西蒙地產 (SPG) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Chelsea Property Group fourth quarter 2003 earnings conference call. My name is Jean and I will be your conference coordinator for today. At this time all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded for replay purposes. Before we begin I have been asked to read the following notice pertaining to the Private Securities Litigation Reform Act of 1995. The statements made in the following discussion that relate to future plans, events, expectations, objectives or performance or assumptions under such statements are forward-looking statements. As such they involve a number of known and unknown risks and uncertainties that may cause actual results to differ materially from those set forth in or implied by forward-looking statements.

Risk factors include without limitation the receipt of regulatory entitlements for and completion of development projects in the United States or abroad. Construction risks, the availability and costs of capital and foreign currency, credit risk, the Company's ability to lease properties, retail, real estate and economic condition, risks inherent to being a partner of joint ventures, risks inherent in developing marketing technology-based business and competition. We direct you to the Company's various filings with the Securities and Exchange Commission for a detailed discussion of risks and uncertainties. Acknowledging the fact that this call may be webcast for some time to come, we believe it is important to note that today's call includes time-sensitive information that may cause accurate only as of today's date, February 26, 2004. As a reminder today's conference is being recorded, Thursday, February 26, 2004. Now I would like to introduce Mr. David Bloom, Chairman and CEO of the Chelsea Property Group. Please go ahead, sir.

Good afternoon and welcome to our year end 2003 conference call. We are very pleased with our fourth-quarter results. We beat our internal industry estimates. As a result we have laid a strong foundation for 2004. Mike Clarke, our Chief Financial Officer will provide guidance for 2004 and cover our financial results. Les Chao, President and Tom Davis, Chief Operating Officer, will discuss our international and domestic operations. Before handing the call over to Mike, I would like to make an observation.

We were very pleasantly surprised by the strength of our sales of our centers in the fourth quarter particularly in our domestic premium portfolio. You may recall we experienced a difficult first quarter in 2003 largely due to very inclement weather on the East Coast over the President Day holiday. Comp space sales in our domestic premium properties were a negative -3 percent. Sales rebounded nicely in the second quarter ending up 4 percent. Sales started to accelerate during the third quarter ending up 6 percent. That trend continued with the fourth quarter up 8 percent. Results could have been even higher had we not been adversely impacted by two consecutive poor weather weekends on the East Coast just prior to Christmas.

January 2004 results were strong. February comparison should be easy given last year's bad weather. Should the surprising acceleration in comp space sales continue for a substantial period of time or even level off at high single digit levels, we should benefit in two ways. Initially we should enjoy higher than anticipated percentage rents. More importantly over the longer-term we should enjoy higher than projected base rents as leases roll over. During our next call later this spring we should have a somewhat better indication where we are headed.

Also Tom will talk more about sales later. Now I would like to turn the call over to Mike.

Thank you, David, and good afternoon everyone. As reported last evening, fully diluted FFO per share for the fourth quarter gained 27 cents to $1.08 from 85 cents which was 6 cents ahead of Street consensus estimates. For the year 2003 FFO per share rose 25 percent to $3.56 from $2.85 in 2002. The full year 2003 results were 7 cents ahead of Street consensus estimates and 6 cents above the high end of our most recent guidance.

Our favorable fourth-quarter results were primarily due to very strong tenant sales in our domestic premium portfolio that resulted in percentage rents exceeding internal estimates by 5 cents per share. Other favorable variances included better-than-expected results from our investment in Japan, mainly from higher sales. A lower loss at Chelsea Interactive due to higher sales and larger gains from pad sales. These positive results were partially offset by a onetime $1.5 million or 3 cent per share charge to G&A for an accounting change related to the timing and recognition of the deferred compensation expense tied to our 2006 five-year plan.

Most of our fourth-quarter growth was generated from the $500 million of acquisition activity completed after the third quarter of 2002 and the Company's decision to wind down and transfer its e-commerce business. New development also contributed significant growth, including openings in Japan of the first phase of Sano Premium Outlets in March, and the second phase of Gotemba Premium Outlets in July, as well as the opening of our Las Vegas Premium Outlets in August.

Base rent leasing spreads at our core domestic Premium Outlets continued at a double-digit pace. During 2003 we released and renewed about 1.4 million square feet of GLA, and initial contraction cash basis rent under these new leases improved by over 12 percent to $25.40 per square foot from $22.60 per square foot for expiring leases. We continue to maintain a very strong balance sheet as the foundation to support our growth. Leverage remains modest at a debt-to-market capitalization ratio of 30 percent, with a wealth sequence debt maturity schedule and variable interest rate debt representing about 17 percent of total outstanding debt.

Interest and fixed charge coverage ratios continue to be favorable at 3.8 and 2.9 times, respectively. During February 2004 the Company negotiated a 25-basis point interest rate reduction and unencumbered the properties securing an existing $61.4 million mortgage term loan that is due in April, 2010. By unsecuring this loan the Company improved its ratio of secured debt to total debt by 500 basis points to 27 percent from 32 percent, adding further flexibility to our already strong financial position.

We raised our dividend by 15 percent in 2003 to $2.14 from $1.86 per share in 2002. This increase was necessary to maintain our REIT status and cover the increase in our taxable income during 2003. From a cash flow standpoint we continue to comfortably cover our dividends. The Company's Board of Directors will be reviewing our 2004 dividend policy at their next meeting scheduled for next week.

Finally, I would like to comment on FFO per share estimates. Based on the current outlook, we expect that 2004 FFO per share should increase by approximately 10 percent over 2003, or to be about $3.92 per share for the year. This guidance assumes, amongst other things, that the Company's core portfolio and new development projects perform as expected and there are no unanticipated changes to economic and market conditions that might affect the Company's business.

We have completed our valuation analysis of the assets and in place leases for our most recent acquisitions in Tannersville, Pennsylvania and Las Vegas, Nevada under statement of financial accounting standards number 141. This analysis resulted in a non-cash pickup of less than a penny a share in 2003, and includes about 2 cents in our 2004 FFO per share guidance. Our guidance also assumes that the Company will successfully exercise its option to acquire a 300,000 square foot outlet center during the second half of 2004, that should yield three to four cents of FFO per share in 2004.

We have completed two years of our current five-year plan, and we are pleased to report that we are ahead of our 10 percent compounded FFO per share growth rate target for the five years 2002 through 2006. However, we still have three years to go and these expectations are subject to many variables, including economic and market conditions, tenant sales, continued favorable releasing spreads, delivering domestic and international development projects on time and on budget, foreign exchange rates and interest rates. Our plan does not include any acquisitions other than exercising our option on an outlet center already mentioned.

As previously stated, our growth during the five-year period is likely to be somewhat uneven from quarter-to-quarter and year-to-year, however, we remain confident that we can meet or beat our targeted compounded growth rate. Thank you, and now I will turn things over to Les Chao to discuss our international business.

Thanks, Mike. Good afternoon. Chelsea Japan finished 2003 on plan and on schedule. We had two major openings during the year, Sano Premium Outlets in March and the expansion of Gotemba Premium Outlets in July. These are our properties serving the northern and western regions of the Tokyo market. At year-end our total operating portfolio stood at 820,000 square feet. All three of our existing projects, including Rinku Premium Outlets in the Osaka market are fully leased. Tosu Premium Outlets our fourth project will have its grand opening in two weeks. It should be one 100 percent leased. Phase I will have approximately 185,000 square foot of GLA leased to 102 retail restaurants and food court tenants. This project is located about 20 miles or roughly 30 minutes drive time south of Fukuoka. Fukuoka is the fourth-largest and southernmost major city in Japan with a regional population of about 9 million people.

Tosu has been designed in a very attractive California Spanish mission style and based on our experience we are confident there will be another great success in keeping with Chelsea Japan's first free centers. Upon opening this project will put Chelsea Japan over one million square feet of space completed in less than four years, representing a total of 375 retail and restaurant spaces.

Sales of our first three properties remain very strong. Gotemba in particular is benefiting from its expansion last summer with 2003 weighted average sales of about $900 per square foot. Sano Premium Outlets opened last March and is performing as expected with average sales today annualizing at about $1000 per square foot, although this number will continue to come down as the grand opening affect fades. Rinku Premium Outlets the Osaka Center, has been on a clear up trend since its expansion in 2002. Weighted average sales in 2003 were in the range of $675 per square foot.

To put some perspective on our growth, total tenant sales in Japan including Tosu and the coming expansions at Sano and Rinku will approach $1 billion this year at current exchange rates. The 2004 pipeline for Japan is on track. Phase II of Sano Premium Outlets is under construction, and scheduled to open in September. Phase III of Rinku should be underway in a few weeks for opening by the holiday season. We have secured a very strong tenant roster for this addition which will bring Rinku's total GLA to 320,000 square feet.

Lastly Phase I of Toki Premium Outlets, our project in Nagoya is scheduled to start production in August for an opening in early April next year. Overall we are extremely pleased with our growth in Japan. Our goal of 1.5 million square feet by 2006 is within reach. Chelsea Japan is rapidly solidifying its leadership position with dominant, highly productive properties and is making a significant and growing contribution to our NOI.

A brief update on Mexico. Construction of the 230,000 square foot First Phase of Punta Norte Premium Outlets, our project in Mexico City is continuing. At this point we believe we've resolved all our infrastructure and traffic issues and from here on it should be a matter of finishing in time for an opening toward year-end. I will keep you posted.

There are no significance to report in other international markets, but we continue to work actively on a number opportunities. I will keep you posted on those, also. Finally, I want to mention an important personnel change. Tony Galvin has recently been promoted to head our international group. Tony has headed our domestic leasing department since 1997 and his track record speaks for itself. We are very excited about having him with us in international, particularly because the most challenging work in foreign markets have to do with brands and leasing. Tony brings 16 years of experience from both the tenant and landlord side of the outlet business. He is off to a running start, and we think he will start to add value quickly. Tom Davis will explain how we came to the opportunity to put Tony to work in international. Thank you, and now I will turn things over to Tom.

Thank you, Les. As David mentioned, we are pleased to report a solid same space sales gain of plus 8 percent in the domestic premium portfolio in the important fourth-quarter versus the year ago period. Same space sales for the full year are up 4 percent versus 2002. Weighted average sales for the full year 2003 were $399 per square foot versus $383 per square foot in 2002. We are equally pleased to report that our top centers in terms of sales per square foot productivity, all posted positive sales gains for the year. January, our most recent month with tenant sales results reported was up 11 percent.

Due to the outdoor nature of our properties and the extreme weather conditions during the month, we are quite happy with these results. Including January, we have posted 10 consecutive months of same space increases of three percent or greater. As the year progressed, so did sales with the exception of December. In December as David mentioned earlier, we had unfavorable weather comparisons. We still ended the month up 4 percent. The big question is why are sales improving and how long will this trend continue. Honestly, we do not yet have a single answer. Factors probably include a stronger economy, a better tenant mix and higher spending by international tourists due to the weaker dollar. We will continue to monitor sales closely, hope the trend continues and let you know what happens.

Moving to leasing, we ended the quarter and year 99 percent occupied in our premium portfolio and 93 percent occupied in our other remaining domestic centers. This compares to 99 percent and 95 percent for the same period in 2002. The modest loss in occupancy in our other domestic centers is attributable to our non outlet centers, primarily Branson, Missouri and the loss of a large Spiegel store in that property due to bankruptcy. This occupancy loss has no meaningful effect on FFO.

Over 50 new tenants opened a store for the first time in the Chelsea property during calendar year 2003. Some of the better known brands from this group include Brunini, Laxiton (ph), Alan Edmonds, Adrian Vittadini, Rip Curl (ph) Tommy Hilfiger Kids and Kaldie, Sworaski (ph) Ascot Chang (ph) and (indiscernible). On the other end of the spectrum tenant bankruptcies totaling 542,000 square feet in our domestic portfolio on calendar year 2003. Chapter 11 filings have become an inevitable part of our business. We maintain a watchlist that includes those tenants that show signs of trouble. Be it late payments, historic sales declines or in competitive categories with stronger, better run companies.

2003 was no different than prior years when very few companies rejected a large number of outlet leases. In fact, the vast majority are assumed by the filing tenant. To date approximately 90 percent of the bankrupt space in 2003 is either released or the filing tenant remains in possession. This year to date two companies K.B. Toy and Illuminations have filed Chapter 11. Combined they operate 38 stores totaling approximately 188,000 square feet in our domestic portfolio. At present only three stores are slated to close.

In mid-December Phillips Van Heusen, one of the outlet sectors largest tenants, announced plans to close approximately 200 outlet stores. This decision by PVH will have no meaningful impact on Chelsea. We have a signed agreement that allows PVH to close three stores prior to their natural lease exploration. All three will close no later than December 31, 2004. We expect to recapture and re-let all three stores prior to year end. In addition, PVH has executed leases for 11 new store locations and are in negotiations for an additional 5 stores, all to open this calendar year in our portfolio.

Our domestic development efforts are continuing at an accelerated pace. Chicago Premium Outlets, a joint venture project with Simon Property Group, is on time and on budget for a May 19, 2004 opening. Cost net of tip (ph) and pad sale proceeds are approximately $67 million or $152 per square foot. We expect to be at or near 100 percent leased at time of opening with unlevered returns in excess of 14 percent. Tenant names in this project include Nike, Timberland, Guess, Liz Claiborne, Brooks Brothers, Gap, Nautica, Tommy Hilfiger, Banana Republic, Polo Ralph Lauren, Cieri (ph) Max Mara (ph) Kenneth Cole, (indiscernible) Versaci, Giorgio Armani and many others.

On February 2, 2004 we executed our land lease agreement with the Tulalip Indian tribe clearing the way for us to commence construction on Seattle Premium Outlets. This 355,000 square foot Phase I project is approximately 50 percent pre-leased and costs are estimated at $54 million or $150 per square foot. We expect a low double-digit unlevered return and expect to deliver this project for tenant fit-up Spring of 2005.

Additional Phase I groundup developments in active stages of pre-leasing and pre-development include locations at the Jersey Shore, North Philadelphia and in the Pocono region of Pennsylvania. The land for all three is currently under contract. New phases will be added to four existing properties in calendar year 2004 totaling 171,000 square feet. All but 22,000 square feet of these expansions are under construction and the total cost of approximately $200 per square foot. Our pad development in (indiscernible) Massachusetts has been turned over to the tenants. Three of the five pads are under construction with the fourth to begin in the second quarter. One pad remains and is actively being marketed. All users are under land lease agreements and are responsible to build their own box. We expect 35,000 square feet to open by year-end and the remaining 24,000 square feet to open in 2005.

On February 2, 2004 Richard Lewis (ph) joined our company as senior vice president of domestic leasing. Richard will head up our leasing and leasing support groups. Richard has spent the last 15 years in the outlet sector in various capacities and is a seasoned executive. His most recent position was President of Charter Oak Properties. In that capacity he was responsible for the overall supervision of the largest privately owned portfolio of outlet centers. We were thrilled to have the opportunity to land Richard. In our opinion only Richard could enable us to take Tony and focus his invaluable skills on international without hurting our domestic operations.

Lastly, I would like to share some comments on the outlet sector. The International Council of Shopping Centers published the state of the industry report for year ending 2003. They count approximately 230 outlet centers at year end, totaling approximately 54.1 million square feet. In the ten-year period of Chelsea as a public company, we have grown our share of the domestic outlet business from less than 5 percent to approximately 28 percent in terms of GLA. More importantly in terms of quality, we own eight of the top ten outlet centers in the U.S. as measured by the tenant community in terms of sales productivity.

If we look back over the same ten-year period all but one competitor has either exited the business or has shrunk in terms of size and/or quality as the industry consolidated. We have emerged as a much stronger company with sound fundamentals and a deep management team supported by a strong organization that should be capable of providing solid growth and earnings. Thank you, and Jean will now open the call up to questions.

(OPERATOR INSTRUCTIONS) Lee Schalop of Banc of America Securities.

On the bankruptcy front, Tom, you mentioned some of the tenants that have had some issues. Do you see any more potential issues coming over the next few months, or is bankruptcy season largely behind us?

Typically this time of year is when most of the bankruptcy announcements occur. As I mentioned, we do keep a watchlist. There are some tenants that are still in bankruptcy from 2003 that continue to operate stores in our portfolio, they continue to obviously be on our watchlist. But there is no one else currently that is inevitable. We are hearing that there is a tenant out there called Wilson's that is closing some stores at full price, but they have yet to indicate to us that they plan to have any outlet closings. So again, they are difficult to time and predict. But I would say the bulk of them are probably already behind us.

And then on the development front, you guys gave a lot of detail on the '04 and '05 openings. Could you give us some color beyond that, either in general terms, (inaudible) you could have X per year, or if you can share some specifics, whether its other countries or other geographic locations where you think there is an opportunity down the road?

I can address that domestically. We do, in fact, have a number of other markets that we are currently very active in beyond the three that I mentioned. And they include some major markets domestically, where there is not a Premium Outlet presence. Again, the timing of those really all depends on how fastly we get through our predevelopment and preleasing, but I think we would be disappointed to say that we don't bring on one to two large Phase I projects per year. And we have certainly enough in the pipeline to do that for the foreseeable future.

I think internationally we still have a long way to go in Japan in terms of opportunities. By the end of next year we will have at least one property in each of the four biggest markets in that country. But beyond that, I think there are other pockets in those same markets as well as outside of those markets that we can explore. And we are actually busy working on those. Mexico, as you know, we are hoping to be open by the end of this year. And if things go well I think that should open things up to look at other cities in Mexico. We are actively looking at partnerships in other Asian countries, which we talked about Korea from time to time, and that is still ongoing and active, as well as other parts of Asia. Europe is still something of a question mark, although there is clearly opportunities to explore over there. And we are also actively working on that. But nothing concrete that we can talk about at this point.

One last question and then I will yield the floor. You talked about the success of the Company vis-a-vis a number of competitors over the last ten years. Do you see any additional opportunities to buy out some of these competitors that have fallen on hard times to increase your asset base at attractive prices?

As I mentioned on previous calls, our acquisition activity over the last 36 months is obviously been very active. There are no large quality portfolios that are privately owned still out there that are available. However, there are a number of independent owners that have a few centers. And there's a number of independent owners that own one property. So although we have no acquisition other than what Mike has mentioned earlier in our plan for '04, we continue to get properties submitted to us that we look at, and we continue to be active communicating with those assets we would like to own. Just the timing of those is difficult to predict.

Thanks very much.

Jeff Donnelly with Wachovia.

A couple of questions. Actually I guess first probably for Les and it pertains to valuation on the Japan properties. I don't expect you to pinpoint what you guys necessarily think those properties are worth, but I was wondering if you could maybe highlight -- have there been any comparable transactions that have occurred, outlet or other forms of retail there that might allow us to come up with some metrics? Or how you value these on, whether it is cap rate or local conventional, have a yen for Sano or to bow or what makes sense?

Not really. You were over there with us about a year ago so you had a little bit of a firsthand look. But as you know, we really have become the dominant firm in the higher end outlet centers over there. And in fact, our only competitor is Mitsui Tuason (ph) which is a Japanese real estate company, and they own six outlet centers, which in terms of quality are somewhat different from ours with a different tenant mix, different locations and so forth. To my knowledge, none of those assets or any of the other major assets in the (indiscernible) Japan have changed hands recently or at all. And so it is not -- I can't really come up with a good benchmark out there in terms of done deals. We do, I think the way we look at it really is purely in terms of the absolute NOI that we are bringing back to the states from our investment in Japan. And I think it is all, it is hard to value from a cap rate standpoint.

For Mike, I do not know if you might have this handy, but the question concerning I guess the geography of your cash flows just because some of the centers that you added over the years like Orlando and Las Vegas, plus you have been very inquisitive, it strikes me that Chelsea has had a market shift away from northeastern markets. I wasn't sure if you might have data on how your revenue sources break out here in the United States.

I'm probably going to pass it over to Tom, but we are a lot more diverse than we have been in the past.

I do not have exactly all the properties domestically in front of me but I do recall that Woodbury Common is about 13 percent of our NOI and the California properties represent roughly about 30 percent. So combined between California and Woodbury they are roughly 50 percent of the NOI domestically.

I was trying to get at.

Its probably a little bit less than that, maybe around 40 percent. I think California might be 25 and Woodbury about 13 as Tom said. But the majority of our NOI now comes from probably New York, New Jersey, Pennsylvania, of course, Boston, as you know. California and with Orlando probably Florida is also a main contributor.

It just strikes me that your exposure to winter weather market has declined.

Yes, quite a bit.

And another one actually for you, Mike, just concerning the run rate or seasonality from your income from unconsolidated investments, as we look out for '04, I guess how should we think about it as compares to '03? And as additional projects are added, whether its expansions to the other projects come online, how can you help us think through that as to what is in your guidance?

Well, as far as what is in unconsolidated investments, certainly Japan over the last year or so has been the major contributor. I think as we look out over the next year Japan is going to be about 900,000 square feet of weighted average GLA. So you can look at it as far as our usual returns there. Obviously things are weighted more towards the back end of the year than the front. Typically it probably follows our domestic trends as well. As far as domestically, our Simon joint ventures are also in there. Las Vegas opened in August, and you get the benefit of a full year results of Las Vegas. That property is about 438,000 square feet, a couple hundred dollars a square foot. Looking for a 15 or so percent return on that. And basically I think Las Vegas will be probably more even over the year, probably still more skewed towards the second and third quarter of the year. And Chicago will open in May, as Tom said. And you get about half a year of results there. So that's about 438,000 square feet at 150 bucks with about a 14 percent return. So that is going to be essentially the makeup, and then you have certainly in Japan -- you've got the Tosu opening next month, and as Les mentioned some of the expansions later on in the year.

I think in the last couple of years we've had a good bit of volatility in that contribution from the unconsolidated investments, in large part because we bought back 50 percent of Orlando consignment, and we also bought back 51 percent of those for Fortress Properties. So all those earnings wound up going into the wholly-owned line and got taken out of there, and in the meantime we had an increase in contribution from Japan. So there's been quite a lot of movement in that number. But going forward I don't see as much as movement because we've got fewer items in that category now, and it is primarily going to be Japan and our JV with Simon.

Question actually I guess for Tom on trying to understand percentage rent levels in 2004 and 2003, and I know there's a lot of moving parts here. But I was curious, roughly what level of sales growth is necessary for your portfolio do you suspect to offset the dimunition in just percentage rent that would naturally come from your desire to convert expiring leases to base rent on renewal or the increase in break points that come as just contractual rent growth? Is there for example, is 3 percent same-store sales growth that's actually translated into zero or flat dollar amounts in percentage rents?

I can, I guess, answer that in two parts. One is just from a percentage rent standpoint what we typically do year-over-year is we go into the year with flat projections, and then we obviously update those quarter by quarter based on the actual sales results. As far as lease renewals as it relates to percentage rent, I think it is fair to say that in most cases we can lock in the percentage and include that in the base rent on any type of renewal, that is the posture we take, to lock in as much of it as we can. So I don't know if that answered your question exactly. But that is kind of how we view percentage rent.

Not exactly, but -- Mike, are you able to tell me maybe what your guidance is for percentage rents in '04?

I'll try to give a crack at it. It's very difficult, and I can't give you an exact number. If sales were to be flat -- because when we do our five-year projection and we look ahead we used flat sales in our projections -- so if indeed sales were to be flat and we project no percentage rent coming in from any new tenants that we lease to, then your percentage rents would decline as we believe or factor in increasing base rents to captures part of the percentage rents over time.

However, when you do look out over any period of time, what in reality tends to happen is that as we negotiate new leases, we tend to be more effective in the kind of leases that we are negotiating and get better percentage rent clauses than we might have historically. And we are getting an increasing number of tenants at an increasing number of centers that are paying percentage rent because we've been fortunate enough to have enough centers get to those kind of levels in sales where they become good percentage rent contributors.

So net overall I think if sales were flat we would see probably some decline in percentage rents, (indiscernible) a good chance that could be offset with the new centers we are bringing online and new tenants that we do not project any percentage rent for, but there would probably be a slight decline. If we had 3 percent increase in sales over time, I would have to assume that it would be a guess because you have to look at the tenant by tenant that we would see an increase in percentage rents.

Okay, thanks.

(OPERATOR INSTRUCTIONS) Ralph Block of Bay Isles Financial.

On your 8 percent sales increase for Q4, was that pretty much across the board, or was that focused on a few particular centers?

It was pretty much across the board and the vast majority of our centers domestically in the fourth quarter were up.

Okay, and on the new lease I think you mentioned 1.4 million in new lease space. How much of that was renewal versus new tenants coming in?

Eight-hundred-fifty thousand approximately was renewal and re-leasing was the balance or about 515,000 square feet.

And of the 115, was any significant portion of that from tenants who haven't been in your centers before?

I don't have that breakdown in front of me, but as I did mention, we did have a number of new tenants enter our domestic portfolio for the year. Approximately 50 new tenants entered in '04 that were not in the portfolio in '03. And I don't know if you heard me correctly, but that number was 515,000, not 115 on re-leasing.

And do you have a kind of a rough guess on -- let me backup. It looks like the guidance’s were about a 36 cent increase in FFO for '04. How much of that would come from internal versus acquisitions and developments?

Basically the breakdown, which is 10 percent, I guess we look at it by percentages. Internal growth should represent somewhere between three and four percent. And then the external growth would make up -- I guess there would be some leverage on the internal growth. So let's say half of the growth would come from internal sources. And then the majority of the remainder would come from the domestic development and acquisitions including the full-year results from Tannersville and Las Vegas outlets, as well as the new development from Las Vegas Premium Outlets and Chicago.

Okay, and one last question on the Punta Norte in Mexico City, what does the tenant makeup look like there? Is it going to be similar to what we've seen in Japan in terms of a mix of international and local, and is there much differential there between what you've seen in Japan?

It will be different, but similar. It will have -- there are some names I really can't mention, but it will have names along the lines of a Nike or those kinds of names, as well as a good representation of luxury names. The international names will makeup about half of the tenant mix and the remainder will be domestic Mexican brands, which are generally going to be unknown to us.

Approximately 50/50 you say?

Yes.

Craig Schmidt of Merrill Lynch.

The Seattle project, are you thinking that investment will be wholly owned or may it be joint venture?

No, wholly owned.

In Chicago, my sense was that Chicago leasing was a little bit tougher because it was so much surrounded by traditional mall retailing. But it sounds at the 100 percent. Has that issue been avoided or are there some tenants there that you may not have taken (indiscernible) the option you had in Las Vegas?

No, we did experience difficulty on the leasing front from a sensitivity standpoint in Chicago. I believe when this project is open it will represent a very substantial mix of fashion tenants. And like I said, we expect to be 100 percent leased at the time of opening. We are currently 92 percent preleased. So the leasing activity has been fine for Chicago.

So it is going to be similar let's say to Orlando and Las Vegas?

Yes.

Okay and then Las Vegas, I was wondering if update through the holidays, how has the two centers working and are they attracting the audience you thought they originally were attracting or has that changed?

We are actually pleasantly surprised. When we acquired the Las Vegas outlet center from Bells as you recall we projected approximately a 20 percent sales decline when we brought our Las Vegas Premium Outlets center on board. And we are experiencing about half of that. And each month that decline seems to go down even lower in the single digit category. Both are really responding as we expected. The Las Vegas outlet center is much more local based. And the Premium Outlet center is attracting a larger number of the international visitors that are coming into the strip.

Great. Thanks.

(OPERATOR INSTRUCTIONS)

Thank you everybody, and we will speak to you later in the spring.

Thank you for joining us on the call. You may now disconnect.