building, what kind of rent premium do you think you need to be at relative to what's in the market at the moment?
Art Coppola - Chairman and CEO
Like I said, if we get the rents that are currently being obtained at trophy office space in Reston Town Center, our building is a homerun.
Quentin Velleley - Analyst
Okay.
Art Coppola - Chairman and CEO
Just north of $50 a foot.
Quentin Velleley - Analyst
Thanks.
Art Coppola - Chairman and CEO
And there's plenty of precedent for those types of rents.
Now, we're well aware of the head winds in the market, but there is nothing else in the market like this period, case closed.
And you're talking about we'll own less than 2% of the inventory in the market, and it's going to be best of class in every respect.
So we're very confident based upon the meetings that we've had.
There's six lead tenants that we've already given presentations to, and we've got plenty of time and we're going to be stingy.
Look, if we don't get the rents that we want, we can pause and we can continue on and we'll have the infrastructure ready, and we'll be in a short timeframe to build out when we get the right lead tenants at the right rents.
But Alaska's very conservative, our partner.
We're being very cautious here.
Our advisors, I think, are best in class, and we're all very bullish on the way we're doing it.
But we built in a hedge factor.
And like I said, the burn rate between now and those types of decisions is around $5 million a month, which is tolerable.
And our share of that is half of that.
Quentin Velleley - Analyst
That's great.
Thanks.
And then just at NAREIT, you had commented on some additional development projects, or acquisition projects in terms of the outlet sector.
I think New York was a market you mentioned and LA was a market you mentioned.
Could you just give us a little bit more detail in terms of what you are looking at and what you're thinking about in those markets?
Art Coppola - Chairman and CEO
Just that they are long-term, our business plan remains the same.
We would like to have outlet centers in the same types of markets that we have our best of regional malls.
So we've said historically that the markets we love to do business in are LA, San Francisco, the other major cities in the west coast, New York, the New York-Washington, DC corridor, Chicago, and then Arizona.
I mean, and those are our six or seven major markets where we have our best assets.
That's where we're concentrating.
And those will be the markets that we will likely pursue outlet opportunities.
So we're under construction and opening the one in Chicago.
We own one in upstate New York, the one in Niagara Falls, obviously.
Now, the expansion of Niagara Falls is coming along well in terms of the preleasing.
But we won't reach a decision point on that in terms of breaking ground for another nine months or so.
The other markets that are really on our radar screen and we'd love to be involved in those markets, we think there's opportunities, but there's nothing to report on.
Quentin Velleley - Analyst
All right.
Thank you.
Operator
Paul Morgan, Morgan Stanley.
Paul Morgan - Analyst
Just going back to Tyson for a second, so the, the economics of the development agreement, I mean, you and Alaska are continuing -- in terms of the ultimate investment to keep the pro rata investment in terms of the development partners, what's their position?
Art Coppola - Chairman and CEO
Yes, we're 50/50 owners in the entire project.
And together, we thought about selling off air rights and development rights to these two other folks and there were a long list of folks that would have loved to have bought the development rights.
But we decided together that there was frankly too much money to be made.
But also, the execution of the mixed-use expansion needed to be integrated and cross managed and cross marketed and cross developed, and this plaza that connects us to the metro rail and bridges over Chain Bridge Road to the rail and then creates this urban space, this 55,000-foot central outdoor space up in the air above the current parking lot and feeds into the second level of the shopping center, is such a key to the opening up of the second level of the center and enhancing the traffic to the second level of the center, that common ownership was really dictated, that we decided to do it on our own.
And that's why we did it, together as partners.
We could easily monetize one or more of those elements down the road.
But like I said, we have such modest debt on Tysons Corner today that even at very modest debt yields, we could finance out of whatever we spend on these, on the project in total, when that loan comes due in two years.
Paul Morgan - Analyst
And could you see -- the way it's structured with the podium, could you see moving forward on one or two of the buildings instead of all three based on market conditions, or is it --
Art Coppola - Chairman and CEO
That's exactly right.
We could decide to not proceed vertically on any of the three elements and just finish off the plaza and have basically subterranean parking in place that will support the office building and the residential tower.
Now, what's the cost of doing that?
The cost of that infrastructure is probably $50 million, give or take.
And look, given the time value of money, if you deferred the project six months to a year or even two years, that's not a deal killer to the burn rate of having that behind you, because it would put you in a position where you would only go vertical when you felt the market was hot.
And look, this is a once in a generation opportunity to create value.
So what we're really doing here is making sure we have the connection to the rail.
We're doing the infrastructure.
There was huge utility work that had to be done, huge ring and road work that had to be done, huge off site work that had to be done.
It's all been spent to date.
And then again, the key decision point on whether you go vertical on each of the three elements is in that March to April, May timeframe of next year.
And there's no magic to that.
If we decide to pause on one of the elements, no big deal.
We're going to build from strength.
The one that you would likely, that would likely be the one most in question probably would be the office one, because you're signing 10-year deals on the office.
On the residential, you're marking to market every 30 days and so timing is not as critical on that.
Paul Morgan - Analyst
Okay, thanks.
And then my other question, just on the dispositions, you mentioned $400 million with $240 million to $250 million of equity.
Is that what's in your FFO guidance?
And is that still all non-malls?
Tom O'Hern - Senior EVP, CFO
Well, the total is -- the guidance we gave was $300 million to $350 million, recognizing that we'll try to sell some assets that may not sell and there may be others that we initially weren't sure were going to be in the mix that are, and there could be a mall or two in there.
We've said not just we're selling urban villages, but other assets.
So there could be other, there could be a mall or two in there.
Paul Morgan - Analyst
So did you mention $400 million, or did I mishear that?
Art Coppola - Chairman and CEO
You heard the right number.
Our original guidance numbers for the entire year was our pro rata share, was going to be between $300 million and $350 million, and I did comment that I felt that in fact, it will be our pro rata share will be closer to $400 million to $450 million.
Paul Morgan - Analyst
Okay.
Art Coppola - Chairman and CEO
It will be higher, and what Tom is adding is there could be an interest in a mall that is a non-core interest involved in that sizing, and we'll see.
That's all.
Paul Morgan - Analyst
Okay, and last, you have the cap rates on the deals that you did close?
Art Coppola - Chairman and CEO
Yes, the deals that have closed to date are just under 7%, probably 6.5% to 7% blended cap rates.
They are small deals, they're partnership interests in a lot of them.
So overall, we're from an energy viewpoint, it gives us a lot of capacity to refine our focus.
It was a bigger disposition than the dollars would seem to reflect.
And again, most all of these assets were disposed of were in the Phoenix marketplace.
So this now leaves us with really just the regional mall investments that we have there, with the exception of one or two urban villages.
Paul Morgan - Analyst
Great, thanks.
Operator
Christine McElroy, UBS.
Christine McElroy - Analyst
Just to follow up on that last question, with regard to the disposition, I just want to make sure I'm clear.
That's $400 million to $450 million pro rata by year end?
Art Coppola - Chairman and CEO
That's our best estimate, yes.
Christine McElroy - Analyst
And at this point, you've completed $180 million.
Do you have anything under contract at this point?
Art Coppola - Chairman and CEO
We have a policy that we don't comment on the specifics of acquisitions or dispositions, and we find that's a good policy.
But that's our best guidance.
That's all I can do, is give you guidance today.
Christine McElroy - Analyst
Okay, and Tom, you mentioned the assumptions that are in guidance are largely the same.
Can you confirm, I think your prior same-store NOI growth guidance was 2.5% to 3.5% and then your occupancy guidance was up 50 basis points.
Is that still about right?
Tom O'Hern - Senior EVP, CFO
That's right.
The same-center NOI growth, that's excluding lease termination and SFAS 141 that was in our guidance, was 2.5% to 3.5%.
And through six months, we're at 3.1%.
So we're right there, right in the middle of the range.
And that remains the same.
Christine McElroy - Analyst
Okay, and then just lastly, regarding the income tax benefit in the quarter, just wondering what that was related to.
And what do you have in guidance for the full year for net expected tax benefit or expense?
Tom O'Hern - Senior EVP, CFO
Yes, you get little -- that's through the taxable REIT subsidiary, Christy, and dispose of an asset sometimes you get a small tax, sometimes you get a small benefit.
If you look at it year to date, it's only about $1 million.
Christine McElroy - Analyst
Right.
Tom O'Hern - Senior EVP, CFO
It's not particularly big.
And we factor in based on last year maybe $2 million of gain on the year, $2 million of tax benefit for the year.
But it's relatively small and in some cases, in some quarters, it's going to be an expense.
In some quarters, it's going to be a benefit.
But in either direction, it's not going to be too significant.
Christine McElroy - Analyst
So would you say on par with last year, about $2 million benefit?
Tom O'Hern - Senior EVP, CFO
Yes.
Christine McElroy - Analyst
Okay, thanks.
Operator
Rich Moore, RBC Capital Markets.
Rich Moore - Analyst
Tysons and Chicago seems like the ones you're focused on at the moment.
But I'm curious, more broadly, Art, you had given us a bigger number for development, redevelopment spend over the next five years.
Where do you see that at this point?
And I guess either annually or over a longer period of time, what are you expecting?
Art Coppola - Chairman and CEO
Look over the five-year period, I think that the numbers that we've shared with you are roughly accurate with the exception that the possibility of us building an outlet center in the Scottsdale marketplace in the next five years is probably out of those numbers now.
The possibility of us opening and building a full-price regional mall in the Goodyear marketplace is probably out of those numbers at this point in time.
So right now, I think it's best that we focus on exactly what we're in the ground on and we're in the ground with Tysons.
We're in the ground with Chicago.
It's likely that we will break ground on Niagara Falls next year.
In the long-term horizon, we're still working on that entitlement at Broadway Plaza in Walnut Creek.
That's gone, going along okay, but it's a difficult negotiation with the city.
Lots of master planning implications.
So I think the opportunities are out there to, still along the lines of the sizing we had talked about, with the exception that when you take out the new possible mall in Phoenix and Goodyear and the possibility of an outlet center in Scottsdale, that's a significant amount of money.
That's $300 million, $400 million that comes out that was pretty much back ended anyway.
But at this point in time, I think the real focus is on Chicago, Tysons and the opportunity for Niagara Falls.
And we'll see how the others go.
We're working on entitlements all the time.
It's always hard when you're trying to project out five years to know what's going to happen.
And just because you see it in your sights, when you talk about it, if market conditions change and all of a sudden you've got overbuilding that's being created in a market, like Phoenix, you've got to back away for a while.
And so right now, we're really just focused on the three that we've talked about here with the next big one coming after that being Walnut Creek.
But we've still got a lot of work to do on Walnut Creek.
Rich Moore - Analyst
All right, good.
Thank you.
That's very helpful.
Looking at, for a moment at the mall business itself, how do you guys size up traffic trends maybe more recently, or even since the end of the quarter, given that the economy has slowed a bit here?
Art Coppola - Chairman and CEO
Are you talking about foot traffic or sales?
Rich Moore - Analyst
Yes, foot traffic at the malls.
Art Coppola - Chairman and CEO
It's about the same.
We don't have traffic counters at all of our malls.
But sales are up and some people would -- on a global basis, people prognosticate that, sometimes their purchases per visit are down, which was, which would infer that traffic is up.
Look, the malls that we own, they feel busy, they look busy, they are busy, they are productive, and foot traffic is very important, but it's hard to have a direct correlation between foot traffic and sales.
I think on a macro basis, people are continually more stretched for time and they probably tend to go places less often and consolidate their visits a little bit when they do go.
But it varies.
Every property is different.
You take the traffic at Santa Monica Place, and you can just observe that it's virtually gridlock in terms of the number of bodies that we move through there.
The big number, look, is in the -- the eating is in tasting the pudding there, and sales are great.
Sales are good.
That's the most important thing.
Rich Moore - Analyst
Okay, good.
Thank you.
And then, Tom, last thing, is NorthPark done?
Is the refinancing of that done?
Tom O'Hern - Senior EVP, CFO
Rich, that's being handled by our partner.
We're a passive investor in there and they are operating under a short-term extension now and working with one of the existing lenders on that.
Rich Moore - Analyst
Okay.
So probably in the next quarter, I'm guessing it's done, right?
Tom O'Hern - Senior EVP, CFO
That's my assumption.
Rich Moore - Analyst
Okay.
All right.
Good.
Thank you.
Operator
Michael Mueller, JPMorgan.
Michael Mueller - Analyst
I heard the comments about not knowing all the specific time frames, but if you think about Broadway, if everything really lines up and it goes according to plan under the best scenario, what could a rough timeframe look like for that project?
Art Coppola - Chairman and CEO
I think we've talked about it, the grand reopening being in 2015 roughly.
Michael Mueller - Analyst
Okay.
Okay.
Art Coppola - Chairman and CEO
But there's lots of things that when we started the process, we had a certain comfort factor that the city was going to allow one level of development and then as they have gotten into it, they have decided that some of the public spaces that they thought they were willing to walk away from, they don't want to walk away from, so that has caused us to rejigger the development.
When we first started talking about the development, that's another one that in a previous call I had said we're thinking about the possibility of allowing residential to be built on top of the retail, and as we've gotten into the process with the city and we've looked at it, we've just made the decision that we're not going to incorporate residential into that, and it's going to be a pure retail expansion.
So things are moving around.
Look, that's a project that we're getting paid on our land through the rents that we get today, while we work on the opportunity to build something that's a lot better.
So it's the best of both worlds.
Sometimes when you work on a piece of land, you're not getting paid while you're thinking about what to build.
But here, you have a situation where, as we think about what to build, we've got increasing sales, we've got increasing NOI.
And once we get our entitlements in order for this project to pencil out, we'll have to convince ourselves that the incremental spend is worth decommissioning and then rebuilding.
Preliminary numbers say that we have a huge NAV creation possibility here and that we have the opportunity to create one of the top centers in the United States.
It's tremendously well anchored today with a fabulous Nordstrom, a fabulous new Neiman Marcus.
You got a big Macy's that wants to get bigger and wants to become one of the standout Macy's of the marketplace, and you have specialty retailers that are lined up around the block that want to be there.
So that's one that we're very patient, but we're actually getting paid for our patience.
And then when we decide to pull the trigger, then the whole process is roughly 24 to 30 months.
We think it could happen in the fall of 2015, but frankly, it doesn't matter if it's '15 or '16, because we're getting paid to think about it.
Michael Mueller - Analyst
Okay, okay.
Separately, a little bit more of a technical question.
When we're thinking about Chicago leasing, how do the leases for that project with the tenants compare to, say, a normal traditional regional mall lease, if we're thinking about lease term, the escalators, are they comparable?
Art Coppola - Chairman and CEO
Yes.
Michael Mueller - Analyst
Okay.
And then last question, sticking with leasing, any sort of update you can give us on just the Santa Monica?
You're starting to turn some of the leases there.
What's happening in terms of the renewal rates versus prior rates?
Art Coppola - Chairman and CEO
I think I mentioned on a previous call, but every time that we've looked at quoting a renewal deal or replacement deal to new tenants that are coming in, like Free People is replacing Sketchers, and we've got two other new tenants that have come in; Lorna Jane has replaced Fluxus Lorna Jane is an athletic specialty retailer out of Australia and it's a first-to-market location for them.
Roughly on average, the new rents compared to the old rents on the tenant that's going away are, they are always above.
In some cases, they are double.
So as I've indicated before, there's I think a big opportunity to increase the rent levels as we recycle, because we were leasing in the worst of times.
And so not unusual that that's the case and it's also not unusual that that's the case when you've got a really successful center, because the guys that want to come in that are not there now, they already have the advantage of knowing what works.
So they can see the volumes of peers that they have and see the success, then they can pencil out better sales projections for themselves and afford to pay you better rent.
When you're building a project from scratch and just have a mediocre mall, it's still speculative.
We thought it was going to be a big winner, we believed it was going to be a big winner, turned out to be a big winner, but it was still speculative.
Until you open it, you don't know.
The trend is good, it's solid, NOI growth there is good.
We're very bullish on the future.
Only good things are going to happen there.
Michael Mueller - Analyst
Okay.
Okay.
Thanks.
Operator
Steve Sakwa, ISI Group.
Steve Sakwa - Analyst
Tom or Art, I was wondering if you would be able to, on a go-forward basis, I know you used to have a table in the back that provided the development projects and the costs, and as the pipeline begins to ramp up, I'm just wondering if you would be able to provide a little more detail of the CIP number, which I think stands at about $350 million today.
Would you be able to just go through and talking about some of the projects that you mentioned, whether it's Tysons, Niagara, Chicago, maybe Broadway and some others, could you help us just bucket how much you've spent to date on each of those assets?
Tom O'Hern - Senior EVP, CFO
Steve, we include a lot of assets in there, but the bulk of the CIP is Tysons, Chicago, and then Estrella Falls, and it's not just ground-up construction.
It also includes the land relating to those projects.
That's the bulk of what's in there, but there's other land holdings throughout the portfolio that are in there.
There are other smaller projects that are in there.
That schedule you referred to was a throwback to the era of '07 and '08 when we were scaling back on capital spending.
But I'm sure we can come up with something to give a little bit more detail to CIP as we go forward.
Steve Sakwa - Analyst
Would you have [the CIP] handy for those three main projects, Tyson, Chicago, and Estrella now?
Tom O'Hern - Senior EVP, CFO
Not at my fingertips, Steve.
I'll have to get back to you on that.
Art Coppola - Chairman and CEO
I think in my comments, Steve, I did indicate that over the course of the next year, our expected burn rate on Tysons is $5 million a month and we have 50% interest in that.
But if you add our total expected projection from day one, including sunk costs and interest carry and everything else on Tysons, and from an equity viewpoint and add up our total equity that we're going to put into Chicago, those two primarily from beginning to end, the total investment probably is around $350 million, our equity component, our equity piece of that.
And of that, probably we've got our pro rata share expense to date is under $100 million and the burn rate is what it is.
But the key variable being, which elements do we decide to go vertical with at Tysons come spring of next year.
Steve Sakwa - Analyst
Okay, and then could you maybe just elaborate a little more on Niagara?
It sounded like you said you're nine months away from making a decision there.
I guess, what's -- I guess why is that taking so long, or what are the necessary approvals you need to make that decision?
Art Coppola - Chairman and CEO
Well, the land that we're expanding on, we are, is currently a trailer park and we're deleasing it, so it takes a little time.
Steve Sakwa - Analyst
Okay, thank you.
Operator
Jeffrey Donnelly, Wells Fargo.
Jeffrey Donnelly - Analyst
Two questions.
Art, has your partner given you a sense of how the rents you're targeting for the office tower at Tysons compare to the rents the prospective anchor tenants are actually paying today?
I guess I'm wondering if there's a sense that maybe some of these folks might already be paying above market rents, so from their perspective, any kind of incremental change might not be all that much of a stretch.
Art Coppola - Chairman and CEO
Okay.
The market rents that we're seeking to achieve are roughly in line with the rents that are currently being achieved at the other, what are considered to be trophy office buildings in the marketplace, and we think that we've got the best product in the marketplace, so we're confident that we can get the rents that we need to achieve.
Those rents are north of $50 a foot.
Jeffrey Donnelly - Analyst
That's helpful.
Hopefully you can hear me okay.
And then you mentioned just the burn rate.
I think your share was $2.5 million a month.
How long are you guys willing to carry, or are you preparing to carry that cost before it becomes unpalatable?
Art Coppola - Chairman and CEO
Oh, no, no, it's not going to be unpalatable.
The only question would be whether or not we continue full bore in the spring of next year, or we pause on one of the elements.
But we're very bullish on all three elements.
So I was really just outlining basically how much money we will have invested before we have to make the decision to go vertical or not.
Jeffrey Donnelly - Analyst
Okay.
Understood.
And just last question, just concerning your cash leasing spreads, from where you guys sit today, on the mall side, do you expect to maintain a similar pace of growth as we roll into 2013?
I know it can move around quarter to quarter, but just trying to think what you think you'll average going forward.
Tom O'Hern - Senior EVP, CFO
Well, if you look at what we've done in the past, Jeff, we've been between, fairly consistently between 10% and 20%.
The numbers -- we tend not to give a quarterly number, because you can get quite a bit of fluctuation, so the numbers we give on leasing spreads are trailing 12 months.
I would say as we see what rolls forward ahead of us, it's reasonable to expect to be between 10% and 20%.
Jeffrey Donnelly - Analyst
Okay, just wanted to check.
Thanks, guys.
Operator
And that does conclude the question and answer session.
I'll now turn the conference back over to you for any additional or closing remarks.
Art Coppola - Chairman and CEO
All right.
Well, thank you very much for joining us.
We look forward to seeing you soon and reporting to you on our progress.
So thanks again for joining us today.
Operator
Thank you.
And that does conclude today's conference.
Thank you for your participation today.