Good day, ladies and gentlemen, and welcome to the Simon Property Group Incorporated’s First Quarter 2016 Earnings Conference Call. At this time, all participant lines are in listen-only mode to reduce background noise, but later we will conduct a question-and-answer session. Instructions will follow at that time. [Operator Instructions]. As a reminder, today’s conference call is being recorded. I would now like to introduce your first speaker for today Tom Ward, Vice President of Investor Relations. You have the floor, sir.

Thank you, Andrew. Good morning, everyone. Presenting on today’s call is David Simon, Chairman and Chief Executive Officer. Also on the call are Rick Sokolov, President and Chief Operating Officer; Andy Juster, Chief Financial Officer; and Steve Broadwater, Chief Accounting Officer. Before we begin, a quick reminder that statements made during this call maybe deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties, and other factors. We refer you to today’s press release and our SEC filings for a detailed discussion of forward-looking statements. Please note that this call includes information that may be accurate only as of today’s date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today’s Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. For our prepared remarks, I’m pleased to introduce David Simon.

Okay. We had strong start to 2016 we completed several significant redevelopment projects started constructions on others, announced more that will further enhance the value of our real estate. We completed the acquisition of the shops to crystal, extending our presence in Las Vegas marketplace and we continue to achieve strong operating financial results which were highlighted by FFO of $2.63 per share, which is an increase of 15.4% compared to prior year. Our -- we had strong key operating metrics. Mall and Premium outlet occupancy was 95.6%. Leasing activity remains healthy which we the Mall and Outlet business had re-leasing spreads of $10.24 per square foot, which is an increase of 17.5%. And our base minimum rent was $49.70 up more than 4% compared to last year. Total sales per square foot for our Mall and Outlet business was 6.13 compared to 6.21 in the prior year period. We measure our success through growth of operating income and cash flow. We have a unique ability to drive growth through not only increases in comparable property NOI, but also through disciplined capital allocation for new development, redevelopment acquisitions and investments and our press release and supplement this quarter we have provided additional new metrics summarizing the composition of our total portfolio NOI. These new metrics provide further detail in the profitability generated by our portfolio and we have broken them out into four categories, comparable property NOI, NOI from new development, redevelopment, expansions and acquisitions that are not included in comp NOI, NOI from our international properties which is our premium outlets and designer outlets. And then our share of NOI from investments which includes Klépierre and HBS Global Properties and then below the property NOI line you have the corporate sources of NOI. And importantly, for the first quarter…

[Operator Instructions].Our first question comes from the line of Christy McElroy from Citibank. Your line is open.

Hey, David, it's Michael Bilerman for Christy. I just wanted to go first and then Christy will have one. And I was wondering, how the markets you think about Simon strategically going forward? And it’s about two years to the day when you spun off WPG, all the assets under 10 million of NOI and arguably lower sales productivity and now you are left with this immensely high quality model portfolio, a global outlet portfolio, the mills portfolio and its taking -- here and some other sort of ventures around. Should we think about potential spins of any of those businesses going forward or do you think you are still going to own assets across the price spectrum of retail real estate?

Yes. We have no -- we have no intention to spin off any other assets. We think they are absolutely synergistic across with our retailer relationships. We have the lowest overhead, lowest cost of capital, given the portfolio. We have got historically the best comp NOI growth. So, as long as we can continue to do what we are doing, I don’t see any reason why we would want to spin anything off. And they all fit nicely together. They are all in major metro markets. All the assets are producing great cash flow. And we are -- I mean our results speak for themselves. I think the WP spin-off was really a focus on we were -- we were a little -- we weren’t focusing as much on the smaller properties as probably we should have and we thought that was in the best interest of the shareholders, but we don’t see any other reason to take any other corporate restructuring beyond that.

Hi good morning, it’s Christy here. Just wondering if -- and tax fund stops paying you rent at anytime during the first quarter and if reserving for that might have impacted your bad debt at all in Q1? And maybe you could give us an update on sort of your overall outlook for retailer bankruptcies and stock closing for the balance of the year and whether or not you are more or less cautious versus the quarter ago?

Well I -- look I think a quarter ago we were cautious, we continue to be cautious. I don’t want to mention specific retailers whether they paid rent or not paid rent. The only one that’s filed bankruptcy thus far is Paxton [ph]. I am sure there were some pre-petition amounts that we wrote-off in the quarter. I mean it’s not overly material and that’s part of what we have dealt with for 60 years retail bankruptcies. So we remain cautious, our biggest reason we were cautious, is that the U.S. economy continues to flatten out, I mean there is not a lot of growth I suggest you look at a lot of industries in our beyond real estate to see what’s going on in the U.S. economy and it is what it is.

Thank you.

You know but we have been cautious on those couple of retailers but you know we will deal with it.

Thanks, David.

Thank you. Our next question comes from the line of Craig Schmidt from Bank of America. Your line is open

Thank you. I notice other income and consolidated properties were up significantly, was that related to one specific area?

Well I would suggest you look to page 21 on our supplemental. Our corporate, this is after our property portfolio NOI corporate and other sources were up roughly $20 million and that was a function of the residential interest that we had that through that flowed through our corporate NOI number.

Okay and you have been doing a great job touching on some really big redevelopments. I just wonder actually you start to touch more and more of your top properties, will the shadow of pipeline start to consider and include maybe a second tranche of redevelopments to continue that path of growth.

Well I mean, if you look at our 8-K, you can see all the stuff that we have been working on. I just spend an hour and a half with my guy that does residential, which other way just has made 20 million bucks which ain’t bad. We sold those at a lower cap rate than what we bought crystals [ph] which I thought was a pretty good interesting dynamic in our industry. He’s got; the other meaning was longer that I wanted it to be because my attention span is decreasing. But as I get older, but the fact is he’s got plenty of things going on across the portfolio. If you look at our 8-K all the stuff they are doing, I think we touching a lot. We just opened Dick’s Sporting Goods at Independence Mall. Just to give you one small example of kind of a solid middle market mall that produces a lot of cash flow year after year, but continue. We think continue to get better and I mean -- so the answer is we are touching everything.

And just bringing up crystals, is there an expansion opportunity I guess with the Harmon [ph] powers at that property?

Yes.

Okay, thank you.

Sure.

Thank you. Our next question comes from the line of Jeff Spector from Bank of America. Your line is open.

Great, thank you. Just wanted to ask about the retail landscape I feel like all the years Craig and I have covering the sector this past year we’ve seen some real dramatic changes. I guess how have things changed in your view just from a year ago and your planning whether with the lease contracts or your approach with retailers, you know what your latest thoughts?

Well honestly, I think maybe you are getting caught up in a lot of the media discussions. I mean our business is as solid as it’s even been. We’ve have top NOI increases, 5.1%. Our earnings grew 15.4% per year. We are projecting to have $10.72 to $10.82. So I think our simplistic view is it’s not as bad people want to write about, and I think the biggest issue out there frankly is that we have a U.S. economy, and we don’t, we’ll never use excuses but I think you have to look at our performance in conjunction with what’s going on in the U.S. economy. And the fact of the matter is the U.S. economy is flat line, and yet we are holding our old and gaining market share with a lot of our properties and obviously we’ve got great tourist oriented centers that have had a tough year. I think that we after this first quarter we’ll probably anniversary the stronger dollar here coming up, but we’ve seen the tourism sales decreased unnecessarily the traffic. But the media about the death we don’t see it, demand is fine. Properties are getting better, we got supply and demand in our favour, no one’s building Class A Outlets or Malls to any degreeable issue, certainly there will be retail space that gets re-focussed which will help us obviously in supply and demand equations and I just -- I don’t view it beyond that. The Internet is not the panacea. A lot of CapEx have been spent there. It’s not showing the returns for retailers, so I think they are going to -- their biggest and best opportunity continues to be bricks and mortar and you know we’ll keep plugging along. I don’t know if that answers your question. But that’s how we view it from here.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Alexander Goldfarb from Sandler O'Neill. Your line is open.

Yes, hi good morning, David. First thanks for page 21, the NOI breakout it’s helpful. A quick question, maybe you commented on the resi upfront, but can you just give a little bit more color which projects they were and then as we go through the rest of the pipeline, I mean you know obviously you got the tower that you announced down in Houston but how much sort of embedded potential is there in the portfolio and is each project that you guys undertake something that you are going to harvest itself, so we should expect over the next several years more of these $20 million quarterly benefits?

Yes, I think we tend not be long term. We look at these things more as investments than we do operating properties, that’s been our point of view just like in Q1, 2015 we had a gain from a development side, we decided the flip in Europe as opposed to staying involved. And so the good news is that we are able to create -- you know we’ve had a few mistakes. So we are not perfect, but we are able to generate additional income in this company through all of our activity. And I mean that’s been proven in Q2 of last year as you know we had a big sizeable gain in sale of marketable securities. So please remember that when we report Q2. So we are able to do that, and we do look at investments in whether its hotels, residential we do look at them as investments and we do tend to look at those as ones that we are not going to own for 30, 40, 50 years like we do the vast majority of our retail holdings. And that will flow through the P&L as rightly so. That’s GAAP accounting by the way, which happy to explain to anybody that its good GAAP accounting. And I do think with the list of all the activity you are going to see that episodically, but certainly consistent with how we are going to drive our cash flow growth. Now, specifically we sold fire wheel residential and we also sold SouthPark which additionally which goes to show you how things can change. We actually did SouthPark as the Condo development. The market crash we actually rode off our investment in that, and that went through FFO. And then now our investment in that was not big. So…

Yes. You guys have been quite vocal on that point. On crystals, I mean you guys obviously have basically unlimited capital, so can you just talk about your decision to JV that especially if there’s development upside and how especially in that market given how it book cases, the strip, your decision to JV and then other investments how you figure out if you want to do it wholly versus bringing in a partner?

Well in this case was relatively simple. We approached a partner and we like to approach those, and we fell it would be beneficial to do a joint venture. We the assets have a great foundation. It’s been well leased, it does high sales productivity and it we are hopeful that we could add value to it overtime and we have a great partner to do that and may be some other things. So in this case, the opportunity really came from them and so it was natural to just partner in it. You know that doesn’t mean each deal is a little bit separately, we may or may not partnered it depends on the circumstances but in this case they really approached us and we like to who approached us and it’s a very good asset that’s been well leased and managed and operated by the owners and their manager ahead of time and we hope that we will able to do add value to it overtime. And now look, I mean it’s not cheap, but given where A quality assets are being priced in all sectors, I think it’s going to be a good deal for us in the not too distant future. I think it’s good to start and it will get better overtime.

Okay. Thank you.

Are you guys able to hear me okay, cause we are getting comments that you can’t hear me. But it sounds like you can hear me fine.

Yes. You are coming through clearly.

All right. Appreciate it.

Happy -- it.

Thank you.

Thank you. Our next question comes from the line of Caitlin Burrows from Goldman Sachs.

Hi, good morning. I was just wondering again on those non-retail gains that were included in the first quarter results, was that $0.06 gain that you referenced included in your prior guidance.

Yes.

Okay. And then if you look ex that $0.06 impact, the growth is still over 10%, but it doesn't look like your full year guidance is quite that high? So I was just wondering is there anything else driving the first quarter to be especially strong or just trying to see to what extent you might be being conservative for the rest of year versus actually expecting a slowdown, albeit from a pretty high level.

Good question. First of all I believe our growth would have been 12%.

Yes.

12% if you wanted to, it’s upto you and I understand why you would want to. You know just say okay the $0.06 is a success. But it’s actually 12% and look, I think you know we are as we started, I think it’s consistent with what we described when we get our year-end call, is that we are still being conservative and how we are looking at the business because primarily not because of the internet, not because of department stores, not because of I don’t know. But there -- we do have exposure to tourism, that’s obviously affecting our average rent you can see that when I was explained a day on the P&L. And the U.S. economy even though it feels like it should be growing is more or less flat lining. I mean, I don’t what does Goldman think, the first quarter GDP is going to be this year. What is your guide…

You asked me last quarter, so I looked it up. 1.8%.

All right, well I take the under -- so -- is that’s not costing? Is it?

I am not sure who exactly it is from.

Well, we know you have like 10 of them, so you will get a right no matter what. But, so we are just being, I’d say we are being overly conservative and just because there are -- you know you’ve got the election year; by the way I hear it’s very interesting. I -- we have essentially no exposure to the U.K. But the U.K. is softening. It just -- there is a general softening worldwide in the worldwide economy and we as much as I would love to be immune to that, we can’t be. We are not. We are consumer oriented company, and I mean we are the basically the worldwide economy is flattening. There is a lot of stuff out there. And we are just being a lit bit of cautious. And obviously I mean, we all know there is a few tenants out there that may or may not go bankrupt may or may not close the bunch of stores. We’ve got to be -- we have got to be judicious on how we model their future.

Got it. Okay. And then also just if you could -- I know you mentioned as we all know, tourist sales are not so great. If there is any comment you could make just on the malls versus outlets versus mills, either in numbers or just a general feeling?

I am happy to say that our comp sales were up nicely in the mall business and down in the outlet business. And down in the outlet business 100% due to high producing tourist centers and the fact that the consumer the traffic is not down. The traffic is up in the outlet business. But the fact of the matter is, their spend is less because of the stronger dollar in. We are going to anniversary that at some point this year, but we didn’t anniversary yet in the first quarter.

Okay. Thank you.

Thank you. Our next question comes from the line of Ross Nussbaum from UBS. Your line is open.

Good morning I am here with Jeremy Metz. Hey David, I thought the fact that you guys put up nearly 4.5% base rent growth in the quarter was pretty impressive, despite the sluggish sales environment. But I guess at least it leads to the question of realistically how long can that continue. The occupancy cost is up year over year from 11.7% up to 12.5%. So I guess realistically, if in fact mall sales are at the similar levels for the next year, do you think we're going to be looking at occupancy costs for your portfolio that is pushing 13.5% a year from now?

Well again, we could argue ad nauseam [ph] and I’ve lost the argument, so I will admit defeat, okay. I will admit defeat publicly. We have lost the argument on the correlation or lack thereof between retail sales and our ability to drive rents, which happens I believe that are more toward supply and demand and then retail sales, because as you know if retailer is not producing results and there are lease happens to come up, we have the ability certainly to replace them with a retailer that’s going to be more productive. Now as I also said in the mall business, our comp sales are actually up. It’s in the outlet business where we are seeing the reduction in comp sales and that is absolutely unequivocally tied to what’s going along with the tourism picture. And as I said, hopefully that will anniversary and then that base will move. Now the comp NOI growth was outstanding in for the whole portfolio, but it was particularly good in the outlet business, so that it is a very profitable category for our retailers and we have the ability to drive rents and drive NOI. So, at this point we can argue ad nauseam [ph] about the correlation, I’d rather not, we’ll do the best we can and like I said, we are going to grow, we are going to grow our comp NOI better maybe one day or we will revert to the main and I am not guaranteeing that we won’t, but we have grown couple of 100 basis points comp NOI above and beyond the GDP growth because of what that I think is our portfolio skews towards the better customer. And I am hopeful that that trend will continue, and I actually think it’s more tied to what’s going to go on in tourism and what’s going to go on in the general economy that it is one particular retailer sales. And well that does not necessarily mean anything about the property. But I have lost the argument, I admit defeat, we’ll do the best we can.

All right. My follow-up question is on your guidance. If I focus in on the comment you made which was, I think $0.03 of the beat this quarter was not related to the asset sales, you only raised guidance for the full year by $0.02. So I guess the question is, if I annualized the non-asset sale beat during the quarter it’s obviously a bigger number than what you raised guidance by. Are you being conservative, or was there anything else going on in the quarter that’s not necessarily recurring?

There is absolutely nothing going on in there. I mean, the disclosure you see the comp NOI you see all of that. I -- we’re you know Ross we continue to just be relatively conservative given what’s going on to the general U.S. economy. And I’m not again, I am not using that as excuse but there is a level of -- there is just level around the world about consumer spending growth in wages, election year we still have certain retailers that may or may not impact us maybe we’ve got -- maybe we budgeted them right, maybe we didn’t -- all of that none of that really is all that material for us, thankfully. We’ve built this company to sustain ins and outs of certain retailers; all of this affects us on the margin. As you know, I mean whether you slice is by products type, by geography, by retailer, you cut slice bake Europe whatever. I just think generally, we are operating appropriately given the growth in the economy and again our year-over-year, if you didn’t hear our delta and quarter-over-quarter Q1 '15, Q1 '16 was really $0.06 because of the opportunity that we sold in Q1 of '15 of last year. Okay, so if you are going to look at the delta, don’t look at $0.08 really look at $0.06 if that’s important to you.

Appreciate it. Thanks Dave.

Yes, no worry.

Thank you. Our next question comes from the line of [Indiscernible] from Mizuho. Your line is open.

Yes, good morning. Thank you for taking my questions. A first one for you, David. I guess on the acquisition market. I'm curious on what you are hearing and seeing these days in your conversations with potential sellers. Are you getting approached a bit more? Are you getting a sense that more people are willing to engage in conversations than maybe a year or two ago, given some of the concerns about the broader macro that you laid out earlier?

You know that’s interesting. I would have thought -- maybe but not really, not really. I mean as you know we are not actively scouring the world for new deals and as I have stated to you before the big deal business is not something on our drawing board at this time and you know there is a selective thing here there but it’s not -- it’s not as if and maybe it’s my personality, but it’s not a -- I’m not getting a lot of phone calls. Rick, are you getting any phone calls?

I’m not, you know I am a better person now.

Rick certainly has the better personality but -- so the answer is not really, but you know our business is --it’s not easy. It’s not for the faint of heart. It is when we have a slow economy it really requires a lot of patience, lot of grinding, a lot of focus on the details. Sometimes that creates opportunity in itself. But at this point nothing really jumps out of me.

Got you. And I appreciate that. And then, one more if I might ask, might be redundant but I’m having a bit of trouble hearing you earlier. But, did I hear you say that you would be putting a $500 million mortgage on Crystal Shops? And if so just curious on thoughts for the use of capital. Is it effectively earmarked for maybe the redev, or how should we think about any excess proceeds from that?

Well, simplistically it was $1.1 billion deal. We’re going to put 550 thereabouts mortgage on it, which will have positive leverage which we think it’s very important, just using good old real estate 101 fundamentals. And the balance of the equity required will be split between us and our partner, Invesco. Simple as that, so there is no access financing proceeds. The financing is really part of the purchase price financing sources and uses.

Got it. And then one last one, more of an accounting one. The other day, obviously there is the big block floated by you guys on behalf of the DeBartolo of 4.4 million shares. Just curious if Simon bought any of those shares, certainly again maybe not as an attractive a price a few months back, but just curious if the company at all participated in buying down any of those shares?

Well just to be technically accurate, we didn’t float it, was part of the DeBartolo family estate and we did not -- Simon property group did not buy any stock. And as you know the shares were placed relatively quick and straight forward manner.

Okay, got it.

We had nothing to do with the sale of those shares. That was all between DeBartolo and the DeBartolo family, the state holdings and their advisor. And they have been a great limited partner, very supportive, they are still a very, very significant owner and it -- those are the facts.

Wonderful. Thank you.

Sure.

Thank you. Our next question comes from the line of Jeff Donnelly from Wells Fargo. Your line is open.

Good morning guys. Actually first question is for Rick. I was curious as we are headed into ICS, if broadly speaking there was any themes maybe you're thinking about as we head out to Vegas? And maybe more specifically any projects that are more mission critical for your team?

Well it’s interesting, because as David has said, our portfolio has never been stronger and we still have significant demand for our properties. And where we are totally focused is maximizing the rent and productivity of our properties and so our themes going after is making sure we get the right retailers in the right spaces in the right sizes so we can maximize our revenue. And we obviously are spending time doing that, but frankly for us ICSE is relevant but we have retailers coming in here all the time. We have a major retail in here coming in tonight and here for the next three days going over the whole portfolio. So we are going out there optimistically. We’ve gotten a lot of good reversed enquiries as to our space, and we’ve got a great portfolio across all of our platforms to try and market.

And maybe just a follow up or two. I guess maybe David, somewhat related to that. How do you think about the pursuit of omnichannel ultimately plays out for retailers down the road? Because while bricks and mortar as you said, is the biggest and best channel today for retailers, consumers do like to buy online, irrespective of whether or not it is weighing on retailer margins. So I guess, I'm curious. I mean if you think forward a few years, do you think lower margins are just the new normal for omnichannel retailers and that's all she wrote, or do you think retailers ultimately have to effectively price in the convenience aspect of buying online, or take it to the extreme, do you think there is going to be a time when retailers need to restructure and that gives them an opportunity to sort of reset their cost basis and their online business and shed the weaker stores?

Well, again, I think the fallacy [ph] in what is talked about is the fact that even if the stores are don’t have high -- high sales per square foot they could generate a lot of operating cash flow for them. So I don’t look at the stores losing money they are going to close the stores that’s for sure. The issue is if the store -- the sales metrics that we all expect us, but many let say -- let me restate it many focus on does not necessarily tied to profitability because a lot of these stores could very low rent, could be fully depreciated, could be you know when markets that aren’t great, exciting markets that are growing but they produce a lot of operating cash flow. They need that operating cash flow to make investments and whatever they want to make investments, whether that’s omnichannel or you know technology or new stores or whatever. So the statement they are less productive, therefore they are going to close stores is not how I think they look at it. I think they look at whether the store has a four wall profit. And whether or not if they close it, what does it really do for the organization. So, you know what is this all going to mean? I think at the end of the day the all retailers have to be profitable. All e-commerce player have to be profitable, unless you know Wall Street and other investors are going to fund those investments. And I don’t have a crystal ball as to how it’s all going to shake out. Could it put pressure on bricks and mortar, certainly it could but I think you’ve got to keep in mind that a lot of these are cash cows that they are using, maybe they are not investing in them like the way they should or we as owners of the real estate would like to see him do it, but that I don’t think that equates to store closures necessarily. Now if they become unprofitable, they are going to close the store, simple as that. You have to weigh that against what they charge the store in terms of corporate allocations and overhead and all that and all that. And I think certainly investments in technology is putting pressure on the retailer. And we have to be sensitive to that, but you know I think they are going to look at carefully what services they are going to need to provide to the consumer, because at the end of the day they chase that and they can’t create profitability out of it, you know that’s not doing anybody any good.

Helpful. And just one last question. There has been a lot of ink spilled in the folks in our seeds estimating the implication of the spinout of REITs in the S&P under the new sector classification. I am just curious as the largest REIT, how are you guys thinking about that prospect and anything you intend to do differently going forward, that maybe positioning yourself maybe differently in the eyes of that newer larger pocket of capital.

Well you know I think we’re going to be explaining the company in what we do and how they all look at us. The good news of that group is they look at cash flow growth. They look at earnings growth. They look at balance sheet metrics, you know they will compare us to other industries as opposed to just within our sector they won’t’ be thoroughly focused on NAV, which again I you know we can argue about. They won’t worry about a quarter here or there of our retail sales. They are going to look at what kind of growth we have in our cash flow, in our earnings and I think that plays perfectly well with us given the kind of earnings growth that we’ve had over many many many years and many different cycles. So we are very focussed on trying to solicit them, whether or not they are going to be interested and whether or not that’s going to be whole new category, I mean we have no particular crystal ball on that front. But if they do look at us, I think we’ve got a great story to tell and they are going to look at earnings and cash flow growth and they know that we have hard assets which never hurt in any cycle. They have hard physical assets.

Thanks guys.

Sure.

Thank you. Our next question comes from the line of Paul Morgan from Canaccord Genuity. Your line is open.

Hi good morning. David I guess maybe in light of kind of all your caution on the macro and the consumer I’d see if might Rick could offer a little sunshine [ph] and give some of the concepts where we are seeing expansion and maybe kind of particularly in the kind of the mall expansions and redevelopments that you are doing, number one. And then kind of the number two, for anchor spaces where you might be looking to replace a department store.

Well first on the department store side, it is important to note we have one vacant department store in the entire portfolio and we have like 441 of them. So again, the narrative out there would have you believe something very different and when David implied earlier just as to what we think is going to happen with these department stores that was a very informed opinion because we meet with these guys all the time, and that’s what they are telling us. If you look at the activity that we put in the K we have significant number of anchors that are coming into the portfolio, David always makes fun of me when I list them, so I won't.

No, please do.

Fine. There is a lot going in and there are across the portfolio quality wise in terms of the smaller properties the more productive, the slightly less productive and they are all getting better. And if you just follow our momentum we had 19 added in 2015, we are now up to 35 in 2016. And it's across the gammit of restaurants, Neiman Marcus, Bloomingdales. Brand new Saks is opening this week at Houston Galleria and what is spectacular state of the art store. And as we had new space, that enables us to accommodate the new cutting edge retailers that otherwise we would not be able to accommodate and they are still looking to expand at productive properties. And so that is ongoing, and there’s basically if you step back, we are seeing demand from international retailers come to this market, from new retail concepts like suite supply and [indiscernible] from retailers opening stores that’s been talked about a lot. Brand extension of our existing retailers that white barn candle is growing aggressively. Victoria’s Secret is growing 4% this year. We have, we are adding restaurants as David said throughout the portfolio and all of this is just making the portfolio stronger and stronger.

And again, we put in page 21 to show you what the fruits of our efforts produce. And I believe the portfolio NOI which doesn’t include our corporate activity increased 7.8% for the quarter you know as my favourite guy that I love to quote Adam Sandler would say that ain’t too shabby. So you know we are conservative but it’s not getting in the way of producing results we want to produce.

And then, just on the -- the kind of the team segment, if we do get a ramp up in closings I mean, obviously closings are a lot of these chains have been going on for a lot of years. But let's say it ramps up. A lot of the chains themselves don't seem to be producing kind of sales at the volume of on a square foot basis that kind of your portfolio average is. Is there a pretty strong positive mark-to-market on that space? I mean would we expect spreads to be consistent if you get hundreds of closings that can bring in more productive retailers, or is that not the way to look at it?

Well I think if you look at our activity generated last year where we have Wet feel and Cache [ph] and body shop go out, we have been able to release a very significant amount of space at positive rents and positive productivity contributions because there are more productive retailers coming in. So there are going to be downtimes certainly. Will that have an impact on short term results, of course but at the end we certainly demonstrated an ability to replace those retailers that go out with better retailers and frankly that hasn’t changed for decades, that’s the business.

Great. Thanks.

Sure.

Thank you. Our next question comes from the line of Tayo Okusanya from Jefferies. Your line is open.

Yes, good morning everyone. Just two questions from us. First of all on the development and the redevelopment side of the business, just noticed a couple of yield change. The yields for the new development and the premium outlets went down a little bit, and also expected yields on the mills redevelopment went down a little bit. Is that purely due to mix?

Yes, yes. So in the outlets we added our Canadian deal which changed the mix and then there were a couple of changes in the mills mix. But no budget below, there is no income below, it’s all just mix changes.

Okay. That's helpful. And then second of all in regards to Sears, Kmart, some announcements this week or last week that they are accelerating closures, just wondering what you think the implication of that would be going forward either for your portfolio or also in regards to your JV with Sears?

Well as far as we know and I think it’s pretty safe statement, none of those closing are in any of our assets, so that has no impact and you know if it makes Sears a healthier retailer we are all for that. I mean it really doesn’t impact our Sears card [ph] JV or our relationship with Sears. I mean, I think it’s -- you know we are still doing business as usual there.

So it doesn't [Indiscernible] accelerate the ability for you to make a couple of changes in regards to Sears moving out of some of the -- type space and you are redeveloping and leasing that space?

No its not been changed given that recent announcements. We have no K marts in our portfolio. So I’d say it’s pretty much business as usual there. We still obviously spend in a lot of time going through our JVs to redevelop some of those boxes. So that’s not -- no different sense of pace or not given the recent Sears announcement.

And I would like to point out the vast majority of those stores that Sears announced as closing were K marts and free standing stores. I believe there is only one or two mall based stores in that entire list, none of which were ours.

Great. Thank you.

You’re welcome.

Thank you. Our next question comes from the line of Carol Kemple of Hilliard Lyons. Your line is open.

Good morning. Earlier in the call you all mentioned that you think some of the best opportunities for many of the online retailers are opening in physical stores. What kind of feedback have you received from the online retailers who have already opened stores at your malls?

Positive. Very positive, the cost of customer acquisition we would encourage you to read the L2 study that we produced the cost of customer acquisition for pure online retailer at a certain level if they don’t have physical stores is so high that they all view physical stores as a way to really reduce their customer acquisition cost, extend the branding, extend the reach. And so far its seems to be producing what they -- what they are looking to get out of that. So far, so good there.

Are you starting to see some of them that maybe you signed 10 leases with in the beginning looking to enter into more of your malls, or are they kind of content with the space they have right now?

No they are all; they are all looking to expand.

Okay. Great. Thank you.

Thank you. Our next question comes from the line of Ki Bin Kim from SunTrust. Your line is open.

Thank you. So I just wanted to ask you a couple of questions on occupancy cost. For new leases that you are signing, what do the occupancy costs look like, and I think when I asked this question last time you said around 14% to 15%. I was curious if that needle is moving closer to 15% or 14% lately?

You know it’s so specific retailer space specific, but I think the important think if we look at our base – our average base land we are its still under 10% well under 10% what the sales are, our averages means a lot because you know we have the vast portfolio. You can see the role over schedule, there is no one -- there is just no way I can really answer that question. It’s so specific on location, mall, retailer use someone and so forth, but we are increasing our average base rents and our spreads are spreads and comp NOI or comp NOI.

Okay. I guess I was asking if there were any more general trends you were noticing if things were changing at all. But, I guess my second question is how will you treat Tesla sales in your report stats if they are going to be in there at all?

Well if they report sales, they are in. If they don’t they are not. I mean we have that policy with every retailer. The Good, the bad the indifferent.

I mean so with that, does that mean that their sales would eventually be included?

I just said, if they report sales, they are in. If they don’t they are not and just as every retailer under 10,000 fee again I mean and I think they report in a couple, I think they don’t report and the most of them. And so again given the size of our portfolio it’s immaterial

Okay. Thank you.

We -- as you know we have hundred and -- how many together. How many Tom, how many malls do we have?

107.

And how many outlets that we…

Seven.

So you know none of this one particular retailer is going to change it all that much.

Okay. Thank you.

Sure.

Thank you. Our next question comes from the line of Vincent Chao from Deutsche Bank. Your line is open.

Hey, just a couple of cleanup questions here. In terms of the other income, which I know we talked about inclusive of the resi gains if we take out that impact, it seems like it is about $52 million or so for the quarter, which is similar to fourth quarter but up quite a bit year-over-year. Just curious if that’s a decent run rate going forward or if there was some other -- there is a bunch of things in that line item? Just wondering if there is other one time?

I just think you know you’re going to have to get used to the fact that it’s going to have ups and downs in that number over the year it kind of balances this out. You know we generated a lot of additional income from our portfolio and we are hoping that that will grow. I’d say overall that number is around $200 million but it could be you know -- but it could be higher one quarter, lower in the next. It could be higher over the whole year or a little lower over one year and it’s just a number that’s going to be volatile. Again, we’re -- our total revenue base is, Steve, when you had included our share the JV $8 billion of revenue. You know we a big company, so it’s not you know it -- these things are going to go in and out a little bit. But the good news is its income, it’s not losses. Okay.

Right. Okay. And just, maybe not a question -- if I missed it from earlier. On the 5.1% same-store NOI comp in the quarter it was quite a bit stronger than last sort of couple of quarters that you reported. Again, obviously we just talked about the ins and outs on a quarterly basis. Just curious, though, if there was anything surprising here in the first quarter for you guys relative to your initial outlook on the quarter…

Not really. We don’t -- we don’t update our comp NOI quarter-over-quarter. We told you what we felt we would do. We are always trying to achieve better than that. Last year we didn’t. We came in a little bit under what we had wanted to see in comp NOI, that was all related to the unanticipated to at least to the degree in our overage rent due to the decrease in tourism spending, yet we produced our good earnings despite that headwind. All of that’s explained in my shareholder letter. But we don’t update it, we are hopeful to do better than that. Then we guided to early in the year and you know we’ll see.

Okay. Thanks. And maybe just one last question on the anchor openings. I think there was about four backstages that opened this quarter. Just curious if you could provide some color on what you were seeing from that particular concept.

While those backstages that open were done in existing Macy stores and if you look at how they are integrated into the store, they were basically taking one for side and one parking field and branding it, Macy’s backstage and it’s I think too early to say what kind of sales impact it has, but it is another reason for consumers to come to that store and hopefully it will contribute the kind of positive sales impact that they are looking for. But the physical presentation of it is basically a dedicated entrance and a dedicated portion of one floor of an existing Macy store.

Okay. Thank you.

Sure.

Thank you. Our next question comes from the line of Michael Mueller from JPMorgan. Your line is open.

Hi. Just have one quick one last, what was the dollar volume of dispositions that you announced including the residential?

The total, not to gain the total amount -- can do quick add 65 million somewhere in that including the outlet that we sold.

Okay. That was it. Thank you.

No worries.

Thank you. Our next question is a follow-up from Jeff Spector from Bank of America. Your line is open.

Great. Thank you. I appreciate hearing some additional comments helped answers my first questions how things have changed in the last year. I guess thinking about it David, would you consider disclosing the latest occupancy cost of sales for the outlets just to demonstrate the ability to continue to push rents further, or at this point you are just combining it with the malls?

We’ve always we’ve combined them for the last several years. I mean, any -- look I think all of this metrics manifest itself in the cash flow and comp NOI. And we are not as obsessed with metrics as maybe the analytic community that could be good or that could be bad, but that just a way we look at things. We also take a longer term view of the real estate that we do on a quarter-by-quarter and even year-by-year view. So I don’t think that data is going to do you any good, frankly it’s not something we are like obsessed with what’s the occupancy cost going to be you know on this particular deal with this particular tenant on how we run the business. We are looking at retail mix with a primary purpose that the retailer does well and the consumer likes it and then if that works together then hopefully it will create the environment that we are trying to do which by the way we are not -- you know we are decent at, good at. We are not great at, we can always do better. So another metric it’s just you know we just -- it’s just not where we want you to think about us. We want you to think about our cash flow growth, our investment and our assets over the long term and so on. But all I can tell you is the outlet business comp NOI growth is doing very well and we don’t see a change in that even with the tourism slowdown that we are currently experiencing. Now we are -- our portfolio NOI grew 7.8% with top tourism spend and a slow growth economy. That’s pretty good work. I can’t guarantee we are going to do it every quarter, but I think that’s pretty good work. That’s what I like you to focus on.

Okay. Sounds good. And then my last question is just on retailer CapEx tenant allowance. Any change there as we think about whether -- how you are signing deals or some of your competitors? Is that increasing for some, decreasing? Is it similar to what we have seen in the past?

Now if you look in the Q [ph] our allowance has been flat year-over-year and frankly all that allowance is just for new tenants. We have minimal allowance for our renewal.

Great. That’s helpful. Thank you.

No worries. Thank you.

Thank you. Our next question comes from the line of Christy McElroy from Citibank. Your line is open.

Yes, it’s Michael Bilerman. David, I am curious, as you think about all the investments you are making in the mall of the future, how do you think effectively the return on that capital will come? Do you think it is going to come direct from the consumer to you, or do you think it is going to come in the form of better sales, better productivity, better margins of your tenants and therefore higher rents that are able to be paid to you. And maybe just talk about where we are in sort of your view about how close we are to this mall of the future that you envision?

Well I think we are still in the very early stages. I mean, I wish we were more along that curve, but it’s you know it’s not easy. I would say to you first, but there’s lots of things we are experimenting with and you know I continue to think that as we do those investments that the consumer will appreciate them and it will lead to more traffic and more visits and more browsing which is very important. I would say to you that the -- I don’t necessarily see, I see it more as creating a better environment which will lead to all the benefits of that as opposed to the consumer is going to pay us for it. The consumer, frankly as we all know is getting a lot of stuff subsidized right now because of what’s going on in the broader world, you know delivery returns just to name a couple. So I see it more as creating an environment that’s going to drive traffic and lead to you know more demand from retailers wanting to be in those places where traffic is. And more demand I think relates to for us hopefully we’ll be able to generate more cash because you know supply and demand is important in every industry and obviously very important in the real estate industry. So, I think it’s more of that. But I wouldn’t rule out that the consumer but I think it’s more creating the appropriate environment if -- to give you a simple answer to that. And I’d say, we are early days in that but you know we are hopeful, we are hopeful to continue to improve the environment.

I am curious how much buying you have from the retailers to sort of experimenting and bringing more experience based things to their stores and, clearly doing all this stuff in terms of parking and direct on the consumer side to get them to come to the mall. But is there some retailers that are being better partners in terms of just trying to drive that increased traffic?

Yes I think they are all very focused on it. I think the relationship on that front is excellent. We are getting a lot of cooperation buy end. It obviously depends on the sophistication of the retailer and you know frankly they are very busy too. But the good news is when we describe to them what we are trying to achieve and how they can play a role in, you know they are all very receptive. But they are also all very busy as well. So it’s for us it’s prioritizing the biggest thing for the buck making it easy as possible in terms of plug and play almost to use a technology, terminology we can deliver that to the retailer that’s a lot easier. I mean it gets a little gruesome with the details which I’ll spare you and me and everybody else on the call to go into that level but I think they are being excellent. They have been very cooperative and we all want to drive traffic to the physical world and we all see the benefit of that and you know we’ll continue to experiment plug along here.

Great. And thanks for the NOI disclosure.

Sure.

Thank you. Our next question comes from the line of Floris van Dijkum from Boenning. Your line is open.

Thank you. Could you --your gross international NOI exposure is 8% today. What is your net exposure, and would you consider expanding your international NOI based on low interest rates that offer in both Europe and in Japan? And in particular, when you look at your European outlets platform, do you think you can expand that by another 3 million square feet over the next five years?

Well, look I think we do want to expand our Asian premium outlet portfolio, but we only want to do it when there is a supply and demand and that we don’t want to do it because of low interest rates. And I we feel strongly about our McArthurGlen relationship as well and the good news is having been back and forth to see the MGE folks twice in the last I don’t know four or five weeks. They have a very good pipe. So the answer there is yes, we want to build out their pipe in Continental Europe and the U.K. and we certainly wanted, we certainly got a handful of opportunities in Asia as well and listen, the low interest rate certainly make it easier in a sense but it’s always supply and demand, can we lease the building? That’s -- can we lease the building and at what rent? On your net question, you are asking from a hedging point of view, I wasn’t really sure what you meant by the gross versus the net, so maybe if I could ask you again that?

Sure. It is both on an asset and obviously you are partly hedged through local debt, but also on an epical contribution in terms of your interest expense in local currencies. What’s your interest -- what is your currency risk in that income on both the asset as well as the income side?

Well we certainly hedged; we are in the high 90s in terms of our investment. And so that’s hedged. But you know given you can see the NOI contribution, it’s not -- it’s real dollars once converted obviously. So there is risk there. And we were not overly leveraged, so you know we’ll make some of it on the interest expense as we mark that to dollars you know on a weighted average quarterly basis, but we have got, they are extremely profitable our debt service ratios are extremely high. So we’ll never be able to hedge the profitability of that and never be able to-- you know we don’t want to hedge over our investment because then you will have that run through the P&L every quarter and I don’t want to do that. We will have the earnings run through the P&L but I don’t want to go outside of currency hedges that would have to be mark to market if we were overhedged. And so we’ve always, we’ve always hedged upto our investment and I think we are in the 90 some odd percent up. I hope I answered your question.

Yes. Partly. The other question I had was regarding your Seritage JV and in particular maybe, Rick, you can talk about, do you and your partner have similar views on the capital required to redevelop those boxes?

Certainly we have identical vision as to the potential for those boxes. Each of us are going to have to deal with the funding of that when the time through their own sources, but they fully recognize that and we do not perceive that as an issue.

And when do you expect you are going to start your first project there?

We are working with Seritage but also working with Sears because we need to go through the pretty complicated process of downsizing these stores and that’s not a straightforward enterprise.

Okay, thanks.

Thank you.

Thank you. That is all the time that we have for questions for today. So I’d like to turn the call back over to David Simon for closing remarks.

Thank you for your questions and your interest, we really appreciate it. And we look forward to talking to you in the future.

Ladies and gentlemen, thank you again for your participation in today’s conference call. This now concludes the program and you may all disconnect your telephone lines at this time. Everyone have a great day.