西蒙地產 (SPG) 2011 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to the fourth-quarter 2011 Simon Property Group earnings conference call. My name is Kathy and I will be your operator for today.

At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today's call, to Ms. Shelly Doran, Vice President of Investor Relations. Please proceed.

Good morning and welcome to Simon Property Group's fourth-quarter 2011 earnings conference call.

Please be aware that statements made during this call may be deemed forward-looking statements, and actual results may differ materially from those indicated by forward-looking statements due to a variety of risks, uncertainties, and other factors. Please refer to our filings with the SEC for a detailed discussion.

Acknowledging the fact that this call may be webcast for some time to come, we believe it is important to note that our call includes time-sensitive information that may be accurate only as of today's date February 3, 2012.

During today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures are included within the earnings release or the Company's supplemental information package that was included in this morning's Form 8-K. This package is also available on the Simon website in the Investors section.

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

Good morning.

We reported FFO of $1.91 per diluted share for the quarter, which represents an increase of 6.1% over FFO in the fourth quarter of 2010. FFO for the fourth quarter was $0.065 higher than the midpoint of our increased guidance range provided in October of 2011 with our third-quarter results. These results exceeded the First Call consensus by $0.01 per share, and we have now met or exceeded expectations for 30 of the past 32 quarters, which is an eight-year run.

This quarter capped off a great 2011 for SPG. Our FFO growth per share was 14% for the year, expected to be amongst the highest of all the REITs. Our FFO of $6.89 per share was $0.365 higher than the midpoint of our original guidance provided in February of 2011.

For our malls and outlets, total sales on a rolling 12-month basis were $536 per square foot, up 10.7% from $484 as of December 31, 2010. Occupancy was 94.8%, which was 30 basis points higher than the year-earlier period and 90 basis points higher than the end of the third quarter. The releasing spread for the rolling 12 months was $5.20 per square foot, a positive of 10.5%. Our releasing spread continues to grow at a steady pace as deal quality continues to improve, resulting -- the following resulted in our comparable property net income growth of 4.5% for the quarter, which had a positive impact from overage rent. Our year comp NOI growth came in at 3.4%.

During the fourth quarter and subsequent to year-end, we completed several property transactions. We dissolved our joint venture with the Macerich Company and exchanged our 50% ownership interest in six malls in one community center with M4, the ownership interest in five malls and one community center. No cash was exchanged other than customary net working capital adjustments. We disposed of our interest in three properties -- Gwinnett Place, Factory Merchants Branson and Crystal River Mall. These transactions lead to a reported gain as disclosed in the financial statements.

For the full year 2011, we invested approximately $1.8 billion in acquisition activities with the acquisition of one property and the acquisition of initial ownership interest or increases in ownership interest in 12 properties. For the full year, we disposed of our interest in ten malls, three outlets and one community center for a total value of $550 million. During January 2012, we acquired an additional 25% ownership interest in Del Amo Fashion Center, which now increases our ownership interest to 50%. We are extremely excited about the upside potential from this transaction, given the redevelopment opportunities that exist there.

Also in January, we sold our 49% interest in GCI, which is our Italian interest investment. As a result of this transaction, we no longer own any interest or any assets in Italy. We received aggregate proceeds of $378 million for our equity interest and will report a gain in the first quarter of 2012 associated with this transaction.

On development, we opened one new development in the fourth quarter, Johor Premium Outlets in Malaysia. It's 100% leased. Initial sales are very good, and we plan on working on Phase II of that transaction, that development.

We also have, as you know, two new outlet projects under construction in Merrimack, New Hampshire and southeast Houston, Texas. Both will open later this year. We currently have 23 renovation and expanding projects under construction in the US with completion dates scheduled for 2012 and 2013, including which is the major restoration of Opry Mills, which is scheduled to open March 29 of this year. We are very excited about that event. It's been a long, long, tough road to get that mall back to where it will be a very productive asset for us.

In 2011, we spent approximately $400 million in new development, redevelopment, and renovation activities. We have identified 20 new development, expansion, and renovations where we expect to begin construction in 2012. Three that I want to highlight importantly in our premium outlet projects.

First, today in fact or maybe yesterday depending on how you're thinking about Korea's time zone, but we marked the groundbreaking of a 240,000 square-foot outlet center in Busan in Korea, which is scheduled to open in the fall of 2013, will be our third project in Korea. We also will begin construction in April of our 360,000 square-foot Phoenix Premium Outlet Center which will open in the spring of 2013. Additionally, we plan to begin construction of our 360,000 square-foot premium outlet in Toronto this spring with our partner Calloway. That will open in the summer of 2013.

We are seeing very good value creation opportunities in these new developments and redevelopment projects, and we are anticipating spending $1 billion in 2012 with all the activity that's going on. That estimated rate at this point we anticipate being approximately $1 billion in 2013 and $1 billion in 2014. As always, as construction commences, we will detail all the costs, returns, and timing for these projects in our supplemental reporting package.

Let me turn to the capital markets. As you know, in October, the fourth quarter, we closed on our new unsecured revolving credit facility. That increased our revolving borrowing capacity to $4 billion. This facility can be increased to $5 billion during its term and can be extended to October 30, 2016 at our sole option. The base interest rate is LIBOR plus 100 basis points.

On November 10, 2011, we completed a $1.2 billion senior note offering which resulted in historically low coupon rates and effective yields with an average weighted all-in yield of 3.6% interest for eight years, which we were very pleased to do.

Let me turn to our dividends. In the fourth quarter, as you know, we increased our -- in the fourth quarter of 2011, we increased the quarterly dividend of our common stock from $0.80 to $0.90. I'm pleased to announce another increase in the dividend today from $0.90 to $0.95. Our quarterly dividend now has increased 18.8% since the third quarter of 2011. This puts us on a trajectory to pay dividends of at least $3.80 per share in 2012.

This morning, we also released guidance for 2012 of $7.20 to $7.30 per share. This guidance includes the near-term dilution resulting from our sale of our GCI business, the proceeds of which have been utilized to pay down short-term floating rate debt currently until the capital is more permanently redeployed. It also reflects down-time at some of our better assets that are undergoing major redevelopments in 2012, including but not limited to the Fashion Mall at Keystone here in Indianapolis, Southdale Center, Dadeland, Quaker Bridge and Walt Whitman malls, to name a few. It also reflects the impact of expenses we will incur in connection with the development of our proprietary consumer marketing initiative.

In the fourth quarter of last year, I recall that my conclusion addressed concerns voiced by some about our ability to grow in light of our size. We generated Funds From Operation of an aggregate of $2.4 billion in 2011, a record for us and the industry. This represents an increase of nearly $320 million over our 2010 FFO. By comparison, by our standards, we have only researched 15 US REITs that in fact have an FFO greater than $320 million in 2011. We will continue to grow our Company and deliver excellent results.

Our common stock once again outperformed in 2011, generating a total return to our stockholders of 33.6% as compared to the RMS return of 8.7% and an S&P return of 2.1%. We have now outperformed the RMS for the last 11 consecutive years and have outperformed the S&P 500 in 10 of the last 11 years as well.

We are very well-positioned for 2012 with a strong portfolio, irreplaceable assets and a very attractive pipeline of new and redevelopment projects. We look forward to another strong year, and our focus remains on enhancing long-term shareholder value.

With that, we're ready for any questions.

(Operator Instructions). Quentin Velleley, Citi.

I'm here with Michael Bilerman as well. My first question is maybe for Rick. Just in terms of JCPenney's announcement of their main street concept and they 80 to 100 branded shops that they are thinking of introducing into their department store boxes, Rick, I'm just keen for your thoughts on what you think the overall impact might be on the mall?

Well, let me just take a step back. We obviously are very excited about anything that will make our properties better and we want all of our tenants to be as good as they can be. Certainly, Ron Johnson and his new management team have energized all the constituencies based on the introduction of this strategy, and we hope they can implement it.

As to your specific question, the concept of having the in-store shops is certainly not a new one. If you walk our mall and walk the existing vendor matrixes of our department stores, you are going to find dozens of retailers that have wholesale presence in the department stores along with very robust in-line, full-priced specialty stores in our malls. As an example, Nike, Skechers, Coach, Sephora, Bare Essentials, Kiehl's, Art of shaving, I could go on and on. So the answer is that we don't think it's going to be a particularly negative impact, and we hope it's going to be a lot stronger to enhance the marketshare of our properties.

Yes, let me just make it even simpler than that. He is a great retailer. We think it will be great for the mall environment. We look forward to working with Ron, who we know well during his, both his Target days and his Apple days.

Thanks. David, just regarding your capital shopping center stake, there were some related party transactions announced regarding landing Glasgow and an option on landing Spain. I understand you're sort of now a passive investor in that REIT. But I'm just keen for your thoughts on those transactions and whether or not that changes the way you view owning the stock?

Well, that's a very good question. Needless to say, I think we are in -- we were disappointed in the Spain transaction. I think the Company needs to focus on improving the UK shopping center environment and its centers. Even though the transaction is not overly material, I think it is a bad use of management's focus to go ahead and spend time in Spain. Needless to say, we all know what's going on in Spain in terms of unemployment and retail sales. Certainly, as a large real estate owner, we understand that we want to look at things on the long-term basis.

But in my humble opinion, this management team has no business being in pursuing projects outside of its native territory in the UK. It is -- it puts doubt into me the strategy that the Company is undertaking. Obviously, I don't have to reiterate how they viewed our offer and whether or not they acted in the best interest of shareholders. At this point, I think we have the better argument in that case, and I am waiting for an explanation as to why in fact they are pursuing, it looks to me, like just a divergence of focus. Whether or not it will impact our stake, it's too early to tell, but I am waiting for some kind of explanation from the management team.

David, it's Michael Bilerman. Just one quick question. You talked about costs relating to proprietary customer marketing initiatives. It sounds like that's all the Simon Groupon type stuff, a lot of the customer data and technology stuff that you have been doing. Can you just elaborate a little bit more about sort of what you intend to spend and sort of timing of when things will come to fruition?

Yes, look, the spend, we have allocated in our budget a spend, you know, that -- you know, I don't want to get too specific but there will be an investment that we will spend. We will have some -- obviously we're going to be expensing all of this, so there's no capitalization of it. You know, it's not going to change the materiality of the Company. Given the prospects of a successful creation of a product, we think it's worthy of the investment.

Now, our goal right now, Michael, is to debut this product in the Northeast for the fourth quarter of this year. You know, there is not complete certainty that we will do that just because it is complicated and we want certainly a handful of important retailers to join in our effort, but that is what we are anticipating to be. We would prototype this and debut it in up to five properties in the Northeast and look to see what kind of adoption and what kind of product acceptance we get and then tweak it from there, but that is the goal.

The materiality of it, materiality is in the eyes of the beholder. I will just say it's not going to detract overly. It's you know certainly more than a rounding error, but it's something that we want to invest in. Connecting with the consumer, understanding the consumer is, I think, critical to the future of mall ownership. So this is where we are going to embark. We will see where it goes from there.

Jay Habermann, Goldman Sachs.

Good morning. You know, just focusing on the anchor stores for a moment and maybe just back to sort of Quentin's question on JCPenney. As you think about sort of the leaders in the category, and I guess you could put Macy's, Nordstrom, and certainly the positive news on JCPenney -- how are you thinking about potential closings over the next couple of years and perhaps capital that my night need to be invested as some of the sales or market share erosion for others are declining? Or accelerating, sorry.

If you look at our capital that had been spent, and we show you every quarter all the activity we have, this is really an ongoing process. Over the years, we have replaced probably over 60 anchors from all the different consolidations. In virtually every case, the property ends up stronger and we have been able to generate good returns as a result of that process. We don't envision that this time period is going to be any different.

So you're not concerned about the number of closings accelerating in the near term?

We-- frankly, based on all the announcements from Sears, that included none of our properties and Ron Johnson in his presentation reiterated his strong belief in malls and the significant opportunity that his stores have in malls.

Okay. Maybe just switching gears a moment, I mean, David, you mentioned the very strong performance over the last decade. Clearly, US sales have recovered and more than some since the last downturn, and your stock now at an all-time high. How do you think about sort of the best opportunities for growth or new investment over the intermediate term, you know, say, the next three years or so? And specifically, you know, you talked about Brazil, you've talked about China and obviously Europe has been in the cards as well.

Look, Jay, it's absolutely clear to us that the best thing we can do and why we added to the executive ranks here is redevelopment in our core business. We anticipate -- again, things can change and I think I am pleased that we got confidence coming out of the economic upheaval sooner than a lot of folks that this year we are going to spend. I mean, always things take longer than you want and things flop from one year to the next and redevelopment and development, but this year, we are budgeting $1 billion. It looks like we're going to spend $1 billion next year. These are all very high return on investment activity.

So, to me, that's the absolute number one priority. We have got two new outlets. We've got two outlets that are going to open this year; let's not lose sight of that. We've got the restoration of Opry which has been closed for I don't know how long, but too long, 2.5-plus years. We are starting construction in two outlets, Phoenix and Toronto, in the next 60 days, as just example. Then, you know, we've got all sorts of expansions on the outlet side and the mall side. So to me that is the focus.

I think you will see something from us in Brazil, something from us in China, but it won't be, you know, a big, grand, huge, unique, big investment on either one. But I think you will see us enter those markets thoughtfully.

You know, we are out of Europe right now and I have, at this point, I have no regrets from that decision. So Europe is a different animal.

Right, you timed it well. Just in terms of the starts on the premium outlet side, can you talk about the pre-leasing it at this point and maybe, Rick, just sort of where you are on 2012 lease roles?

Well, on the outlet side, Galveston is, frankly, substantially leased. We expect to open that thing almost 90% with a great collection of tenants. Merrimack is opening in this year. We are, frankly, almost -- we're 95% leased there. In terms of our rollovers, we're about halfway through our 2012, and we have very good momentum in that business.

David Harris, Imperial Capital.

Good morning. Could you just elaborate a little bit more on the dividend? I for one was a little surprised that your board chose to increase it again, having increased it last quarter.

David, it really boils down to simple calculus, which is we are chasing our taxable income. It is likely that we're going to have to chase our taxable income all year. So we are trying to do it in the most thoughtful way. We did listen to the marketplace about the special dividend. You know, the world was less than excited about it. To me, $0.20 of cash is still $0.20 of cash. But we listened and we are looking to chase our taxable income the rest of this year and then in the future, so it really just boils down to that simple calculus.

So it's reasonable to expect there could be another review subsequently this year?

I think it's reasonable to assume that, every quarter, it's going to go under -- taxable income for any entity, any big company, is complicated. It's certainly in our case complicated because not only do you have taxable income from just the normal business but you have got acquisitions, sales obviously. We're going to get future depreciation from all the investment we're in, etc. But the fact of the matter is it's going to have to be under intense scrutiny each quarter from here on out the rest of this year, and it's likely we're going to have to chase it a little bit this year. The good news is it ain't going down.

With regard to Europe, your comments, do they include or exclude the UK?

I would say they -- I would include -- you know, I've been more impressed, frankly, with the UK government's actions. So I think, just from a macro point of view, I almost feel a little bit better about kind of what they're trying to do macro there, but put that aside because I'm certainly not no expert. I would throw them in the same bucket.

All [bongo bongo] parties would still be (inaudible) got a bit too much for you did they?

Unfortunately, we never got on that list and Rick and I can't get invited to any Super Bowl parties either. So it's just the spot we're in I guess.

Hey, one final question. I think it was on this call a year ago that you talked about the biggest decision you were going to be making looking to make this year, i.e. in '12 -- sorry, 2011 -- would be whether to really tap the capital markets. Now, I know you raised the $1.2 billion of unsecured and you looked to your revolver. But it -- the market didn't really force that decision. How do you look at the world today, particularly in the light of Bernanke suggesting that or telling us that the Fed is going to remain on hold through the end of 2014?

I think we have the ability to be extraordinarily thoughtful and patient there. I mean we have no capital needs, really 2012 and 2013, if you look at our balance sheet, other than typical refinancing of mortgages which the market has gotten some somewhat better at. Look, if there is a transaction out there is we will factor something like that, but right now, even though the capital markets are attractive, at this point, we don't see any reason to warehouse capital..

David, it's Steve. I would just add one thing to what David said which is, you know, we do, as an ordinary course of business, roll over a lot of secured debt. We have been very active with extending duration and locking in rates, given the environment we are in. In fact, I just happened to look at this this morning. Our weighted average borrowing cost over the course of the last 12 months went down 20 basis points. On $24 billion of debt, that's a pretty meaningful move. So while the headline "large raise of bond proceeds" we did just once in 2011, we were doing a lot of nick and nacking it around rolling over our debt. It did affect the profile of the balance sheet.

Just while I have got you Steve, and I'm sorry to take up so much time, I know there's a lot of other people waiting but today is the Company kind of where you want to be in terms of leverage or do you consider yourself to be under-levered or whatever metric you want to use to think of your debt-to-equity?

Well, it's certainly a broad question. I will say this. If you look at our coverages today, which are three times, and you look at the stability of the cash flow that was demonstrated during 2008, 2009, I think the strength of the balance sheet is pretty evident and the stability of the cash flows have demonstrated that. Typically, we're going to naturally de-lever because the cash flow that we generate, absent a transaction. As David said, we have the opportunity, given a transaction, to be very aggressive in the capital markets with the way the financing environment is right now.

I would just say I like delevering, okay, so --

It's not a bad thing.

So I have -- again, we are good at doing deals and making money from doing deals. The spot we are in right now where we can delever, invest in our good real estate is a good spot to be in and I like that position.

Okay, great. Thank you.

Christy McElroy, UBS.

Hey, good morning guys. In the process with Macerich of dissolving the JV, as you came to an agreement on the value of those assets and determining the appropriate split, can you just talk about the range of cap rates that were used to value the malls and what was the median cap rate of the portfolio?

Look, I don't have those numbers right in front of me, but these assets were appraised a while ago, and we basically used those appraisals as the basis, but it was much more simple than that. The fact is Macerich expressed an interest in unwinding the deal. We said fine, suggest to us how you would do it. They came back and said you can choose between the two pools of assets, the one that they manage and the one we manage. We looked at the real estate, we looked at the relative values, and we chose the pool that they were managing. It was really, since the appraisals were done, I don't know, a year-plus ago when we had a discussion about the same kind of topic. At that point, it was just whether or not we wanted to proceed on the basis that they suggested. We did. It's as simple as that. It wasn't a -- we didn't sit there and negotiate values. They gave us an option A and an option B and we chose option A, and they were left to decide whether what they offered was good and we were left to decide whether or not what they offered was good for us. We are pleased with the outcome.

Okay. Then just with regard to the sale of the GCI portfolio, I'm wondering if you could disclose the cap rate? Can you talk about your sort of IRR over the life of that investment? So what was your undepreciated cost basis in GCI?

You will see the gain in the first quarter. It was an okay deal. It was not a great deal, the cap rates sale based upon '12 was around a 6.5 cap rate. We learned a lot. It was a good experience. [O'Sean] was a good partner. The reason we got out, we were more worried about the macro environment than they were. The redevelopment that was offered was less returns than what we wanted, and we had a mutually agreeable way to unwind, very similar to Macerich. That's what happens sometimes. The cap rate was 6.5. It was a highly levered entity. That's why we will have dilution this year, I think, Steve, $0.06, $0.07.

About $0.07.

In our numbers, so we had we not sold it, we would have had guidance higher, but we think, in the long run, it was the right thing to do. It was an okay deal, not a great deal. I don't know what our IRR was but the gain you will see in the first quarter.

Then just lastly regarding the debt coming due on Mills this year, you have the $655 million senior facility and then another I think $1 billion of mortgage debt coming due. Can you talk about plans for refinancing all that? Are you having preliminary discussions on the facility? Would you expect any resulting changes to the partnership this year.

The mortgage refinancing is all in process, so we anticipate that happening. Again, you've got to remember some of those deals -- Mills is TMLP, our partnership with Farallon, is a small partner in some of those assets. So the gross number sounds bigger than what the actual TMLP's responsibility is. Then if you look at our responsibility as half the owner of TMLP it's even smaller.

The senior and the med debt, you know, we are just starting discussions with the senior lenders. No issue there. We expect -- we built up a significant amount of cash in TMLP to deal with any refinancing requirements. That is in process. We'll spend the next couple of months doing that.

The last one, look, you never know. Partnerships sometimes are built to last a long, long time and sometimes they unwind in a very positive way. I would expect that we'll have a positive outcome. It's been a good partnership and it will either continue on, on a very good basis, or we'll figure something else out.

Steve Sakwa, ISI Group.

Thanks. Steve, I had just a couple of technical questions as it relates to Page 15. I guess the interest and other -- interest and dividend income went down and I guess we were under the impression that we would do a dividend from CSC. I'm just wondering if that's the case or there was a timing issue or is something else going on in that line item?

There's something else going on in it, Steve. If you look at the balance sheet, you will also see a decrease in our deferred costs and other assets. I think we had mentioned on prior calls that we held some mortgages as investments on other shopping centers. Those mortgages were paid back at their maturity date.

We were really bummed on that front.

Okay. Secondly, I just noticed that, down on the other expense line item, the "other" figure jumped quite a bit for the quarter and is up pretty significantly for the year. Is there anything you can sort of talk about? Does that relate to any of these projects, David, that you talked about in terms of this consumer marketing initiative, or is there something else in that line item?

This is Steve. It's really a function -- and you will see the line right above it on Page 15 as well. The professional expenses was up quite a bit in the quarter. You know, there was -- we've got a lot of transaction activity going on, some of which materialized in the fourth quarter, some of which David alluded to as potential activity in 2012. It's just a combination of costs related to those. Some are professional expenses, some are related expenses, but they are all driven by transaction or potential transaction equity that we have got in the hopper right now.

But it did include -- we have been using BCG to help us work, scope out work on this initiative that we hope to prototype and debut in the fourth quarter. So, some of those expenses are also rolling through that number.

So it is fair to assume the twelve-month numbers may be inflated, or you think those are good run rates?

No, I think the 12 -- I think the fourth-quarter number is higher than what you would see on a run rate basis.

Okay, maybe I missed it. Did you -- I know you gave guidance but did you give a same-store guidance for the year?

No. You know, Steve, we really decided to change the -- we decided in 2010, if you go back in 2010, we decided not to do that any longer just to give you kind of the gross number. So the answer is no, we did not do that. Obviously, we feel confident it will be positive this year, but we do not give that number out.

Okay. Just in terms of leasing spreads, is there anything you could talk about terms of how it will progress throughout the year? Because I'm just trying to figure out if you kind of exited the year at a substantially stronger rate as you kind of go into 2012 and does that kind of 10.5%, 11% number sort of have upward bias to it as you look into 2012?

We did have positive progress throughout the year quarter-over-quarter in our spreads, and we are seeing better demand as we enter into 2012. We have already made very good progress towards our 2012 renewals in the mall business, so we anticipate a positive bias in that spread.

Yes, and look, Steve, I just want to -- the retail real estate business is still tough, okay, and we are grinding like no other time. Results, our sales, our occupancy and our rents are all obviously very positive. But it is a grind and there are retailers that continue to downsize and continue to -- we continue to have struggles on leasing some of that space up and getting market rents in some of that space. So we still feel positive about it but there is still work to be done. You know, it is not -- it's a lot of work to produce these results.

Okay. My last question -- could you just circle back on the Toronto project? I mean you were pretty adamant you were starting that project. I realize there's kind of been a head-to-head competition up there. What can you sort of tell us about leasing or kind of the state of the site and any more details about that project?

Emphatically we're going to start in the spring. So, we feel we are permitted to go; we are finishing it up. Leasing -- look, we are in a different spot than others in the outlet business. We have the -- we can rely on the experience and judgment of having seven premium outlets, Mills assets throughout the world. We don't necessarily need to pre-lease. We are pros; we're experts in this business.

The answer is we have got real interest. We've got certain commitments. Barring something unforeseen, both of those that I mentioned we will be starting construction. So we are a little different. We understand this business very well. We know the risks about starting construction, whether you are fully leased or not. We have done it in the past in the outlet business, and we're good to go on both of these deals.

Paul Morgan, Morgan Stanley.

Hi, good morning. I just wanted to go back to the dividend a little bit. You have got based on where you are now, your FFO payout ratio is only 52%-something. You've got a big portfolio. As you burn through your depreciation base, you said you're kind of chasing taxable income. I kind of wonder. Do you have a feel for -- I mean your guidance for FFO is relatively narrow. Do you have a feel for kind of where -- how much you might have to grow the dividend? Is the dividend going to be growing at a materially faster pace than FFO going forward, short of a bigger deal?

Paul, it's an entirely appropriate question. Obviously, this is a great dialogue at the Board level so I -- it's hard for me to be really specific. But based upon what I know, it's -- we're going to have to, I would think, continue to raise our dividend the rest of the year. Now, that doesn't give you guidance on how much and when, but we want a little bit more data coming in with the first quarter offers. We want to understand what, if any, transactions transpire or have been or what have you that may have some impact on that. But what I know today, obviously subject to counsel with the Board, $0.95 will not be enough per quarter to pay out our 100% of our taxable income.

Does -- I mean you generate a lot of free cash flow right now, and you have kind of thought over the years to grow that after the dividend. Does this make it any more -- does it make you any more inclined to pursue deals? Because obviously that's one in five benefit of a large transaction.

Only -- look, not at all really because -- and I mentioned it early -- we have got so much going on with the existing portfolio and all the redevelopment and new development. Again, there is nothing wrong with generating the cash, increasing the dividend, delivering, and just keep doing what we are doing. So, I feel absolutely no need or pressure to do any deal whatsoever.

I like kind of the model we've got. That's not to say we won't if we think we like the real estate that we would get at the end of the day, but you know I am -- I don't like parting with our cash right now. I like reinvesting it in our portfolio. So, you know, we are entirely pleased with what is going on here.

You know, on that note, you've got $700 million or so. What your supplemental talks about is the kind of renovation and expansion. It doesn't really say much about kind of which malls are being expanded, but it kind of applies $70 million of incremental NOI essentially. Do you have any color on kind of where that's coming from or any kind of big expansion to drive that? It just looks like sort of renovations. But --

Yes, I mean, for instance, in the outlet side, we expect to start in Las Vegas and in Orlando and in Desert Hills just -- and Seattle.

Seattle is under construction.

Seattle is under construction. So those are four in that side.

In the mall side, we are undergoing a massive expansion and redevelopment of Walt Whitman, Quaker Bridge. We've got Opry Mills. We've got King of Prussia. We announced, as you know, at KOP, that we are going to connect the two malls. We are in planning phase on that now. We're obviously working with the town on approvals. Those are just -- Nanuet is -- the mall has been shut down. We're going to shut start construction there finally. La Plaza, we are going to add a second level on. We've got major redos, new department stores, new food courts, examples with Keystone, Dadeland and Southridge and Milwaukee. Plaza Carolina has been -- several boxes have been added. So those are just off the top of my head. When we start construction, we put it in the 8-K, and I think you will see an addition to that disclosure as the year progresses.

Okay, great. Just my last question on occupancy. At the end of the year, I think maybe it's not your highest number ever. Are you reaching a point at kind of [94-8], I know some of it is seasonally high but where you are sort of at a frictional max. How much farther do you think you can drive portfolio occupancy? If it's not much farther does, that mean you can start push rents harder?

Well, I think yes, you're right. There is the frictional number. This year will be a little bit interesting because we do have a lot of movement going on with the portfolio, as you might imagine, with all the development spending. So -- but put that aside. I think there's some improvement but I think now the focus is on improving the quality of the 95% that were leased. We didn't have that luxury obviously in '09, '10 and to some extent '11. We're still going to feel pressure '12 with certain retailers, but I think the focus now hopefully is to marginally improve that occupancy, but it's really going to be taking the existing occupancy, maybe stabilizing that as it is, but really improving who's in the space.

Alex Goldfarb, Sandler O'Neill.

Good morning.

Good morning. I'm impressed you guys are in with all the stuff going out there in Indy.

Well, you know, we are so focused on what we do.

I figured you guys would be renting out the parking spots for additional FFO.

That's true. We've got sponsorship on our building. That may have a big impact on our fourth quarter -- first quarter. But we are so focused on what we do, we have blinders on this for this week in any event.

In fact, we're so focused on what we do that we forgot the Super Bowl was this weekend when we planned our board meeting and our earnings call. Okay? We could have probably picked a better week.

Just quickly, it sounds like, in Europe, obviously the macro situation didn't help any, but it sounds like the yields that you were seeing over there from your investments just were not meeting your expectation and the macro situation just sort of was the hair on the camel's back. As you think about Brazil in China, what are the returns or what are the return premiums over what you would invest at in the US? What are you looking for in those different markets.

I think the development returns in Brazil are well articulated. I think, in our view, in Brazil, what we would do is develop as opposed to buy there. I think the development yields there that try to achieve the 15% kind of return on cost would be where our focus would be.

You know, China is -- we've got opportunities. I was over there in December. We're working on a couple of outlet deals. But the number side of that equation, all the kind of the financial due diligence, is still in a work in progress. But if it's not a premium to what we do here, there's just no reason to do it. Even though you might argue that the NOI growth will offset that, I still want to invest at higher levels than I can here. That is the frustration with, say, going to Europe and doing a lot of redevelopment. But we do see, as we pencil out China and Brazil, just like we have seen in Japan, seen in Korea, seen in Malaysia, all of those are higher development yields than we would gather here, garner here I should say.

Okay so by implication then when you were considering capital shopping then, despite the low going-in yields that the UK commands, from your underwriting you were seeing returns that were in excess of the US? Is that fair?

No, I was really referring to new developments. I think what we saw there -- and again, you know, recall that our deal was subject to due diligence. We saw, at the end of the day, yields comparable to what we would pay here on acquisitions yet once we got our hands on the fact that management operations could be improved. And so I don't want to confuse development yields with acquisition yields. We saw kind of comparable acquisition yields in the UK comparable to what we would pay here. With supply issues, they are a lot different than they were here, so on that basis, it was worthy of pursuing it to get to the point where we could validate that initial conclusion, but we weren't given access to the books. Therefore, we did not make a formal full bid.

Okay. Just the second question is going back to the dividend. EQR went to a policy where they paid a steady first-, second-, third-quarter dividend with a true-up in the fourth. Is that, as you guys contemplate the dividend, is that something that would be -- that you think would be helpful or would investors be receptive?

Look. That is what we did in 2011. The fact is the more we talk to people, the less they liked it. So my view would be to try and not do that really, create a dividend that equals taxable and then as that grows, your dividend grows.

Okay.

So we would like to get away from the special dividend based upon kind of the true-up dividend which, in our case, was represented by a special dividend. We would like to get away from that and make it more what I said.

Now, look, sometimes you never rule out -- if you sold $5 billion of properties and you had a big taxable income, you may -- there may be certain circumstances that you'd have to do that, but the fact is we would like to not do that. That's what we're going to try and achieve in 2012. But certainly, as we catch up to our taxable income, you know, we will get away from the special true-up dividend.

Ki Bin Kim, Macquarie.

Thank you. Just to follow-up on Alex's previous questions about Brazil, from a levered return standpoint, would you be funding it locally or is there some arbor opportunity using your cheap cost of corporate debt to fund development out there?

Well, we would use our -- the cheapest capital we have is the cash on the balance sheet. You know, what are we getting?

$1 billion a year.

No, no, but what are we investing?

Oh, 20 or 30 bips.

20 or 30 bits. So the fact of the matter is -- and any development that we would undertake in Brazil we're going to cash fund, so we wouldn't use any leverage.

Is that typically -- would you go a JV or by yourself?

Right now, we are contemplating a JV. That's probably likely how we will do that, and in China as well if we get to that point in China.

Okay. Last question, if I look at the sales per square foot increases in your portfolio, consolidated versus unconsolidated, it seems like your JV property has done a lot better, up 22% year-over-year versus your consolidated, which is up only 9%. Still good but lower than your JV assets. So how should we think about the opportunity for additional JV take-off in terms of are all the JVs at one point in time, are they all opportunities for you?

Broadly speaking if you could talk about cap rates, not deals specifically but, for the best assets, where could we see cap rates for these assets and I guess kind of going down the spectrum on quality? Sorry for the long question.

Yes, no, I would just say part of the difference between the growth in consolidated and unconsolidated, I think we can get a better answer for you on that than just the quality because --

Some of it is mix change.

Yes, mix change in that we put -- we have more outlets in there now that we put prime in our numbers, but I think we restated 10 for that in any event. So -- but we can get you a better answer on that.

So, I think our mix in our wholly-owned properties is great, and so there's no real issue between what's in our JV and what's in our consolidated. In our consolidated, you've got Roosevelt Field, King of Prussia, Forum Shops, Woodbury, all of the outlet business. So put that aside, that's not to say we don't have some great JV assets but the base is much bigger in the consolidated than in the JV. So don't read too much into that.

Now, going to your question, cap rates on A assets has got to be -- there's not a lot being done in that whole area, but they continue to move lower, given the fact that investors believe in NOI growth for high-quality retail assets. So, you know, you tell me. It's low. It's lower than -- it's in the 4s maybe -- that helps?

Yes, it does help. I guess one part of that question is what percentage --

I doubt that we will be buying in the 4s though because you know --

Okay, okay.

But I think there are people out there that would clearly buy in the 4s.

So even for your A assets that you are managing, something in the 4s would not be a price that would [clear up] for a take-out?

You know, look, I don't know. We would have to -- it would have to be something really, really unique to get to that. King of Prussia, we did not get to that number. There's nothing like that asset, especially given its development. So, look, it all depends on the circumstances, but I do think there are institutional investors out there that would feel comfortable with those kind of iconic assets to be in that level. Whether we would or not, it would take an interesting set of circumstances.

Got you. Thank you for that color.

Jeffrey Donnelly, Wells Fargo.

Good morning guys. Well, Dave, if any of your board members need a room, I hear the Knights Inn at the airport is like $800 a night.

Actually, can you just talk about the volume of move-outs that have happened subsequent to quarter end? Is that in line with prior years? Then just on your guidance, where did you guys peg year-end occupancy?

Well, the move-outs have basically been consistent historically. We didn't have anything out of the ordinary.

This is Steve. We have also, year-to-date as you, seen very little bankruptcy activity as well. So --

What did you say was in your guidance maybe for year-end occupancy as a target?

We don't -- we're really getting away from those kind of specifics. We do it asset-by-asset to build up to our budget. You know, it's, you know, in our own budget, it's a slight improvement, but we don't give specific numbers, Jeff.

Then just while I got you guys then, on Sears, just more obviously more focus on Sears Holdings. You have de minimus, I think, direct exposure to base rent but do you have an estimate of what your ultimate financial exposure is through co-tenancy rights?

Yes. I would just say if we do give co-tenancies with retailers, and we do in some cases and I'm not really happy about it but we do do it -- it's rare that it's going to be tied to a Sears operating. Usually it's three out of four and something like that, but I would say that particular issue would be de minimus.

Okay. Just maybe you could talk a little bit about your exposure there. Is there a theme to it, if you will, where maybe the majority of your exposure is in single or two-story stores or they're in malls of a certain sales production? Just curious.

If you look at our Sears portfolio, they are very well situated in our better properties. We have obviously a significant number throughout the portfolio but, again, this is nothing new. This is we're working with Sears. We are strategizing. If, in fact, the eventuality comes and we want to deal with it, we're lining up demand. There is happily substantial demand, and we are just going to have to see how this unfolds to date.

None of our stores have been impacted, and we try to monitor their volumes. Our portfolio as a whole is above average, both in terms of gross volumes in sales per foot.

And just last two questions. One is on Del Amo. Are you able to share maybe a cap rate or a rough cap rate on that transaction? Then maybe, Steve, can you talk about what you have seen change in the financing market for I guess I'll say second-tier market malls or those with below average sales production? Any movement there?

I can take the second part of the question first, Jeff. We have continued to see really pretty robust demand on the call it them for lack of a better term the middle-quality malls. Interestingly enough, it's come from the banks in anticipation of a restart of the CMBS market in 2012 and the ability to syndicate some of these. Pricing has been pretty decent. As I said, we have been out with two or three assets, and the demand has been very good.

Look, Jeff, we don't do individual cap rate things, malls, other than we really feel like we made a fair deal and one that we'll be able to add value with as we move very aggressively on our redevelopment plans there.

Carol Kemple, Hilliard Lyons.

Good morning. Are there any updates on the St. Louis potential outlet development?

We are working it, but the answer, the short answer is not really.

Okay. Then, Steve, I noticed G&A expense was up in the quarter. Was that something that is just this quarter or is that a good run rate going forward?

It's a little bit of both. There's part of it where it's just the full-year impact of compensation plans but then there is a bit of it that is probably not going to repeat in 2012.

Okay. Then I know you all have talked about you feel no pressure to do acquisitions and you think renovations are a better reinvestment of your capital this point. If you decided you wanted to do acquisitions, is there anything out there on the market that you have any interest in?

Do you have any ideas?

No, I don't.

Okay.

But I like the renovations at you old malls personally.

You know, the answer is usually they come about when you least expect it. So, again, we -- it's not a high priority, but we look at just about every and any alternative. The good news is -- but you have got to be really disciplined when you have the stability. The good news we could look at basically any real estate company in the world and decide whether or not it makes sense for us. So -- but comes what that a burden not to screw up. So what's better? You could look at every deal or you are in a position where you can't. I'd rather be in the fact that we could look at every deal, but what that comes some discipline here that we better not make a mistake.

Cedrik Lachance, Green Street Advisors.

Thank you. David, earlier you talked about some of the challenges that are still out there when it comes to leasing space in your properties or in the mall business in general. Can you quantify it per mall category, if you will? So what do you observe in A malls versus Bs and Cs?

Well, look, the risk in the A malls is really not a risk because, if you do get that space back, you're going to -- you have plenty of demand to lease that up. But it is going to be in the, you know, in kind of the -- however you want to characterize. I hate listing malls A, B, and C. But it's certainly going to -- the pressure that we have as an owner will be on what people call is the B mall category. It is surfacing because of tenants like the Gap, the Pac Sunwears of the world that are still and continuing to connect with the consumer. Again, I don't like naming names and pointing retailers out. That's only a representation of a couple of retailers that in fact themselves have said they're closing stores. But fact is that is where the pressure in the portfolio occurs and is occurring, and that's what we are working to offset. You know, if we get the space back -- and the fact of the matter, in a lot of A malls, you know, retailers that are downsizing, you know, we are taking the opportunity to help with that downsizing by not renewing them in the A malls.

Okay, so staying with the B malls, who are your replacement tenants when a Gap or Pac Sun exits the property?

Well, there are a lot of people that are very aggressively growing their footprint, and that leads to David's point. We are doing deals throughout the quality spectrum with Loft, with Love Culture, Crazy 8, Zumiez, Tilly's Cotton On, Francesca's, all of the -- Teavana. All of those tenants are -- H&M. So we're dealing with a lot of these tenants throughout the portfolio.

One other point that I want to make is this $1 billion that we're spending in our portfolio is certainly giving us more attractive properties in terms of the tenants wanting to be in them. It's no accident when we're adding over 35 anchors in our portfolio, when we are renovating 20 properties, when we're getting substantially higher growth, that is making us have a better product for our leasing agents. That's hopefully going to bear fruit and enable us to deal with the space we get back from the tenants that are shrinking their footprint.

Okay. Just to finish, in terms of the Italian sale, are there any circumstances or tax circumstances associated with repatriating the capital to the US?

None.

None.

Ben Yang, KBW.

Yes, hi. Good morning. David, you talked earlier about how the joint venture with Macerich carved up. But I don't think you mentioned, was there any consideration to sell those assets outright?

Not really. The answer is no. We are off on our own with each other, so we never really talked about selling the whole portfolio.

That just slides to these comments that the financing market for the midtier malls is coming back? I mean is it anticipated that you might end up selling them or selling more above and beyond what you just got from Macerich?

Well, the fact of the matter is the portfolio that we got will we think there is upside, so we're pleased with the outcome. We think we can move the needle on those assets, and we have no intention at all of selling those assets. So, look, we're going to still prune the portfolio. I think, as Steve said, the fact that the financing market is getting better I think that will help us. It's been -- obviously that has been a challenge to sell kind of the smaller malls, but with respect -- specific respect to IBN, there is absolutely no desire or interest to sell those assets.

Okay, and then just switching gears, you had made some comments also that you guys are different. You don't need to pre-lease start new outlet construction, which to me it sounds like kind of a shot across the bat to the competition. So I was just curious.

I didn't say -- I said we take a different approach. You used the word "different", so I don't think I said the word "different", but we'll have to go back. I could be wrong.

Okay. I'm just wondering. Can you talk about how retailers have been evaluating the multiple options in those markets that you identified where there is competition? Is it just a stalemate that kind of forces you to -- or it looks like go to do some spec developments in outlets?

I think every development is different. In a lot of cases, the retailer is using the competitive scenario to drive down rents. We are seeing that a lot. You know, so the retailer is very adept, very adept, very skilled at using the leverage of competition to drive rents down. In some cases, they are sitting on the sidelines saying, well, I want to be -- I want to have an outlet in this marketplace but you guys figure it out, and they are on the sidelines. In some cases, they have faith in us. They want to go with us because we have got this knowledge base of all of these assets. In some cases, they want to go with the other guy because of whatever other reason. So it's all over the board.

You know, the fact of the matter is we don't really pre-lease, period. We're doing a Nanuet and we've got, you know, that's not an outlet. We've got certain commitments from very important retailers. But you know, are we sitting there leasing up the small shop up to a certain percent to where we lease? The answer is no. We should be able to use our judgment and our experience of whether or not we can get something leased and at what rent. That is just the way we operate. Certainly not meant to be a shot across the bow for anybody. Everybody can do whatever they want. I have no influence on that at all. But that's how we operate, that's how we operate.

That's helpful. But at what point do you end up actually buying the land? I mean, is it fair to assume that you have actually purchased the land in Phoenix, in Toronto, in St. Louis? Is that --?

Phoenix we have signed the ground lease. I was down there -- I don't know -- was it last week or two weeks ago?

(inaudible)

I signed the -- it's a ground lease. We are on Indian land, and you know, by the Wild Horse casino there. So that ground lease is signed. Toronto, it's all documented and signed; the land closing is forthcoming.

What type of delta is that when you ground-lease something like that versus buying the land outright?

It tends to have a better return in a lot of cases. You know, obviously, when we are on Indian land, you can't really buy the land, so that's how it works.

We thought -- we like the site enough, given that was -- and there's -- that was a good outcome for us on that deal.

[Gotham Garr], Credit Suisse.

I'll take another retailer example. Williams-Sonoma was amongst your larger tenants five years back and now roughly 40% of their business is online and about a quarter of their leases are expiring over the next two years. What I'm hearing from multiple conferences is that they are planning on trying to negotiate the rent on those expirations. If they are not successful, they are just plan to move more of their business online. I just wanted to get your thoughts on it and if this is like indicative of a changing trend in retail in general?

I don't believe there is anything out of the ordinary with your example. Williams-Sonoma happens to have great real estate and great properties. If their business strategy is such and their productivity is such that they cannot afford to maintain the space that they currently have, they are going to come in and offer us a rent that enables them to maintain their occupancy. If we don't believe that rent is fair market value, they are going to move out and we are going to replace them with somebody that has got productivity and business strategy that will enable them to pay what we believe is fair market rent.

Right. Thank you. It makes sense. Another question. Are there any acquisitions included in your 2012 guidance?

Acquisitions?

Yes.

No, there are not.

Jim Sullivan, Cowen and Co.

Hi. I just have a couple of questions on Del Amo. The -- obviously a very large asset and I think, David, in your prepared comments, you talked about a redevelopment or an investment in that asset and understood you just recently increased your share in it. I'm just curious if you can tell us whether the $1 billion for this year and next year of redevelopment includes Del Amo, number one.

Number two, if you could talk a little bit about your plans for that asset, if you feel able to at this point?

The $1 billion does not include for this year, because we still think we are in a spot where are going to use this year for '12 to plan what we are doing. Part of that depends on outcomes with certain discussions with certain stores. But it's a complicated asset. I will turn it over to Rick to explain. You know, we have lots of different options. It's complicated. It's probably better to show you physically than words, but I will let Rick take it from there.

Very briefly, it's midway between Century City and South Coast Plaza. It's positioned to serve all of the great communities on the Pacific Ocean that have -- we have a trade here of 1 million people with $90,000 household income. So we believe there is an opportunity to add fashion anchors. We believe there is an opportunity to add some full-line anchors and completely redevelop the property. It's over 2.275 million square feet, so we have got a lot of FAR in a great market and we are very focused on bringing that forward. It is certainly going to be part of the capital spending that David talked about in 2013 and 2014.

Tayo Okusanya, Jefferies & Co.

Well done.

Good afternoon guys. Two questions. The first one is a Steve-Rick combo. I just wanted to find out what occupancy cost of sales was in the fourth quarter and for new tenants signing leases what the target is on that number.

The occupancy costs in the fourth quarter for the malls and the outlets was 11.8%. Really, the way we price our real estate is a function of who is the tenant, what is the productivity of that tenant, what is the mall, what is the space in the mall? So we have a very focused process and all of those factors feed into it.

Okay. Could you give a range?

It's very hard to do. I think, if you look at our -- the leases we signed I believe in the fourth quarter were $50 and change starting rent, so that gives you a pretty good barometer of the type of activity that is undergoing in the portfolio right now.

Got it, okay. That's helpful. Then in regards to guidance, you talked about the $0.07 dilution from GCI. Could you give us a sense of what the dilution is from the consumer marketing initiative as well is the down time from the redevelopment?

You know, we're not going to give specifics on that but it is all in our numbers.

Wes Golladay, RBC Capital Markets.

Hello everyone. Rick, can you give us a quick rundown of the new retailers and concepts entering the Simon portfolio?

Well, the ones that are coming in that we are working with are examples of drygoods that is a division of Von Maurr, Vince from Kellwood, C Wonder. Running Company is a new concept that Finish Line is working with -- Virsona, from Cato. But I certainly don't want to ignore like you look at Limited Brands and they had a great report, and they are aggressively looking to get more space to take care of their Pink concept. So the fact that a brand is mature doesn't mean that it still doesn't have significant growth potential.

Okay thank you. One quick final question. Now that we are five years from the peak of the market, are you noticing any pressure from releasing the leases signed five years ago?

No.

No.

Michael Mueller, JPMorgan.

Great, thanks. I know you don't like breaking up the portfolio in terms of performance, but can you talk generically about how the mall portfolio is performing versus the community center portfolio and maybe thinking about 2011 and 2012? Is the gap any closer these days?

They are both performing better than what we expected in 2011. The outlet business continues to have higher comp NOI growth than the mall business, but I will tell you I think we are generally pleased with both segments. The gap is certainly less -- it certainly has been reduced compared to '09 and '10 levels. 2009 and 2010 levels. I think it's safe to say that the outlet business was stronger in the height of the significant economic downturn. So that gap, that growth rate gap has certainly narrowed.

Okay. And that is fair between the traditional mall and the community center as well?

You know, our community center, we don't -- you mean the --

Growth rate.

The growth rate, yes, the mall business grows much better than the community center business.

okay. Then going back to non-core asset sales, could you just talk about generically about how big the potential pool of assets that you would like to sell over time is?

Well, I think, historically, you know, this year, we basically disposed of assets around $500 million. If we could continue to sell $200 million to $300 million, $400 million of assets a year in terms of pruning, I think that would be at the level that would be desirable.

Okay, great. Thanks.

Jeffrey Spector, Bank of America.

Great, good afternoon. A few questions. If we could just start off I guess with the big picture. Rick, I just wanted a follow-up from our ICSC dinner in December. Can you talk about your more recent conversations with tenants? Retail sales seem to be stronger than expected. What is their latest view on these new store openings or new concepts?

I think, as David alluded to earlier, it's very much a tenant-by-tenant analysis. Sales were better. There were some pressures on margins. We detailed earlier in the call a number of tenants that have very aggressive growth profiles. There are others that are retracing a little bit and reducing their footprint. Generally, however, the balance sheets remain strong. They are still generating cash flow, and we are still able to drive demand from the types of tenants that we would like to have in our properties.

So I guess where do you stand on pricing power at this point? I know David said business is still tough. Is it still a tough negotiation, or you feel like pricing power is coming a little bit more back to your side?

There is never an negotiation that is not tough. Look, we're fighting over the same dollar and that has been that way for 40 years and it will continue that way. Ultimately, do we have some better power? Look, as the productivity of our properties gets better, as we improve our properties, as our occupancy gets stronger, just fundamental supply and demand, there's virtually no new construction, that certainly plays into our strengths.

I guess, thinking about your -- the budget and your guidance, I guess, David, your thoughts on the consumer? Our economists keep saying consuming consumer spending is going to slow second half of the year. When you thought about -- I guess when you finalized your budget, how were you thinking about the consumer?

Well, look, I think our budgeting is -- it reflects -- it's ground-up so you know, it reflects the general nature of our -- the fact that we are cautious in how we put our numbers together. So I think, in a sense, that reflects also what is going on in the macro environment. So I think we take that into account.

You know, there's no guarantees in anything, but I do think we take in the fact that it is generally still a very cautious environment. We, you know, we would -- we have a lot of work to do to make our numbers. On the other hand, we always want to beat our numbers. We are at the point now where we're giving you our view of kind of what it is, given what transpired with the GCI sale, etc. We always want to beat our numbers, but we are generally cautious. So -- and I think that reflects the consumer.

This year, you do have a certain added uncertainty with the general election and all of that crap that follows with it. On the other hand, there are reasonable -- I mean it's very confusing signs out there but there are some reasonable ones. Jeff you are aware, obviously, what happened with jobs today. On the other hand, you see more layoffs that have been announced over the last week or two.

So it's, in my view, it's still a very confounding tough environment to kind of decipher through. I do know though that the program that we have in our internal investments will pay rewards for our shareholders in the future. so that I'm not worried about. We would like to see better income growth and job growth. That would give us a cushion that we haven't been able to really have over the last couple of years even though we produced terrific industry-leading results.

Great. Then I just want to clarify. David, you mentioned you're going to spend $1 billion this year in development, next year $1 billion. I think you also said 2014. Is that strictly redevelopments, new premium outlet centers, and expansions at your existing premium outlet centers?

Correct, yes. That's all-in. That's new development and redevelopment.

But not, just to clarify, not new malls?

Yes, you know, unless you have got a site you want to show us, the new malls I still think are a ways away. I think I still don't see a real demand for a lot of new malls. Now, Nanuet is a good example. You could consider that a new mall in a sense but we put that in our redevelopment category.

In Brazil, should we assume it is full price and China premium outlets, did you say that?

I did not say that and you should not necessarily assume that.

Okay, and then with the Phoenix --

On both fronts, Jeff, on both fronts.

Okay. Then last question on Phoenix, I guess, with your announcement, have you heard anything from your competitors on their sites?

I assume there -- our assumption is they are going to go full-steam ahead. We are, going forward, will have no impact on what they do.

Okay. Actually I'm sorry. One last question. Do you still have the ownership stake in value retail in the UK and Europe?

We do.

You do, okay. Anything with that at this point with the sale in Italy or you like that small investment, keep it as is or is there any chance to increase that or do anything more on the outlet front I guess?

We like that investment. In fact, we, you know, we have an investment at the holding company, more or less. Then there is investors in various outlets that, in some cases, are different than the investors at the holding company. In fact, we just increased our ownership interest in two outlets at year-end.

In value retail?

Correct.

Okay, great. Thanks very much.

Yes, no worries.

Craig Schmidt, Bank of America Merrill Lynch.

Thank you. I just wanted to push a little more on Del Amo. Do you think that investment could be north of $200 million?

Yes, it could be. It could be. If you want to see all the options, we will let you spend -- it is at your own peril, but we will 80 spend time with David Contis.

Okay.

We could actually use your help, Craig.

It sounds like you --

It will be at your own peril. It may take a long time, so reserve half the day.

It sounds like you're talking to fashion anchors. Are they positively inclined at this point?

Everyone acknowledges the importance of the market and the fact that it's not adequately penetrated (inaudible) their existing stores. Obviously we are now in an environment where people are considering more capital investments, and we are optimistic.

Okay. Then prior to my meeting with David Contis, is it still going to be done in phase? There was one time I thought you had focused on the northern end first?

It will still be done in phases based on when we can get the right critical mass. Right now, we are focusing on what and how we are going to start it. But it is, again, a very big project, so it is going to take a number of phases and a number of years to bring to fruition.

Okay. Then just shifting gears slightly, in terms of the outlet business, what I'm wondering is like the malls, are the higher end ones doing better than the more moderately priced ones, or are outlets strong just throughout the price point spectrum?

I would say they are generally strong but the tourist outlets are the ones that are really kicking ass.

With no further questions in the queue at this time, I will now turn the call over to Mr. David Simon for closing remarks. Please proceed.

Okay thank you everybody. Thanks for your patience on the call and have a good weekend.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.