Simon Property Group (SPG) Earnings Report: Q4 2014...

CompanyName:SimonPropertyGroupIncCompanyTicker:SPGSector:Financial

Industry:RealEstateEventDescription:Q4 2014 EarningsCall

©2014TheStreet,Inc.AllRightsReserved Page1of 22

SimonPropertyGroup(SPG)EarningsReport:Q42014ConferenceCallTranscriptThefollowingSimonPropertyGroupconferencecalltookplaceonJanuary30,2015,11:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

TomWard;SimonPropertyGroup;VP-IRDavidSimon;SimonPropertyGroup;Chairman,CEORickSokolov;SimonPropertyGroup;President,COOSteveBroadwater;SimonPropertyGroup;CAOAndyJuster;SimonPropertyGroup;EVP,CFO

OtherPart icipants

RossNussbaum;UBSSecurities;AnalystMichaelBilerman;CitiInvestmentResearch;AnalystChristyMcElroy;CitiInvestmentResearch;AnalystCraigSchmidt;BankofAmericaMerrillLynch;AnalystPaulMorgan;MLV;AnalystGeorgeAuerbach;CreditSuisse;AnalystAlexanderGoldfarb;SandlerO'Neill;AnalystCarolKemple;HilliardLyons;AnalystTayoOkusanya;Jefferies;AnalystVincentChao;DeutscheBank;AnalystHaendelSt.Juste;MorganStanley;AnalystKiBinKim;SunTrustRobinsonHumphrey;AnalystMichaelMueller;JPMorgan;AnalystLindaTsai;BarclaysCapital;AnalystCaitlinBurrows;GoldmanSachs;AnalystRichMoore;RBCCapitalMarkets;AnalystScottO'Donnell;MetLife;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator:

Goodday,ladiesandgentlemen,andwelcometotheQ42014SimonPropertyGroupearningsconferencecall.MynameisTawandaandIwillbeyourcoordinatorfortoday.

(OperatorInstructions).

Asareminder,thisconferenceisbeingrecordedforreplaypurposes.IwouldnowliketoturntheconferenceovertoMr.TomWard,VPofInvestorRelations.Pleaseproceed,sir.

TomWard(VP-IR):

Thankyou,Tawanda.GoodmorningandwelcometoSimonPropertyGroup'sfourth-quarterandfull-year2014earningsconferencecall.Presentingontoday'scallisDavidSimon,ChairmanandChiefExecutive




Officer.AlsoonthecallareRickSokolov,PresidentandChiefOperatingOfficer;AndyJuster,ChiefFinancialOfficer;andSteveBroadwater,ChiefAccountingOfficer.

Beforewebeginaquickreminderthatstatementsmadeduringthiscallmaybedeemedforward-lookingstatementswithinthemeaningoftheSafeHarborofthePrivateSecuritiesLitigationReformActof1995andactualresultstodiffermateriallyduetoavarietyofrisks,uncertaintiesandotherfactors.Wereferyoutotoday'spressreleaseandourSECfilingsforadetaileddiscussionofforward-lookingstatements.

Pleasenotethatcallincludesinformationthatmaybeaccurateonlyasoftoday'sdate.Reconciliationsofnon-GAAPfinancialmeasurestothemostdirectlycomparableGAAPmeasuresareincludedwithinthepressreleaseandthesupplementalinformationintoday'sForm8-Kfiling.BoththepressreleaseandthesupplementalinformationareavailableonourIRWebsiteatinvestors.Simon.com.ForourpreparedremarksI'mpleasedtointroduceDavidSimon.

DavidSimon(Chairman,CEO):

Goodmorning.Wehadstrongresultstowrapupanexceptional2014.WeopenedPremiumOutletsMontreal.StartedconstructionontwonewPremiumOutletsinstrongandgrowingmarketsofTampaandTucson.WeannouncedourfirstnewfullpricedevelopmentprojectinthelastseveralyearswithTheShopsatClearforkinFortWorth,TexasanchoredbyNeimanMarcus.Andmostimportantly,wecontinuetoproducestrongoperatingandfinancialperformance.

ResultsinthequarterwerehighlightedbyFFOof$2.47pershare.Onacomparablebasis,excludingtheoperatingresultsfromWPGpropertiesintheprioryearperiod,ourFFOperdilutedshareincreased12.3%forthequarteror$0.27yearoveryear.

Asareminder,ourFFOperdilutedshareiscalculatedstrictlyinaccordancewiththeNAREITwhitepaper.Andweencouragetheindustrytoacknowledgetheimportanceofusingthislong-standingmeasurewithoutmodification.

OurfourthquarterFFOperdilutedsharewasimpactedbyapproximately$0.04fromourshareofKlepierre'scostsrelatedtoboththeirbondtenderofferandtheirtenderofferforCorio,aswellasunfavorableeffectsofforeigncurrencydevaluations.

Fortheyearonacomparablebasis,excludingtheoperatingresultsfromtheWPGproperties,thespinofftransactionsandthedebtextinguishmentcharge,FFOperdilutedshareincreased13.9%.Aftertakingintoaccountthespinoffanddebtcharge,webeatourinitialguidanceof2014thatweprovidedtoyoubyanimpressive$0.40.

Wecontinuedtorecordstrongkeyoperatingmetricsandcashflow.Occupancyincreasedacrosstheportfolio.AtourMallsandPremiumOutletscombinedoccupancyendedtheyearatrecord97.1%.Leasingactivityishealthy.TheMallsandPremiumOutletsrecordedre-leasingspreadsof$9.59persquarefoot,anincreaseof16.6%.

CompNOIincreased4%inthefourthquarter2014comparedtoanincreaseof6.1%inthefourthquarterof2013andanincreaseintotalof5.1%.Sowehadanincreaseof4%overanincreaseof6.1%lastyear.Andasareminder,approximately95%ofourdomesticpropertyNOIisincludedinourcompNOIcalc.

Totalsalesinourportfolioincreased2.3%inthefourthquartercomparedtolastyearevenwithmajorredevelopmentoccurringatseveralofourPremierproperties.AsIsaid,weopenedMontrealOctober30togreatexcitement,wecommencedconstructioninTampaandTucson,andtheconstructioninNewJerseywiththeGloucesterPremium--PhiladelphiaPremiumOutletscontinuestomoveforward.

Allofthosewillopenin2015.AndweareslatedtobeginconstructionoffournewdomesticPremiumOutletsin




2015whichincludeColumbus,Ohio;Clarksburg,Maryland;Norfolk,Virginia;andTulsa,Oklahoma.

Nowduringthequarter,evenwithallthatnewdevelopment,wecompletedseveralredevelopmentsincludingtheadditionofNordstromandsmallshopexpansionsatSt.John'sTownCenter,therelocationofBloomingdale'satStanfordShoppingCenter,aswellastheexpansionsatPremiumOutletsinMexicoCityandTokiPremiumOutletsinJapan.

WestartedconstructioninKingofPrussia;weareunderwaywiththeexpansiontoconnecttheplazaandthecourtthatwilladdapproximately150,000squarefeettoPennsylvania'stopretaildestinationandisexpectedtobecompletedinAugustof2016.AndatthePhippsPlazaweareaddinganACHotelbyMarriott,aluxuryresidence,bothexpectedtobecompletedin2016aswell.

ConstructioncontinuesonmajorredevelopmentexpansionprojectsatsomeofourmostproductivemallpropertiesincludingRooseveltField,HoustonGalleria,StanfordandourPremiumOutletsinWoodberryCommon,LasVegasNorth,LivermoreSanFranciscoandChicago.Thesemajorredevelopmentsaretobecompletedinlate2015and2016.

Redevelopmentandexpansionprojectsareongoing,thatisunderconstructionacrossallthreeofourplatformsintheUSandAsiaandhaveatotalcommittedspendof$2.1billion.Soagain,thatisunderconstruction.

Acquisitions,weclosedonJerseyGardensandUniversityParkVillagefor$1.09billiononJanuary15andareexcitedtoincludethesegreatpropertiesintheportfolio.AndbothJerseyGardensandUPVhavesalespersquarefootof$850--perfoot.

LetmeturntoKlepierre,wearepleasedwithourinvestmentinKlepierre.Ournetequityinvestmentisup$850millionevenwiththeweakereuro.Andastheirlargestshareholderweareexcitedforthemas94%ofourCorioshares--ofallCoriosharesweretenderedinsupportofKlepierre'sacquisition.Andoncethemergeriscompleted,expectedbytheendofthefirstquarter,theintegrationofthetwocompanieswillbegin.

Nowlet'stalkaboutourbalancesheet.Weended2014withadebttomarketcapitalizationratioof29%,industry-leading.Ourinterestcoveragewas3.8times,industry-leading.NettoEBITDAof5.4times,industry-leading.Ourlong-termissuerratingofAandA2continuestobeindustry-leading.

Solet'snotlosesightofthesignificantdifferentiatingandpositiveattributeofourbalancesheetascomparedtoourpeergroup.Afewofthecapitalmarketactivities;bythewaythisreplacesRick'slistingoftenants.

Weretired$2.9billionofseniornotesatanaveragecoupon,theywereat5.76%,weissued$2.5billionofnewnoteswithaweightedaveragetermof12yearsandaweightedaveragecouponof3.32%.Weamendedandextendedour$4billionrevolveruntil2019.Weclosed16newmortgageswithaweightedaverageinterestrateandtermof3.29%and8.4years.AndwebecamethefirstUSREITtoestablishaglobalcommercialpapergrowthprogramissuing$400millionofCPataweightedaverageinterestrateof18basispoints.

So,let'sturntothedividend.Weannouncedourdividendthisquarterof$1.40pershare,anincreaseyearoveryearof12%.Wewillpayatleast$5.60individendsin2015,whichisanincreaseof8.7%comparedtolastyearintotality.AndifweincludeWP'sdividendwehavemorethandoubledourdividendsincetheGreatRecession.

Nowlet'sturntoguidance.OurguidanceofFFOis$9.60to$9.70pershare;thisrangerepresents8%to9%growthcomparedtoourreportedFFOpershareof$8.90for2014.OurrangeisbasedoncomparableNOIgrowthofapproximately4%forourMalls,PremiumOutletsandMillsplatforms.

ItalsoassumesnoadditionalacquisitionordispositionactivitybeyondwhatwejustcompletedwithJerseyGardensandUPV.Anditalsoincludestheunfavorableimpacttorecentcurrencydevaluationswhich




shouldapproximate$0.10comparedtothecurrencylevelsthatexistedin2014.

Solet'sconclude.Weproducedanotherexceptionalyearwithourresultsforthefourthquarterandthefullyear2014,beatingguidanceforanunprecedented10plusyearsinarow.Weachievedrecordlevelsinoccupancy,FFOpershareanddividendsdespitethelossofapproximately$1.00pershareofFFOfromWPandthedebtextinguishmentcharge.Andwecontinuetoimproveourportfolioandconsumerandcustomerservicesforthebenefitofstakeholdersandweareveryexcitedabout2015.Wearereadyforanyquestions.

QUESTIONS&ANSWERS

Operator:

(OperatorInstructions).RossNussbaum,UBS.

RossNussbaum(Analyst-UBSSecurities):

IguesssinceI'mfirstyouknowwhatiscoming.Iguessthehonorofaskingyouwhattheheckisgoingonwith[research].


Well,Ithoughtweweregoingtotalkaboutyourheadlinethatsaidmixedbag.Sowhatwasmixedbag?Ourrecordrevenuegrowth,ourrecordcompNOIgrowth,ourrecordbalancesheet,ourrecordoccupancy,ourrecordrentalrate?Iwantedtotalkaboutyourheadlinefirst.Canwedothat?


Wecan--yes,wecanallreadthenote.ButtheguidancecominginbelowtheStreetisanoffsettobeatingforthequarter.Onewouldcallthatperhapsamixedbag.Butwecantalkaboutthatalloff(multiplespeakers).


Ithinkontheguidance--youknow,look,firstofall,thoseareyournumbers,notours.Andobviouslythatispredominantlydrivenbythecurrencydevaluationthat'soccurringbothwithrespecttotheyenandtheeuro.

Thegoodnewsisevenwiththatbecauseofour--atleastourhedgeinEurope,weareup$850millioninKlepierre.So,yes,wearegoingtohavesomevolatility,it'sabout1%ofour--wheretheratesaretodayversuswheretheyareitisabout1%ofourearnings,whichtomeissomewhatimmaterial.

SoIdothinkweneedtoputthatinperspective.Iamnotsurethatshouldhavegeneratedyourheadline.But,youknow,youcertainlyunderstandourposition,Iunderstandyours.


Appreciatethat.So,backtotheelephantintheroom.


Yes.Whatisyourquestion?


AlittleCaliforniabasedmallCompanycalledMacerich,canyou--whatcanyoutellusaboutwhatiscurrentlygoingon?Whatwasgoingthroughyourheadacouplemonthsagowhenyouputouttheannouncementthatyoudid?Whatcanyousayaboutit?





Well,look,asmuchaswe--I'msureyouwouldlovetotalkaboutit,wedisclosedourstakeof--itwas4.1%thengotdiluteddownto3.6%inMacerich.Westillholdthatpositionandatthispointitisreallynotappropriateformetoaddanythingotherthanthefactthatwestillownit.AndthereisnotalotmoreIcansay--actuallyletmetakeawaytheclarifyingstatement,thereisnothingmoreIcanaddtothat.


Youmaynotwanttoanswerthis,butIwillaskitanyway.Iftherewerenothinggoingononemightassumeyouwouldbehappytotellusthatyouownapositioninanothercompany,thatyouthoughtthestockwasundervaluedatthetime.Butifyoucan'tcommentonititwouldsuggestthatthereissomethinggoingonotherthanthat.


Well,look,wenevercommentonM&Aactivity.Andwestillownthestakeand,asyouknow,wearesignificantlyinthemoneyonthestake.Thereisno--therehasbeennoP&Limpactonourstake,asIknowsomepeoplehaveaskedTomthatquestion.Anditiswhatitis.ThereisnothingreallyIcanaddotherthanthat.AndI'msorryIcan't,butthereisnothingmorethatIcanaddtothat.


Allright.Iandmymixedbagwillgetbackinthequeue.


It'sallright.Listen,itisatwo-waystreet;yougiveustome,we'regoingtogiveitbackalittlebitanyway.Thatiswhatyoulikeaboutus.

Operator:

ChristyMcElroy,Citi.

MichaelBilerman(Analyst-CitiInvestmentResearch):

YesitisMichaelBilermanwithChristy.David,letmejusttryjustadifferentangle.Whenyoumadethestatementyousaidyoumayseekawaiver,andyouputthatoutpublicly.Soatleastcanyoucommentonwhetheryou'vemadetheaskforthewaiverandiftherehasbeenaresponse?Andifyouhaven'tmadetheaskwhyhaven'tyou?

Andthenthesecondpartisjusttheintentoftakingthestake.Andwasitsolelyforthepurposeofapassiveinvestmentjusttoyouthoughtyouhadalotofcashhangingaround,sobuysomethingthatyouthink--youcan'tbuyassetsintheprivatemarket,sobuysomethingthatyouknowreallywellthatyouthinkistradingatadiscount,makemoneyandgohome?Orwasitmadeforthepurposeofmovingforwardwithanon-passiveagenda?


Well,Ican't--Rossaskedthequestion,Ican'taddtothatotherthanwehavemanagedtofindinvestments,asevidencedbythelittleover$1billionthatwejustspentinJanuary2015,tobuytworeallygoodassetswithreallygoodgrowthpotentialthatwethinkthisyearwillyieldterrificresults.

I'mstillanold-fashionedrealestateguy,Ilikecurrentyieldgoingin.AndthecurrentyieldgoinginisveryattractivewithonceRickandtheMillsteam,certainlywithJerseyGardens,workstheirmagicIthinkwe'vegotalotofupside.AndnottosaythatIthinkMichaelGlimcherdidagreatjobwiththatasset.




So--butthereisnothing,nothingIcanaddotherthanwhatIsaidtoRossjustearlier,Michael.AndI'msorry,but,asyouknow,itisjustinappropriateformetocommentfurther.

ChristyMcElroy(Analyst-CitiInvestmentResearch):

ItisChristyMcElroyherewithMichael.Justfollowinguponthecurrencyandtheimpactto2015.Youmentioneda$0.10impactembeddedinyourguidance.Howyouarethinkingabouthedgingthatexposurepotentially?Wouldyouexpecttotakeonmoredebttoprovideanaturalhedgeormaybeputinplaceanyotherforeigncurrencyhedges?Justwanttogetasenseforhowthatisrollingthroughthenumbers.

Andthenjustrelatedtothat,Iamwonderingifyouhaveseenanyimpactatallfromthestrongerdollarintermsofachangeintrafficorsalesatanyofyourcentersthathaveahigherinternationaltourismcomponenttothecustomerbase.


Sure,happytoanswerthose.Solet'sjusttalkaboutthenet--weareprettywellhedgedontheKlepierreinitialstake.SowearenotashedgedwithourMcArthurGleninvestment.Theproblem,asyouknow,togettheperfecthedge,andwithratesaslowastheyareintheeuro,youarenevergoingtomakeupthat.

ButIwouldsaygenerallywearereasonablyhedgedintheeuroinkindofthe80%-90%range.Butsincerates--withdebt,butwithratesaresolowthereit's--themathissuchthatitisstillgoingtohaveanimpactonus.

SothegoodnewsthatIseeatleastisthatthebusinessthereisnotnecessarilyreflectingthedevaluation.SoIthinktheconsumerthereisstillshoppinganddoingthat.Andso,it's--Ithinkitiskindofmoreofatemporarything.Butitisgoingtoimpactusfornextyear.Anditiswhatitis.

Thesamethingwiththeyeninasensethatfromabookvaluepointofviewwearebasicallycompletelyhedged.Butagain,theyen'sratesaresolowthereisjustnowaytodoit.

Nowwehavelockedinsomeforwardsonthedividendyields--I'msorry,onthedividendthatwebothgetfromKlepierreandfromJapan.Butasyouknow,weequityaccountforboth.Sothatdoesn'timpact--thatisjustcashflowwhichisimportanttobehedgedoncashflow,don'tgetmewrong.

Butstillatthesametimeitdoes--aswetakeourshareoftheequityincomeinthosebusinesseswearegoingtohaveexposure.Anditiswhatitis.SoIhope--Iassumethatansweredyourquestiononthatfront.

Imeanfromaninvestmentpointofview,bookvalueweareessentiallyhedged,butitisnotgoingtomeanalot.Wearestillgoingtohavesomevolatility.Notfromacashflowpointofviewbutfromanearningspointofview.Doesthatansweryourquestiononthatfront?


[Yes,itdoes.]Thanks,David.


Nowonthesales,look,Ithinkitisveryinterestingbecause--somecommentaryaroundit.WedidseealittlebitofflatteningoutintheFloridaareakindoffirst--asoneinitial,asyouknow,intermsofdevaluationtheLatinAmericancustomerhappenedquickerthansaytheeurodevaluation.Wedon'thaveanyearningsimpactonthat;thatjustmightimpactsales.

Wealso,Christy,asyouknow,weareundergoinghugetransformationalredevelopmentinKingofPrussia,theField,eventheforumshopswearechangingalotofthetenantmix,changingthetransitionhallfrom




Phase1tothePhase3thatisoutonthestrip.

Aswellaswehadthisunusualanomalythatwehadoneretailerthatisinastatethatdoesn'tpaysalestax.Theyhadanextraordinaryamountofsalesin2013thatdidn'trepeatbecauseoftheirownconstraintsthattheyposedfor2014thatalsomayhaveflattenedsalesintermsofhowyouwerethinkingaboutit.

ButIwouldgenerallysayyouputallthosethingstogether,ourportfoliodoeswhat,620afoot.Stillindustry-leading,givensizeandscaleweareaddingtothemix,wearedoingalotofgreatstuff.

SoyouknowhowgenerallyIfeelaboutretailsales,okay.AndyouhaveseenevenwithflatretailsalesgenerallyoverthelasttwoorthreeyearsyouhaveseenourcompNOIincreases,youknowmyargumentonthat.ButatleastIhopethatgivesyousomecolorastohowyoumightthinkaboutournumbercomparedtoothersoutthere.Buttheportfoliohasneverbeenstrongerorbetter.


Iappreciatethecolor.Thanks,David.

Operator:

CraigSchmidt,BankofAmerica.

CraigSchmidt (Analyst-BankofAmericaMerrillLynch):

Iwaswonderingifyoucouldcommentonthetrendoftheoutletsales.


Actuallyweareslightlybetterthanthemallsbecausethemallshadthis--thosekindoftwoorthreethings,Craig,thatIjustdiscussed.AndourPremiumOutletsfrombotha--fromacomppointofviewhadbetterresultsthantheMallbusiness.


Okay,great.Andthenhowfaristhegrown-updevelopmentShopsAtClearforkfromtheUniversityParkVillagethatyoujustacquired?


Howfaralongisit?


Well,howfararetheyfromeachother?


Oh,threemilesorso--threemiles,Rick?

RickSokolov(President,COO):

Yes,aboutthree.


Itisdifferenttradeareas,butIwouldsaythreebecausethereisariverthatrunsthrough,itisoneofthosethings.



©2014TheStreet,Inc.AllRightsReserved Page8 of 22


Okay.AndthenisthereanyfurtherthingsthatyoucoulddowithCostcojustgiventhesizeoftheirprojectbeyondTheShopsatClearfork?


Hi,Craig,it'sRick.Rightnowweareobviouslyfocusedonthefirstphase.Thereareanumberofelementstothatphase.Theydohavesomeadditionallandand,dependingonhowthisgoes,we'dobviouslybeopentotryanddosomeadditionaldevelopment.Butrightnowthefirstphasehasourattention.


Great.Andthenfinallyjust--maybethisisforRick.HaveyouseenwhatyouthinkmightbeachangeinpaceineitherstoreopeningsorstoreclosingsintheMallspacefor2015?


Well,basicallyobviouslywe'vehadtheannouncementthateveryonehasseen.Sothereisalittlemorepressureonsomeclosings.Butconverselyweareatrecordoccupancy,wehavejustcomeoutofourmeetingsinDecemberandwegotalotofmomentuminthebusinessbecausetherearealotofpeoplethatarelookingforspace.

Andwecertainlyanticipatewearegoingtobeabletoholdourmarketshareandthereisalwaysgoingtobethechurningthatwe'vehadhistorically,butwearegoingtobasicallybeabletokeepthingsprettymuchwheretheyarenowintermsofoccupancy.Andeverybodywereplaceisgoingtobereplacedbysomeonewhoismorecreditworthyandmoreproductiveonasalesperfootbasis.


Yes,but,Craig,weclearlyhave--atthispointintimecomparedtolastyear,moreretailersinbankruptcy.Soasyouknowthat--wearenotsurehowmanystoresweregoingtogetback,somehavealreadyannouncedit,soitisreallyclosingstores,someinfactareevenliquidating.

Soweare--Imean,itdoesn'tchangethefundamentalsofourbusiness,but2015isgoingtobealotofworkinre-leasingthoseretailers.Becausedependingonwhenwegetitandhowmuchtimewehavetoleaseituptherecouldbealittlegapthere.


Okay,thankyou.

Operator:

PaulMorgan,MLV.

PaulMorgan(Analyst-MLV):

Yoursame-storenumbershappenbouncingsortofinthe4%to6%rangeoverthepastthreeyearsandyourleasespreadiskindofinthe15%to20%range.Imeanyourguidanceforsame-storewas4%.HowshouldIthinkaboutthatinthecontextofthepastfewyearswheretheaverageissortofabovethat?

Andthenkindofrelatedtothat,whereyou'reatintermsofoccupancy.Isthatwhatyouthinkofasmaybeapproachingkindofafrictionalceilingandwhetherthatcouldconstrainyoursame-storegrowthatall?





Well,Ithink--look,wehavealwaystriedtoberealisticandconservative.Iforget,Steve,whatweannouncedlastyear,whatourcompNOIwas.But4%maybe?

SteveBroadwater(CAO):

4%.


Sowewerefortunatetooutperformthat.So,Paul,wearetakingintoaccount,wedohavemorebankruptciesthisyear.SoIthinkitisappropriateforustobeconservativebecause,asyouknow,wedon'tcontrol--wedon'tgetthespacebackandthenwecanhavedowntimeandsoon.

SoifthereisaconservativeelementtowhatIwouldsay,itisalittlebitbecauseofthe--justthebankruptciesthatwearehavingtodealwithin2015versus2014.


Okay,thanks.Andthenjustmaybeaswethinkaboutinvestments,youhavegot$3billionindevelopments--redevelopmentsatwhatyoutargetasa9%yield.Onacquisitionsthecapratesfortodayarekindofhalfthatfordecentproperties.

Imeanhowdothinkaboutthatspreadbothintermsofkindofevaluatingacquisitions?WhatmakesanacquisitionwhetheritisasingleassetoraportfoliooranM&Adealatamuchloweryieldthanyou'regettingonyourredevelopments?Imeanwhatmakesitcompellingfromyourperspective?


Well,look,thereisnobodybeenmoreactiveinnewdevelopmentandredevelopmentthanwehavebeen.Butitisnot--itisnotlike,oh,let'sjustdoaredevelopment.Thereisalotof--alotthat'srequiredtogetthere.Andthenewdevelopment,wewanttobuildstuffthatisattheendofthedaygoingtofitinthe--certainlyinthetophalfofourportfoliooverthelongrun.

Sothat's--wehaveahellofaportfoliosothatishardtoachieve.Andwearegoingreasonablyquickwhenwegettonewdevelopmentandredevelopment.Andso,atthesametimewearenotgoingtobuyanythingoranybodyunlesswefeellikewecanaddsignificantvaluetoit.

Nowlet'stakeacoupleofrecentexamples.ItisnotbadformynetinvestmentinKlepierretobeup4X,okay,notbad.Andwefeltlikewecouldaddvaluetothatbusinessandthankfullywehave.ThesamethingonthegoinginyieldwiththetwodealsweboughtforGlimcherisaround5,andwethinkthey'reAassets,A+assetsandobviouslywethinkwewillbeabletogrowthose.

Sothatisagreatopportunity.Andlookat--theonethingthatIthinkthemarkethaslostsightofisjusteverybody'sbalancesheetagain.It'slike,forgetaboutit.Ourbalancesheetis--itis5.4EBITDAmultiple,it's3.8%interestcoveragedespitehaving--Istilllookatthose10.75%thatI'vegotoutstandinguntil2019--right,Andy,2019?

AndyJuster(EVP,CFO):

Right.


Westillhaveroomto--dependingonwhereratesaretorollthatdownandeventomakeastrongercoverageratioandbalancesheet.SoImeanwehavealwayslookedateverything,wewilllookateverything;weare




notgoingtochasedeals.Andwhenitcomestoacquisitions,unlesswefeellikewecanaddvaluetothatpropertywithour--eitherourinfrastructureorourleasingknow-how,developmentknow-how,wejustdon'tdoit.


Doesyourleverageandyourbalancesheetadvantages--Imean,doyouthinkofthatasanimportantlevertopullwhenyouarelookingatbiggerdealscapitalizingonthat?


Well,sure.Imeanlook,itledto--let'sjustgobackto2009.Imeanthefactofthematterisintheretailrealestatesectorthereisnobodybecausetheyweresoleveredandwedidsometoughfinancingsincludingequity.ButthereisnobodyinoursectorotherthanmaybesayTaubman,thathasoutgrownwhateverdilution.Andnotonlyhaveweoutgrownit.wejustblewitaway.

EverybodyelseisstilltryingtogetbacktotheirrecordFFOpersharethattheyhadin2006-2007andtheirdividend.Weare--wehaveblownthroughthosedramatically.

Andthatbalancesheetthatwehad,eventhoughwepanickedlikeafewothers,allowedustobeconservativeyetsignalthemarketthatwewerealiveandwell,blowthroughthegrowththatwehad,wehadayearortwoofflatnessorastepbackwherewewereabletousethattofindgoodinvestmentsthathavefueledourgrowth.

SoIwouldhopeevenincapitalrichtimeswewereabletodothataswell.Butit's--weareprettyconservative,wedon'twanttoblowthebalancesheet.Asyouknow,mybackgroundintherealestateworld,besidesbeinganM&Abanker,whichwasoutsideofrealestateandinallsortsofindustries,wasdirectlyinvolvedinrestructuringrealestateworkouts.

Anditisn'tanyfunandwearenevergoingtogetthere.Sowehaveagreatasset,we'veworkedhardtoachieveit.Andit--it'sagreatthing,butyoucan'ttakeitforgranted.


Great,thanks.

Operator:

GeorgeAuerbach,CreditSuisse.

GeorgeAuerbach(Analyst-CreditSuisse):

JusttofollowuponChristy'squestion.David,haveyouquantifiedtheimpactofredevelopmentatKingofPrussia,Fields?AndIforgettheotherassetyoumentioned--butjustsortofwhatthathasdonetotheoverallsalesgrowth.Tryingtothinkaboutyourportfolioonamorenormalizedleveladjustingoutsomeofthenoise.


Look,yes,IamnotmakingexcusesandyouknowhowwehaveallhadthisdiscussionaboutourtenantsalesandhowIthinkaboutit.Butifyoutaketheseanomalies,Iwouldsaygenerallywewouldbearound4%ish.Butagain,ournumberisournumber.Andyouknowhowmanagementfeelsaboutit.

Iappreciateyoumayhaveadifferentpointofview.Wehavenothingtohideor--wehadafewanomalies,wearenotmakingexcuses,wewillacceptbeingdingedonitifyouwant.Butthereisalotoftransforming,wedohaveexposuretocertainmarkets,Braziltakesalittlebreatherandwehadthisstrangethinginastate--I




meanI'mgivingyouenough.Butwetendnottotalkaboutspecificretailers.

Butyoucouldfigureitoutwithastatethatdoesn'thavesalestax.Anditiswhatitis.SametimewedoFFOpursuanttothewhitepaperthenumberisthenumber.Wepointedoutthe$0.04onlybecausewethoughtmaybethemarketdidn'tknowthatwehadtopickupourshareofKlepierre'stransactioncostsassociatedwithbothtendersaswellasthecurrencydroppedprettyprecipitouslyquarteroverquarteroflastyear.Sowethoughtitwasimportanttodoit.Butthenumberisthenumber.


Well,no,IwasaskingbecauseintheMacerichAnalystDaytheymentionedthatIthinktherewerethreebigredevelopmentstheyhadthatloweredtheirsame-storegrowthonthatwholeportfolioby100basispoints.SoIknowoneortwoassetscanreallymovethenumber.ThatiswhyIwasasking.


Yes.No,no,itisalegitimatequestion.Iwastalkingmoreabouttenantsales.OnourcompNOItheyareallinournumber.SoallofthosethatIhavetalkedaboutareinit,eventhoughwearetakingsomeimmediatestepbacksasweredevelopit.Sothosereallyaren'taffectingourcompNOI,atleastthoseassetsthatItalkedtoyouabout.


Right.AndIguessjustthelastoneforme.YouandtheBoardhaveincreasedthedividendprettymeaningfullyoverthelastcouplequartersatapaceaboveFFOgrowth.Iguessastheredevelopmentspendmaybetapersoffinto2015and2016shouldweanticipatethatthedividendgrowthwillcontinuetooutpaceFFOorAFFOgrowthfortheforeseeablefuture?


Yes.Look,ourtaxableincomehasgotalotofvariability.Weare--asyouknow,wepaidout100%ofourtaxableincomelastyear.Andwe--Ididunderline--Ihopeyousaw,thatatleast[560]--Iwillunderlinethat,thatisatleast560orso.Theanswerisourtaxableincomeisgrowingsignificantlyasourearningsare.Andso,itisveryconceivablethatthatcouldbeanoutcomeofthat.


Great,thankyou.

Operator:

SteveSakwa,EvercoreISI.We'llmovetothenextquestion.AlexanderGoldfarb,SandlerO'Neill.

AlexanderGoldfarb(Analyst-SandlerO'Neill):

Anditis--IknowyouarenotcommentingontheMacerich,butitisinteresting.Themarketischeeringyouguysandyourstock'soutperformance.Soclearlythemarketseemstobesuggestingthatitwantssomethingtohappen.

JustasfarasMacerichintheguidance,Andy,areyousayingthereisnoimpact--thewayyouareaccountingforitthereisnoimpacttothe2015numbersorweshouldbepickingupsomething?


Noimpact.





Okay.Okay.Andthen,David--.


Letmedoclarifythat.We--letmejustclarifythat,theydopayusadividend.Sowedohavethedividendincomeinournumbers,okay.


Okay.


Butobviouslyit's--themovementupanddowngoesintocomprehensiveincomeorloss,inthiscaseit'sincomebecauseitisup.ButthatisnotanFFOnumber.So,andtheonlythinginourFFOguidanceistheirdividendincome.Okay,Alex?


Yes,thatisright.IJustwantedtomakesurethatthat'sthewayyouareaccountingforit.

Thenextthing,David,isrightaftertheworldwokeuptoloweroilafterThanksgivingyouannouncedtwoprojectsdowninoilcountry.Sojustsortofcuriouswhatyouguyshave--obviouslytenantdemandwasunaffectedbyit.

Soshouldwejusttakeawayfromthisthattheretailersareunfazedbythedropinoilandtheyjustseecontinuedstrongsalesdowninthosemarkets?Orisyourviewthatmaybesomeofthetenantswhoinitiallyindicatedthattheywouldbeinterestedinbothoftheseprojectsmaystarttohavesecondthoughts?


Well,theHoustonGalleriahasbeenunderconstructionforquitesometime--welloverayear.So,butTexasitselfissodiversifiedthatitusedtobe20plusyearsago--20plusyearsagoitwasoilandbasicallyrealestate.

Todayitistech,it'sHoustonisverydiversified,obviouslyoilandgasisimportant.Butit'sgotthemedical--it'sgotmedical,themedicalfocus,alltheuniversities.AndDallas-FortWorth--that'slessandlessorlinkaskcompletely,thatismore--.

Sotheansweriswedon'tthinkitwillhaveanyimpact.FortWorthweareexcitedaboutbecauseNeimanMarcusisobviouslyhugeinthatarea.TheyarerelocatingfromonemalltothistobetheirflagshipstoreinFortWorth.Andwethinkthedemandforthatisgreat,noissuesinHouston,Galleriawhichisoneofthetopfivecentersinthecountry.Andsowhenyouputitalltogetheritisreally--longrunthereisnoissueatall.


Okay,andIguesssameappliestoTulsa?


True.


Okay.Andthenfinalquestionis,asyouguysstarttodomoreofthesemixuseorataddeddensitytosomeof




theprojects,someofyourmalls,howdoyouunderwritetheprojectsas,yes,thereisareturnfromobviouslyaddingapartmentsoraddinghotelsandthenthereishopefullytheadditionalreturnofjustaddedtraffictothemallthatallowsyoutodrivehigherNOIandcashflows.

Soifwethinkaboutthereturnsasyouguyspenciloutdensifyingsomeofthesites,howshouldwethinkabouttheincrementalreturnfromjustboostingNOIversusjustaddinganadditionalusetoacenter?


Hi,thisisRick.Basicallywhenweaddanapartmentorahotel,thosestandontheirown.Itisaseparateanalysis.Ifthereissomeincrementalbenefit,great.Butwedonottheoreticallycreateanykindofincrementalreturnbasedonaddingmoremassordensifyinganasset.


Okay.So,Rick,istherelikeanincrementalthatwecanexpectoryouguysexpectoryoudon'tunderwritebutanyway,shapeorform?


Wedonotunderwritethat.


None.Zero.Don'tgivemyguysanyideas.


Tosandbagthenumbers?Neverwouldcrossourminds.


No,no,no,don'tgivemydevelopmentguys--youknow,whentheycomeinandtheywantaprojecttoprove,don'tassume--theywillcomeinandsay,itisgoingtodothistothemall,weshouldimprove--no,forgetit,itdoesn'thappenthatway.


Okay,thanksalot.

Operator:

CarolKemple,HilliardLyons.

CarolKemple (Analyst-HilliardLyons):

HaveyouallnoticedanychangewithinthelastthreemonthsinyourconversationswithSearsandJCPenney'saboutbuyingsomeoftheboxesback?


No.


Okay.Andthenarethereanynewconceptsthatarecomingintoyourmallsoroutletcentersthatyouareexcitedaboutthatyoucanshare?





Well,herewegoagain.Allright,so,Rick,thisisRick's--helovesthispart.So,Rick,lethergo,okay,herewego.Hereisthelist.


Unleashingthefury.IntheOutletsectorevery--literallyeverymonthwearefindingmoreandmoreretailersthatunderstandthatthisisaveryvaluableandprofitabledistributionchannel.AndsoJeff,AllisonOlivia,CitizensWatch,JonathanAdler,Helzberg--literallywecouldgoon.ButtheansweristhereisagreatdealofnewentrantsintotheOutletsector.

IntotheMallsectorwearedoingstuffwith(inaudible),[DavidT.],wearedoingNYXisanewconceptfromL'Oreal.UNIQLOisveryactivelylooking.Andinterestingly,itislostinthesauce,butLBrandsisdramaticallygrowingPinkandVictoria'sSecret.Sothereisalotofverygooddynamicdemandforourproperties.


Okay,thankyou.

Operator:

TayoOkusanya,Jefferies.

TayoOkusanya (Analyst-Jefferies):

Iwouldliketokindofgobacktothe2015guidanceand,again,thepointofguidancerelativetowhereconsensusis.Itsounds,basedonyourcomments,it'sabout1%ofearningswhichisabout$0.09to$0.10thatisFXrelated.

ButIamwonderingwhatelseisinguidancethatmaybewearenot--maybetheStreetisnotfullyappreciatingwhichiswhyournumbersseemalittlebithigh?Isit,again,someoftheworkingthroughofsomeoftheretailbankruptciesthathavehappenedthatmay--?


Yes,Ithink--Idon'tknowwhatyourcompNOIis.AndIalsothinkalotofithastodowithmaybehowyouarefactoringinourdevelopmentspend.Becausemostof2015andalotof2016isbackendweighted.Soyouhavegot--wehavegotoursharearound2.1.Sothatwouldreallybethe--thatwouldbeouronlyotherguess,butI'msureTomcanwalkyouthroughhowyoudoit.

ButmaybeyouhavealittlebithighercompNOI.Imentionedweareconservativeonthatnumberbecausewearelookingatalittlebithigherbankruptciesthanwelookedatlastyear.Weobviouslyalwaystrytodobetter.Butourdevelopmentspendtendstobebackendweighted.Sodependingonhowyoufactorthatin.Andthenobviouslythecurrencydeltafromtheyenandtheeuroisaround$0.10from2014to2015.Soyouadditupanditiswhatitis.


Gotit.Andcouldyoujusttalkaboutin2015guidancewhataverageoccupancyisbakedintothosenumbers?


Prettyconsistentwithwhat2014showed.





Great,okay,that'shelpful.Andtheninthesupplementalwhenwejusttakealookatthedevelopmentpage,theOutlet--theyieldontheOutletbusiness,ontheOutletdevelopmentisupto11%versus9%previously.Isthatjustamixchange?


Yes,MontrealwasalittleloweryieldandTampaismuchhigher.Tampawethinkwillbeagreatoutletcenter,oneofthe--attheendofthedayoneoftheleadingoutletcentersinthecountry.Andabsolutelyisthatmixchange.


Great.AndthenlastlywithJerseyGardens,justcuriouswhatyourthoughtsareinregardstowhatNOIgrowthcouldlooklikeoncerentsstarttoresetforalotofthetenants?


Look,wehave--thisisRick,wehavealreadysetthebaselineoverallonourNOIgrowthandJerseyGardensshouldbeinexcessofthatoncewestartdoingwhatwethinkcanbedonethere.AndasDavidsaid,theydidagreatjobbefore;wearejustnowtakingittothenextlevelandallocatingspaceandbringinginincrementalmoreproductivetenantsthat'sgoingtodriverentandsales.


Thatisveryhelpful.Thankyou,gentlemen.

Operator:

VincentChao,DeutscheBank.

Vincent Chao (Analyst-DeutscheBank):

JustmaybethinkingaboutthecompNOIguidanceslightlydifferently.Justaswethinkaboutthe4%versusthe5.1%andalsoinlightofthecommentsabouthigherlevelsofbankruptcies.Iguesswhatwould--andhowmuchofthehigherlevelofbankruptciesissortofthedifferencebetweenthe5.1%andthe4%?


Welllook,again,wearefactoringthatin.AndlikeIsaid,lastyearwehad--ourbusinesshasacertainlevelofvolatilitytoit.Notalot,becausewedon'thavetogosellallourproductatthestartofeveryyearlikealotofothercompanies.

Sobecausewehavemostlycontractualrentsthebigvariabilityisunanticipatedbankruptcy,thetimingofwhichthatoccurs,whenwegetitandthenhowlongittakesustoleaseitup.SoIsaidlastyear,SteveBroadwater,weprojected,whatwasourNOIprojection?

SteveBroadwater(CAO):

4%.


4%,wegot5.1%.Soagainwearefactoringthatin.Wewillsee.Obviouslywehavegotvariabilitytosomeextentmarginallyonexpensesandwehavecertainvariabilityonoveragerent.Andwehavealonghistoryofkindofmodelingthat,butitdoescreatesomevariability.




Wealsohavealotofredevelopmentworkwherewearenotnecessarilytakingoutacomp.ThetakeprojectslikeRooseveltFieldandKingofPrussiaandthose--wearemovingalotoftenantsaroundintheForumshops,wehavegotCopley.IthinkCopleyifIrememberfromourbudgetsessionsisgoingdown$2millionthisyear,reallypissedmeoffinourbudgetmeetingsbecauseweareretenantingtoabettergroup.

Butthatisthenature.Yougottoretenant,yougottoimprovethemix.Whenyouarebringinginabettertenanttheyhavealongerbuildout,allofthattakestime.Sowehopetodobetter,itisnottooshabby.Wemoveon.


Okay,thanks.AndthenjustoneotherquestionontheFX,IapologizeifImissedit.The$0.10headwind,whateurorateandyenrateisthatbasedon?


Youknow,itisbaseduponourviewofitoveraperiodoftime.So,butthisisreallyincomparisonto2014.


Okay,thankyou.

Operator:

HaendelSt.Juste,MorganStanley.

HaendelSt .Juste (Analyst-MorganStanley):

Soafewquestionsforyou.First,David,onKlepierre,IwascuriousifyoucouldhelpgiveusabroadsenseofthemagnitudeofupsideyouthinkyoumighthavethereperhapsintermsofpercentageofG&Aexpense,portfolioupgrading,closingevaluationgapwith[Univie],justcuriousforyourthoughtsthere.


Well,itisbetterthatmanagementteamtheredoesthat.ButIwillsaygenerallyjustfrommyperspectiveweare--theyhavedoneareallygoodjoboverthelastcoupleyearswithourstrategichelptocontinuetomoveintherightdirection,smaller--reducethesmallerassets,focusmoreonthebiggerones,upgradethemarketingtenantmix,etc.

IthinkCoriohasgotabetterportfoliothanalotofpeoplethink.TheintegrationthereisalittlemorecomplicatedthanitissayintheUSwhenitcomestointegrationbecauseoftherulesoutthereandIwon'tboreyouwithallthetechnicalitiesaboutit.

ButIthinknet-netoveraperiodoftimethereisgreatupsideinrunningabetter,moreefficientCompanywith--aftertheCoriomergeriscompleted.AndIwouldexpectthatthatgapwouldcontinuetonarrow,whichithasdramatically,butwillcontinuetonarrow.

AndlikeIsaid,ImeanIamnot--themostimportantthinginallofthisisgreat,butareyoumakingmoney?Ournetinvestmentisup$850millionin2years,2.5years.Maybeisit3years--maybeitis3yearsnow,okay,so--I'msorry,it's3yearsnow.So--andIstillthinktheyhavegotupsidetomoveforward.


Appreciatethat.AndfollowinguponIguesssomeoftheearlierstrongerdollarquestions,clearlymakesyourpurchasingpowerbetteroverseas.Wonderingifthatperhapsmightmakeyoumoreperhapsaggressivelyinclinedonexpandingyourinternationalportfolio.





Weonlywanttodoitifwethinkwecanmakemoney.SoIhavenodesiretoexpandinternationalunlesswethinkitisaprofitopportunityforus.


Fairenough.Andthenlastone.Wonderinghowmuchofyourenergycostsarevariable.Justtryingtogetasenseofiftherecouldbeapositiveimpacttomargins.


Notreallybecausewetendtochargethattothetenants.Andsowejustpassonthatsavingstothem.Tosomeextentthesharethatwepayforourselveswillhaveanaddedbenefit.Soitisnotoverlymaterial.


Okay,thankyou.

Operator:

KiBinKim,SunTrustRobinsonHumphrey.

KiBinKim(Analyst-SunTrustRobinsonHumphrey):

Sojustturningtoyourexpenses,ifIlookatthetrendjustinoperatingexpensesasapercentofyourrevenuehasbeentrendingdownforaverylongtimewhichhashelpedobviouslyyourexpenserecoveriesandwhatnot.

Andjustcuriousisthisatrend--Imeanitishardtoimagineitgoingmorefavorabletowards--versustheperhapsrunrate.Butgivenlikerisingexpensesandrisingtaxesdowe--wheredoyouthinkthissettlesout?Andhowdoesthatimpactyourexpenserecoveriesgoingforwardandmaybeshouldweexpectsomekindofreversiontothemeanatonepoint?


Well,Ithinkwearealwaystryingtoimproveouroperatingmargins.Soeveryonceinawhiletherewillbemodestchangesfromyeartoyear.Obviouslyin2009recessionwetookaverytoughfewofthat.NowwearestillgettingthecompNOIlikegrowtheventhoughwearelessfocusedonthatlikewewerein2009--Ishouldn'tsaylessfocused,butwearenotas--wearenottryingtowringeverynickeloutofit.

Wealsohavemarketingexpenses,customerrelations,consumerrelationsexpensesthatwearefocusedondoing.Sotherewillbeyear-to-yearvariabilitytoit,butwearestilltryingtoimproveit.


So,ifI--maybeIcanaskitinadifferentway.For2014youendedwithabout32%-33%operatingexpensesasapercentofrents.Inyourguidanceareyouimplicitlymodelingthatstaysflatorimprovesorrevertsback?


Well,relatively--relativelythesame.


Okay.



©2014TheStreet,Inc.AllRightsReserved Page18 of 22


Relativelyflat.


Andjustlastquestion.Howdoyoucomparethequalityof--andIknowthereisdifferentregions,butKlepierrewithCorioversusaMacerich?howwouldyoudescribethequalitybetweenthosetwoportfolios?


Well,that'sagoodone.Iwouldsayitishardto--itishardtonecessarilycompareonetothenext.InEuropethesupplyanddemandisreasonablyfavorable,butontheotherhandtheUSisreallycaughtuponthatfrontbecausetherehasbeen--asweallknownonewreallyfullpricedevelopmentforanumberofyears.

SotheoccupancycostsarealittlehigherinEuropethantheyare--foraretailerthantheyareintheUS.ButIdon'tknow,Iwouldhavetogivethatalittlebitmorethought.Idon'tnecessarily--Ilookatitmoreinthatspecificmarketasopposedtoonecountrytoanothercountry.Itisalittletoughercomparisontodo.Butletmegiveitsomethought.


Yes,ImeansothereasonIaskthatiswhenyouhaveyourchoicesofcapital--wheretodeploycapitalandyouhaveMacerichtradingat4.5%,andIknowifyoutakeitfurtherthereisprobablysomeoperatingmarginyoucanpulloutofitifyoudidtakedownthewholeportfolio.

AndwhenIcomparetomaybeaKlepierrewithCorioonquality,withthatportfoliotradingatmaybea5%caprate--andthisisjustroughmath,bytheway--orhigher,howdoyoumakethatrelativecomparisonintermsofwheretodeploythatcapital?


Wellyouhavegotto--Imeanthemostimportantthingisyou'vegottoriskadjust.Andyoudon't--intheUSyoudon'thavecurrencyrisk.Soasyoucansee,nooneisreallyhappyaboutourcurrencyrisktoday.SoIamnotoverlyworriedaboutit,butitis--wedohavealittlebitofrisk.

TheUSisasafer--weshouldgetahigherreturnwhenwegooutsideofournaturalborders.Itisslightlyhardertounderwrite,itisalittlemorecomplex,therearemorerulesandregulationstodowhatyouwant.Andwe--eventhoughwehavehadaprofoundimpactonKlepierre,weknowUSinvestingbetterthanweknowoutsideUSinvesting.

SoyoucertainlywouldwantahigherreturnanywhereoutsidetheUSforthoseandotherreasons.SoIdon't--soitgetskindof--inyourquestion,you'vegottofactorthatintoit.Nowtheratesthereare--theratestherearereally,reallyattractive.Soifyoucantakeintoaccountthehigherriskadjustedrateofreturnyoumayhavebetterinvestmentopportunity.

Butatthispointwedon'tlookatamutuallyexclusivetheUSorEuropeorAsia.Weliketolookateachindividualideaorinvestmentonitsownandthenstresstestitwithourcorporateopportunitiesandourowninternalopportunitiesandseewhatitmeansforourbalancesheetandourmanagementbandwidth.


Okay,thankyou.

Operator:




MichaelMueller,JPMorgan.

MichaelMueller(Analyst-JPMorgan):

Justaquickone.WhatsortofyieldareyoulookingatfortheClearforkdevelopment?AndisthereanyupdateonanythoughtsandplansfortheOysterBaysite?


Clearforkwillbe--itisnotyet--ithasn'tstartedconstruction,butwewilloutlinethatonceweputitintoservice.Soitisnotinour8-Kyetbecausewehaven'tactuallystartedconstruction.Wearegetting--it'sgoingtohappen,butwearefinalizingourcostnumbersandtheleasingplanandallthatanditshouldstartinthenexttwomonthsorso.

Sothereissomegradinggoingononthesitenowbut--sowewillletyouknowonthat.Butitwillbeattractivevalueenhancingreturn.AndyourOysterBay--OysterBayIthinkwillbeaveryactiveyear.Wehaveanunbelievableplanandvisionofwhatwewanttodowiththeproperties.

Weareworkingnowwiththevarious--thetownandthevariousagenciesaboutgoingthroughtheapprovalprocess.Iamsureyouwillseemoreofthatthisyearasitcomesout,butwehaveactuallydevelopedaplan,averyuniquelifestylemixedusecenterthatwethinkwillhavegreatappealtousfinanciallyaswellasallofthecommunitygroupsthere.

MichaelMueller(Analyst-JPMorgan):

Okay,great,thankyou.

Operator:

LindaTsai,Barclays.

LindaTsai(Analyst-BarclaysCapital):

Howwouldyoucharacterizeholidaysalesoverall?Doestheoutcomesaymuchtoyouabouttheunderlyingstrengthoftheeconomy?Andthenalsointhecontextofrecentstoreclosureannouncements,Irealizealotoftheseretailerswerealreadystruggling,buthowmuchofanimpactdidtheholidayseasonhaveorweretheylikelytocloseanywayinyourview?


Ithinkonthelatterquestion,the[ark]oftheretailersthathavealreadyannouncedbankruptcyorclosingswasreallybeyondagivenquarterandagivenresultintheholiday.Theyhavebeenstrugglingforanextendedperiodoftime.

Intermsoftheholidaysales,insomeplacestheywerestronger,somethestrongerretailersreportedbettersales.Buttherewerealargerpercentagethatwereweaker.Butoverallistheeconomystronger?Itis.Istheloweroilandgaspricesputtingsomeincrementaldisposablemoneyintheconsumer'spocket,itis.Confidenceisup.Sooverallthemacrofactorsareencouraging.

LindaTsai(Analyst-BarclaysCapital):

Thanks.

Operator:

CaitlinBurrows,GoldmanSachs.




Cait linBurrows (Analyst-GoldmanSachs):

Ifyoucouldjustcommentonyourcapacityandinterestinissuingmoreeurodenominateddebtgiven(inaudible)isat0.3%.


Yes,goodquestion.Ithinktheansweriswearegoingtoseriouslyconsiderit,right,Andy?


Yes,absolutely.Wealwayslookatbothcurrencies.Rightnowwecouldissue10-yeareurodebtatunder1.5%,significantlyunder.Sothat'ssomethingwewilllookat.Andthebasisplayhasbecomealotmorefavorableinthelastcoupleofmonths.


Okay,great,thanks.Andthenalsojustacknowledgingthatyouhavealreadyspunoffyourlowertier(inaudible)withintheportfolioyouhavenow.Couldyoujustdescribeanydifferencesbetweentenantproductivityandyourtop-tierversuslower-tiercentersandalsotenantinterest?


Withinour--theexistingSPGportfolioafterspin?


Thatiscorrect.


Iwouldsaynotdramaticallydifferentintermsoftenantdemand.Imean,sure,thetop20centersalwaysaregoingtohavesomewhatmoredemandthanthenext20.Butgenerallynothing--nogreatvariationthere.


Okay,great.Thanks.

Operator:

RichMoore,RBCCapitalMarkets.

RichMoore (Analyst-RBCCapitalMarkets):

IwantedtojustmakesureIunderstood--theredevelopmentpipelineyouguyshaverightnowisprettymuchcompletedin2015and2016.Butthenasyoulookforwardwhatkindofannualspendinredevelopmentdoyouthinkyouwillhaveasyougooutto2017,2018,etc.?


Well,Rich,the2.1isdirectlyfromour8-K.Andthatisonlyprojectsthatareactuallystartedandthencorporatelyapprovedthroughourapprovalprocess.So,forinstance,itdoesn'tincludeClearforkyet,itdoesn'tincludeOysterBay,itdoesn'tincludeCopley,itdoesn'tincludeawholehostofotherdeals.

Sothenumberthatwehavekindofsaidgenerallyisaround$1billionayearfortheforeseeablefuture.AndIstill,Rich,wouldgenerallysaythatisprobablyaprettygoodnumber.





Okay,good.Soyoufeelcomfortablewiththat,thatisgreat.Thankyou.AndthenIalsowantedtoaskusuallyearlyintheyear,maybebythemiddleoftheyear,you'veprettymuchcoveredalotoftheleasing,Rick,thatisgoingtohappenfortheyear.So2015bymiddleoftheyearwouldprettymuchbehandled.

AndIamcuriouswithoccupancyashighasitis,isthatmovingup?Imeanareyoudonewithmoreleasingatthispointintheyearfor2015thanyoumightnormallybe?


Weareaheadthisyearoverlastyear.Weareabout65%throughourrenewalsin2015.Andwehaveobviouslymadeamajorfocusongettingasfaroutaheadofitaswecansowecanberesponsive.Andbecauseouroccupancyishigherthosetenantsthatarelookingforspaceunderstandthatiftheydon'tcommitsomeoneelseisgoingtogetthespace.Sothatobviouslyisalsoencouragingpeopletoacceleratetheirdecision-makingaswell.


Okay,good,gotyou.Sonormallythistimeofyearyouwouldbemaybehalfdone,somethinglikethatorless?


Yes.


Okay.Allright,good.Thankyou,guys.

Operator:

ScottO'Donnell,MetLife.

Scot t O'Donnell(Analyst-MetLife):

Youguyshavebeenagreatstewardofthebalancesheetforbondholders.IguessIhavetoaskthequestion,whythecommercialpaperprogram?Howdoesthatmakesensefromastrategicstandpoint?Andcanyouexplainthestrategyaroundexposingyourselftotheshort-termmoneymarkets?


Well,Scott,it'sAndy,wegobackalongtime,asyouknow.Wehavegota$70billionequitymarketcap,itislessthan1%ofourtotalmarketcapandithelpsus--oneofthethingswearelookingatisaswesignificantlywanttorolldownourdebtcostwehaveahugeopportunityoverthenexttwoyears.

Asouraverageinterestrateisabout5.65%onthe$5billionofdebtthatcomesdue,itallowsustolookatpotentially,one,preparingsomeofoursecuredebtwherewecanborrowatwasit15to16basispointsandthereisabsolutelynorisk.

Italsodiversifiesourinvestorbase,wehavehadsignificantstronginvestorsandthereisreallynoriskbecauseitislikeintheoldendays,asyouknow,whenweusedtohavethebanksbidonacompetitivebidlinenowwejustreplacethatwith,asyouknow,commercialpaper.

Andtheregulationsinthemarketisfar,fardifferentthanitwas5,10yearsago.Sowehadnoproblem.WestartedinOctober,thereweresomevolatilemarkets.Wehadabsolutelynoproblemrollingoveranyofour,ifyouwould,europaperorourUSDpaperandit's,again,somethinginasmallwaythatwearegoingto




continuetodoandtobeproactiveandopportunistic.


SoIgetthat.SoyouareviewingitmorefromatransactionalflexibilitystandpointratherthanastrategicpartofyourcapitalstructurebecauseIthinkwehavetalkedovertheyearsaboutthis.Youguyshavelong-termassetsandyoutendtowanttofundthemlong-term,right?


Yes,absolutely.Andthatiswhywesignificantlyincreasedouraverageweightedtermaswereducedtherateandwillcontinuetobethecase.


Okay.


Thankyou.


Ithink,anyotherquestionsoperator?


Atthistimetherearenofurtherquestions.


Thankyou,ma'am.Thankyou,everybody,haveahealthyNewYear,aHappyNewYearandwewilltalktoyousoon.

Operator:

Thankyouforjoiningtoday'sconference.Thatconcludesthepresentation.

Allrightsreserved(c)2014TheStreet,Inc.

Pleasefeelfreetoquoteupto200wordspertranscript.Anyquoteshouldbeaccompaniedby"ProvidedbyTheStreet"andalinktothecompletetranscriptandwww.thestreet.com.Anyotheruseormethodofdistributionisstrictlyprohibited.

THEINFORMATIONCONTAINEDINEACHWRITTENORAUDIOTRANSCRIPT(the"TRANSCRIPT")ISAREPRODUCTIONOFAPARTICULARCOMPANY'SCONFERENCECALL,CONFERENCEPRESENTATIONOROTHERAUDIOPRESENTATION.THETRANSCRIPTSAREPROVIDED"ASIS"AND"ASAVAILABLE"ANDTHESTREETISNOTRESPONSIBLEINANYWAYNORDOESITMAKEANYREPRESENTATIONORWARRANTYREGARDINGTHEACCURACYORCOMPLETENESSOFTHETRANSCRIPTSASPRODUCED,NORTHESUBSTANCEOFAPARTICULARCOMPANY'SINFORMATION.

THETRANSCRIPTSAREPROVIDEDFORINFORMATIONALPURPOSESONLY.THESTREETISNOTPROVIDINGANYINVESTMENTADVICEORENDORSINGANYPARTICULARCOMPANY.

Date post:	09-Sep-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

Simon Property Group (SPG) Earnings Report: Q4 2014...

Documents