西蒙地產 (SPG) 2004 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2004 Simon Property Group earnings conference call. My name is Ann Marie, and I will be your coordinator for today. At this time, all participants are in listen-only mode, and we will be facilitating a question and answer session towards end the of this conference.

If at any time during the call you require assistance, please press star 0, and a coordinator will be happy to assist you.

I would now like to turn the presentation over to Ms. Shelly Doran, Vice-President of Investor Relations. You may proceed.

Thank you. Good morning, and welcome to the Simon Property Group first quarter earnings conference call. Please be aware that statements made during this call that are not historical may be deemed forward-looking statements.

Although the Company believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements, due to a variety of risks and uncertainties.

Those risks and uncertainties include, but are not limited to, national, international, regional and local economic climates, competitive market forces, changes in market rental rates, trends in the retail industry, the inability to collect rent due to a bankruptcy or insolvency of tenants or otherwise, and changes in market rates in relation to foreign currency. We direct you to the Company's various filing with the 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 be accurate only as of today's date, May 7, 2004.

The Company's quarterly supplemental information package was filed yesterday, Form 8-K. This filing is available via mail or e-mail, and it is posted on the simon.com website in the investor relations section, under "Other Financial Reports".

If you would like to be added to the list for e-mail distribution of this information, please notify me at sdoran@simon.com.

Participating in today's call will be David Simon, Chief Executive Officer; Rick Sokolov, President and Chief Operating Officer; and Steve Sterrett, Chief Financial Officer. And now I will turn the call over to Mr. Simon.

Good morning, thank you for joining us on our call today. We had a very solid quarter, reporting FFO of 96 cents per share, in line with Wall Street's consensus expectations and 7.9% above last year. Our core portfolio continues to perform well, and we have been very active on both the development and acquisition fronts.

Later in the call, Steve will discussion financial results and capital market activities, and Rick will give you an update on our development activities and our European investments.

First, I would like to take a few minutes to talk about our growth strategy. I believe we are unique in the estate industry and certainly in the mall sector, because of the multiple ways we have demonstrated that we can grow our business. We have five distinct elements of growth, each of which I will discuss briefly.

First, enhanced profitability of our core portfolio. We already have a portfolio unrivaled in size and quality, with 40 of the top 100 malls in the country, but we are still working hard each and every day to make what we have even better, and we do this in several ways. We are focused on improving profit margins through the aggressive leasing and re-leasing of our retail space.

We believe that we can continue to use our size to drive down operating costs. We invest capital in our portfolio to increase cash flow and enhance our assets through renovation and expansion.

We take anchor spaces vacated by tenants like Montgomery Ward and Lord &Taylor, [INAUDIBLE] Dick Sporting Goods and [INAUDIBLE], just to name a few, to our properties. And lastly, we improved overall portfolio quality through the selective disposition of noncore assets.

Our track record in this area, from industry-leading releasing spreads to well-executed redevelopments like Houston Galleria, Norm Shop, South Park and Charlotte, and Town Center Boca, is outstanding.

Second, we generate supplemental revenues. We created this category of opportunity for growth for the mall industry in 1997 with the creation of Simon Brand Ventures. The programs within SPG and Simon Business Network continue to generate increased revenues each year. In 2003, SPG's share of these revenues was 119.4 million dollars, up 17.5% from 2002.

We continue to develop new platforms such as Simon Super Chef Live, which is currently touring select malls in our portfolio,.

And our Simon-branded gift card program is the largest Visa prepaid card in the country. Sales of the gift card year-to-date through April were up 28.5% over the year earlier period. And in 2003, as we reported, we sold $340 million worth of gift cards.

Third, develop high-quality retail real estate. We are as active as we've been at any time during the last 15 years in the development area. We have five major developments under construction, and yesterday announced the construction of Coconut Point in Bonita Springs, Florida.

We are very disciplined in our approach to new developments, which allow us to develop projects that consistently meet our anticipated investment returns.

We are excited about all of our new projects, great locations and growing markets, with world class designs, exciting tenant line-ups, and double-digit yields on construction costs.

Fourth, acquire high quality retail real estate. As you read if our release yesterday, so far in 2004 we have spent nearly $500 million on the acquisition of high-quality retail real estate. We've acquired 100% ownership of Plaza Carolina in Puerta Rico, increased our ownership positions in Banger Mall and Montgomery Mall, and acquired a 95% interest in Gateway Shopping Center, a high quality lifestyle center in Austin, Texas.

Again, we've taken a very disciplined long term approach to acquisitions. We want to acquire real estate that enhances our existing franchise at prices that make sense.

We look for opportunities where our size, capital structure, and existing relationship assist us in the acquisition of properties that meet our return objectives, enhance our NAB, and increase our cash flow, yet selectively expand our international presence.

Our initial investment of [INAUDIBLE], which occurred in 1998, with our investment in Group BEG, a Paris-based developer of retail properties in Europe, was a new strategy for U.S.-based retail reefs. Our experience with Group BEG has been positive, and investment returns have been attractive, resulting in our decision in 2003 to expand our presence in Europe.

In December of 2003, we created a joint venture called GCI with the Rinascente Group, an Italian retail and real estate developer, to own, manager, and develop shopping centers in Italy. Today, we own interest in 48 assets in Europe, and have two additional projects under construction, both scheduled to open this Fall.

The same week that we're opening Phase 3 expansion of forum [PHONETIC] shops in Las Vegas, we will open Arcadia in Warsaw, Poland. Arcadia will be the largest mall in central Europe. In addition, both BEG and our Italian joint venture have significant development pipelines provisioning our European investment for future growth.

This multifaceted growth strategy, combined with our portfolio of highly productive, well-located retail real estate, positions us well, I believe, for solid growth in the future.

I will now turn the call over to Steve for an overview of our financial and operational results for the quarter.

Thank you David. We reported strong increases in revenue and FFO for the quarter. Consolidated revenues were up 9.2% over the year earlier period to $584.3 million.

Diluted FFO of the Simon portfolio was also up 9.2% to $254.3 million, and diluted FFO per share for the quarter was up 7.9%, as David mentioned, and 96 cents a share. Our portfolio continues to perform well. The follows statistical information covers our regional malls and in the retail components of our mixed use property. Our portfolio demonstrated strong sales growth in the first quarter.

Comparable sales per square foot -- that is, sales of tenants who have been in a place for at least 24 months -- increased 5.4% to $411 per square foot, compared to $390 at March 31,2003. Total sales per square foot increased 5.7% to $408 a foot, as compared to $386 a year earlier.

For the third consecutive month, every region within our portfolio showed positive comp store gains, led by the Mountain and Pacific regions.

Several factors have been cited for the first quarter's strong performance by the retailer: favorable weather this Spring, fashion-starved consumers who are finding what they are looking for in the stores; and strong consumer cash flow from the increased tax refunds as "checks" in the overall recovery of the economy.

The department store category shows encouraging news. All 8 of the major department store chains showed positive comp store gains for March, and that trend generally continued in April.

Most department store chains had increases in excess of 5%, with the higher-end department stores showing strong double-digit sales gains. Apparel was strong in the first quarter, with a 7.9% increase in our portfolio. Within Apparel, the Family category showed the strongest growth, followed by Women's, Specialty, Junior, Children, and Women's Better.

Our best comp store sales gains are coming from our bigger, better and more fashion-oriented centers. We have already mentioned to you previously that our top 50 centers provide approximately half of our NOI. And these already strong centers keep getting better. For example, Town Center at Boca had a 25% comp store sales growth for the first quarter.

Sales at the forum shops in Las Vegas were up 18%, even though the center is under construction with the Phase 3 expansion. Fashion Valley Mall in San Diego showed comp store sales gains of 16% for the quarter, as did the Fashion Mall at Keystone at the Crossing here in Indianapolis and the shops at Mission Viejo. Sales were up 14% at the Fashion Center in Pentagon City, the mall that [INAUDIBLE] and King of Prussia.

Sales were up 13% at the Westchester and Adventura, and up 12% at Copley Place in Boston. Our portfolio now includes 27 centers that generate sales in excess of $500 per square foot.

Seven of those generate sales in excess of $700 a square foot, including the Forum Shop, the Mall at Chestnut Hill,, Stanford, Copley Place, Fashion Center at Pentagon City, Fashion Valley in San Diego and Roosevelt Field. Occupancy from all the free standing stores in the regional malls at March 31, 2004, was 91.1%, 60 basis points lower than the occupancy as of March 31, 2003.

This decline is wholly attributable to bankruptcy related closings during the last quarter of 2003, and the first quarter of 2004. We lost 144,000 square feet in the fourth quarter of last year, and 187,000 square feet in the first quarter of '04, to bankruptcies such a as Eddie Bauer, Gadzooks, KB Toys and Illuminations.

We think demand for space remains very positive. We anticipate retenanting the space before year-end, and that occupancy at 12-31-2004 will approximate the 92.4% that we reported at year end 2003. Average space rented for our mall portfolio increased by 4.7% over the prior year period to $32.75 per square foot.

Our re-leasing spread for the quarter was was a strong industry-leading 19%. The average initial base rent for new mall-leased stores signed was $38.61, which is $6.25 above the tenants who closed or whose leases expired. Growth in same property NOI for the region of all portfolio the quarter was 3%.

This calculation, as always, excludes the impact of redevelopment activities, disposition properties, and new acquisitions -- for the quarter, about 87% of our mall NOI was comparable. Our net income for the quarter was down by 5 cents a share from last year. This decline was wholly attributable to a $13.5 million loss provision we recorded, related to Mall of America.

This amount represents an adjustment to the loss research we recorded in the third quarter of 2003 to estimate the impact of the Court's ruling that SPG must disgorge it's net profits, or MOA. You may recall that our September 2003 reserve was an estimate of the financial impact. The judge appointed a special master to calculate the actual impact.

The change we recorded this quarter was primarily related to the calculation of the cost of capital we are entitled to receive on our initial investment. We received the special master's memorandum on May 3rd, 2004.

We continue to vehemently disagree with both the judge's original decision, and he special master's memorandum. We think that in arriving at flawed and illogical conclusions, both decisions ignore controlling case law, and fail to take into account the basic terms and conditions of the original Mall of America transaction and existing contracts between the parties.

The judge's original order is already on appeal to the 8th Circuit Court of Appeals. We are also appealing the special master's findings. However, we have adjusted the reserve as required under their generally-accepted accounting principles.

This affects net is income, but not FFO, as we have treated Mall of America as if it was effectively sold in the third quarter of 2003, and we have not booked any earnings to net income or FFO from Mall of America since that time. Let me talk just a minute about capital activities.

In January, we issued $500 million of debt securities, $300 million of 3.75% notes due 2009, and $200 million of 4.9% notes due 2014. As of March 31, 2004, our floating rate debt, including out of the money cap, represents about 17% of our share of total indebtedness, which is consistent with our targeted mix of fixed and floating rate debt.

Our interest coverage is 2.6 times, and our expected 2004 FFO payout ratio is approximately 60%. We currently have approximately $775 million of availability on our $1.25 billion credit facility. For the year 2004, we expect to generate approximately $1.2 billion of cash flow after servicing our debt and our fixed charge obligations, which will be available to fund Cap Ex and to to pay our dividends.

We maintain investment grade ratings of BBB-plus, BAA 2 with a stable outlook, and we believe that our balance sheet, quite frankly, has never been stronger. One additional item: Yesterday, we announced the $250 million stock repurchase program.

This program reflects our confidence in our business going forward, our belief that our stock is undervalued, and that it's a great long-term investment. With that, I'll now turn the call over to Rick.

Thanks, Steve.

This week, we were excited to announce another new development for the Company, Coconut Point in a [INAUDIBLE] of Bonita Springs, Florida. Located halfway between Fort Meyers and Naples, Coconut Point will be a 166-acre town center located in a master plan 500-acre mixed use development.

Coconut Point will be in open air, mixed use, main street regional shopping center, with a community center component, comprising 1.2 million square feet of retail space, 90,000 square feet of the office condominiums and 200 to 400 upscale residential units.

As described in the release, Coconut Point's retail space will be comprised of three components: A main street village, a community center, and an area we call the Lakefront.

And we are pleased to bring a wide variety of tenants to this project, including Dillard's, Movie Co. Theaters, Barnes & Noble, Bed, Bath & Beyond, Dax 5, Designer Shoe Warehouse, Office Max, Old Navy, Pet Smart, Huron, Ross Dress for Less, and Sports Authority.

The project will also include a significant number of restaurants. The first phase of the project is expected to open in October of 2005, and will include the community center, the Lakefront shops, and a portion of the village, including the Movie Co. Theater.

The remainder of the project is expected to open in the Fall of 2006. The Company owns 50 percent of this asset. Located between Naples and Fort Myers, Coconut Point will benefit from the growth experience in Lee and Collier counties, both among the 100 fastest growing counties in the United States.

Naples ranked number one, and Fort Myers number 10 as the fastest growing metropolitan areas in the Southeast United States between 2000 and 2003. Naples ranked number two in the United States over the same period. Between 2003 and 2006, population within the trade area is projected to grow at an annual rate of the 3.4%.

Within five miles of Coconut Point, there are close to 100 active residential projects of the more than 50 high-end projects which are half a million dollars and up in the two county area, half of them located within five miles of our project. Each year, the influx of seasonal residents increases the population in the two-county area by over 300,000 people.

Coconut Point is another example of our strategy to selectively develop high quality retail real estate in growing affluent markets. As documented in yesterday's press release and our 8-K, we have five major new development projects under construction:

Chicago Premium Outlet, that will be opening later this month; Clay Terrace, north of Indianapolis, that will be openings later this year; St. John's Town Center in Jacksonville, opening in March of next year; Wolf Ranch, located outside of Austin, Texas and opening in the Fall of next year; And Firewheel Center in Garland, Texas, also opening in the fall of next year. These projects are all open-air concepts located in growing markets.

They contain lifestyle tenants and increased number of quality restaurants, and place less reliance on traditional department store anchors.

As I have stated before, this approach allows us to integrate a wide variety of retail uses and format, and it creates [INAUDIBLE] that have broad shopper appeal, and are positioned to capture greater market share.

All of our development projects are on-track to yield stabilized double-digit, unlevered returns on costs. All of the costs and returns are included in our supplemental 8-K filing, which is already available. We also are actively working on a predevelopment pipeline of another half dozen potential projects, the first of which is the domain in Austin Texas.

This project will be anchored by Neiman Marcus, one other moderate to better department store. We are finalizing the details, but hope to start construction yet this year on this exciting project and the great Austin market. We have several expansion and/or renovation projects also under construction.

As David mentioned, the Phase 3 expansion of the Forum shops at Caesar's is continuing on schedule. Those of you that get to visit us out in Las Vegas at the ICIC will see something that is truly extraordinary emerging on the Las Vegas strip. Project income is running ahead of our proforma.

Leasing efforts are proceeding well, and key tenants for the expansion have already been secured The expansion of South Park Mall in Charlotte, North Carolina, continues with the addition of Gallion's, small shops, a food court, and upscale restaurant McCormick & Schmick and Merck's [PHONETIC].

At Aurora Mall in Denver, a suburb of Aurora, we are consolidating two Foleys locations into one state-of-the-art building, adding a brand-new Dillards, which is relocating from another competing center, and a food court containing a multi-nation to tap into the growth that is occurring in East Denver.

The renovation of Burlington Mall in the Boston suburb of Burlington is underway, as the expansion of Battlefield Mall in Springfield Missouri. At Battlefield, we are adding a lifestyle cluster on the front of the mall, creating additional GOI. We will add Chico's, Coldwater Creek, Straw Box, [INAUDIBLE] Loft and Joseph A. Banks.

In addition to generating a very attractive return, we are also taking these tenants out of the market and increasing the market share of the our property. We have many other properties where is we believe the strategy will work. We are in construction on several, and we have additional plans underway for many more.

We continue to add impact tenants to our properties, ranging from department stores to big boxes, to restaurants, to theaters, to the specialty shops, all designed to effectively satisfy changing shopper demand.

The anchors and big boxes opening in our portfolio in 2004 and 2005 are listed in our supplemental 8-K package on the summary of "Regional Mall Anchor and Big Box Openings".

During that two year period, we will open nearly 50 new high-impact retailers at 31 of our properties, including Neiman-Marcus, Nordstrom, Bloomingdale's, Dillard's, Foleys, Barnes & Noble, Best Buy, Dick's Sporting Good's and many more.

These additions enhance the market share of our properties, and provide attractive returns on our investment. Would like to just spend a couple of minutes to highlight our acquisition activities in the last quarter.

We have completed nearly 500 million of acquisitions to date in 2004. On February 5th, we acquired a 95% interest in Gateway Shopping Center in Austin,Texas for $107 million. This 513,000 square foot project is 99% leased, and generates average sales in excess of $370 per square foot.

Gateway's line-up includes The Container Store, Whole Foods, Smith & Hawkin, Linens 'n Things, Old Navy, Best Buy, Ultra Salon and Cosmetics, Comp USA, REI, and Regal Cinema. In the fall of this year, Crate and Barrel will open its only Austin store at Gateway, and it will be a two-level 335,000 square-foot location. Several stores at Gateway report sales in excess of $500 a foot.

The Container Store at Gateway, for example, is their second highest performing store in the country. We are already working on redevelopment opportunities at Gateway, as several of the existing retailers want to enhance their presence at the Center.

As we have discussed with you before, Austin's overall economy has experienced strong growth since 1990, with average annual population growth of 4%, and average annual job growth of 5%. A recent [INAUDIBLE] study concluded that Austin is the second strongest retail real estate investment market in the United States. Gateway is a logical expansion of our ownership of the Arboretum, located just across the street.

It is great real estate, offers significant redevelopment opportunities, and will add to the existing Simon franchise in the strong Austin market. Copied with a [INAUDIBLE] development of Domain, Gateway will create a unique retail cluster for us in central Austin.

On April 27th, the California Public Employees Retirement System, CALPERS, and the State of the Michigan Treasury, Michigan, sold their entire interest in Bangor Mall in Bangor, Maine and Montgomery Mall in Mongomeryville, Pennsylvania, to the existing partners in those projects, including Simon. We had acquired our initial interest in Bangor and Montgomery in the Craftco [PHONETIC] transaction. Our interest in Bangor Mall is now 67.6%, and our interest in Montgomery Mall is now 54.4%.

Banger and Montgomery are both high quality, well located assets. Bangor Mall comprises 655,000 square feet, and is anchored by [INAUDIBLE], J.C. Penney and Sears. Dick's Sporting Goods is under construction, and is scheduled to open in November of 2004 at the project. Bangor Mall generates sales of approximately $370 per square foot, with 91% leased as of December 31st, 2003, and it's the only mall in the city of Bangor.

Montgomery Mall is a 1.1 million square foot center in suburban Philadelphia, and is anchored by Penney's, Macey's, Sears and [INAUDIBLE]. Montgomery Mall generates sales of approximately $260 per square foot, and was 92% leased as of December 31. On May 4th, we completed the purchase of Plaza Carolina in San Juan, Puerto Rico for $309 million.

Plaza Carolina was also acquired from a parentership behind Calpers in Michigan. It is the only regional mall serving a geographically large and thriving trade area, east -- in the eastern half of Puerto Rico.

Plaza Carolina contains 1.1 million of square feet, and it is anchored by Penney's, Sears, a supermarket, a cinema, and four junior anchors.

Total sales are 275 million, and sales per foot are over $450 a foot. It has maintained a 98% leasing level for the last five years. We anticipate no additional regional mall development, and we also believe we have a significant opportunity to remerchandise Plaza Carolina by upgrading the specialty retailers and adding additional junior anchors.

Together, the Plaza Carolina, Bangor and Montgomery acquisitions will yield an attractive 8%. At this point, let me turn it back over to David to review with you the European initiatives we have ongoing.

We're going to give Rick a break, as you can see.

[INAUDIBLE, LAUGHTER] I can't talk this much.

We have lots going on. But just to give you an update on Europe, as you know we completed our joint venture with the Rinascente Group and formed GCI for the purpose of owning, managing, and developing shopping centers in Italy.

The joint venture owns 39 centers, currently opened and operating consisting of over 6 million square feet; and additionally, GCI had several projects under construction and redevelopment. The GCI assets are performing in line with our underwriting and the 2004 budget.

In March of this year, we opened [INAUDIBLE] Mondino Shopping Center one month aheads of the business plan, and a hundred percent occupied. Tenant sales at the center are in line with expectations.

As I mentioned to you before, we have our investment with BEG, which is also performing in line with our 2004 budget. Two new development projects will open this year. I mentioned Arcadia, and Warsaw, which will be the largest shopping center in Poland; and in fact, all of central Europe with 1.1 million square feet in GLA.

It's anchored by Carpor [PHONETIC] and Leroy Merlin Do it Yourself center, and a multiscreen theater, the center will contain nearly 200 small shops and approximately 300 square feet of small shops, and the cinema will open at Bay 1 on [INAUDIBLE] suburb of Paris in November. The development is adjacent to our Phase 2 project, anchored by Carpor, which opened in February of 2003.

The GCI and BEG properties are 99% occupied, indicative of the high demand for retail real estate in Europe. We are excited about the prospects in Europes through our existing joint ventures.

By joining with established European-based partners experience in the complex development process across Europe, we believe that we can create a significant amount of equity value by selectively developing and expanding these European shopping centers. Before I open it up for Q&A, let me offer two final thoughts.

Yesterday's annual meeting welcomed -- actually Wednesday's annual meeting welcomed the new independent Director to our Board, Karen Horn. Karen brings a wealth of experience to us and also serves on the board of Eli Lilly and Georgia Pacific, also leaders in their respective industries. She has already proven to be a great addition.

Lastly, we updated our 2004 FFO guidance and our earnings, released yesterday to a range $4.28 to $4.32. This is at the upper end of our previous guidance, and reflects our ongoing confidence in our business and our portfolio.

And with that, operator, we're ready for the Q&A session.

Ladies and gentlemen, if you wish to ask a question, please press star one on your touch-tone phone. If your question has been answered or you wish to withdraw your question, please press star 2.

Again, to ask questions, the command is star 1, and we'll pause briefly as questions queue up. And your first question comes from Michael Billerman of Goldman Sachs. You may proceed.

Good morning. Cary Callahan is here with me, as well.

How are you?

I was wondering, and this may be a question for David or Rick, but you've embarked on a pretty big campaign, replacing a lot of anchors in your portfolio with some new anchors in big boxes, and in your 8-K, you know, a lot of openings in '04.

Can you comment on how much that may be impeding some of the growth in '04, maybe just as some lower NOI as you're going through that renovation process, versus how much you will act as a good catalyst for stronger growth into '05?

I will say, you know, 2004 continues to be a transaction year for us in terms of the overall portfolio. We are adding a lot to it. We've got several expansions, major expansions, that are still ongoing.

We've got our development pipeline that's really not going to kick in -- into gear until '05 and '06, so you know,, we're still going to produce solid growth this year, but I don't think it will be as accelerated once we go through the portfolio and replacing the Lord and Taylor stores and so on.

And as we said in our text, you know, the property NOI growth was 3% quarter over quarter, and you know, that was about 87% of the portfolio, but -- so, you know, the other 13%, obviously, is going to generate, we think, higher growth once it becomes on-line.

I will also say to you that if you look in the 8-K, we have set forth most of the our anchor replacement projects with the aggregate costs and the returns, and we're getting comparable returns on our anchor replacement strategy that we're getting with our redevelopment and new developments.

How much of a redevelopment spend do you see going forward? I mean, how much more opportunity to do you see within the portfolio?

Frankly, everyday we're working to bring additional products forward that we believe we can get comparable returns.

We are working on a substantial number of opportunities. Whether they will come to fruition remains to be seed, but we're excited that we're going to be able to maintain this kind of pace with these kinds of returns for the foreseeable future.

Yeah, and I would say, you know, a great example of that is Battlefield Mall in Springfield, which Rick and I had the opportunity to see a month or two ago.

And essentially, what we're doing is creating additional GLA in the right -- right in the front of the center, and adding about six tenants, generating about a -- Rick has got it right here in front of me. Basically, about a 9% return.

We think there's a lot of additional opportunity to basically just hang out additional GLA for tenants that want some frontage.

And if you think about the mall environment, you've got a lot of setback, and a lot of parking, and I think a lot of opportunity to create additional GLA in the entrances of these centers. And I think that's just going to be an ongoing program that we do each year, day on and day out, but that's going to be a major focus for the Company.

We've got two others that have recently been approved in our capital allocation committee, one in Independence, which is Missouri -- Independence, Missouri -- and second in Broadway -- Tyler, Texas.

We're doing the exact same thing we did in -- in Battlefield, and we would hope to do four, five, or six, if not more, for the next few years, per year.

That's helpful, David. And maybe just a question for Steve. Steve, how are you hedged for currency fluctuations in Europe? I know you have a fair amount of Euro denominated debt, but are there any other hedges that you have in place?

Michael, that The main hedge that we're doing is we're in fact using the cash flow from the existing assets in Europe to fund the capital for the development pipeline there, so we're never repatrioting those dollars to the U.S., and so we are relatively insulated in that regard, because we're using Euro dollars to fund the new projects

But you're right, I mean, the equity investment, not all of it, but the vast majority of it, has been borrowed in Europe.

In Euro.

In Euro, so that -- you know, it creates it's own hedge from that point of view.

And then just from the ongoing income that you're earning, just from your reported results, is there a certain fluctuation that we should keep in mind if currencies go one way or the other?

At this point, it's immaterial. Because you've got the -- you know, you've got to have a currency exchange adjustment, obviously, each quarter; but between the interest borrowings, and the -- and the earnings, and the size of it compared to our Company is immaterial at this point.

And I think Cary just had a question, as well.

Actually, I'm good. Thanks, guys.

Thank you.

See you in Denver.

Okay.

And your next question comes from Amy Demone of Banc of America. You may proceed.

Good morning.

Hi.

Hi. You completed, you know, about 500 million of acquisitions. So I was wondering if you could talk about the acquisition environment, maybe your expectations for the remainder of the year?

Well, I think Amy it's safe to say that from our standpoint, we don't expect much to happen. It's not in our plan for the balance of the year. We are patiently awaiting cap rates to -- to move up, and if they don't, I don't think we'll be very active.

And so we have nothing left in our plan this year. Obviously, we'll continue to -- to look, you know, to look at opportunities, but we think the pricing has gotten generally too rich for our blood.

And Lee is on the line, as well.

Hey, Lee.

Hey guys, two questions. First, David, at the beginning, you talked about the -- you call it noncore of the business stuff, the credit cards and all of this.

How big do you think that can get, either dollars or as a percentage of the business?

Well, I'm not -- I'm personally not putting any limitations on it, because it is a new business. I still think, you know, the gift card business is growing tremendously.

It's -- you know, obviously, at some point, it will -- it will stabilize, but I think, you know, there's lots -- we really haven't tapped into the corporate gift card market.

We're actually close to hiring somebody to go after major corporations to use that as, you know, incentive, incentives and so on, how they use those kind of things, and so I think that business still has a significant amount of growth.

And on the marketing side, the mall as the medium, I think, is completely untapped. You know, if you look at radio and network TV, and the fragmentation occurring throughout the media world, where you have all of these people that are predisposed to shop and spend a lot of time in a property, I think it's a great opportunity.

Nielson actually just came out with a study on arenas, and their effectiveness when it comes to signage. We've worked with Arbitron [PHONETIC], which is kind of a Nielson-type competitor, to look at the Boston market and what our reach there is. So I think there's a long ways to go.

We've got great personnel in the Company, you know, we've had some fits and starts in that area, but I think we've got some real good leadership, and you know, I'm hoping to make it a big business, but it's still early, it's hard to quantify.

The only thing I would add to that, if you look at what's going on in the technology between TiVo and satellite radio, there is going to be an increasing inability for advertisers to meet with their customers through those mediums, and the mall is the one thing where there is no way to interrupt our offering, So we're very encouraged, as David said, just trying to get it tapped.

Okay. And then on the second question on the stock buyback. Certainly today with the stock in the high 40s, it's a lot cheaper than it was -- very recently it was in the high 50s -- but at this level, it's still higher than it's been for a very long time, other than the past three months.

You only have to go back to the end of '03 to get to that level. So help us understand why today's stock looks attractive to buy, and it didn't so much in the past.

Look, I think from our standpoint, we would rather invest in our Company yielding what it's yielding with its growth prospects than, you know, what we're seeing on the acquisition front, so part of that is because we do see a lack of of financially sound acquisitions.

We are ramping up our development pipeline for external growth; but, you know, that does take some time, and ultimately we just believe tremendously in the Company, and we have the excess cash flow to reinvest in our business that way, and I think it's a subtle change.

It's not, you know, it's not dramatic given the size of the Company, but I think it's just something that we believe ultimately in the value of the Company.

We look at the yield that that kind of investment will generate, the growth prospects, and we feel comfortable and our Board feels comfortable with the decision.

Okay. Thanks.

Thank you.

And your next question comes from Lou Taylor of Deutsche Banc. You may proceed.

Yes, thanks. David, just staying with that theme for a minute, can you just broadly outline your just investment plans over the next say, three to five years, but -- because on on our calculation, it looks like you've easily got capital to make a billion dollars of investments per year.

How do you see that breaking out in terms of Europe, U.S., development in the U.S., versus development in Europe, as far as acquisitions in Europe?

Lou, this is Steve. On the development side, I think as Rick mentioned, not only do we have, you know, a pretty active program of things under construction today, both new development and redevelopment, and we're going to spend $450 million to $500 million this year between those two areas.

And I think that the new development pipeline has enough in it that that level of spending in the aggregate between new and redevelopment is something that I would expect to us continue for the next three to five years. You know, on the acquisition side, it's very hard to -- to predict, because it is a function of not only market conditions, but what opportunities are out there.

The one thing that I would tell you is that in Europe, you know, as a marketplace, it is obviously much less consolidated in the U.S., pretty fragmented ownership.

And so, you know, I do think there's some opportunity there, and I do think if we were sitting here having this conversation five years from now, we will own more assets and have more of a presence on an international basis than we do today.

Yeah, I would just add on Europe, our two investments both in BEG, and in GCI, have been financed and structured in a way that in order for them to meet their development pipeline, certainly with GCI, we're not going to need additional equity investment in it.

It's -- it's got the debt capacity and the cash flow that will allow it to kind of meet it's growth plan over the next five years, absent, you know, some major new development opportunity within GCI.

BEG, on the other hand, is in a similar sort of scenario, though they are working on a couple of major developments in France that if -- if they were to secure the right to build would require potentially a little more equity investment from us; but again, not -- not a major, major investment.

And on the development side, I think the one additional deal that we will announce this year, and start this year, as Rick mentioned, is the Domain, and that is anchored by Neiman, and another very, you know, very -- a very strong department store, and that will generally -- you know, we're still finalizing the details -- but that's going to be around $175 million project, which we will own a hundred percent of effectively.

And absent that, we have gone through the existing development pipeline -- that will be a two-year deal, so we hope to open that and follow those six. It may slip to spring '07

I'm pushing our people, they're screaming at me, but that's what I would like to be able to do. And then it's the predevelopment stuff, which is, as Rick mentioned, you know, six plus or minus a couple here or there that we have good prospects on, but at this point, it's very hard to quantify whether or not they're going to happen.

But that would be -- you know, if they were -- if a five or so of those would hit, I assume those would average about 150 a pop, and you know, but that would basically be going from '05 to '08, in that kind of time frame.

Okay. Just two follow ups. One, I mean given the cash flow you throw up and your investment pipeline, are you concerned at all that you might be underlevered for five years from now?

Well, I think it's important in this market to keep our powder dry, and obviously, we could have done a much bigger buyback, but we still want to be opportunistic.

We love, frankly -- I mean, I don't like our stock going down, but, you know, I love uncertain markets, and I think that's when we've done our best work, and it's important in that kind of -- if we are moving toward that, even though the economy is picking up, but the capital and the equity values of the industry get a little more uncertain. I think that's when we excel, and that's why we want -- we want our fire power.

So I don't think -- you know, we might be, if things were status quo, but obviously, they're not status quo for us.

And then just last question. And it's with regards to your economisting portfolio. Do you see you see selling off a partial interest in places like the Forum shops or some of the other larger assets you own 100% of, you've done the redevelopment, you know, to raise capital for deployment elsewhere, or where do you stand in that potential

Lou, I would say, interestingly enough, probably the opposite is true.

We are more likely to be an acquirer joint venture interest and control, you know, a 100% of more assets as opposed to less.

You know, I think there are clearly enough capital sources available to us, and as David, mentioned, the strength of the balance sheet, you know, I mean, in this cap rate environment, it would be an easy decision to make to say to go sell a Forum shop, you know, at a very attractive cap rate.

But at the end of the day, don't forget, you're giving on fair bit of control over that asset in order to bring in a joint venture partner. And quite frankly, we like the fact that we own 100% of most of these assets, and a lot them -- you know, take Roosevelt Field for an example, it has 60 plus million dollars of NOI -- is unencumbered, and that flexibility is something that we have that nobody else in our sector has.

Yeah, well, I would just say we're really -- we're looking at that more on external new deals, if we think it makes sense. I agree with Steve.

Those assets that you could do that have great growth characteristics, and -- and, you know, we're not in a need of capital, really; and secondly, I would add to that -- I mean, one of the thing that we're contemplating is continuing to sell -- you know, not a material amount, but a meaningful amount of noncore assets that's going to also give us capital to reinvest in our business.

Great. Thank you.

Thank you.

And Your next question comes from Ross Dufbaugh of Smith Barney. You may proceed.

Hi guys, here with John Litz. David, you talked about acquisition prices being a bit frothy. I'm curious what you guys are in the market selling today?

I would -- we're evaluating certain noncore assets in terms of our sales. And a couple of also joint venture properties. And, you know, it's a function of the price.

I mean, we're not going to be a -- you know, we're going to be very focused on getting the right price form, but that's it. And we're not selling what I'm call "poor assets".

Are we talking about a couple of hundred million of assets over the next year?

Yeah, if not more than that.

Okay, you have a May 1st joint venture on the Midwestern portfolio.

What's going to happen there? Isn't there a buy/sell trigger coming up?

It's actually -- our guidance here is about -- we're -- you know, everybody's into this "Texas hold 'em" scenario, so we're going to sell tickets to what we call a "baseball draft".

Effectively, what can happen there is, when we unwind it, it's not a buy/sell, it's basically just an allocation of property.

Yeah, there's collateralized debt, cross collateralized debt, Ross, that comes due in late '06, is my recollection.

And then what happens is you just basically -- whoever starts the process, the other guy gets the pick, and you go back and forth until you separate the properties.

So that's an '06 event, not an '05 event?

I believe that it is.

Okay. Final question.

Can you talk about your thoughts on the implications of what Westfield is doing, and how you think that's going to influence your position in the market, both in the U.S. and in Europe?

It has no -- you know, it has no impact on -- on how we're going to run our business.

I mean, it's interesting, it's obviously something that, you know, we're going to look at, but, you know, it doesn't make me nervous or happy or sad or anything else, it's a development that we'll study, and be abreast of, but it doesn't affect the way that we think about our Company.

Thank you.

And your next question comes from Matt Osgard of Morgan Stanley. You may proceed.

Thanks. Most of my questions were answered. Just, Steve, could you just talk about lease termination fees or impacts this quarter versus last?

Lease termination fees were pretty much flat with last year, and are at relatively low level, Matt.

I think land sales were actually down a little bit relative to last year, so -- but neither one of them had a material impact on the quarter.

Thank you.

Okay. Thanks.

And your next question comes from David Pughdy of Lehman Brothers. You play proceed.

Good morning everyone.

Good morning.

Two quick questions for you. There's a recent article in Business Week about on-line jewelry sales seriously eroding retailers. Have you seen any sign of stress in your tenant base?

From that? No.

I read the same article, and, you know, that's still -- that's still a leap of faith, I think, to get to that point, but, you know, we can't underestimate the internet and ultimately its impact, but we have certainly not seen any of that, and I think the best example of that is, you know, if you think about the book store business, even though Amazon has been obviously highly successful.

You know, the Barnes and the Borders have continued to show great signs of -- of a business model that includes physical real estate, so there may be some impact, but I don't think it's going to eliminate the jewelry store in any sense of the imagination.

All right, so they may evolve into sort of a coexistence?

Do you have any sense of what percentage of your tenant base is, you know, roughly jewelry related?

Not off the top of my head, but you know, one of my top 15 tenants is Zales. I know that for a fact.

That's the only one.

But we would have to add up the other people.

Okay. My second question is sort of -- is sort of related to the Coconut Point development.

Mixed use projects generally have a little bit more risk in terms of timing and getting the design right, and you guys are sort of -- your core company base is obviously in retail development.

Are you bringing people on board, or is this something your partner is bringing to the table on this development?

Uh, no, we are bringing outside designers. In fact, Coconut Point was designed by the Jerde partnership, that's is a world-renowned architect,

These properties require a much higher level of design, because you really are creating a much more sophisticated environment for your shopper, and particularly when it incorporates residential uses, and office uses.

Coconut Point has got 18 acres of lakes, where we're going to have pedestrian areas and outdoor dining, so we have a substantial outside design function, but we also have a considerable expertise internally just to make sure that that design function is managed in a way consistent with a timely delivery of the product, and an on-budget delivery of the product.

Yeah, but -- and one of the things you need to be aware of, with respect to the apartments or office, we will either sell the air rights or the development opportunities, and/or partner. We're not going to bring in experts to do that. So it's -- you know, we're only going to hire people on that vis a vis end venture or you're selling it to a third party.

I see. Do you see any meaningful cost [INAUDIBLE] in a development like that, in terms of, you know, greater stock costs, or complicated hard costs in terms of structure, and landscaping?

No, I mean, you save obviously a lot of money, in -- in effect that you don't have to enclose it, but you do have increase in the -- in landscaping and the architectural design and so on.

And it kind of -- you know, it kind of balances out, but the interesting news from a return point of view is that the rents, you know, can be a little bit more robust, because you do have a lower common area of costs associated with the development.

Okay,and lastly just as a follow-up, do you see more of this the future, more mixed use?

I think so.

It can take different -- for example, Saint John's we have mixed use, but it's basically, as David said we allocated parcels that have been sold to two multifamily developers, and one hotel developer that are integrated into the overall plan of the project opinion

Great. Thank you very much.

Thank you.

And your next question comes from Jim Sullivan of Prudential Equity. You may proceed.

Good morning.

Hey, Jim.

I had a couple of questions on some of the things you're doing that you characterize as lifestyle.

For example, the Battlefield lifestyle clusters, which I thought was a pretty interesting development. Even though it's small. The question I had, the -- you know, looking at the supplement, it appears on a cost per foot basis than it's about 225 to 250 a foot, and that, I think, is a good deal more than kind of a standard alone lifestyle center.

And what I was curious about here, in terms of the tenants and pricing, will the tenants in that cluster be hit with the same cam as the indoor tenants?

Let me just go why part of that is expensive. Is that you're obviously building a small amount of square footage, so you know, it is going to be much higher on a per square foot basis than it would be otherwise; and in this particular case, we have -- the tenants that do not have any. entrance into the mall -- there's one tenant that has an entrance into the mall, an exterior entrance, but all the other ones will not -- you know, will be paying basically a fixed cam number, but they won't be paying kind of what the prorata cam cost is in that center

And I think when Rick was commenting on it -- and I think you said this as well, David -- that this is something that you think can do with a lot of your centers?

Yes.

And the question I have, you know, is that -- typically we hear with [INAUDIBLE] stand-alone lifestyle centers, because of the newness of the format, it's not been proven over a number of years, the tenants demand and typically receive kickouts.

Some people talk about kickouts after three years, some people talk about the master five, and I just wonder if you're offering the same type of term, number one. And number two, in terms of attracting tenants to these centers, are you thinking of taking advantage of tenants who are in the market with kickouts elsewhere?

Well, let me just do a couple of things.

One, the idea of hanging retail on the exterior of malls is not new. We've been doing it for a number of years with adding like Barnes & Noble, and Cheesecake at Menlow [PHONETIC] Park. cheesecake factory in [INAUDIBLE] in South Park. So that is a demonstrated technique.

Secondly, there's much less risk in being added to an existing very productive regional mall, and one of the reasons why there is less ability to provide a cleaner lease in a lifestyle environment potentially is because of the fact that they're not demonstrated projects.

Thirdly, in terms of your issue about attracting others -- absolutely, one of the things that we're very focused on in our Company is monitoring any potential competitive activity that would impact our market share, and to the extent that we can move those retailers into our project in configuration that opens out on the parking lot, and eliminate that potential competition, that's certainly what we're very focused on doing.

Yeah, and I would say, Jim, you know, that's the flaw in these itsy bitsy lifestyle centers, the 200,000 to 300,000 square foot ones, because they are a house of cards in a lot of respects, and the developers of those don't have the tenant relationships or the wherewithal to be able to kind of negotiate what we could would call an appropriate deal, which would not include kickouts, but, you know, you have in Coconut -- or Garland, as an example, is anchored by Foleys, and Dillard's, and Barnes & Noble, just as an example.

That's a major development, and that's -- that's a development where -- that's not to say there won't be one or two kickouts, but generally, we're not going to see anything like what you would at these smaller lifestyles. Jacksonville is the same scenario that St. John's. I mean, that's a major development. It's got Target and Dillards, and so on and so fort.

Same thing with have Bonita Springs, and that's why when you see what we are building, we are building projects with big-time critical mass, because I do think, you know, our view here is that these little itsy bitsy lifestyle centers have a high risk to them, and that's something that we want to avoid.

And the -- in your development list, you have this asset at Clay Terrace, which of, course, characterized as a lifestyle center. That's over half a million square feet. So at what point does it not -- is it not, to use your phrase, itsy bitsy, David? What is big enough?

Well, I think Clay Terrace is a great example of a market strategy. Take Clay Terrace.

If that were not in a market where we have a lot of retail, we probably would not -- even though that's on the bigger side, we probably would have passed, but given that we've got the major power center across the street, and with Keystone and Castleton here on the north side, we thought it was important to, you know, to be involved in that project.

I do worry -- I mean, I don't think, unless it's a unique, unique, you know, never say never, but, you know, it's got to be in that 500-plus category for us to be of interest. It just doesn't move the needle for us to build a couple hundred thousand square feet here and there, unless a market that we're really in, and really know, and we think we can eliminate the high risk associated with that kind of project.

Okay, and just to be clear on the Battlefield. That's about a 9 ROI, I think?

Yeah.

Okay.

I will tell you this, I I think that's an extremely conservative, you know, number. We will do better than that, but, you know, it is in the 8-K at that number.

Okay,and just shifting focus to Europe for a minute.

You made the comment about the very fragmented nature of retail in Europe; and, indeed, what you're doing from one country to another is, in terms of size and scale, quite different, you know, with the Polish asset being very big, and what you're doing in Italy, I guess what the market allows you to do much smaller types of product.

I'm just curious, do you see, ultimately in Europe, the opportunity for, you know, building some type of consolidated pan European asset base, where you would have a little more similarity with the assets number one? And number two, sort of less fragmentation on the tenant sides.

I mean, I know you have Care Four that's in both of these markets, but I was thinking more on the small shop side of the ledger. Is there developing kind of a pan European small, you know, specialty store base which is pushing for shopping center-type developments throughout Europe?

Well, I think, you know, there are a lot of commonality on the retail side -- specialty retail side -- even in Poland, as an example.

We have Mark's and Spencer, and H&M, and Zora, et cetera, and Mango, Foot Locker -- you know, you have the same think in Italy, other than the centers tend to be smaller, And so, you have a little bit of that. I mean, I do think if we're afforded the opportunity to think outside the box, there is going to be the potential for someone to create, I think, a pan European retail real estate company similar to what the mall -- the mall reads have done here in the U.S.

But, you know, that -- you know, that's certainly not a slam dunk, and it's not a certainty, but, you know, I do think at some point someone is going to be able to create that, and gain the advantages that we've gained here, and that's access to capital, that's tenant relationships, that's the ability to manage costs effectively.

That's the ability to find growth opportunities, et cetera. So I do think that's a possibility, but -- but it -- you know, it's not a certainty for any stretch of the imagination.

And for the time being do you anticipate comparable internal growth with the European assets as you have in -- as you expect in North America?

Yeah, I think that's true, Jim.

Okay. Good. Thank you.

Thanks.

And your next question comes from Mike Miller of J.P. Morgan. You may proceed.

Hey guys, it's actually Josh Peter here. Just one quick question. Can you give us an idea of what the breadth of buyers look like for the top ten assets when it comes to north Italy.

Generally how wide id the gap between the litigators and the pack?

It's hard to know, because we have -- we're having a hard time getting to the second round, in many cases. So I -- we're not the best person to ask.

Okay. Thanks.

Thanks.

And your nest question come comes from Paul Morgan of SBR. You may proceed.

Good morning.

How's it going, Paul?

Good. Just in terms of the leasing environment, could you just -- particularly headed into ICSC, could you talk about some of the segments maybe first in the anchor space that are having a lot of open buys, or looking to grow in the malls, and then in the specialty stores basically?

Well, on the anchor space side, we continue to have a very significant demand from the large format sporting goods. We're doing a lot of work with Dick's, we are working with Gallion's working with REI, that are very interested in those contexts.

The other thing when you look at our 8-K, you'll see that retailers that have traditionally operated in a power center complex like Best Buy or Linens 'n Things, Circuit City, Bed, Bath, & Beyond, Cost Plus, have all come to our properties in the last -- we've been doing it all along, but there's an accelerating trend of that.

We're also finding out if the theater industry has been recapitalized, and we're using a number of the available anchor locations to reintroduce theaters back into our properties on a much firmer financial basis than was previously the case.

In these instances, they own their own assets, and are going to operate their theater on the specialty side. We have, literally in the last week, just met with with about seven retailers, William Sonoma, their [INAUDIBLE] entire [INAUDIBLE] for two days, and they are aggressively starting to roll out William Sonoma Home and West Town -- those are new concepts, looking for significant more square footage for their existing concepts.

Build-a-Bear, who's here, may have. a new concept that they're looking to do adjacent to their existing stores. Joseph Beck book sellers was here. They are a relatively new large format book store that is interested in growing in our portfolio. Fun gate is rolls out. Fun Gate is rolling out.

Happily, also, as you've seen with the results of all of our retailers, their balance sheets for the most part have never been better. Gap has had significant sales growth, Limited has had kind of growth, and they're both very much focused on growing their exposure in the better malls, which, frankly, plays into our strength.

So we are very optimistic going into the convention, because there are a number of new concepts emerging, and there's a lot of demand from our existing retailer base.

Thanks. You said that you looked for occupancy to be near where it was at the end of last year by the end of this year.

Could you give us a sense of how much of the -- you know, those major store closings that took place in the first quarter is reflected in the March 31 number for occupancy?

Yeah, between the fourth quarter of last year and the first quarter of this year, it's almost 400,000 square feet in total, which represents about 6 to 7/10 of a percent of occupancy

Site really is reflective of all of the decline. You know, and as you know, tenants typically want to open in two or three different seasons during the course of the year.

We think we'll get some of that space re-leased for back to school, and then the rest of it taken care of, you know, prior to the Christmas season.

So you would probably expect another dip in the second quarter, because some of these closings may not have occurred yet, or no?

Yeah, you know, it's hard to say.

There's a fair bit of activity out there right now, but it would not surprised me if we were still down a little bit year-over-year in the second quarter.

Okay, and the last thing is, do you have a number for the average gift card purchase?

It's about 50 bucks.

Okay. Thank you.

Again, ladies and gentlemen, if you wish to ask a question, please press star 1. And you have a follow low up question from David Tady of Lehman Brothers. You may proceed.

Hi, just a quick question on the gift card thing. It seems like you guys have stumbled on sort of like an untapped gold mine.

In terms of branding, I know you're looking at a bunch of options, but are you seeing any opportunities in actual consumer finance? It seems like there my might be some opportunities there

No, but if you've got a good idea, we'll listen. We'll give

We'll give you a commission.

I guess my question is sort of like what -- aside from just branding, have you considered anything sort of beyond that? Maybe consumer finance is sort of a far end of the spectrum, but --

Look, we're -- you know, we're -- the big focus within SPV is trying to push the mall as a -- as a medium, much like, you know, TV and radio is, and so on, and that's still -- you know, we're still just scratching the surface, and that can take a lot of shapes and forms and sizes, but I think that's the one -- that's the big mat that we would like to crack.

A bit more on the physical level then than the financial. Great, thank you.

Yeah. Thanks.

And your next question comes from David Fick of Legg Mason. You may proceed.

Good afternoon, gentlemen.

I was wondering if you could comment on the performance trends you're seeing at your more average malls, if you will, your CC-plus type malls. You've spent a lot of time talking about the great sales numbers at your higher performing malls, and I assume that there has to be a fairly wide standard deviation, and so I'm just kind of wondering what you're seeing in places like Topeka.

Well, for example in our portfolio, throughout the portfolio, our sales per foot were up across all the quality types as against the first quarter.

The best malls were up higher than the worst malls, but all of the mails were up. We had no -- no quality type that was not positive year-to-date. And interestingly enough, on the occupancy side, it's the same type of results except for different reasons.

The reality is that if you have a bankrupt tenant that is looking to reorganize and getting out of certain spaces, David and I, we've been to probably about 60 malls in the last three month, and we go to our best malls, and they're the malls where we're losing the KB Toys and the like, because they cannot afford to pay that kind of rent, but as you [INAUDIBLE] in that space, yeah, it's some of the more moderate malls there they have lower rent and they're continuing to operate.

So as a result, our occupancy tends to be relatively even across on all the types for that kind of deviation. So the good news is we've had a relatively consistent operational pattern across the portfolio types. We obviously have higher demand for the -- for the better center, but the reality is that we're driving our rents considerably at those properties.

And I would just say, David, you know, the more fashion oriented centers with quote, you know, the wealth effect over the last four or five months, obviously has had, you know, more of an increase than kind of the -- you know, the middle market malls, but it's not like the middle market malls, anything different there is happening. And as you know, our size, you know, these averages actually mean something, and,you know, so there's no -- there's no real major negative trend there.

What you are seeing, though, is just the positive of the higher end property showing more growth because of the -- basically the wealth effect, and -- and, you know, the tax refunds and so on, but the middle market malls are kind of chugging along what we would expect them to be doing.

Okay. Thanks guys. Good luck in Las Vegas.

Thank you.

And there are no further questions.

Okay.

Well, thank you everybody for your time, and we look forward to talking to you next quarter. Take care.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.