Please standby. Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Macerich Company First Quarter 2014 Earnings Conference Call. Today’s call is being recorded. At this time, I would -- all participants are in a listen-only mode. The following presentation will conduct a Q&A session. Instructions will be provided at that time for you to queue up for question. I would now like to remind everyone that this conference is being recorded. And I would like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead, ma’am.

Thank you everyone for joining us on our first quarter 2014 earnings call. During the course of this call, management will be making forward-looking statements, which are subject to uncertainty and risk associated with our business and industry. For a more detailed description of these risks, please refer to the company’s press filing and SEC filings. During this quarter, we will discuss certain non-GAAP financial measures as defined by the SEC’s Regulation G. The reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is included in the press release and the supplemental 8-K filings for the quarter, which are posted in the Investors section of the company’s website at www.macerich.com. Joining us today are Art Coppola, CEO and Chairman; Tom O’Hern, Senior Executive Vice President and Chief Financial Officer; and Robert Perlmutter, Executive Vice President, Leasing; and John Perry, Senior Vice President, Investor Relations. With that, I would like to turn the call over to Tom. Tom O’Hern: Thank you, Jean. Consistent with our past practice, we will be limiting today's call to one hour, if we run out of time and you still have questions, please don't hesitate to call me or John Perry or Jean. It was another strong quarter for us. We executed on our plan to disclose non-core assets and we had a very good operating performance during the quarter. Looking at the operating metrics, we continue to see good fundamentals, including leasing spreads which came in at 14.8% for the quarter and just to point out on that stat. Those are cash basis rents for us. They do not include straight lining of rents which would have the effect of widening that spread to something significantly greater than 14.8%. Occupancy was, came in very high at 95.1%. That was up…

Thanks Tom and welcome to our call. I’m very pleased with our operating results for the quarter. I’m very are pleased with our continued pruning of our portfolio. As I look at the -- our disposition program over the last year, we have successfully brought ourselves to a position where over 90% of our EBITDA is coming from centers that are doing over $600 square foot. If we didn’t sell one more properly in our bottom 10 of our portfolio, just simply executing on our redevelopment pipeline over the next two or three years is willing to bring our portion of NOI coming from centers that are doing over $600 a foot to something over 95%. And obviously, if we use future dispositions as a source of funding our redevelopment program, we can get to our goal of getting to virtually 100% of our NOI coming from a quality centers. We are going to be opportunistic on any future dispositions. I want to make one correction, on our last call I indicated that, I felt that the average cap rate on the centers that we would be selling this year would be something close to 9%. Having sold a couple of centers were sold in the first quarter and now when I look at what is likely in the possible disposition path that we are looking at right now, I would say the average cap rate in terms of combined cap rate on this group of assets will likely be closer to 8% to 9%. On the redevelopment pipeline itself, we are very pleased at some recent developments that have taken place. Tysons Corner continues to come online. You can take a look at photographs. I believe of Tysons Corner on the Tysons Corner website within the macerich.com website. And…

Thank you. (Operator Instructions) And our first question comes from Alexander Goldfarb from Sandler O’Neill. Go ahead sir.

Good morning. Alexander Goldfarb - Sandler O’Neill: Hey, good morning out there. Just a few questions here. First of all, Art, you guys have outlined the dispositions and the impact that it had on sales productivity. But can you sort of give some framework around how it has improved cash flow or releasing spreads, just something quantifiable that we would see over the next few quarters or next year or two where we would see it come into the numbers, the improvements that you guys have made to the portfolio by selling the lesser productive assets?

Well, it is going to come in two forms and look this is a marathon, not a sprint. So it’s not going to show up necessarily in this quarter or next. But look the long-term goal was to take in recycle well over $1 billion of assets that we’re doing $320, $330 a foot and to recycle that cash into proven winners and that’s currently being done in our redevelopment pipeline which is identified in our supplement. So that will show up as we bring those projects online. We also have talked about the fact that in previous calls, that a year ago, if you look at our top 40 malls and you compare that to the 25 malls that were behind them that the growth rates over the last five years, the same center growth rates in the top 40 malls was significantly higher than the bottom 25. And we have already disposed them -- let’s say 15 of those have bottom 25. And we think that that is going through definitely just -- we are going to have addition by subtraction by taking away some of the centers that had either slower or flat or negative growth rates which was the profile of the bottom 25 and having more focus for our management team to focus on our better centers and really having a better and a stronger landlord-tenant conversation or when you are sitting down with the tenant, virtually every store that they have with you is a winner. It just puts you in a stronger position. So look at this point, I could say we are going to just have to let time prove out the thesis. But we know that there is zero question that recycling over a $1 billion of capital that was sitting in centers doing $320 a foot and pushing it into centers that are doing 700 to 800, 900 dollars of square foot. That by itself is going to lead to very powerful results. And time will prove the thesis and we are just going to have to -- we're certain that it wasn’t the right thing to do. And we’ll have to prove it out overtime. Alexander Goldfarb - Sandler O’Neill: Okay. And then as far as further dispositions, I mean it seems like everyone is now jumping into the fashionable trend of disposing the lower tier malls. But doesn't sound like from your comments that pricing has been impacted. So are you seeing more buyers coming out of the woodwork, or are you seeing the existing cash -- usual suspects just increasing their appetite to just buy more of the malls that are on the market?

There’s definitely more buyers today than a year ago. There is more buyers today than three months ago and their appetite I believe are much bigger than they were three months ago or a year ago. And I think look, part of that was a function of the fact that they realized that just because you call it a B mall, doesn’t mean that this doesn’t have a reason to B, to live. And they realized that if they are focused on that type of product then they can obtain good results. There is some proven operators out there that have done pretty well in terms of their leasing of B mall type of portfolios. And look, with the appetite as I see it is much bigger than it was three months, maybe even six months ago of the existing pool of buyers. And hypothetically, they are at least one or two new buyers that are going to be coming out here soon that may end up wanting to add to their portfolios. I think the market is only going to warm up over the next year. But we had already decided when we gave guidance this year that we had pretty accomplished what we wanted to accomplish with our disposition program. And then we sold off a couple of more centers here in this quarter. This year's disposition target guidance is pretty modest at $250 million and we are going to be -- we've heard from investors that they would prefer a see us try and time our dispositions with reinvestment opportunities and so I think we are going to be listening to that. But the market is clearly warmer today than it was three months ago and harder than a year ago. I mean, a year ago it was more of a hypothetical as to what, how deep the market was. But there are clearly platforms that are trying to be formed or have already been formed. Alexander Goldfarb - Sandler O’Neill: And just finally, Tom, did you mention Victor Valley, are you going to refi that or pay it off when it comes due later this year? Tom O’Hern: I mean, that’s opened but certainly it’s a refi candidate and the centers done well and so we will probably be refinancing it. Alexander Goldfarb - Sandler O’Neill: Floating or fixed? Tom O’Hern: Our preference is fixed, long-term fixed and the rates are still extremely attractive and the tenure has hung in there. It bounces between 260 and 280, and there is certainly a fair amount of both life company and CMBS debt out there. So it's still a great time to be a borrower if we go fixed and long.

If we talk about turning B malls and A malls, if you just look at the two-dimensional number of sales per square foot you could argue that that’s what we did in Victor Valley over the past several years. We have two brand new department stores. We have -- one of them being a brand new expanded JCPenney, which is doing very well. We have a brand new Macy's at every place that had replaced the Bacon department store and then we have a brand new Dick's Sporting Goods that replaced the old smaller 50,000 foot JCPenney. And as a consequence of that, on a sales per foot of that center are now in the excess of $500 of square foot and we are showing strong sales growth trends there and strong income growth and so it looks and feels great. So that’s an example of it. But was probably a small market, tertiary market or secondary market but it’s within the greater sort of California area and we could argue that was an example of taking a B mall and turning it into an A mall. Alexander Goldfarb - Sandler O’Neill: Thank you.

Thank you.

And our next question comes from Christy McElroy from Citi.

Hi, Christie.

Hi, good morning to you guys. Art, I just wanted to follow up on your comment about the average cap rate of the sales being closer to 8% than 9%. I think you talked about selling four to five malls. You've sold three so far. I'm sure you can appreciate sort of our willingness or desire to get a sense for sort of the valuation split between B and C. I think you talked about one of those four to five being a B mall. So I am -- can you disclose the cap rate on the assets that you've sold or maybe an average of the three and talk about maybe the split there in that 8%?

Well, the ones that have been sold today were clearly C malls.

Right.

And frankly at this point in time, I could argue that we have no more C malls. So anything that would be sold from this point forward in my view I would consider it to be a B mall. And the cap rates on C malls, you can’t really peg them. They are really hard to think. On going forward 2014 numbers, look, they were clearly double digits in the low teens but they were small centers that were going in the wrong direction. And they were bought by opportunistic people who have a plan to turn them around. The remaining one or two or three and I don’t know, how many it will be centers that will sell that gets within that guidance range will likely command cap rates that are closer to the cap rates on the centers that we sold last year, which is closer to the low 7s to the mid7s. So that’s why I was modifying our guidance here to say that the combined cap rates for the dispositions this year is probably going to be closer to 8 and the 9 that I indicated in our last call. The C malls, it’s really hard to peg -- Tom, what was the average sales per foot on the centers that we sold? Tom O’Hern: It was in the low 200s, Art. And we’ve kind of broken it out in the supplement on Page 14. The three that we sold this year with the average 244 a foot.

And they were all C malls. And they were all over 10% type of cap rates and they all had income that was declining. So it’s hard to say what that number is. But we think that the B mall market is north of $300 a foot, mid 300s that type of thing. But there is still strong appetite for this type of centers.

And that strong appetite that you mentioned is what caused you to revise that number down from the 8% to 9%, it is not a function of the mix of assets that you are selling?

It’s really just a recalculation frankly of looking at what got sold and looking at what we are talking about during now and just looking at the reality of what I now see.

Okay. And then on Kings Plaza, your sales are down about 7% year-over-year. How much of that decline was weather-related versus the major remerchandising effort that you have got going on there?

This is Bob Perlmutter. It was probably a combination of all those things. Clearly, if you look at the detail of the East Coast centers, were impacted by the weather but we also like you say have a lot of moving pieces, including a lot of new leases that are getting signed and a renovation in process. So that asset is probably likely to be impacted a little bit by all those items and fluctuate a little bit more over the next 12 to 24 months.

And those new leases, are those lower productivity, which is impacting the average?

No, the new leases won't go into the comp sales until they’ve been open for year and actually many of the tenants will have the opportunities to significantly improve the productivity. People like Michael Kors and Fossil, some of the higher productivity tenants that are coming into the center.

Thank you so much, guys.

Thanks, Christine.

And our next question comes from Paul Morgan from MLV. Go ahead, sir.

Hi. Good morning. Art, you mentioned kind of upsizing stores that we view it as strategic to have bigger stores. What’s your experience been in terms of the rents per foot you can get because you might think the opposite, that it is better to have smaller stores because smaller stores usually pay higher rents, since you'd rather have 10 small stores paying higher rents, unless you are getting the same types of big rents from bigger boxes and what’s your experience been when you have had those upsized stores?

It depends on the center. So if it’s center that’s $300 a foot and you are adding a junior anchor, chances are you are going to -- your rents are going to go down a little bit but you pick it up with the occupancy gains. But given that that’s not really what we own anymore and give them our top 40 centers now and producing over $600 of square foot. We consider them all to be A centers. What happens in those centers and particularly as you go up the quality spectrum and you get up into the top 20 centers. When a tenant comes to us, part of the strong omni-channel retailer strategies is to have kind of hub and spoke type of retail, brick and mortar locations. So they like to have sometimes a big store in a great location and there maybe a few other smaller stores in other locations in the market. So if you happen to own the best location in a given market, which we do in quite a few markets and they come to us and they say, look, we are interested in taking and building a flagship store. What the answer is that from a supply viewpoint that’s very hard to create. And you have to assemble spaces to create that and we’ve actually had experiences that when tenants come to us and they would normally be a 10,000 to 12,000 foot tenant and they say that they want a 20,000 foot flagship store. We’ve had experiences that we can get more rent per foot for the bigger store than for the more typical store. And it’s just because of the law of supply and demand. We cannot create in a center, 20,000 foot stores. That would take away from the comparison shopping and the experience that shoppers expect. So when retailers ask us to do something or to create a space that is highly unusual and it happens to be in a great center, which is exactly where these flagship stores want to be located. We found that from a pricing discussion that we actually can get more rent per foot than for their more typical stores.

Paul, this is Bob Perlmutter. One of the other effects of doing these flagship stores is very often it allows us to move the retailers that are there in these areas were doing well into lesser areas of the centers. So there is sort of related affect that we are accumulating the space. We are able in many cases to get a premium for the accumulation, but we are also retaining the tenants are there albeit at lesser location than the center which also helps drive rents.

Yes, sure. And then my other question is just on the bankruptcies and kind of the state of your tenant watch list. We've had obviously a little bit of a tick up year-to-date off a very low level. And I am just wondering your thinking -- given what you said about the disparity between productivity within the mall, I mean could it maybe be beneficial that you are weeding out some of the underperformers that you normally see more of than we have in the past couple of years? What’s your view on the net from the store closings year to date?

Well, I think your comment is right in the sense that it’s a little bit more active than it’s been in past years, albeit past years have been extremely low level. So we are probably getting closer to normalized level. I think the second thought is, this is something that goes in the retail business, in the mall business for the last 20 years in terms of tenants growing and expanding and then contracting. So there is a constant rollover which provides us opportunities to bring in more productive tenants. I think the other point is, we’ve been -- many of these bankruptcies like a Coldwater Creek have been evident for a number of years. And so, we look at Coldwater as potential opportunity. They are generally better locations and are best centers with moderate rents. I think their average fixed minimum rent with us is $36, so that presents an opportunity. My only point here is we have been thinking about this for the last two years. This really isn’t new news and we have been both reducing our count with them as well as trying to line up deals on the belief that they would have actually go bankrupt.

So the closings year-to-date hasn't had any impact on kind of what you think you are going to be from a same-store and occupancy perspective in the year? Tom O’Hern: I think it’s all been factored into our guidance.

No, again, these aren’t surprises when you look at Brookstone and Coldwater Creek and Sbarro and some of the others certainly not unexpected we have been planning for it and even counting on it frankly.

Thanks.

Thank you.

And our next question comes from Jim Sullivan from Cowen Group. Go ahead.

Thank you. Art, you talked about the lower cap rate on the dispositions. Is there any change in your timing? I recall in the fourth quarter call, you talked about the dispositions being front-end loaded. Is it still front-end loaded or will they be spread a little bit more over the balance of the year?

At this point in time, we obviously have some front-end loaded dispositions on the two that were sold, but those were small deals. It’s hard to predict exactly when balance of the dispositions will happen. Frankly, we have a deal on the contract that fell out of contract and that was what was causing us to talk about it being front-end loaded. So now it’s hard to predict buyer’s behavior and we can’t control our buyers’ behavior. I am convinced that we will sell $250 million or so of assets this year, but it would be hard for to be front-end loaded now given that there is nothing under contract at this point in time. So it’s going to be more loaded towards the mid to the latter part of the year at this point in time.

Okay. In your development schedule also this quarter, you raised the yield -- increased the yield on a Niagara outlet expansion. I just wonder if you could talk about what was driving that. I think the costs actually were increased a little bit, so presumably it reflects demand in pricing. I wonder if you could talk about that, as well as the prospects for other expansions at any of the other outlet center projects in the portfolio?

It was just a recalculation of what we saw, the return to be based upon the rents that we are getting and we lease it down into a pro forma. We think that we are getting -- it’s going to cost us X dollars to build it. We are going to get Y dollars in rent, So weather did drive up the cost a little bit, but the rents that we are getting are better than what we had put into our original pro forma. So this is just simple recalculation. As far as Fashion Outlets of Chicago, it’s doing great. If we could expand it, we would have demand to expand it, but at this point in time there are no plans or even obvious opportunities to do any expansions. We are looking at potential other outlet opportunities around the country that are similar in nature to Fashion Out of Chicago in terms of their urbanity and density of population. And so it’s possible that during the course of this year that we will be making an announcement that we’ve identified an opportunity or two.

Okay. And then final question for me, in terms of Santa Monica Place, sales productivity there has been increasing nicely over the last several quarters and you have the theater coming. Can you just remind us -- I know that the occupancy has declined from year end 2012 I think by about 400 basis points or so, and there has been a little more turnover in the upper levels of that center. Can you just remind us, the theater will be cutting in at the third level I understand, and is that where the vacancy is and how optimistic -- well, not how optimistic, but when you think about the tenant mix on the third level, do you expect it to change in any material way from how you originally conceived it when you opened this theater?

So no, where the theater is going, we never included it as vacant space. It was -- it is the third level of an old Macy’s building and it was roughly 50,000 feet. So when we redid the center we convinced Macy’s to convert their 3 level Macy’s building to a 2 level Bloomingdale’s building and the theater is simply going into the -- what used to be the 3rd level of Macy’s and it’s really space that if you walk the center, you really wouldn’t know it was even there. Whatever occupancy changes or reductions that you would see in our disclosures that would be likely the result of the fact that we are in a second generation of releasing Santa Monica Place now which is extremely early. Usually when you build a new center, it takes just 7 to 10 years to be able us to move into a second generation of re-leasing opportunities. But when we leased Santa Monica Place it was spring of 2009, it was the worst time possible to be leasing it, and we weren’t able to get as many upscale or branded or luxury retailers as the market deserves. And so what we are doing right now is we are recycling tenants that probably shouldn’t have been there long-term anyway with more appropriate tenants. Do you want to talk a little bit further about the re-letting of that and the impact of the theater on the 3rd level, Bob?

Yes, I mean, Jim to your question about the 3rd level, the 3rd level has obviously been designed and merchandised for food uses. And so that having the theater up on the third level is obviously going to have a materially beneficial impact in bringing traffic to that 3rd level. It really allows us to do two things and allows us to generate more business for the existing food users are there, but it also allows us to bring in new food users and upgrade the quality and bring in what we believe will be some high volume users. So I would say before the end of the year you are going to hear a couple of announcements with some new restaurants up there that who is interested is directly related to the fact that there is going to be start of the art theater in a market that is desperately in need of a quality theater operation.

And you are going to see continued announcements of new upscale branded retailers, so they are going to be coming into the sector.

Yes, best the best example we recently signed a lease with DPF to come into the center which would be new to the market and you will continue to see the luxury build on the lower level and the traditional specialty mall tenants on the second level.

Good. Thank you.

Thank you.

And our next question comes from Haendel St. Juste from Morgan Stanley. Please go ahead, sir.

Good afternoon.

Good morning to you. Thanks for taking my questions. Art, I guess, as you consider the projects you are moving from your shadow pipeline to the in-progress, can you provide an update on Green Acres? Were you looking at a big box center and as part of that, can you talk about how you are thinking about traditional versus fast fashion retailers when you think about filling the big-box space?

I see the pre-leasing of the 20 acres of land that we have at Green Acres, it’s coming along extremely well. We are really in the entitlement trades there right now. We do have retailer, we are expanding H&M there, Bob. That’s not on the 20 acres, so that’s on the mall. So there is two things that are happening. One, we are taking that the 20 acres that we bought and we are in the middle of getting entitlements to populate it with traditional bog box uses and including potentially a new theater. The Green Acres is an interesting center. If you look at simply the sales per square foot which again can be a two dimensional number, it does $541 a foot. You look the top two-thirds of the tenants at Green Acres mall, they do $750 a square foot. So there is an opportunity there to recycle within the mall, so out some of the lower productive tenants and bring in some more productive tenants. So right now we are in the entitlement phase. If we have the entitlements at Green Acres to do the -- to build out the 20 acre expansion site will be under construction today. We are getting those entitlements and the other thing that we are working on is the remerchandising of the mall itself. So again, one thing I’ll point out about Green Acres is that it does $541 a foot, which is an impressive number. But the more impressive number to me is the fact that the retail that sits on the site that we own today does over $800 million. When we finish this expansion that we’re going to do, it’s not inconceivable that this property will generate $1 billion of sales that would put it on par with Tysons Corner in terms of the sales that have been generated from the property. So we see this has a great opportunity for us and the only thing that’s holding back the big box build-out on the 20 acres right now is the entitlements. Do you want to add anything to that, Bob?

Yeah. Just a comment about -- that you asked about inside the mall, the fast fashion. As an example, we recently signed a lease with H&M who is an existing tenant, almost double the size of their space to go from about 12,000 to 22,000 feet. And we see additional opportunities like that within the mall. One of the interesting things about the H&M deal is they’re actually going to do an interior and an exterior entrance which has been one of our goals to have more exterior pace in retail and take advantage of the traffic not only within the mall but on the entire site. And then secondly, the demand on the 20 acres from the big box tenants has been very strong and the rental levels are very strong, which has been reflected in the returns on the development.

Okay. So you certainly sound pretty enthusiastic and optimistic for the outlook. Is it conceivable to think that this could be a top 10, maybe top 20, but maybe a top 10 mall in terms of productivity in your portfolio?

(Indiscernible) but again that’s kind of work I was touching upon. It will clearly be a top 10 center in terms of the retail sales that are generated from that site. It’s hard to imagine that it would be a top 10 center in terms of sales per square foot, which really is something that I need to point out to you is that the sales per square foot numbers that you hear from landlords are little bit too dimensional. You have to drill down further to really understand what it all means. And at $541 a square foot, that’s a good solid number. But when we looked at it as we’re buying it, we said, wait a minute, this thing is doing over $800 billion of business, that’s a massive retail complex. And when we get down with the expansion here and the remerchandising of the center, it is not inconceivable that it will be doing $1 billion of business, which clearly would be one of our top 10 centers in terms of total dollars that are generated in and that plays into the leasing. I mean, when retailers realize the volumes that have been done by other retailers, it creates interest and they don’t really look at the ales per square foot of the itself when we’re leasing space to them. They look at an examples of other peer retailers or is just opportunity that they think that they can fill? Again, the pre-leasing that we’ve got on the 20 acres is coming on very, very strong. We’ve home good users, sporting goods users, furniture users, several restaurant users and we think it’s a hidden opportunity. We were able to buy the 20 acres while we were under contract to buy the mall and as you can from the returns of the shadow pipeline, its going to be a very attractive addition and we think it will -- its going to just bring traffic to the site that will make the mall better also.

A couple more quick ones here. Just curious, you talked a bit about your tenant percentage. Did you guys ever discuss or can you discuss what your target tenant percentage is and assuming the elevated levels go down once Broadway Plaza is completed?

The historical number was close to 2% to 3%, to say 2.5% that got elevated as we went through the recession and we are just pushing occupancy rather than rate or quality of the occupancy. So, we think we get down to that level, 5.5% that gives this another 300 basis points over the next few years to convert that to the higher quality occupancy and pickup the incremental rent which as I said, we think, on average can be as much as $20 to $25 a foot.

Okay. And then on Estrella Falls, the completion timing slipped a bit. Can you talk about that?

The Phoenix market is clearly recovering. I met a Board at this morning that it was the number one city in the United States for job creation in the finance category last year. Population growth is coming. But look there’s going to be a one more full price regional mall build in the Phoenix Metroplex over the next five to eight years. It’s going to be in West Phoenix. It is our belief. We are on the site and there is just no reason to build it before we feel that we have a strong tailwind. And at this point in time we don't feel a strong tailwind at that particular location. There are -- Phoenix coming back significantly in different areas in different submarket, that particular submarket has not come back with enough strength to give us the rent levels that we would like to get and so we have no rush to do anything there.

Great. Thank you, guys.

And our next call comes from Todd Thomas from KeyBanc Capital Markets. Go ahead sir.

Hello

Hi. Thanks. Good morning out there. Just first question on guidance. Apologies if I missed this. So you maintained FFO guidance for the year, but I was just wondering if you mentioned or maintained your same-store NOI growth forecast 3.75% to 4.25% just given the 100 basis point drag on the same-store from the weather and if so, what is the offset to that?

Well, again, its one quarter. We don’t expect the polar vortex to affect us negatively as we move forward through the rest of the year, so we view that as kind of a one time bump. So, I mean, absent that, we were running closer to the mid 4s, which is at or above our guidance rate. So we are still comfortable at that same-center NOI guidance for the year.

Okay. And then how do you think about these costs going forward with new leases that you sign? I know it is, like you said, just one quarter, I guess, the fourth quarter last year was also a bit elevated, but how are those elevated costs overall factored into that CAM pool that you will build into new leases? Are they considered abnormal at all or one-time in nature? Do you sort of smooth them out using a two or three-year figure? How does that work?

Well, typically on a CAM quote, we gives ourselves couple of dollars of margins there. I think that’s consistent within the industry as we as an industry shifted away from triple net leases to fixed CAM. We believe we can control cost, but obviously, some cost such as utilities and snow removal as proved out this winter are 100% controllable. So there's always a little bit of cushion in that CAM quote and its considered as you quote CAM numbers to tenants as we go forward.

Okay.

There’s a still healthy recovery rate, our recovery rate is still in excess of 100% and that’s because we do quote a little cushion in the CAM number.

Okay. And then just last question, I think, I heard you mention that there maybe two new entrants into the B mall segment of the market that might emerge? Are these buyers that are, as you say, they are planning to own and operate portfolios or are they financial buyers that might look to partner up with an operator?

Well. I mean one of the obvious ones that I can predict what they’re going to do is the spinco off of Simon Property Group. I mean, who knows what they’re going to do. With an investment grade rating, they would have the ability to be a very aggressive consolidator if they wanted to be, once they get up and running. So I can’t predict to what they are going to do or I don’t know what they’re going to do but they could clearly be our new player. And there are other private new players that are forming platforms that are new platforms that don’t currently exist that our seeking to buy some B malls. So it’s just the depth and the breadth of the pool and the appetite of the pool. It is just much greater than it was a year ago. And it’s really for good reasons. I mean, there is money to be made here in this category of asset. And particularly, if you have a management team that has got folks on it but have deep relationships in the big-box category killer power center type of backgrounds or community center backgrounds because one of the opportunities in this B malls is to introduce elements, that you would normally find any community center or power center. Remember that number that I put out there our bottom 10 properties average say $295 a foot. But embedded within that $295 a foot, top two-thirds of the tenants within the bottom 10 properties that we own, that average $295 a foot. The top two-thirds do over $422 a foot. So one of the opportunities for B mall buyer or some of those properties and we’ve seen this happened might be to eat up some of the vacancy and bring in new junior anchors to those types of properties. I mean many of them are very viable properties.

Okay. Thank you.

It looks like we’ve got time for one more question.

And our last question comes from DJ Busch from Green Street Advisors.

Thank you. Just one quick question for Tom. I was hoping you could provide a little more color on the current financing environment with regards to the appetite for movie goers and pricing spreads between some of the top centers and perhaps the lower productivity centers and some of those that you are trying to dispose of?

I can certainly comment on the top quality centers. We recently were out and evaluating, getting bids on Biltmore, which is a good A quality center. And it was a pretty competitive bidding process and interestingly it was the life companies, very, very competitive for A quality space with the CMBS lenders and in fact the life companies were 10 to 20 basis point sharper than the CMBS shops. And very competitive at rates for 10-year money in the low 4s. Although we haven’t been out financing any lower quality assets, what I’m hearing from the CMBS shops is they are all active. They’re putting pools together. They are aggressive and they are definitely financing B-quality assets. And there doesn’t seem to be any shortage of capacity right now from what we’re seeing. Tom O’Hern: And just to add on to that. We tend to keep the properties that we’re going to sell. We try and keep them unencumbered. So that a buyer who may have an appetite for high leverage, which that’s generally the profile of the private equity type of buyers that are out there, that they can have an opportunity to take the unencumbered asset and to leverage it up to the max, which generates better pricing for us. So over half of our bottom 10 assets are unencumbered. And we have found that buyers prefer to put their own financing on properties than to inherit some of the finance that you might have. So I’m sure that we’ll tend to keep assets that we think our future dispositions candidates unencumbered.

Okay, thank you.

All right, well, thank you everybody. We look forward to continuing to report to you during the balance of the year and seeing you at upcoming events. Thank you very much.

And this concludes today’s conference today call today. And I thank you for your participation. And have a great day.