Simon Property Group, Inc. (SPG) Q3 2012 Earnings Report, Transcript and Summary

Shelly J. Doran - Vice President of Investor Relations David E. Simon - Chairman, Chief Executive Officer and Chairman of Executive Committee Richard S. Sokolov - President, Chief Operating Officer, Director and Member of Executive Committee Stephen E. Sterrett - Chief Financial Officer and Senior Executive Vice President

Quentin Velleley - Citigroup Inc, Research Division Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division Craig R. Schmidt - BofA Merrill Lynch, Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Steve Sakwa - ISI Group Inc., Research Division Cedrik Lachance - Green Street Advisors, Inc., Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division Carol L. Kemple - Hilliard Lyons, Research Division David Harris - Imperial Capital, LLC, Research Division Richard C. Moore - RBC Capital Markets, LLC, Research Division Jeffrey Spector - BofA Merrill Lynch, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Michael Bilerman - Citigroup Inc, Research Division Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division Paul Morgan - Morgan Stanley, Research Division Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division

Good day, ladies and gentlemen. Welcome to the Quarter 3 2012 Simon Property Group Earnings Conference Call. My name is Julianne, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Shelly Doran, Vice President, Investor Relations. Please proceed, ma'am.

Good morning, and welcome to Simon Property Group's Third 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, October 25, 2012. 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 excellent. Here are some highlights: FFO was $1.99 per share, up 16.4% from the third quarter of 2011. Year-to-date, FFO was almost $2.1 billion or $5.70 per share, up 14.7% over 2011. FFO once again exceeded the First Call consensus by $0.07 this quarter. For our Malls and Premium Outlets, comparable property NOI grew 4.7%. Keep in mind, our comp NOI growth in the third quarter of 2011 was 3.8%. Our comp NOI growth year-to-date was 5.3%. Tenant sales were up 9.3% to $562 per foot. Occupancy was up 80 basis points to 94.6%. Base minimum rent per square foot increased by 3.8%. The releasing spread was a positive 10.4% or $4.86 per square foot. Capital market activity. As you know, on July 20, we redeemed for cash 2 million units of our operating partnership owned by an affiliate of JCPenney at $124 per unit or share. We've been active in the secured debt markets. Year-to-date, we've closed or locked rate on 24 new mortgages totaling $2.6 billion, of which our share is $1.7 billion. The weighted average interest rate on the loans is 4.1% and the weighted average term is 8.1 years. Subsequent to quarter end, we disposed of our investment in Capital Shopping Centres and Capital & Counties Properties, generating total proceeds of approximately $327 million. Development activity. Last Friday was the grand opening of our new outlet center in Texas City. Very strong opening, 97% leased. The traffic was great on opening day with backups, long lines. Coach, Nike, Michael Kors and several other tenants have reported very strong sales numbers. Construction is underway on 5 additional Premium Outlet Centers, all scheduled to open in 2013. 2 are in the U.S.: Chandler, Arizona, which is a suburb of Phoenix; and Chesterfield, Missouri, a suburb of St. Louis. One is in Canada, in Toronto. We have one in Japan and our fifth is in Busan, Korea. Our share of the development costs of these assets is expected to approximate $325 million. As you know, there have been a select few markets where competing new outlet centers have been announced or identified. This is not unusual in the long history of shopping center development, 60-plus years, as ours is a very competitive business. Rest assured, we know what we're doing. We have opened 19 Premium Outlets in the U.S. and Asia since our acquisition of Chelsea Property Group, delivering high returns and high-quality assets. We will not waver from this approach. And we shouldn't think, given our track record, that the market should overreact to a couple of competitive situations. Progress continues on our first outlet center in Brazil. Our joint venture partner is the well-respected BR Malls. We expect to start construction shortly for a November 2013 opening, which will then add to our fifth -- will bring our total of under-construction outlets to 6. Openings for next year, we have also identified a couple of other sites with BR Malls for Brazil activity. Construction is underway on 24 redevelopment and expansion projects throughout our portfolio, all with 2012 and 2013 completion dates, several of which are quite significant in size and scope. This redevelopment pipeline was identified in 2010. The scope of projects range from addition of department stores, restaurants, specialty store tenants to the redevelopment of the entire asset. We identified these opportunities very early in the recovery phase of our economy. And more than half of the projects will be completed in '12 and '13, increasing our cash flow growth. As projects are completed, a new group of redevelopment properties, which have already been identified, will take their place in the pipeline. This program is big and ambitious and impactful to our future growth, and it should not be overlooked. We also continue to strengthen our franchise assets with the addition of strong anchor tenants. Recent announced examples include Neiman Marcus at Roosevelt Field on Long Island; a new Bloomingdale's at Stanford Shopping Center, which will lead to the redevelopment of that asset; a new Nordstrom at St. Johns Town Center in Jacksonville; and additionally, a Target at Coddingtown Mall in Santa Rosa, California. We expect our share of development and redevelopment spend to approximate $1.12 billion and [Audio Gap] Rents for the shopping center segment were up 4.1% or 1.7% on a comparable basis. They are ahead of schedule on the disposition program with more than EUR 0.5 billion sold, which is above their target. And during the quarter, they completed a 7-year EUR 500 million bond issuance at 2.75% coupon. They are on track to meet their 2012 targets and their liquidity has never been stronger. Additionally, we added to the leadership team in hiring Jean-Marc Jestin as COO. He previously ran Unibail's EUR 5 billion office portfolio. Prior to working at Unibail, he was the COO of our successful Simon Ivanhoe venture. He understands our culture and our expectations. Let me turn to dividends. We announced the fifth consecutive increase in our quarterly dividend from $1.05 to $1.10. The total dividend paid in 2012 is $4.10 as compared to $3.50 per share paid in 2011. That represents an increase of 17.1%. Our dividend is now 22.2% higher than it was immediately prior to the great recession. This is the highest increase among SPG's retail REIT peers, the second-highest among all S&P 500 REITs behind public storage. Current dividend levels, as you know, for many REITs remain well below their 2008 levels. Let me turn to guidance. We increased our guidance again from a range of $7.60 per share to -- from a range of $7.60 to $7.70 per share to our current guidance of $7.80 to $7.85 per share. As you recall, our initial guidance for 2012 was $7.20 to $7.30 per share. Primary factor has been our continued strong operating performance. Our 2012 FFO is expected to be at least 21% higher than SPG's 2008 FFO immediately prior to the great recession. And this is significantly higher percentage than any of our SPG retail REIT peers. Now let me conclude. We're pleased with the strong performance. Our operating metrics at our properties remained fundamentally sound. We're producing industry-leading growth. Our investment activities year-to-date with Klepierre and Mills have been immediately accretive and additive to our franchise and also providing future growth. Our development, redevelopment activities are significant in size and scope and are delivering double-digit returns on investment. And all of this has been accomplished while maintaining an industry-leading balance sheet. We are now ready for questions.

[Operator Instructions] Your first question comes the line of Quentin Velleley.

Just in terms of the outlets, I know St. Louis and Charlotte are only going to be a very small proportion of your growth assets. But given the competition that we are seeing, it feels like there could be more projects where you're competing head to head with some of the other REITs and potentially, product guys. Can you just sort of give us a sense of how many there might be out there? How many more announcements that we might see, where there are sort of these competing projects?

Well, there -- look, there's potential for a couple of more of these situations to arise. I know we've got -- Quentin, we've built 19 of these since we have acquired CPG. We have been extremely successful. We're also expanding a handful of our industry-leading shopping centers. So again, I do -- we have a very good perspective of this. If we didn't think we could lease and produce quality projects, we would not do it. We have all the confidence of our track record and our team to continue to produce the results that the market, and more importantly, what I have grown accustomed to. And if there's 1 or 2 of these things that might pop up, so be it. That's the nature of real estate development for 60 years. It used to be Simon and DeBartolo competed for malls. It's not all that different. But I think we have earned the respect and the confidence of our retailer partners. And when we announce an outlet center development, we expect to lease it. And they have all the confidence in the world that we'll be able to do so. There is none that come to mind immediately on that front, Quentin. And we'll just see how the next couple of years move forward.

Okay. And then just in terms of the strength of your operating metrics: sales up almost 10%; leasing spreads gaining momentum, up over 10%. Is this consistent across both the malls and the outlets? Or are your Premium Outlets outperforming the malls a little?

No. It's relatively consistent. The mall -- I'll turn it to Rick. But generally, the demand -- since '09, '10, the demand for the outlets has been relatively strong. What we're seeing in '11 and '12 and '13 is that the malls have caught up from the retailer base and demand for our mall activity has been very strong. Rick, do you want to add anything to it?

The only thing I would add is to David's point about where all of our development dollars are going. If you look where most of the anchors are being added and most of the boxes are being added and where we're doing our redevelopments, they're in the mall portfolio, where we are having an increasing amount of demand. So it's pretty equal in terms of the momentum in the platforms.

Your next question comes from the line of Jeff Donnelly, Wells Fargo.

David, if I could actually ask Quentin's question maybe from a different angle, is -- the outlet industry development pipeline does seem bigger than ever. And rather than just the question of bumping into one another, how do you think about the risk of overbuilding in this business? Do you think it's one where metro markets can ultimately sustain 2, 3, 4 outlet centers and we just haven't scratched the surface here on new unit potential?

Well, look, I can only answer from our perspective. We will not make any outlet mistakes, okay? The reason we won't is because we're the leader in the business. We have 70 Premium Outlets in the world. We have the best franchise in this business and I just know that we won't make a mistake. So I can't say the same thing for others. That's not my job to worry about what others do. Undoubtedly, there will be development mistakes made. They've been made in the lifestyle business, in the power center business, in the mall business; but they won't be made by us. And I have said this for the last year or 2, I do not think there will be as much built as people think. There's been a list of 50 potential deals that have been kicked around, and there are still going to be 3 or 4 of these things built a year, maybe, and not as much as you think. But I'm not -- it's not my responsibility to opine for others. They'll make mistakes; we won't. And we are not going to -- you can lease something, too, if you give away the building. We're not going to do that either just to get something built.

And then just a follow-up for Rick. What are retailers -- I know it's a little early, but maybe telling you about their expectations for this holiday season? And I guess, how do you think that affects their unit expansion plans for 2013 and '14? Does it influence it heavily?

I don't think there's much of a connection. I think people are cautiously optimistic for this holiday. I don't think they are bullish. The sales have been holding up. Consumer confidence is back above levels where it was in 2007. Studies are showing that the consumers have a higher percentage of disposable income now than they've had in the recent past. So all that augurs pretty well for the holiday. That said, I think the retailers' balance sheets, their growth plans are still very well articulated and we're still seeing pretty substantial demand. And I don't think that will be materially impacted by whether holiday sales are 1% or 2% plus or minus expectations.

Your next question comes from the line of Craig Schmidt, Bank of America.

I was wondering -- I know that you're looking at your options, but what's happening with the Del Amo asset?

We are making terrific, terrific progress. And the redevelopment of that will commence in '13. I think we'll have some very positive announcements to make in the not-too-distant future. And pretty much all systems are go there. We finally turned a corner on what we want to do there and we're getting the right kind of commitments from the right retailers.

Okay. And then in terms of the level of activity that actually seems to be accelerating in terms of new anchor, are we still on the ascension of that? Or is that starting to plateau in terms of demand for new anchors to take new space?

It is accelerating. And if you look at our announced anchor activity from quarter-to-quarter, just as an example in the 8-K we had for the second quarter, there was 69 listed and now we're at 76. And there's still a whole lot more we're working on. So we are still seeing demand in the portfolio plus all the platforms from the anchors.

And would you say the people running -- the private people fronting the malls have access to capital to accommodate maybe that increase? Or is that an advantage you still hold?

I'm not sure. Say it -- we missed it.

I guess, one of the advantages that seemed to be, that you obviously have constant access to capital to be able to pursue these kind of projects, $1 billion, it looks like, for the next 3 possible years. Are the private players able to take part into this expansion of new anchors to the same degree?

No way. I mean, no, I don't think so. I mean, no. But it's more than just capital. It's operational expertise. But no, I think that's why we're able to secure these kind of commitments from these terrific retailers. So capital is part of the equation, but it's also the ability to execute and -- so I think that -- but capital clearly governs a lot of the activity. And that's why you've seen not a lot of redevelopment but essentially no new projects done by kind of the typical group of folks that might be able to have secured capital prior to the great recession.

Your next question comes from Alex Goldfarb, Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: First question is just going to the big picture on Pershing Square. And if you look year-to-date through August when they put out their letter, you guys were outperforming. Subsequent, you guys have been underperforming. Steve was at a conference, was very clear on what he said, but yet the stock is still underperforming. And Ackman is talking -- or media reports suggest he may launch a proxy battle next year. Is there any way for you guys to be more clear of your position so that this weight over the stock can be lifted and that you don't have to deal with it? Or is this one of these technical things and you guys just have to run your business and do the stuff that you do and there's not much that you can do with this external?

Well, look, Steve speaks for the organization. And that's not to say that if we had a problem with what anybody said, we would clarify it. But Steve speaks for the organization and Steve spoke. So I don't know what else we could do other than what we've done. Additionally, just to make it clear, we have no dog in that hunt. This is a discussion between GGP, Brookfield and Pershing Square and we're focused on running our business. And there's nothing other than what I just said that I could add to that. And we hope the market understands that. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. That's helpful. And then a question for Steve. Is there an opportunity for you guys to do -- now that you're in -- you have the Klepierre and you're doing a little more stuff in Brazil and Asia, is there an opportunity to do a multicurrency offering? Or the complexities in the pricing means that just keeping it U.S.-only is more than sufficient and gives you the cheapest cost to capital?

Well, it's a good question, Alex. I mean, our base currency is the U.S., most of our activities are in the U.S. But as you know, we have euros outstanding on our line that are acting as part of the hedge for our equity investment in Klepierre. We could certainly raise capital in a currency like euros. That window of opportunity would be open for us. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Is that something that's attractive as you think about the next few years of growth? Or the U.S. is deep enough and with the floating rate line of credits, et cetera, that you have overseas, there's not really a need for it?

It's certainly something that we'd give consideration to, sure.

I would just add, there's a lot of multinational companies that are tapping outside the U.S. to broaden their investor base.

And vice versa, Europeans that are coming here. It's not inconceivable at all.

So I mean, it's not inconceivable.

Your next question comes from the line of Steve Sakwa, ISI Group.

David, it's a bit of a technical question. I don't know if you guys can answer it here. But when you guys look at the releasing numbers and the actual starting rents and the ending rents on Page 20 of the 8-K, those have actually been going down in just kind of absolute terms from almost $56, I guess, back in the first quarter of '11...

That's just the mix. That's an absolute mix issue. That's happened historically before. And that's just a function of what properties we're rolling over.

Is that a function of the properties? I would think law of large numbers would take care of that? Or is that more a function of putting anchor deals in that might have lower rents?

No. There's been no change in definition. It's just a function of the mix.

One of the other things that would be driving it, to a degree, Steve, is that over the years, the percentage of the outlet business as a percentage of our total business has been going up. And as you know, the historical occupancy costs there have been lower even with comparable sales productivity.

Right, okay. And then Steve, just a question for you. I think the -- kind of the regional costs were down fairly sharply quarter-to-quarter, second quarter to third quarter. Were those fees that were in there from, say, Klepierre? Or was there something else pushing that decline down? And is third quarter a good run rate?

No, Steve, that's just the cost side. It's just our costs were $3 million lower this quarter than a year ago. And that cost structure that flowed through in the third quarter of 2012 is a decent run rate.

Well, it's a good idea, though. We should get fees for Klepierre. I like that idea. I'm not sure all of the shareholders would like that. We certainly would. But there are no fees from Klepierre.

No. I was talking more of professional fees that maybe you guys had incurred as opposed to fees you were collecting.

No.

No. I'm free of service over there.

Your next question comes from the line of Cedrik Lachance, Green Street Advisors.

David, how many regional malls do you think will be built in Europe over the next decade? And how well positioned do you think is Klepierre in capturing its fair share of those developments?

Well, I think, just like the U.S., the idea of new development in Europe has got to be reevaluated. One of the things that we're focused on in Europe is just how do you improve the yields on new and extension-oriented projects. I've always found them to be not where they should be. And so one of the things we've been working with Klepierre is to really try to drive the returns higher on anything and, primarily now going forward, it's going to be extensions. I just don't -- I just view it as the U.S. in a sense that the ultimate new projects will more than likely come from extending existing centers. There's a couple of them on the drawing board. Unibail is, I think, about to start a mall in Stockholm. We -- Jacina [ph] has got their deal in Paris. But a lot of that stuff is already -- kind of was in the pipeline. I just don't see a lot of new stuff. I think it ought to mirror the U.S. for quite some time.

Okay. And then going back to the U.S., when I look at Page 31, you've got a number of outlets listed as your other properties, which I assume will probably be gone over time. And how is the market for selling lower quality outlets at this point?

These are factory stores. These are so small, they are basically single unit businesses or single unit boxes that Chelsea got when they did one of their deals. These things produce like a $0.5 million of cash flow. That market is very thin, but we're slowly selling those out. But they're not -- I wouldn't even call them outlet centers. I mean, they're basically factory stores that are single-purpose buildings.

Your next question comes from the line of Michael Mueller, JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: A couple of questions. First, I was wondering, could you just talk a little bit about dividend policy? I mean, the way you've been raising the dividend every quarter this year, it seems like an efficient way to do it. Is that something you plan on continuing as you move into 2013 or are you considering kind of putting in place more of a normal, increase the dividend once a year or so?

Well, it's hard to say. We're in the process now of doing '13 and what our taxable income is projected to be. And the likelihood, right now, is probably to continue what we did in '12, but we're still evaluating that. We expect -- again, obviously, we have a board to deal with, but the board is constrained by our taxable income and we want to maintain our REIT status. So our taxable income is projected to be higher than what we're paying out today. So our dividend is still on that trajectory, and my guess is we might do quarter-by-quarter, but that remains to be discussed with the board. Michael W. Mueller - JP Morgan Chase & Co, Research Division: Okay. And second, I guess kind of following up on the last question. How focused are you on asset sales at this point? And I'm thinking a little bit more on the mall side, as opposed to the smaller remaining quasi outlets?

Yes. We're going to try and sell a few assets. It still is a very challenging market to do. But I think there's more and more players coming into the market. There's more and more financing that seems to be available to some of these entrepreneurs, so I would hope that we would continue to kind of get back in selling a few non-core assets like we did before kind of the financing market bottom fell out.

Your next question comes from the line of Carol Kemple, Hilliard Lyons.

With your new outlet you had announced last week in Charlotte, why did you all decide to go with a partner on that instead of keeping it to yourself?

It wasn't our site.

Okay. Well, that makes a lot of sense then.

I think if we had the site, we probably wouldn't have partnered with anybody, but it's just not our site.

Okay. And then with the sell of the Capital Shopping Centres securities and the Capital and Counties Properties, how much will your dividend income decrease?

From that?

Yes, from the other income component.

Capital and Counties, they pay, what? 10p a year, so it's $0.01 maybe, yes.

It's kind of $0.01 to $0.02 in the aggregate, Carol.

Yes. Right.

And how much is Capital Shopping Centres?

That's all -- CapCo did not pay any dividend or if they did, it was de minimis.

Our next question comes from the line of David Harris.

Here's a questions related to your French connection, David. I won't ask it in French. A couple of weeks ago the French Industry Minister talked about raising taxes on the property sector. Now this an issue we kind of aired a couple of quarters ago, but my question is related to this. As you said there, thinking about allocating dollars either domestically or overseas, what's sort of premium do you think is justified for overseas investment to try and capture these sort of risks, which I think are implicit in allocating that dollar overseas?

Well, the good news since we last talked, David, the stock is above where we bought it and the euro is above where we made our initial investment. So look, I think that the value that we got in helps to deal with those risks. Business has risk wherever it goes. We certainly have tax risk in the United States of America, if you hadn't been reading the newspapers lately, for individuals and all sorts of things. So I think, at the end of the day, there's been a lot of studies on the seek structure there and how it's helped the French treasury, and I don't expect any material change. But the point is that, in any jurisdiction that you're in -- Brazil, France, Japan, Korea, just to name a few places that we are in -- I mean, you have to underwrite what your true tax costs is, and that's got to be implicit in the returns that you want. But I think we're generating above -- we're taking -- the returns that we're generating there with the future opportunities that I think will exist in the continent, at this point, we feel comfortable with it. And I wouldn't necessarily overreact to comments here and there about what certain French authorities might do. There's been a lot of studies that supported the French seek, and I just don't see any change whatsoever on that front. They need to maintain competitive balance and there's been talk in the U.S., but we don't overreact to that as well.

Okay. Then, a couple of weeks ago, I read that Amazon is in discussions with a number of brand names. Some of those brand names are kind of -- seem to be a very big occupiers of sort of outlet space: Coach, Burberry, Ralph Lauren; and they seem to go upscale on some of these, like Prada and Gucci were also mentioned. Any thoughts as to what that might do to bricks-and-mortar demand in the outlets, which I suspect many people have not really thought of being as vulnerable as it may be if some of that business gravitates to the Internet.

Well, again, I think you're -- I don't know what papers you're reading, but I'm going to start to look at your -- look, I think all of those retailers want to control their brand. So I would be really surprised if they delegated that responsibility to Amazon.

I mean, the comment -- the article that I read, which is actually in the Financial Times, said this the hottest button issue for high-end brand retailers. And that was an independent third-party consultant, so they know a lot more than I do, I'm sure.

Listen, we know these retailers very well. I would be really surprised if they were going to give up control of their brand and be umbrella-ed under an Amazon model. I just can't imagine it. They're very selective in how they deal with their outlet operations. It's got to be brand positive. It's got to fit with their wholesale accounts, very complicated equation that they have. That's why I think a number of these outlets that are being bandied about with those kind of -- in terms of the full demand will be very selective because they're just not going to go to any and all centers. And I think those retailers want to control, they want to be omni-channel, I just don't -- I just can't imagine they're going to end up delegating, losing control over that.

Our next question is from Rich Moore, RBC Capital.

Going back to that Page 31 that Cedrik was talking about, I noticed from last quarter that in the list last quarter, we had Discover Mills and Lakeforest Mall. And I think Discover was maybe...

Yes. They've both been -- they -- again, they're still in TMLP, and we didn't buy all the assets out of TMLP.

Were those underwater, David? Are you giving those back to the lenders?

No. Discover Mills -- I'm sorry, it's renamed.

It's now Sugarloaf Mills because the marketing contract with Discover expired. So that's all that happened there.

Oh good, I was going to ask you what Sugarloaf was. Good. But I had seen that the -- is that one you're trying to sell? Is that the idea?

No. It's -- we're leasing, managing it. It's on our books for nothing. It's levered, but the deal has been extended. We think over time it will get better and better, but we didn't want to buy it out of the partnership. It's no harm, no foul kind of deal.

Got you. And then Lake Forest, is that the one you got rid of?

Yes.

But not a sale, that was I give back to the lender?

It was -- actually, it was a sale.

It was a sale. Okay, great. Then, Steve, the credit line has a balance, and it's a big credit line, but it does have a couple of billion of outstanding debt on it. Is there any plan to take that out or are you comfortable with where that's at?

Well, it's actually 2 credit facilities, Rich. So there's $6 billion of aggregate capacity. Someone asked earlier about the potential of raising capital in euros. More than half of the outstandings right now, EUR 1.2 billion is euro denominated and is acting as a hedge for our equity investment in Klepierre. So potentially, terming that out would be one opportunity, but we're running with $4 billion of liquidity -- or availability on our credit facility, if you will, plus another $1 billion of cash in the bank between wholly-owned and our share of JVs, so plenty above firepower, Rich.

Okay. Yes, it's sounds good, Steve. And then the Provision for credit loss, it just seems to keep shrinking. Is that a pretty good indication from you guys that the retail community, by and large, is, I guess, extremely healthy?

Certainly, receivables are low and write-offs have been also at historically low levels, and you're seeing the result of that with the lack of bad debt experience. There are always a handful of tenants, Rich, that we are monitoring and paying attention to, but the overall health of the tenant base is pretty good.

Okay. Good. And then the last thing I had was the year-end target for occupancy, Rick, I mean you guys are up their pretty high at this point. Does it actually get higher from here or are we pretty much done at the 94.5% sort of number.

We're working, and I think you're still going to see a little more growth from where it is today.

Our next question comes from the line of Jeffrey Spector, Bank of America Merrill Lynch.

I just wanted to see if we could talk a little bit about the sales increases we've seen in your portfolio, the higher-end mall portfolios over the last couple of years versus, I guess, the lower sales per square foot portfolios. From where we sit, it's hard to look at the information and determine exactly what's happening here. Obviously, we've seen much lower increases in sales at the lower sales per square foot malls. So what's happening here? I mean, what do you think, over the next couple of years, what's the consumer saying? Where are they spending? Is it more the discounters? What are you seeing from your centers? Any concern here on these lower sales per square foot malls? And I'm not sure if that's below 300, below 350, below 250?

Well, I'll let Rick -- I want somebody to ask Rick to list tenants, okay. If we could start at St. Louis and list all the commitments we have if you really want. So please, somebody ask Rick. Because if we don't have a call where we can't list the tenants that are doing business, we're in trouble. But let me just say this. The good news that we're seeing in the mall business is that the demand from kind of the general retailer population seems to be moving down the sales per square foot spectrum and so -- that's just the one point that I would make, and then I'll let Rick say the rest.

I would point you to 2 things: One, I believe our properties are taking share in their markets. And if you look at where we're adding our anchors, to David's point, those anchors are being added across the quality spectrum within our portfolio. They are not being solely added into the higher productivity malls. And as we add anchors, we're renovating 15 properties a year, we're making our properties better. And we are, I believe, gaining share. The other thing that's going on is that higher productivity tenants will continue to outperform because they're going from a higher base, and they have higher per sales -- per foot productivity and that's going to drive overall sales. So you put those 2 things together, I think that's what's contributing to the trends you're seeing.

Okay. And then shifting to the redevelopments. I guess, can you talk a little bit more about your plans over the next few years versus, let's say, I don't know, 5 or 7 years ago when lots of malls were under redevelopment. I think for different purposes, it's somewhat to defend against new competition. What's the strategy here? Is it just bottom line to -- you've saved money for a few years there during the crisis and it's time to renovate? Or are you also trying to defend against new competition or is that not really a fear?

Well, look, we're economic animals here. So we -- I think, over the years, the market has seen that when we invest capital, we want a return for it. And we don't build just for the sake of building or -- but we do it with the idea that the cash flow growth from that asset will accelerate or that we'll have a return. And I would say to you the primary driver of this is that we've got great properties that we think we can make better. And the reason we can make better is because we have the retailer demand to come into that center, but we just don't have the space. Or we have space because it's a center that's been around that can be better configured to allow for a better retailer to come into the place. And if you look at our list of activity, it's all disclosed there, I mean, you're seeing it. And the good news is, I mean, our big, big projects -- the Roosevelt Field's, the Copley's, the Del Amo's, to name a few off the top of my head are still on the -- still not at the point where they're -- we're ready to go, but we're are getting very, very close on those. And that is really exciting. And I think what it allows us to do is just to take a great property and make it the place to be. And we had an outset in essentially '09 that we have this great portfolio, but we really wanted to make some of these centers iconic in nature and transform them to gain market share for the 21st century, and that's what we're doing. And as I said in my comments, the market tends to overlook this stuff. I got to tell you we're -- never been busier in this effort and the stuff that we're doing is exciting. It's transforming in on these properties. We have very good economic returns. We got a lot of resources dedicated to it. In some cases, we're drinking from the firehose that we're so busy. But the good news is we're -- stuff is coming online already for the end of this year and next year.

Okay. And then before we get to the tenant side -- I'm sorry, I'm not sure if you discussed this already, but I was just curious of your view on some of the recent mall transactions pricing: Kings Plaza, Green Acres, Woodfield sale. The Woodfield, I guess, hearing high-4s, the others kind of low-5 to mid-5. What do you think about the pricing and what is this saying about the sales productivity at those malls, what that all means?

We did not bid or participate in Green Acres and Kings Plaza, so I really have no comment on the pricing there. But I'd say, generally, I mean the marketplace understands the relative attractiveness of strong malls. It ebbs and flows, sometimes people overreact to potential external threats to the mall business. I will tell you that good malls, despite all of its competitive threats, including the Internet, that if they're properly run and maintained and have the exciting retailers in it, that cash flow is going to grow. I don't -- I mean, we have evidence of that in so many different places. I don't know what else to say. It doesn't surprise me that these values and this kind of low interest rate environment are there. And that's a generic statement, it's not a specific statement on any of those transactions you mentioned.

And so when we think about those transactions and the pricing, you said it is challenging to sell some of the non-core mall properties that you own. Can you just quickly say, I guess, when you say non-core, what are we talking about, sales under 250, under 300?

When we sell it, you'll know it. Until that time, we're running every property as if it's our only one.

Okay. And then Rick, can you talk about tenant demand and where are you seeing the most store openings?

Well, the tenant demand is pretty much across the platforms. We're seeing very good demand in the malls, in the mills, in the Premium Outlets. Premium Outlets, you're having a number of retailers that have, traditionally, not been in that sector, wanting to get involved in that sector in a pretty large way. And we've got some tenants coming over internationally that are getting more aggressive with their U.S. presence. And we have some brand extensions. I mean, the best example is Limited Brands PINK that started out as a sub-brand inside of the Victoria's Secret stores, and now they are very aggressively rolling that out as a free standing retail concept and it's a great retailer, with great credit, with a beautiful store. So these are the types of things that make the properties better.

Your next question comes from the line of Ross Nussbaum, Simon Property Group (sic) [UBS].

It's Ross from UBS. Can you talk about, David, you just said -- I thought you said you didn't participate in looking at Kings Plaza and Green Acres. Why was that?

We just did not have an interest in those centers. I mean, it's not -- much to the market's surprise, we don't look at every and any deal that's out there.

Okay. Next question -- I don't know, David, if you want to take this or Steve. If I look at your expense reimbursements, which handily beat us this quarter and has been trending upwards, frankly, for 5 years now. You're now running effectively at the highest occupancy rate you've ever run at. Your expense reimbursement ratio is also as high as it's ever been. How do we think about the potential upside in your ability to capture future, I guess, an uptick in that reimbursement level and occupancy while we're at it?

Well, I think the way you have to think about it, Ross, is that there's been a delinking over the last 10 years between the reimbursement line and the cost line as the industry migrated to fixed CAM. So fixed CAM is now just another charge that has an annual escalator associated with it. And you can see the trends in the reimbursement revenue line there. The expense side, quite frankly, as a company, we've done a really good job over the last 4 or 5 years of wringing expenses out of the properties. They are at a low level. We've also benefited from some cyclical things like lack of snow this year and low energy costs. So you're going to need to make your assumption about where those costs are going to go in the future. But we've certainly got the benefit of a cycle that has been helpful to us, which has caused the disparity in the reimbursements and caused that recovery ratio to continue to increase.

What percentage of your tenants are now on fixed CAM?

Over 90%.

So is it fair to say that we're now going to start seeing a leveling off in that expense reimbursement ratio versus the uptrend over the last 5 years?

Well, most of those tenants who are on fixed CAM have an annual escalator in that charge. And so the impact on the net recovery will be, do the expenses grow at a rate faster or slower than the aggregate recovery increase from the escalators.

But the fact is, it boils down to also how we negotiate what the CAM charge is, right? So I wouldn't say necessarily it levels off, it just depends on how good we negotiate what the CAM charge is. And we'll see, I mean, when retail demand is strong, we can negotiate a better rate than when it's not.

Do the retailers look -- I mean, the way that we calculate it, you captured 113% of your operating expenses this quarter. Do the retailers say, "Hey, wait a minute. Why are we paying $1.13 for every $1 of cost?"

No. No, other than -- since you're pointing it out, maybe they will now. The fact is it's a negotiation. They don't look at that. It's really a function of what sales productivity they'll generate out of that space. Our people are very focused on it, but I'd also just say this: it's also a pretty, pretty good evidence of our ability to run a big organization and take advantage of our scale. Part of the reason why we're able to drive down operating cost is because we have systems in place, we've got the procedures, we've got vendor relationships. So the fact of the matter is that retailers should not look at that. They should really look at whether or not they're getting the fair deal for their space. And our organization with its size and scale is able to really drive these costs down. That's been our model from a long, long time.

Our next question is from Jeff Donnelly, Wells Fargo.

David, just explain that extra 13% of the baggage handling or fuel surchage fees since those seem to be in vogue these days. I was curious, because last quarter I think you were talking about cap rates on B malls would be coming lower, is that a view you still hold and has there been much that you've seen to support that?

Well, I think there should be more trades happening. It seems like with the financing market coming back, there should be a few more trades coming on board. And I think it will support that thesis.

I'm curious, where would you peg them today if you had to?

I think you've got to be really careful on 6.8, 7.5. I really think it's a function of that asset and its historical cash flow and its future growth. I would be remiss to give you a number. I don't think it means anything. It really -- it's such an asset-specific basis. I will tell you, though, that the market, clearly, is paying for stability and stable cash flow. So it really depends if it has to be redone in some fashion, or is it stable, non-sexy property? That all -- it all kind of goes in, it's really real estate-specific, as it should be.

And just a last question, more of a housekeeping one. Any decision on whether Copley is going to end up as a for sale or for rent project? Wholly-owned or JV'd?

Still evaluating all that. Our view today, we might partner with somebody, but our view today is that it will more than likely be a rental building as opposed to when we first thought about it more of for sale. And you may do a little bit of both, but the view today is that it'll be for rental.

Your next question comes from the line of Quentin Velleley.

Actually, it's Michael Bilerman, here with Quentin. David, I want to come back just to Amazon for a second because, clearly, they've -- I think they've dropped some of the tax battles that they have and, at least in the context that I've been hearing about, they're actually even thinking about going into malls. And part of that is to open up some pop-ups, showcase the Kindle Fires, Kindle HDs, and effectively open people up, if they didn't about Amazon yet, to the shopping experience. I'm just curious whether you're sort of in contact with them, clearly, having the large mall platform that would be an easy way for them to get access in distribution. So how are you thinking about involving them?

Well, look, Amazon is an absolute fantastic company, a force. I think if you talked to Mr. Bezos, he would tell you that there's a role for the way he sells goods. But there's also -- I think he'd be the first to say that there's a significant role for how we sell our -- present our retailers' products. Ultimately, though, I'm sure they'll, at some point, converge. The retailers are certainly converging. We are seeing more and more retailers ship out of stores, have pick-up out of stores and that seems to be a trend, aggressively, that they're doing which I think is very beneficial for us, the mall owner in that if you can pick up or ship out of stores, returns happen, additional visits happen and they -- it helps them on their cost because they don't have to put the extra resources in distribution facilities. So we would expect that trend to continue and I would say, look, we're -- if Amazon or anyone else wanted to talk to us about how to create benefit for our consumer, we'd certainly have an open mind. But to your specific point, I have not heard that they want to own any physical, or operate any physical stores. So we have not heard that.

I guess if you think about -- you talk about the tenants being able to ship out of the store, pick-up in store, have those started now? As that percentage increases -- and I don't know how those sales are tracked. I assume they're not tracked to the store level which means...

They are. They are tracked to the store level, absolutely.

So you're going to get percentage rents and effectively drive your rental income. It's not becoming a point of contention between you and the tenant, the fact that they'll may be...

Sure, it's going to be a discussion, but we're going to hold firm on it. But sure, no, it will be a discussion just like, unfortunately, everything in the lease document. But no, we would expect to be very, very firm, just like they can't offset returns against it if they buy it from -- it's not generated from that store in the first place. So that will be something to discuss, but our view of that is pretty straightforward and we expect over time that, that will be customary.

This is a question for Steve. So you look at guidance today, $7.80 to $7.85, relative to $7.35, $7.50 when you announced Klepierre and Mills. So let's call it a midpoint increase of $0.40. It's about $145 million of FFO. Can you just -- I don't know if you have this analysis, but can you just breakout maybe the big components of that $145 million? Where you're getting it from? What's coming in better than expectations? Perhaps how much is better -- Klepierre performing better than you originally underwrote, just to give us a sense of what's been driving the significant increase over the course of the year?

Mike, I'd give you 2 or 3 thoughts. Sales have remained very robust, more so than we would have anticipated 9 months ago. That has led to higher percentage rents. The fact that sales are higher also has to have a second derivative effect on leasing, so that would all be rolled in there. The cost environment has remained very muted. And so to one of the earlier questions, recovery ratios would be a little higher. And then, we would have assumed that borrowing costs would have gone up a bit. They have not. And even though we've decreased our exposure to floating-rate debt from 16% down to 10%, we have benefited from a lower interest rate environment. I think those would be the 3 or 4 big things.

Klepierre is not driving any bit of -- an increase at all?

Well, Michael, the Klepierre transaction was accretive. We told you it was accretive at the time of the acquisition. I think David mentioned in his prepared remarks, it's performing exactly as we thought it would.

And then I don't know if Matt is there or not, in the room, is he?

He is not.

No.

I'm just curious maybe, David, on your take, Matt's been there now 4 months. Sort of what -- clearly you've liquidated capital shopping centers in capital counties, I don't know if that was his decision. I mean, I know you've been frustrated that -- with the ultimate transaction that occurred last year and...

The buck stops here, brother.

No, no, I know. I just -- what has Matt -- what has happened over the last 4 months? What has he brought to the organization? Are you looking at...

Well, look, he's -- there is going to be a lot of opportunities for this company. And given the amount of activity that we already have with our existing asset base, we just -- we needed a thoughtful pair of hands to help in all of the stuff that we're doing. So he's got ideas and he's looking at all sorts of things, both domestically and internationally. And I'd say, Steve and I, who have the most exposure to him, have been very pleased with what he's contributed and he's got -- he's looking at all sorts of things, which I think, over time, will do some things and that will be helpful to our -- the company's profile. So you know what? The bottom line here is, there's not one deal that we need to do, period. End of story. And we are -- what we really need to do, if I had to tell you what we really need to do is, we really have to execute at the highest level on our redevelopment and development pipeline. That's what we've really got to do. And that's why we brought Contis on board, because we needed -- given the volume of activity, we needed a really -- someone that could really help in that effort, and he's already done that and he's been instrumental, I think, finally, in getting the llama where it is. We've got a great outlet team and they're executing, but Rick and I have to sit on them and prod them and poke them. And then, Goodman, with The Mills, is doing a very good job. And I think you've seen the performance there. So the bottom line is, the one thing we've got to do is, we got to execute our redevelopment pipeline. That's huge. The deal business, if it ain't a good deal, I'm not doing it. It's that simple. And that's why, if we don't do another deal and Matt's here for 3 years before he does a deal, it's okay with me because we're only going to do deals that make sense for this company. But he's a good -- he's a great set of eyes. He's a breath of fresh air. He's younger because we've got some older guys, so it's always good to have a younger guy. He's a nice guy, fits in well with the team and he'll pick up and he'll go to faraway places at a moment's notice and that's helpful. And he represents the company well.

Just one last one for Rick. You have a bunch of these retailers, Walmart, Target, Best Buy, all effectively saying we'll price match relative to Amazon and online. What's your expectation as owning these assets, what potentially could be happening to a shopping experience during the holiday season in guarantees like that?

Well, to the extent that they are going to be aggressively pricing, that can only help increase traffic to our properties and increase our sales. So to that degree, that will be helpful. I will tell you that, like a Walmart and a Best Buy, our exposure to those retailers is relatively low. I mean, all our retailers are more positioned in the moderate to better price points and it's not a commodity product. As David said earlier, each of these retailers are very jealous about their brand and their brand equity and protecting their brand, and pricing strategy is part of that. So -- but to the extent that our property and our retailers are going to be more competitive price-wise, that can only enure to our benefit in terms of increased traffic and sales.

Your next question comes from the line of Tayo Okusanya, Jefferies and Company. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: I hope I didn't miss this earlier because I've done a whole bunch of calls, but did you talk about Charlotte, North Carolina at all and how, ultimately, you envision that market to evolve? Specifically, I wanted to know if you feel both competing projects can be built? And what the potential impact to Concord Mills may be?

Well, yes, we did talk about it briefly. Yes, at the end of the day, my guess is only one will get built there. And it -- there will be a competition of which one gets built, but I don't anticipate -- you've got 2 very experienced -- 3 for that matter, very experienced outlet developers in Charlotte. You've got Tanger, you've got us and Paragon. So I think, at the end of the day, it will be a competition to who gets the retailers, and the experience will ultimately dictate that somebody will get the project and somebody won't, and there'll be one built. And I don't think, given where the locations of both are, I don't think it'll have -- if you know Charlotte, I don't think it's going to have an impact on Concord Mills at all. If it does, it will have a marginal one. Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division: And then one other thing, just when I take a look at your geographic footprint, I think the one thing that always strikes me is your minimal presence in kind of like the highly dense urban cities, like New York, for example. And I'm just curious, is that just a strategic thing with the company, is that you just don't like those markets? Or do you to continue to kind of look for opportunities to get into some of those markets, given that assets in those markets, they generally tend to perform pretty well?

I don't know. I mean, in New York, we got Westchester, Woodbury Commons. We're redeveloping Nanuet and IAC, New York. In Long Island we've got Roosevelt Field, Smith Haven, Walt Whitman, which we've all redeveloped or are under redevelopment. New Jersey, we got a number of properties in New Jersey. So are we in Brooklyn? The answer is no. And -- but, like I said, that's fine for us, we've got plenty to do.

Your next question comes from the line of Paul Morgan, Morgan Stanley.

I'm just curious about what you think about the JCPenney's shop-in-shop model and the competitiveness of what they may be trying to do with the in-line space in the malls adjacent to their stores?

Well, Rick and I visited the prototype store -- when? At the end of August?

Yes, a couple of months.

Yes. So look, I thought it was impressive. And I think it's got a real potential there to be something that we'd love to see as an anchor to our centers, in terms of driving traffic. When you talk to the folks that -- like a Sephora that are in Penney and are in the mall, they view it as 2 different shoppers and it really does not affect how they think about it. And it really gives them an opportunity, probably to go to some markets where they're too small for them to have an individual store. So I think it's beneficial. I think it will be -- it won't be an overly competitive scenario and hopefully it'll drive traffic to Penney, which will drive traffic to the mall.

And the only thing I would add is, if you look at the department store construct, what we have found is there are a number of our full-price retailers that have wholesale businesses within the department stores. And that's a very good source to us of new lease opportunities because if they open in a department store, do business, they see there is market there, and they will now come to us and then say, "We want to open a full-line store because we're missing sales that are going on in the mall," as opposed to just in that store.

I mean, so would that -- I mean, how do you think in the context of some of those comments about, something like the Finish Line and Macy's deal? I mean, that's a retailer who would be in a lot of the malls already and is going into 450 or so of their stores?

We've had that conversation with Finish Line and their view is, and we agree with it, is that it's going to be a different shopper. It's just going to expand their footprint and expose themselves to a shopper that was, otherwise, not going to be available for them in their mall stores.

Okay, great. And then my other question is just on the same-store NOI. You've got, I guess, $7 billion or so of NOI that is in the non-comparable pool. I mean, a lot of that, I guess, is the community and lifestyle business. But is there -- do you have a rough sense of kind of what that would do if you were to include a lot of the -- what you exclude, that is still a same, kind of a same thinner number, if you were to include that in your same-store NOI growth, what it would be?

Well, Paul, the things that -- the comp center NOI growth is for our malls and our outlets only. So Mills, as an example, is not in there. Although the growth rate of Mills has been at or higher...

It would only -- Mills would only improve it.

But it doesn't have the community centers either, does it?

It does, but that's a small part. That's a $150 million annual EBITDA on a $4 billion base.

Yes, that's a very small part. But the comparable -- for the Premium and Outlets, the comparable portfolio is 218...

216 properties. That is a big pool.

216. So it's a big pool. It's not like 10 or 15. It's 218 on the outlets out of a total of -- when you add those 2 up -- I don't have it off the top of my head, but the outlets and the...

It's like 60-plus outlets and...

Well no, just in the U.S. though.

Oh. Just in the U.S.

Yes. So anyway, in any event, it's the vast majority of our portfolio. Again, we're only taking out like the deals that are under construction or where we're...

Okay, and then just last question on the rent spreads. It's a little bit hard to compare going back to the past because you changed your -- you changed to reporting gross spreads. But where are we now versus the types of numbers that you would have reported sort of in '05, '06, when your base rent spreads we're 20%, 25%. I mean, how -- if you were to think about, just in terms of kind of your negotiation leverage and kind of the type of mark ups you're able to get, even though we don't see those numbers historically, where are we today?

Well, I think, Paul, one of the things that's changed is that, as an example, over the last several years, we've gone to annual escalators in minimum rent as well. The number we give you is an ending cash rent to a beginning cash rent of the new lease. But the fact is, because we're getting many more annual escalators in our rent streams now, you're comparing a bit of an apple and an orange, if you try to go back and look at it 5 or 6 years ago.

Yes. I would just say this, though. The -- going from pro rata to fixed, you're not going to see much of a bump there, right? Because if it's -- if the tenant was paying $15 pro rata, you can't suddenly say, well, I'm going to charge you $18 fixed. They may give you a little bit because it takes out the equation. So when you add that in there, you're going to see a lower spread, but it's mostly driven by the rental spread.

So is 10% about what we should expect. I mean...

Yes. Yes, sure.

Your next question comes from the line of Nathan Isbee, Stifel Nicolaus. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: As the focus turns now -- starts to turn now to '13, you've had the close-to-5% growth, same-store growth in '12. Given what you've seen from leasing done already for '13 with almost full occupancy, how should we think about the '13 growth? Is it conceivable to think that the growth could match or even accelerate from where we've gone in '12?

We'll let you know as soon as we finish our '13 budget. I will say this, Nate. One of the things you have to keep in mind with our top NOI numbers is, we've been, again, I mean, the vast majority of our portfolio in the U.S. is comp. I mean, It's 80%, 90%. 90%, if I had the numbers right. So we've also -- so we don't -- it's deep portfolio, so just to underline that. But the other point I'd say to you is, if you look back in '10 and '11, importantly, we were growing our comp NOI portfolio where some of our peers had big decreases or were flat. So you have to keep that mind in perspective in terms of how you look -- I mean, it's great to have -- just take a retailer, when they post negative 10% comp NOI or -- I'm sorry, sales, and then the next year it's up 5%, you got to go back to the minus 10% to look at what plus-5% means. We have been growing our comp NOI. We were flat in '09, we had positives in '10. We had positives in '11, industry-leading positives. 90-some-odd percent of our 220 U.S. mall and outlet portfolio is in that number, and so you just have to put that in context. But the fact is, I'm not going to answer your question until -- we will at the beginning of next year. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: All right. And then you've made a big push on today's call to highlight the redevelopment, the $1 billion a year over the next few years. We've heard from some players that there's been a change of tone from Sears in terms of store closures and store sales. As you contemplate the $1 billion a year, is that assuming a pretty static environment with Sears? And if that changes for you and Sears, would you say that, that $1 billion a year could go up significantly?

Yes. The yes being that, if we were suddenly to buy a bunch of Sears stores, that number would go up. Yes, a couple of them may be -- the redevelopment may take a different form because now, if you had the Sears store back, you would do something different than you might otherwise do. But I think, Nate, that's right. That number would go up if we suddenly saw a lot of Sears activity. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Would you say that the tone of conversations with Sears has changed?

Not really. Not really.

No, I think that we're continuing to have our conversations with them and it's been pretty consistent over the last months.

I mean, I do think, as you mentioned, Nate, I mean, I do think they'll sell stores. But they're -- it's not going to be -- that they have 800 mall stores, if I last remember. I mean, it's not going to be -- you're going to see 200 mall stores sold. I mean they're going to sell a handful here and there, I think. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: No, but if you can get 30 or 40, I mean that could take...

Sure. No, I agree. I'm just saying. But I don't -- I was really talking about your broader Sears question. I don't see a big change in their selling a lot of stores. A couple of here and there.

I think it's important to emphasize, they're still very focused on running a retail business. And that's their business and all of our conversations with them are certainly grounded by that underlying premise, that they are an ongoing, viable retailer looking to get better and increase their market share. Nathan Isbee - Stifel, Nicolaus & Co., Inc., Research Division: Have you seen them more willing to cut the store, give you back half?

They're analyzing their business. They're doing a lot of things internally with their business. And we are just continuing to have conversations with them to see how we make that box in our centers as productive as they can be, both under their ownership and if they decide they want to talk to us about something, obviously, we're here.

Just for those that are still on and interested, which we appreciate -- our comparable U.S. outlets and malls for this quarter was 216 out of 220. Not included were a couple of malls that are going through major redevelopment: Walt Wittman in Keystone and then with Merrimack opening in Silver Sands. That was the only 2 outlets that we weren't in it.

Your next question comes from the line of Ben Yang, Evercore Partners. Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division: David or Rick, I think you commented earlier on seeing increasing retailer demand at some of your lower sales per square foot malls. So I was just wondering if you can maybe elaborate a bit. Kind of how far down the sales per square foot spectrum? What those occupancy costs look like? Are there maybe any preferred geographies for these retailers as well?

In terms of geography, no. But you've got a number of retailers that are growing, that have basically staked out a more moderate consumer and they have a strategy to serve that consumer and they're doing it very well. And we are doing an increasing amount of business with them across a broader swath of our portfolio. Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division: I mean, but is there a tipping point in sales where they won't look at malls that do less than maybe $350 a foot? Or do they go as far down as...

No, it all depends on the market and the real estate. It's not really a function of the $322 or $371. I mean, it's really -- whether they think they can do business and make money -- Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division: Okay and then just final one. Do you ever envision a time in the near future where maybe you can get some better NOI growth out of the B malls over your A malls, given obviously the rents are higher in the A's, the occupancy levels are higher in the A's? I mean, do you think that is something that we'll see any time soon?

You mean changing the operating trends from the B's accelerating higher than the A's? Benjamin Yang - Keefe, Bruyette, & Woods, Inc., Research Division: Yes. Basically getting better growth, more growth out of the B's rather than the A's.

I wouldn't want to categorize it by quality. Certainly, where we have done things in a number of our properties to reposition them, we've seen growth rates commensurate with that capital expended. It's a property-by-property analysis.

I would now like to turn the call over to David Simon for closing remarks.

Okay. Thank you so much for your questions and your interest. And we will talk to you soon.

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