西蒙地產 (SPG) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2012 Simon Property Group earnings conference call. My name is Chantelai and I will be your facilitator for today's call. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

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

Good morning and welcome to Simon Property Group's fourth-quarter 2012 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 4, 2013. Reconciliations of non-GAAP financial 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 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. Our results for the quarter were very strong. FFO was $2.29 per share, up 19.9% from the fourth quarter of 2011. Our FFO exceeded the First Call consensus once again, this time by $0.12 per share. For our Malls and Premium Outlets, tenant sales were up 6.6% to $568 per square foot. Occupancy was up 70 basis points to 95.3%. Base minimum rent per square foot increased by 3.4% and our releasing spread was a positive 10.8% or $5.21 per square foot.

For the year, our 2012 FFO was $2.885 billion, an increase of $446 million from 2011. Growth in FFO per share was an exceptional 15.8% to $7.98 per share and we did achieve such growth through a number of ways; first of all, our comp property NOI growth in our Malls and Premium Outlets platform was 4.8% per year. We completed several acquisitions in 2012 which were done throughout the year, so we will see more of their accretion into 2013 and beyond. But those include The Mills, Klepierre, our investment in Silver Sands, Grand Prairie, Livermore.

We also successfully reopened Opry Mills in Nashville, Tennessee and we opened a new upscale premium outlet center in Merrimack, New Hampshire and our Texas City, Texas deal with our partner in -- with Steve Tanger. Now our significant redevelopment pipeline is also bearing fruit. Again not much benefit in 2012 for these things but we expect to see additional earnings accretion for 2013, 2014 but they include King of Prussia, Fashion Mall at Keystone, Pheasant Lane, Ontario Mills, Sawgrass Mills, and Southridge Mall, again investments made throughout 2012 and opening at the end of 2012.

We continue to demonstrate our balance sheet leadership. December, we did a bond offering of $500 million of 10-year notes at 2.75% interest rate and $750 million of five-year notes at 1.5%, the lowest coupons ever printed by a REIT. 2012, we issued a total of $3 billion in senior unsecured notes at a weighted average interest rate of 2.81% and a weighted average term of 11.6 years.

Now we also were very active in the secured debt markets. We closed our lock rates on 30 new mortgages totaling $3.7 billion of which our share is $2.3 billion. The average interest rate on those loans is 3.88% with a weighted average term of eight years.

Let me turn to the dividend. Common stock dividend increased 17.1% in 2012 to a total of $4.10 per share for the year as compared to $3.50 paid in 2011. This morning we announced the sixth consecutive quarterly increase in our dividend from $1.10 to $1.15 per share. Our stockholder -- total stockholder return in 2012 was 26%. We have outperformed the RMS and the S&P for the 11th time in the past 12 years.

Our compound annual return for the last decade was 21.4% and since our IPO in December of 1993, was 17.2%. Transactions in December in the fourth quarter, we created a venture with CalPERS and Miller Capital Advisory to jointly own the shops at Mission Viejo and Woodfield Mall, two of the best 100 malls in the US.

Prior to the transaction, as you know, we owned 100% of Mission and CalPERS owned 100% of Woodfield. We now own 51% of Mission and 50% of Woodfield and we lease and manage both assets. We have a very strong relationship with CalPERS and Miller and we are excited to partner with them in Woodfield, where we think we will have a good ability to increase that cash flow.

Now let me talk about the Paragon deal. We completed the acquisition of the remaining interest in these two newly developed centers. These centers have been rebranded as Livermore Premium Outlets and Grand Prairie Premium Outlets. They serve the Greater San Francisco and Dallas-Fort Worth areas respectively. Both are 100% leased. Traffic and sales continue to meet or exceed expectations, and with each center creating excellent reputation in their respective trade areas.

Now our new development and redevelopment pipeline continues to move forward aggressively. We invested nearly $900 million in projects during 2012 and expect our share of capital spend in 2013 to be over $1 billion. We have five Premium Outlets under construction, all scheduled to open in 2012. Two of them are in the US -- Chandler, Arizona, a suburb of Phoenix, and Chesterfield, Missouri, a suburb of St. Louis; one in Japan, one in Canada, which is a suburb of Toronto; and our fifth is in Busan, Korea, which will be our third outlet center in Korea.

We plan to start construction in the second quarter of a new upscale outlet center in Montreal. This will be our second Premium Outlet center in Canada. It will comprise approximately 390,000 square feet and is expected to open third quarter of 2014. And construction is also underway at 24 redevelopment expansion projects throughout our US portfolio and at two Premium Outlets in Asia. All will open in 2013 and 2014.

Several are very significant in size and scope including expansions at Seattle Premium outlets, Walt Whitman Shops, Sawgrass Mills, and the redevelopment of a former enclosed mall into an open-air center at The Shops at Nanuet in Nyack, New York.

Klepierre reported last Thursday total rents for the year were up 4% on a current basis and 2.3% on a like-for-like basis. In 2012, they completed asset sales totaling EUR700 million, reduced their LTV by 200 basis points, continue to perform ahead of our expectations as we continue to refine the strategy for the Company.

In conclusion, I am and we are very pleased with our 2012 accomplishments and results. We reported record FFO per share of $7.98 per share. That is $0.71 higher than consensus at the beginning of 2012, $0.73 higher than the midpoint of our initial guidance range, $1.53 or 23.7% than our great -- than our pre-Great Recession high FFO reported in 2008 of $6.45.

We paid record dividends of $4.10 per share and with our recent increase in dividend this quarter, we are on track to pay at least $4.60 per share in 2013. This is $1 higher or 27.8% higher than the dividends paid in 2008 at our great -- at the Great Recession high.

We look forward to another strong year in 2013 and based upon our core business, FFO guidance for 2013 is in a range of $8.40 to $8.50 per share. The midpoint of this range is $2 higher than our record FFO per share prior to the Great Recession for an -- or 31 roughly -- 31% increase.

With that, operator, we are ready for questions.

(Operator Instructions). Christy McElroy, UBS.

Good morning, everyone. I am on the line with Ross as well. I was wondering if you could comment on the changing importance of outlets for retailers and the differences in retailers' profitability across different platforms, especially in light of Mickey Drexler's comments at a forum a few weeks ago that the increasing importance of outlet sales versus full price to the bottom line isn't very widely discussed.

Well, I don't think anything has really changed all that significantly. You know, over the years it has been a very profitable distribution channel for the retailers. I expect it to continue. There are more retailers coming into this sector because of the fact that it is profitable for a number of the retailers.

I also think what we have done, that is Simon, has increased the scale, the design elements, the layout, for the outlet industry in total. We brought it to the front door as opposed to the back door in retailers. We've brought new tenants in. And I think we have had an absolute direct impact on bringing new retailers into that sector and helping it take it out of the -- or less out of the -- more in the mainstream.

Mickey, I love Mickey. Mickey makes lots of comments to those things, some of which have been directed at me in good fun. But the fact of the matter is it's a profitable business. We have had a lot to do with taking it out of kind of the back door and the front door. We've had a lot to do with the design and enhancing the look and feel of the product and also moving the product in better locations and bringing more tenants into it.

David, it's Ross Nussbaum. I had an off-topic question which pertains to your presence as the largest REIT in the industry, and whether you had any thoughts on the increasing number of C-Corps that are converting to REITs and/or restructuring into a Opco Propcos and what kind of implications you think this trend has on the REIT industry overall?

That's a good question. I am starting to get a little bit concerned, maybe too strong a word, but I am getting a little bit concerned that the basic fundamentals of why companies are REITs is because they're in the real estate business and they are focused on growing their cash flow from their business as opposed to the Opco, Propco.

I think the Opco Propco has not worked as a financing vehicle. I am sure the investors are sophisticated to know which ones are primarily used for that vehicle and so I'm getting a little bit concerned.

I haven't had a chance. I've been too busy frankly to talk to NAREIT about what their whole view on this is. But the basic fundamentals of real estate investing with a seasoned management team, with quality real estate that can invest and grow their business is there. It's stronger than ever. The returns, the cash flow, dividend increase for a number of companies has been remarkable in terms of the face of capital coming and going in the industry, the history of results for our industry has been phenomenal. I'm proud of our industry.

I do think, though, if we get a little bit -- if it turns into a financing vehicle, I don't think it will have a taint on the existing successful companies like ours but I do think there should be a caution thrown to the wind with some of those.

I appreciate the thoughts, thanks.

Steve Sakwa, ISI Group.

Thanks, good morning. David, I know you tend not to provide same-store NOI growth figures but I was just wondering if you could sort of talk about what you did in 2012 successfully and maybe what may not repeat or are there some items that may be headwinds this year that we should be thinking about so that 4.8% may or may not repeat. And I will start there.

Look, 4.8% is an unbelievable execution and let me just say this. You know, I have read some of this commentary on our fourth quarter. I find it humorous because we look at it, we look at our comp NOI on a year basis, not on a quarterly basis and the important number is 4.8%.

If you also go back last quarter, last quarter in 2011, we had a 4.5% increase yet our quarterly or our annual 2011 was 3.5%. So occasionally a quarter is going to have a little extra performance, either over performance or underperformance or right on performance. But my goodness, focus on the year. The year was 4.8%. The other thing to focus on is that our comp NOI is -- what is it, Steve? 99% --?

$4.05 billion.

So it's $4.05 billion, if you didn't hear that, 99% of our portfolio. We don't play games with it. It's in our 8-K. It's right there, so I felt like I had to mention that because I've seen some analysts' comments on that.

But put that as aside, look, in our plan for next year is not to achieve the 4.8%. That was for the outlets and the mall business; that was an extraordinary year. It's not doable, frankly. Maybe we can execute that. But we like to be conservative and thoughtful -- that's in our guidance. We certainly want to hit our numbers that we produce. We have an unbelievable track record of producing that, rivals any public company in the country.

And so we will see. There is always headwinds in our business. You know tenants coming, tenants going, bankruptcies, what the guys are doing in Washington, our not executing the way we want, it's never perfect. It's never as good as we want it to be, and never as bad as you think it's going to be.

But in the meantime, we are $2 over our 2008 number per share. Our dividend is $1 higher and growing. We are doing lots of redevelopment and new development, so you know what? I think we'll just do fine.

Okay, I guess we're coming up kind of on the year anniversary of the Klepierre investment and I know you've been a bit reticent to talk about at least some of the operational changes or impact that you might be having on the Company. Is it still too early to talk about those or can you share some of your thoughts with us on that?

Well, you know, Steve, operations take time to manifest itself and -- but we in conjunction with the management and the Board, we don't run the Company first of all. But in conjunction with the management and the Board and as Chairman, we give a lot of strategic advice.

So what have we done? We have done asset sales to increase the financial performance -- or to decrease the LTV and increase the financial firepower. We had EUR2 billion of liquidity. We have rebranded the Company from two brands to one brand in Segece to Klepierre. We are -- we have decided to get out of the office business to focus entirely on retail real estate.

They did a great job of executing three terrific new developments in Sweden and France you know, that if you had a chance to visit, you would feel very proud of. We brought in a new COO that used to work for us at Simon Ivanhoe and worked at Unibuy. The Company is rejuvenated in terms of marketing and operations.

So I think we have done a lot and the good news is it has been a good investment. It will be I think a better investment. It has an element of risk but the fact that they produce comp NOI growth with all the negatives said about Europe, is pretty damn good work and we are proud of our association. We are proud of our investment. We are making big and good progress there that will again take time operationally.

But we are also -- we brought -- are buying in Klemurs, their other publicly traded vehicle, and we will end up monetizing those assets over time. So I think there has been a tremendous amount of work. I'm surprised you don't see that.

No, I was just trying to figure out if you thought that there were real sort of synergies on the leasing side or things that would maybe accelerate some of that growth.

But let me just -- last question, can you just talk sort of about Brazil and China? I know you've kind of been dipping your toe into those two markets and you didn't really mention them, so I'm just curious kind of what your thoughts are as we sit here today.

Yes, turning to China, we continue to underwrite a couple of premium outlet deals. I continue to be very cautious about China, to build anything and including outlets. So there is really nothing new to say there other than it's taking longer to find the right deal to do, which is fine with me. We have plenty to do.

I think the returns, trying to get to the numbers, understanding tenant demand, understanding what's a great site. The ability to build expeditiously is very complicated in China, and we have on-ground experience, as you know, that wasn't a great experience for us but nevertheless, we continue to see whether or not there is an outlet opportunity there. But it's slow going, and the fact of the matter is that's fine with us.

In Brazil we continue to work with BR Malls on one project. It's going through the permitting process there. It's taking some time. Assuming we get the permits, we would still have an interest in doing that. There's no certainty that that will be accomplished, but the site has been identified and we feel good about it if in fact we get the right to build stuff satisfied, and there's also a couple of others that we are looking at.

But both of these markets are complicated. Both of these markets warrant a high level of due diligence, a high level of thoughtfulness, and we are exhibiting that by not just willy-nilly plowing capital in there, but really waiting for the right opportunity that can justify the risk. And make sure the returns are there, which, Steve, frankly is questionable on some of the ones that we have looked at and turned down.

Okay, thanks. That's all I have.

Alexander Goldfarb, Sandler O'Neill.

Good morning, David, maybe we will give you a rest and ask Steve a question to start off. Steve, you guys obviously just did some recent debt financing. One of those was a five-year issuance and just looking at how the 10-year has backed up, in 2019, it's a little bit light. But given how the 10-year has backed up if you guys were going to go to the market again, would you just issue 10 and maybe another 30-year or would you still look to sort of fill in some of the near term?

Alex, it's a good question. It's really a couple of things. We've been really focused in this period of historically low interest rates in extending duration wherever we can. And in fact if you look at the 8-K, for a portfolio that is $28 billion of debt, we moved the needle and extended duration by almost half a year and lowered our average borrowing costs by 23 basis points.

So our primary focus is locking in rates and extending duration wherever we can. The December offering happened to be a specific interest or situation where we had a hole in our maturity schedule that was shorter term and the five-year demand was so good that we issued shorter paper, but the focus is going to be primarily on longer duration stuff.

Okay, then the second question is just going to the Paragon, obviously you guys have your own outlet program but you have already done a few deals now with the Paragon guys. Is there sort of a relationship there where as they source deals they know they sort of have an exit if a deal fits a certain criteria, they know they can sell it to you, or were those two just sort of one offs?

First of all, those deals, we were originally in as a partner in the deal during the development phase, or construction phase, so I don't know if you know that, but that's the first point.

But yes, we have a very good relationship with Paragon. There's no exclusivity on their behalf, on our behalf. We are talking to them on a couple of other deals. David Lichtenstein is a shareholder in the Company -- we -- as part of the Prime transaction, so there is a good relationship. We continue to talk about new stuff and -- but there's no requirement or exclusivity on either side.

But as they are talking to tenants about preleasing, can they talk about --? Obviously they do talk about the relationship and the fact that Simon, the Premium Outlet brand, may be the one ending up managing these? I would imagine that that would be helpful as they are trying to prelease. Can they say that or not the case?

It is really -- it is a deal by deal basis and it's really not the case necessarily. You know, if we do something at the outset that's a 50-50 partnership and we are both leasing it, that's certainly the case. But Livermore and Grand Prairie, we were not involved in leasing or managing. We had nothing to do with it. They did an unbelievable job on their own.

And when we got involved, it was essentially pre-let. If there is a couple of ground-up things that we come in at the beginning, we may lease jointly but in Grand Prairie and Livermore, they did all the work themselves.

Okay, thank you.

Paul Morgan, Morgan Stanley.

Good morning. Just on the core a little bit, your occupancy at 95.3%, at what point are you getting -- it's a little bit different than what you reported pre-recession because of the outlets. But at what point are you getting to where you think you are at a frictional minimum in terms of vacancy? What does that mean then for -- if so, what does that mean for your ability to push rents a little bit harder?

I will just say this. In our plan for 2013, we do have an increase in occupancy for the portfolio. It obviously is getting more challenging than it has as we have increased the occupancy. But we are also focused on improving the mix and we have some deals that are shorter term and we're trying to clean those out and go longer term. So there's a hell of a lot to do and we are bound to get certain stores back because of either bankruptcy and/or the tenant is shrinking its store fleet because of their own issues.

But we do have a plan to increase our occupancy this year, but as important and more importantly, is improving the mix and lengthening some of the shorter-term leases into full seven-, eight-year leases as opposed to one-, two-, or three-year deals.

So if I think about it in terms of lease spreads, your numbers have been around 10% for a while. Is there any reason to think they might change this year?

No, in terms of our spread, no. We should be able to -- look, we're subject to --as unfortunate as it might be, we are subject to the US economy. I wish we could figure out the model where we weren't, but we are. So based on what we know today, I would think that we would be able to achieve those kind of rental spreads.

Okay, great. Then just on the dividend, is there any for 2013 the dividend policy, are you going to keep doing what you've been doing over the past in terms of the quarterly adjustment?

It's safe to say we are getting closer to our taxable income. So I think the growth rate will -- at $4.60, we're getting much closer to our taxable income and we will have to see how that manages itself this year but we will be paying, as I said at least $4.60 but we will have to assess it every quarter. But we are getting closer to our taxable income.

Okay, great. And then just a last question on Woodfield, any -- as you look at it now, anything that you think could be done there interesting in the near term or is it more of a longer-term?

This is Rick. We are all over Woodfield and frankly we think there are a number of things we can do in both the operating expense category, the marketing category; it is a massive property. It's over 2.2 million square feet, almost 890,000 feet of center section, so we've got a lot of flexibility in how we can deal with that space to maximize the NOI and bring in different users and create incremental uses and drive the NOI there by making more efficient use of the existing space.

David Contis and his team has been up there a number of times and they are very focused on what we can do. I think you will be seeing a number of things implemented over the next few months.

Great, thanks.

Cedrik Lachance, Greene Street Advisors.

Just to stay on the topic of Woodfield, what led you to JV Mission Viejo with CalPERS? Was it in terms of accessing the deal for Woodfield or did you want to reduce your exposure to Southern California somewhat?

No, Cedric, actually they have had Miller and CalPERS as partners and our partners have had a tremendous business in investing in top quality regional malls. So they didn't want to reduce their overall exposure and so it was one of those things where we talked about one other mall that was not in California. We really said here are two malls that would meet their criteria. We obviously had a lot more but we just narrowed it down to two and we did that.

In addition, and Steve was intimately involved, in addition they actually wanted California exposure. So that's why between the two that we discussed, they chose Mission, because they did want to increase their California exposure.

Okay, are you able to share the cap rates that were used to value each property?

They were exactly the same, so in other words $1 of cash flow from Woodfield was valued at the same value as 1 of cash flow from Mission.

Just going back to the short-term deals or short-term tenants question from earlier. As you transition some of those shorter tenants or that space is currently leased to short-term tenants to something longer, do you need to find new tenants? If so, what kind of retailers are primarily growing in those spaces?

One, if you keep track, we made substantial progress in the last quarter in reducing the amount of the specialty leasing agreements we have in excess of the 12 months. What we are doing is we are bringing in a number of new tenants and for the most part we are taking that space and incorporating it into existing spaces to create appropriate rooms.

I am not going to give you the usual litany of new tenants that are coming into the mall space, as David always jokes at me about, but we do have a number of tenants that are looking for larger footprints. And three that are particularly relevant, H&M, Zara, and Uniqlo are looking to have footprints that are in the 20,000 to 25,000 foot range, and that requires significant reconfigurations of existing space and pretty unique property solutions to satisfy those needs, and we want to do so because they are great retailers. That is one of the real sources of incremental demand.

Okay, then final question perhaps going back to the outlet business a little bit, what's the appetite on the part of potential institutional joint venture partners to take positions in some of the outlet properties?

Well, we like owning generally 100% of an asset, so we have never really pursued it, but it would be -- the Woodfield, Mission is a great example of how we think about joint venturing. If it's a new opportunity that we couldn't otherwise access, it's great to partner with a highly respected group like Miller and CalPERS.

But for us to bring in a JV partner in any of our outlet business, first of all, we just don't see -- there's a lot of growth in that business and we don't -- it's not like we can't access capital if we need it. We've got obviously a significant amount of retained earnings and cash flow that we plow back into the business to accelerate our growth as evidenced by our growth over the last two or three years.

But there's no doubt in my mind that if in fact we desired that the institutional investors would certainly have a high degree of interest, we get solicited all the time and we kind of just pooh-pooh it. And Mills is a great example where we decided to go ahead and buy that deal as opposed to bring in other highly thought of institutional investors because we thought there was still significant growth there and we wanted to own 100% of the assets that we ended up buying.

Great. Thank you.

David Harris, Imperial Capital.

Good morning, could I just extend that question on CalPERS JV? We've talked about this in the past about Simon's ability to generate higher returns out of assets than perhaps properties that come from other ownerships. Is this going to be an example you might be able to look to, David?

I think so. I will say this, there is a significant demand, David, from institutional highly capitalized, highly thoughtful, highly experienced big-time institutional investors including sovereign wealth funds to invest in retail real estate. And I just had a recent meeting that -- and that's worldwide.

It's not just US. There is a high demand to invest in Europe. There is a high demand to find opportunities in Asia where we can certainly parlay that interest and our corporate success into creating new opportunities for the Company.

Okay, can I stay abroad for a minute? Japan seems to have adopted a leaf out of the Bernanke book on currency debasement. It looks like we are looking at substantial reduction in the yen-dollar rate.

You have fairly substantial high net asset exposure with minimal Japanese yen. I'm just wondering how you are thinking about that, whether it might represent an opportunity for a dollar buyer and also whether you might be thinking of putting some more hedge in place on your existing assets?

We are currently under hedged in terms of our -- the value that we have and we do have a hedge of roughly 200 --

$250 million.

$250 million, roughly. So we do have a hedge but our asset value is much greater than that. And we also hedge -- we get cash flow repatriated through our management and development fees, advisory fees that we do hedge and we have hedged those over a long period of time.

But what we don't hedge, though, is the cash flow that is generated from the business because it's harder to hedge given a lot of that capital goes back into the business to grow either to build something new or expand. It's something we are seriously thinking about.

We are under hedged. We do -- we will suffer a little bit this year, a couple of cents if the yen stays higher than where it is given our plan. But I think it's -- we -- I would say we'll develop a plan here over the next month or so, but it is something we are very focused on.

Obviously as the Company gets bigger and it gets higher exposure to international, you are going to have to lead the way in this sector in terms of your sophistication around this. There are some other leading companies that follow a long ways short of what's needed here.

Can I just -- another point of detail, on page 14 of the 8-K, your international NOI is listed at 6.3, that's inclusive of the -- of Klepierre I'm assuming?

Yes, David. This is Steve. It does include our share of the Klepierre NOI from the date of the investment on.

Great. Terrific. That's all for me.

Quintin Velleley, Citigroup.

Good morning. Maybe just a first question for Rick. Just in terms of leasing in 2013 and some of the I guess opportunities, what is sort of the incremental leasing opportunities to push occupancy up above 95% this year that you're looking at?

David touched on I think the most important one, which is what we are doing is spending a great deal of time making more efficient use of the space that we have by trying to downsize underproductive tenants, and that is the way to generate a lot more NOI out of the existing space.

But the other opportunities, as I mentioned the three significant international users, are all fairly aggressively looking for space now and that is the major source of demand in the properties. And we have got a number of other tenants that are having brand extensions and new international tenants that are seeking space. So it's a matter really of coming up with ways to create space that will be appropriate for their needs, and for the most part at this occupancy level, it involved downsizing existing underproductive tenants or trying to create incremental space.

And a great example of that is Walt Whitman, where we are literally adding significant square footage across the entire front of the property by expanding it and that is enabling us to bring in a significant number of new impact retailers.

Great, and I guess that feeds into the second question I had just in terms of the development pipeline in the US, which is about $1 billion if you include all the re-anchoring that you are doing. Could you maybe just talk about what the shadow pipeline is, if you were to look forward over the next sort of three or four years? What's the kind of volume of capital you're looking at putting back into the US? How are you thinking about returns and construction costs and some of the trends in that development pipeline?

We have said previously and we think this is going to be the case that we can foresee spending at pretty much that same billion-dollar rate over the next couple of years, and that's a combination of the announced projects that are already underway. We're working on some new Premium Outlet deals. We are working on several significant redevelopment opportunities in The Mall portfolio that David has talked about in the past.

We've announced Nordstrom at Del Amo, Bloomingdale's at Stanford, and we still have a significant pipeline of opportunities in this portfolio that is going to enable us to deploy that level of capital at our historic returns.

If you were to use -- and the euros actually do a pretty good job in terms of how they look at their pipeline. But I would say our controlled pipeline is least $5 billion, as Rick mentioned, between the redevelopments of the field, Roosevelt fields, including that field in the Copleys and the Del Amos of the world and including the new development.

So I would say our controlled pipe is around $5 billion and that is over a three-, four-year period of time and that will give you a sense. Projects come in and projects go out, but that's kind of the order of magnitude that we see.

David, it's Michael Bilerman speaking. Just had a question on Klepierre. Given the fact that this is the 10-year anniversary of the tax, there certainly is an element that at some point perhaps you can take this thing private over the course of this year or next.

I guess where do you sort of stand in terms of a desire to sort of increase your ownership? What is your relationship with BNP Paribas and their desire to sell the stake? And sort of how are your thoughts evolving on that?

Those are very simple, straightforward questions that I am really not going to answer other than I will say this. We have an excellent relationship with BNP. They have been very supportive from the get go, once we got the deal negotiated, and they make valuable contributions at the supervisory board level. But the rest, Michael, I am really not going to comment on.

We are pleased with our investment. It is going to take time, but I still think there is a unique opportunity here to turn Klepierre into a really premier retail real estate company in Continental Europe. It's going to take time. I'm very patient on this, reasonably I should say, putting it in quotation marks.

I hope the market here is reasonably patient. But the fact of the matter is for the last, shoot -- the deal closed in late March, early April. We have done a lot of good stuff in a very short period of time getting the Company rejuvenated toward what we think is the -- allows them again subject to a lot more improvement, but at least gives them the path toward preeminence in Continental European retail real estate.

And then you had mentioned Copley, which I don't think yet is in the 8-K in terms of schedule. I guess when are you thinking about breaking ground and are you thinking rental or condo? And I guess both would have a difference in terms of capital deployment or a net capital invested at the end of the day.

The vast -- we're still designing the building and because of that design we may need to go back through some administrative approvals that we don't think will be a big deal. But the idea that we are circling right now is to do mostly rentals, though there will be some condo element to it, and so you would have essentially a hybrid building.

Just last question, Sears and JCPenney, obviously you had some changes at Sears at the helm this quarter. I'm just curious how you sort of think about how that evolves? And then in terms of the JCPenney sort of rebranded stores and any within your portfolio about I guess how you are sort of viewing those performing relative to the others within the portfolio?

Sears, I really can't comment all that much on the management changes. I don't sense it is a huge deal there. So I am not -- I don't think that's any major move on their front.

And Penney, I like the new stores. Rick and I have visited the new complete prototype but we've also seen some of the new shops within the shops at some of our malls. We don't have all the data yet. I am really not in a position to comment on how successful it is. They are.

I like what I see and they are making progress, but the financial implications of that change is really best left for them to describe. And I assume they are coming out with their earnings here shortly, I would imagine. So we will look forward to hearing more in terms of their progress.

But just from a mall owner's point of view, rejuvenating that brand, Penney that is -- is welcome and we are working with them to be supportive of their efforts in rejuvenating the brand.

Okay, thank you.

Jeff Donnelly, Wells Fargo.

Good morning, folks. I think this one is for Rick on leasing spreads. I'm curious about market rents in particular, because if I look at your -- I guess it's the closing rate on leases, it's been moving lower over the last year but the opening rate has been relatively flattish.

Can you speak to the trends in market rents here in the US, because I'm wondering if the growth has been obscured a little bit maybe by a mix issue in the leases that you're signing?

Frankly we continue to see our average base rent go up quarter-over-quarter and it has been consistently. So I would tell you that we still have pricing power. If you look at our occupancy cost percentage -- it is still relatively low. We have significant demand and we are able to continue to grow -- I think to grow those rents.

I think you've really got to look at the spread and that's the more driving -- the mix always is moving around what's expiring, what's coming up, but if you look at kind of what the expiration schedule is and the incoming rents, you will see the spread is there to be had if we execute.

I guess in that regard, how you kind of think about the spreads down the road, specific to anchor expirations, I think in 2014 the expiring anchor rent was sort of north of $5. In most recent years it has been sort of between $2 and $4. Is that something that leads you to think that leasing spreads could decelerate a little bit in 2014 or is that becoming unique there?

The anchors invariably have options, so I wouldn't -- that really has very little in driving our income.

Okay, then a question, David, I guess maybe for you on the asset pricing, because a few of your competitors have put out portfolios of malls in the market that are generally kind of in the $300 a square foot range for sales productivity. What's your sense on where assets like those are pricing today in this capital market given your experience with recent mall sales?

It's really better left for them to explain what their pricing expectations are. You know, the latest data that we have seen is what Westfield sold to Starwood. There's not much new beyond that, but I will tell you that some of the assets that are being sold I find very aggressive pricing.

There was this auction in Kansas City kind of -- I'm really not sure what it is. It used to be a lifestyle center turned outlet, turned just a place where it's a fine center, but just a place where it's big, so you lease it to whomever you can lease it to. That pricing was pretty aggressive.

So I am really -- it's really -- they are really better -- they are really better in a position to tell you what they want to see from pricing than we are.

Okay, just one last question I guess on outlet development because I guess Christy touched on it earlier, but you are seeing outlet development activity kick up, or at least certainly interest in it. Has it gotten to a point where you guys are seeing maybe pressure on development yields because retailers feel that they have more options for who they can align with?

Well, I think that there is certainly going to be pressure on development yields for risky or ill-conceived projects but they always are, right? That's the case in malls, outlet centers, power centers, lifestyle centers. The minute you have to beg a tenant to go into is the minute your yield goes down to unacceptable levels.

I don't think it's going to change all that much for what we are trying to accomplish. I don't -- we're not going to get every deal. We're not going to win every deal. But I think the stuff that we are looking to build, I feel very good that we will continue to generate the returns that you've grown accustomed to.

By the way, it takes a lot of work to generate those yields but -- so I'm sure there's going to be some yields that are going to really be way too low because, you know, the nature of the business is people push projects and retailers sometimes don't pass up deals that are too good to be true, so as long as it's not our mistake, it doesn't matter to us, doesn't impact our business, and that's what you have to understand.

Too many people extrapolate, well, there's going to be four or five bad outlets and it's going to have some impact on you. It's going to have no impact on us, none. And there were 100 bad lifestyle deals. It didn't really have an impact on us. We are $2 higher this year than we were in the Great Recession. That says a lot about the Company's ability to withstand whatever the trend is out there.

So the yield compression is not an issue for SPG. It might be for others and, you know, so there will be some bad deals done and we will say, we knew it. We told you, but what can we say? What can we do? We just have to do what we do.

Actually as just a follow-up, you mentioned before that you prefer to own particularly your JV outlet developments 100%. But I'm curious because return interest is very strong or interest is very strong from institutional investors out there. If there was an opportunity for you to raise capital from there, what sort of terms or return split or valuation would lead you to maybe rethink that and take on a partner?

You know, if somebody wanted to come in at 2% yield on Woodbury (laughter) (multiple speakers).

You're reasonable.

Look, I think Woodbury has got better risk-free credit than the United States of America, with growth potential. So [1 800, David], 2% yield at Woodbury, maybe I would do it. I don't even know if I would do that, frankly. Rick, would you sell it at a 2%? I don't know.

There is a lot of growth left in Woodbury.

You drive a hard bargain. Okay, that's it for me. Thank you.

Mike Mueller, JPMorgan.

Yes, a quick question. If we are thinking about -- let me see -- you had a comparable outlet in a comparable mall, let's say they are doing -- good center is doing $600-$700 a foot, do you think there is a cap rate differential there, number one?

And then if you lower it to, say, a $350 or $400 a foot center, the same question. Is there a cap rate differential there?

You know, cap rates are so real-estate-specific that we'd have to know where the leases are, what the competitive marketplace is, where is this mall or outlet center. There's so many other variables than one just simple number.

The most important point that I would like to make is -- with respect your question is that go back to our involvement in the outlet business. We -- David Bloom and I did a joint venture in 1998 in the outlet business. We built Orlando and Las Vegas together.

Now, I was so stupid, because I invested in some technology business, that I had to show the market that I was maybe not great in technology, but pretty good in real estate, that I -- we had $4 million in Orlando and I sold it out to them a year after it was built for $40 million, which is, you know, 10X on a real estate deal in a year, which, by the way, is -- rivals any private equity deal done or any venture capital deal. So I thought maybe at least the market would say, all right, so he screwed up in technology, but at least he knows what he's doing in real estate.

We have been at it a long time. We've had a dramatic impact on this industry. We have brought it out of the back room into the front room. We have brought new retailers into the business. We've redesigned it. We've brought it closer to market places, like what we did in Orlando and Vegas, et cetera.

So -- and because of all of those efforts, at the end of the day, a great outlet is no different, I think, in the mind of the investor than a great mall. And I think you could say that a good outlet is probably not that much different than a good mall. You could take that thinking all the way from high to the end -- at the end of the day, a bad outlet in a bad mall, who the hell knows? I can't comment on that. But, you know.

So I just think it's -- they are pretty much comparable at the end of the day. And then it gets to the specific real estate questions, like what's rent roll doing? What's sales doing? How can you expand it and all that kind of stuff that go into specific real estate questions?

Now, in addition, look, we've been at it since 1998, and then I think people said, you know what, it's not a bad business. Let's get in it. So I don't know. But that's the only way I can answer your question.

Okay, do you think you are going to see the pace of asset sales pick up this year for some of the secondary market stuff you're looking at?

My instinct is to say yes, but it's still hard work, but my instinct is to say yes.

Okay, great, thanks.

Carol Kemple (technical difficulty)

Good morning. (inaudible) you at Simon put together a great project in Houston and then in October you all both announced plans for Charlotte and then in November you all decided to work together. Is it safe to assume if you and Tanger are competing in the same market there is a high likelihood that you all would work together in the future or would you both try to build your own centers? Or how is that decision made?

Look, we have a very good relationship with Tanger. We have our one joint venture. We have got our two that are in predevelopment, development phase, Columbus, Charlotte. I would find it unlikely that at the end of the day we would both be building in the same markets at the same time. You can never say never, but I would find it unlikely given our good track record that we have with the Tanger guys.

Now look, we -- he just built in West Phoenix and we are building in South Phoenix. There is some overlap in the trade area, but they are really two separate, distinct outlets. I know his was well leased at opening. Ours is going great. We open -- don't forget April 4 and I would find it unlikely that we would have a situation where we were both actually in two or in one trade area where we are both building at the same time.

Now we may be competing and finding out who's going to win, but I would find it unusual we would both build at the same time.

In the process of competition do think it's highly likely you all would join together or one would just (technical difficulty) --? On the vacant Nordstrom space at Circle Center Mall in Indianapolis, have you all had any luck re-tenanting that space or how are discussions going there?

Well, we have a very nominal -- first of all just so you know, we have a very nominal financial interest in it. But we are working -- the mall is doing reasonably well. We are working hard to retenant it but we don't have any tenants to announce right now.

I would just make the comment that we've got 635 department stores and there are six vacant. So less than 1%, so --

That happens to be one of them. That's one of them, so thanks for asking.

You sound like you're in good shape. That's just one close to me, so I notice it when I shop.

It's closer to us.

Yes, it's about two hours for me. Thank you.

Rich Moore, RBC Capital Markets.

Good morning, guys. When I look at sales trends in January, especially the second half of January, it seems like they have been slowing, at least the research we do here. I'm curious, have you seen January sales yet or have any indication what sales trends that your properties might look like for January?

Rich, we don't get our January sales until November, I'm sorry the month later, so we won't get them until the end of February. But anecdotally I've heard actually very good stuff and in fact what was going on in Washington clearly had a reasonably down impact on the whole holiday season. Some of that picked up in January, so I have actually heard the exact opposite of that. But I haven't talked to every retailer and I'm sure there will be some winners and losers, but generally when Rick and I were at NRF a couple of weeks ago and we were hearing January was okay. So I don't know where you're getting that, but actually we heard the reverse, but I'm not going to opine on that just because it's anecdotal.

Mine as well, David. Same thing. Okay, good. Thank you. Then Steve, looking at the credit loss provision, it was unusually high at least certainly higher than it has been the last couple years this quarter and I realize it's been pretty low but anything special going on with credit losses or your thoughts on that?

No, Rich, and in fact I would look at it more on an annual basis to not worry so much about an individual quarter, no different than the comment David made earlier about NOI. And if you look at it on an annual basis, it's still relatively below kind of historical norms for us as a percentage of revenue.

Okay, so no reason to think that goes higher substantially in 2013?

No, sir. In fact I would tell you that the 12 actual is probably a pretty decent run rate for the entire year of 2013.

Okay, got it. Then last thing, guys, back to Paragon for just a second, it seems, David, that you get into projects like this maybe a bit later in the process and hence if you did get into another one that might be well along the way, so would deliver much quicker I guess is one way to think about it. I noticed they had one in the Twin Cities I think they were working on and probably have others. Are there any of the other ones that you are kind of looking at with them at this point?

We're talking to them about one and perhaps two others, but look, as I said to you, they are competent developers. Each deal is going to be a little bit different but the good news is we can't -- given our own resources, we can't tackle every opportunity out there. We never have thought about our business that way and it's good to have a good relationship with Paragon just like it is with Tanger because at the end of the day partnering on some of these, delivering good product to our retailers, making money for our shareholders is all in the same equation. So it's a good, healthy relationship and I would be disappointed if there weren't a couple more to do with both of them as we move forward.

Okay, great. Thank you, guys.

Omotayo Okusanya, Jefferies.

Good afternoon. Just going back to 2013 guidance, you have provided a bit of a roadmap in regard to some of your underlying assumptions about where it seems your NOIR is going, where you expect occupancy to go and maintaining leasing spreads. Any other kind of tidbits you could give us in regards to what's underlying your 2013 guidance?

Look, we go through -- you know, we are a large company. We've got $80 billion of assets. We are in Europe. We are in Japan, Korea, we are in the mall business, the outlet business. We have got development yields that we are trying to achieve, redevelopment, so so much goes into how we do it.

The most important is that we are dedicated to producing the results that would tell the market. We've done it for nine, 10 years. I don't even know, I've lost track. We used to put that in but since no one cares we decided to take it out.

And you know what? That's the number. We just don't think it's all that critical and maybe we are wrong. We are happy to be -- we are happy to have our arm twisted to give you all the specific details as to what we are trying to accomplish given our track record. You know we are trying to grow our comp NOI. You know we are trying to lower the cost of our debt. You know we are trying to do our development deals according to our plan that we have outlined in the 8-K. You know we are trying to increase our operating margins. You know we are trying to keep our overhead reasonably sane as the Company gets bigger and bigger.

You know all that and we're not going to change. We just don't think, given our track record, we need to give you each and every little detail. We are happy to get our arm twisted, yelled at, complain to Steve if you do. But since we are such a big Company, but it does include comp NOI growth. That's our number one priority. It will always be managing the overhead is critical.

There's some things out of our control, interest rates, currency, you know, execution by others that we have empowered, but you put it all in and we think it's reasonable guidance given our past history of performance.

That's fair. I guess the only reason why I asked is it sounds like a lot of things are still going to be going well in 2013. You have a fair amount of acquisitions that hit late in 2012. You have all these redevelopment and development efforts coming online in 2013. I was just kind of curious is there any kind of number in there that weighs on 2013 earnings that we should be aware of?

As a negative?

Yes.

Well, look, we sold -- we have some things that are negative, for instance I'll give you two or three that pop in my mind. We sold our interest in Capital shopping centers. We no longer get that dividend. That was dilutive because we essentially paid down debt.

We sold -- we no longer -- we had some mortgages that we owned on the hope that maybe the owners were going to default. Those got paid off, so we are -- our investment income is way down.

We had a couple land sales. That's a lumpy business, so there's always those kind of things that are a little bit negative that we have to earn our way back.

Okay, that's helpful.

Steve can shed more light -- those are two or three that jump to mind. Yes, we have higher -- we don't have much floating rate debt but we do put in a higher interest rate on the short term so we have some exposure on that. So I mentioned the currency. We are already behind our budget in currency but that didn't change our guidance. We will figure out hopefully how to make that up in some way shape or fashion but that's hurting us with the yen. Those are some of the items that jump out.

Okay, that's helpful. Then just a quick question on Grand Prairie and Livermore. Will those assets be 100% occupied when you acquire them? How should we kind of think about growth within that portfolio and where you expect to get that from?

Well, they were 100% leased prior to our 100% acquisition. And we like the real estate, so the growth will be there over time but nothing imminent. There could be based upon overage rental, I should say, so sales is still a little bit unknown because there's still some overage or percent rent deals with some of the anchors, so there may be growth because those projections may be less than what they produce.

And then Livermore does have an expansion opportunity, so that's a couple years away.

Great and then one last specific question for Steve just ad expense during the quarter went up quite a bit. Just wondering why that was so?

I'm sorry, Omotayo, the advertising expense?

Yes, ad expense.

That would just be seasonal but it nets out because most of that is reimbursed by the tenants, so that's the bottom line.

Great, that's all I wanted to know. Thank you very much.

Ben Yang, Evercore.

Thanks, maybe, David, going back to the outlets, do you have any thoughts maybe longer term on existing outlets that get cut off by new development? Because when I look at my area, San Francisco, I think the new Livermore outlet will probably siphon off some sales from Gilroy. You look at what's happening in Ohio, it looks like Jeffersonville might get fewer shoppers from Columbus once the new outlets center opens up in that market. Are you worried about this at all? Maybe did this back you into your decision to sell Jeffersonville two years ago?

Well, Jeffersonville was a requirement. So I think it's a fine asset and I think it's a different trade area than what the Columbus deals are. But look, some of these may have some impact on some existing centers. I don't think there's enough to create an alarming concern.

And Liver -- Gilroy is -- that's not an easy drive to go from there to Gilroy either way. As we get Livermore essentially gets the East and Gilroy gets the South, you may have some -- all the stuff that we have in the Napa area are pretty focused on that weekend consumer or whatever visitor, tourist, visitor. And so there could be some of that but nothing that I've seen that has been overly dramatic.

Okay, so too early to worry about that issue?

Too early, but look, certain new deals are going to impact existing centers, whether outlets or malls, that's just the nature of the business.

Sure, sure. You had talked about a Kansas City center earlier and I was wondering if you could tell us what under that and what was the cap rate was on that sale?

I think it was -- our read of it was around a 6 cap rate.

What was the asset exactly?

It's -- go ahead and Rich.

It was an open air project that had some community center, power center components, had some full price components, had a lot of food. It was surrounded by a number of attractions in Kansas City that made it a decent location by -- as David said, very big. We really analogized it to our Mills product because it could be all things to all people but at that cap rate, it was a very significant valuation.

So unanchored fixed cap, can you tell us what the name of that center was? Was (multiple speakers)

It was called The Legends in Kansas City. (multiple speakers) on the west side on the way to Topeka.

Got it, thank you. Then final question, David, you make some positive comments on B-malls in the past and I wonder if you could maybe provide your updated thoughts on this tier of your property portfolio?

Well, the demand I think is picking up in it, so I think it's a lot of elbow grease, but generally the demand is picking up in the B mall category. Sales are actually okay and one thing I love to look at is kind of sales year-over-year if we had any that had the decrease and we really didn't, so I think business there is steady as she goes.

When you look at our anchor additions, they are being added throughout the portfolio. I'm not going to categorize the B, C, A, but throughout the portfolio we're adding a lot of anchors and that obviously only helps but increase market share.

Sure. And then do you think there's any institutional interest in joint venturing some B malls currently, maybe something that does below $350 a foot, something in that range?

There's a lot of the private equity money doing it, so indirectly that is institutional interest, because all of their investors are institutional investors generally or some really rich people. So --

What about pension funds? Any pension funds that you think you might want to take an interest in in some of these B malls?

I think that is more going to be done through the private equity guys and I think there's going to be rollup strategies generated out of those guys. The yields are good. The business is more stable. There's more players coming into that, so that's where the interest is and I think you'll see more transactions in that whole category.

Great, thank you.

Michael Gorman, Cowen Group.

Thanks, good afternoon. Just a couple of quick housekeeping questions for Steve. Steve, in the past couple of years there has been sort of a ramp up in the regional office costs from third quarter to fourth quarter that didn't really happen this year. But I was just wondering why that was and if the fourth quarter is still a good run rate for 2013?

No, Mike, for 2013 I would look at the annual number and not necessarily the quarter number. So that kind of $125 million-ish number in total is a good number and then how it breaks out quarter-to-quarter can depend upon a lot of seasonal things like David mentioned with respect to the NOI. But I would really focus on the annual number.

Okay, just one more clarification. When I was looking at the 8-K, there's a footnote that talks about land sale gains of just about $8 million and that seems a little bit different from the breakout of $4.4 million on the income statement. Is that just unconsolidated landfill gains that's the difference there or --?

Yes, we had one that flowed through our JV. That's correct. Very observant.

Bonus points. Thank you. We love when people read our financial statements, especially when management doesn't.

Jeff Spector, Bank of America Merrill Lynch.

Great, thank you. I'm here with Craig Schmidt. Just a few questions. I guess just thinking about 2012 clearly was just a great year for the Company. David, how are you feeling I guess the start of this year versus last year? What's the message to the team I guess for this year?

Thank you for mentioning that. We did have a really, really good year and frankly proud of the organization that on all fronts, financing, operations, leasing, basically there were really no -- we really executed well and I appreciate those comments. I appreciate you pointing those out because we worked our ass off in 2012 to deliver that and we had a lot of moving pieces as we always do and we did a lot of deals.

People forget about all the deals that we did. So -- and hopefully the fruits of those investments have -- did show to some extent in 2012 but they will show more importantly in 2013 and 2014, so thank you for highlighting that.

Look, we are the old Green Bay Packers, three yards and a cloud of dust. If our -- if we said anything different to our people, they would be shocked. So we are not -- we are pleased with what we did in 2012. We got a lot going on in 2013 already and I think what we are doing at the property level in terms of our reinvestment is a huge focus and delivering the redevelopment yields that we want is very, very important to -- for both the consumer and the retailer.

I just think it's more the same of what we do. We -- you know and I would hope to be able to have another year like that in 2013, but it takes a lot of work. There is always the unknown out there. We are spending a lot of capital so we've got to produce the returns that we want in that capital invested. We have a good track record but that doesn't necessarily mean you can produce it.

The mall teams are in good shape. The outlets team is in good shape. We are still working through our international, how to be fed up. The Mills team is in good shape, so generally pleased but as everybody knows around here, we don't rest. We fight. We continue to work to have another good year.

Okay, I guess addressing maybe one of our concerns are question marks on the consumer, any particular area you are more worried about, whether it's luxury or the aspirational shopper or the middle-income shopper?

Well, I think over a long period of time that the middle-income person has been squeezed and that always -- I don't want to get into this big macro discussion because people will either disagree or IK will bore them to death.

But look, that's a big focus. It has always been a big concern, but we are in a good spot because we have that bifurcated product. We have the high-end and that continues to do well. Look, it will ebb and flow, but at the end of the day, the people there have purchasing power and there may be a bad quarter or two of sales but they are going to -- those assets are going to only going to get better.

We are very well represented in the value side, so we have that bifurcation like what the retailers are trying to accomplish. We have some stuff in the middle that gets squeezed. We have the ability to manage those reasonably well. That does retard our growth rate to some extent because some of those assets cash flow does go down. But generally the bifurcation that is out there between looking for value or looking for the higher-end product is no better represented than what we do.

We are the best representative of what's out there is what I really should say.

Okay, then turning to the Internet, I don't believe you guys really discuss that. Just coming for the holidays and it seems like more of the discussion from the retailers coming out of some of the latest conferences has been recognizing the importance of using the Internet along with bricks and mortar. I don't know if there's anything new you have been talking to retailers about, any new thoughts on how to leverage your properties, any new initiatives?

Well, there's lots -- we could go through lots of what we are doing on the digital front in marketing and everything else. But I would say this -- I would just say this. The good news of all of this is that in my opinion the retailers clearly need stores, clearly want to invest in stores, and I think all the technology will enhance their ability to deliver better service to the stores that they have. As we will also. I think we will be able to enhance our service levels through the use of technology and I think that's critical in today's environment.

I have yet to see frankly -- and it may come one day, but I have yet to see a retailer say they are not spending money opening new stores because they are reallocating capital more toward the Internet. Now we may cross that fulcrum at some point, but I haven't seen it and I think what it also means is they are going to be selective on where they go and what they want to do.

But I am a strong believer that good real estate will get stronger and better and I have said to you for a number of years the retail real estate, some of it will become obsolete. We have seen it in some of our assets. It's unfortunate, but that's reality. But I think we will more than make up for it as demand is more focused on the better real estate, which we own a vast preponderance of.

And I think technology is ultimately going to end up being useful to delivering a better product and service to our consumers and make it a more enjoyable experience.

Okay. It's Craig here. I just -- my question focuses on The Mills. Could you talk a little bit about the redevelopment at Sawgrass? And then maybe in general the opportunities or direction given, as you mentioned, the significant reinvestment in The Mills in 2012?

There's a couple of things that are going on at Sawgrass, Craig. First, we took back the want to do use that was a children's interactive retailer. It's about 110,000 feet. That has been completely redivided now into new tenants and they are all open and that's doing very well. It has added a new entrance into the mall. We added a Calvin Klein, Tommy Hilfiger, and that's doing well.

We are opening later I think in the early second quarter an expansion of the Colonnade, which is our upscale outlet presentation of Sawgrass, and that's going to have almost exclusively high-end designers with their only location in Southeast Florida. And that is 100% t and we will be doing very well.

We still have another 400,000 feet of [SAR] at Sawgrass and we are actively working on programs to further expand the square footage there and reconfigure it and we are also working on a renovation of the Oasis, which is the open air section of the property.

We just added a California Pizza Kitchen, Cheesecake Factory, and bringing that up. So a very powerful property doing very well and a major focus of redevelopment efforts and capital.

I just would add this mall will do over $100 million of EBITDA and in the next two to three years, it will probably be over $120 million without the expansion, the big expansion that Rick just mentioned. So it's a beast.

But don't tell anybody, okay?

And then just one last question for Steve. In Brazil, Steve, anything new on the financing front? Anything -- the capital markets there, I'm not sure if there's any new opportunities for a US real estate company there?

In Brazil?

Yes.

You mean in terms of raising dollars in Brazil?

In terms of tapping line of credit there for you, so you could have natural hedge in anything you invest in.

No, not really. No and we really haven't made any investments yet, but no.

Great, thanks, guys.

Andrew Rosivach, Goldman Sachs.

Yes, I'm so sorry. I thought I was out of the queue and you guys deserve to eat lunch. But really quick on Tao's questions. When you guys give guidance, there's kind of two groups. There are companies that throw in spec acquisitions that they haven't made yet and then you have guys like Boston Properties that just give a no acquisition guidance. And then to the extent that you get stuff done later in the year, the numbers end up going up.

Is that part of why you did so well in 2012 versus your initial guidance? And for 2013, is that how you've set it up as well?

Certainly we did have some growth because of our investments that we hadn't planned on, but let me make it clear. In 2013, we have no spec acquisitions at all. So nothing along those -- no spec investments.

That's very helpful, thank you.

At this time, there are no further questions in queue and I would like to turn the call back over to Mr. Simon for closing remarks.

Okay, thank you so much for your participation and we look forward to chatting in the near future.

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