Good afternoon ladies and gentlemen and thank you for standing by. Welcome to today’s Macerich Company Fourth Quarter 2016 Earnings Conference Call. As a reminder today’s conference is being. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be provided at that time. I would now like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Thank you everyone for joining us today on our fourth quarter 2016 earnings call. During the course of this call, management may make certain statements that may be deemed forward-looking within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to the 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. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC which are posted in the Investor section of the company's website at www.macerich.com. Joining us today are Art Coppola, CEO and Chairman; Tom O'Hern, Senior Executive Vice President and Chief Financial Officer; Robert Perlmutter, Senior Executive Vice President and Chief Operating Officer and John Perry, Senior Vice President, Investor Relations. With that, I will turn the call over to Tom.

Thank you, Jean. The fourth quarter reflected continued solid operating results as evidenced by the strength of most of our portfolios key operating metrics. FFO was $1.17 per share compared to $1.12 for the fourth quarter of last year. For the full year FFO per share was $4.07, which was at the midpoint of our initial guidance after factoring in the dilutions from the Capitola sale, which was not part of our original guidance. Same-center NOI in the fourth quarter excluding straight lining rent and SFAS 141 income was up 2.1% compared to the fourth quarter of last year. The decrease in this growth rate compared to earlier in 2016 as discussed on the last call was expected due to the occupancy losses from tenant bankruptcies and the tough comparison of the fourth quarter of ‘15 which grew to 6.4% clip. Same-center NOI for the year was at 5%, which is up the top 10 of our guidance range. Gross margin on a same-center basis for the quarter were 70.5% down from 70.9% in the fourth quarter of ‘15, occupancy declines were the primary reason for that decline, full year 2016 gross margin was 69.7%, up 45 basis points from 69.25% in 2015. The CAM expense recovery rate including joint ventures of pro rata was at 95% from 2016 and that was down from 103% in 2015. A significant factor in that decline in addition to the occupancy losses was the change in the portfolio of composition in 2015, which included the full year impact of the new Tysons Corner Hotel, Tysons Apartment Tower Tysons Office Building all of which incurred significant operating expenses and have no related recoveries. We expect the recovery rate of 2017 to be similar to 2016. If you look at the recovery rate for 2016…

Thanks, Tom. Leasing within the Macerich portfolio generated solid fourth quarter results capping a productive year in 2016. Our trailing 12 month leasing spreads increased to 17.7% from the third quarter rate of 16.1%. The increase in spreads was generated with above average performance at the higher productivity centers. Average rent for lease signed during the trailing 12 month period was $56.57 per square foot, up marginally from the third quarter. During the fourth quarter a total of 962,000 square feet of leases were signed. This represented a 20% increase from the previous quarter. This increase was primarily the result of a number of large renewal packages completed in the fourth quarter. The average term for leases signed in the fourth quarter was 5.2 years. Occupancy at the end of the fourth quarter was 95.4%. This represented a 10 basis point increase on a quarter-over-quarter basis. And our temporary occupancy ended the fourth quarter at 5.2%. As we’ve talked in the past occupancy at the centers continues to be impacted by bankruptcies and early lease terminations. These bankruptcies often present opportunities to secure more productive and more contemporary tenants that will generate higher sales productivity and increased revenues in the coming year. They do however cause some short-term vacancies of the properties. Our portfolio sales ended 2016 in $630 per square foot. This represented a 0.7% decrease on a year-over-year basis. On a same center basis in 2016 sales were $650 per square foot and this represented a 1.1% increase for the year. Fourth quarter sales were supported by a strong December when total sales increased by 1.7% and comparable sales were up 2.1%. Recently, The Limited and Wet Seal declared bankruptcy and announced they will liquidate their remaining store locations. Within our portfolio we have 15 stores with The…

Thanks Bob. Thanks Tom. As you can see from our report, all over operating fundamentals remain extremely solid, as they have over the past year and our outlook on all of our fundamentals for the upcoming year remain extremely solid. With the past year as I think about what we've accomplished, we've come a very long way, the game plan that we outlined going back about a year to 15 months ago has been executed with major part of that game plan being very large joint ventures that we completed with the subsequent, very efficient buyback of stock in the beginning part of 2016. In my comments I’d like to talk about a couple of disconnects that I see that had been brought up to me from investors in particular over the past couple of months. One of them relates to the disconnect that some investors have and that we have on the future prospects for re-leasing spreads is the mark-to-market positive. Are we going to be able to maintain positive re-leasing spreads, and the other one relates to what’s happening with private market valuation, but first of all let me focus on re-leasing spreads. As you know over the past 5 years, 10 years, 15 years, 20 years that we've been a public company, we have reported our re-leasing spreads every quarter and every quarter they’re in the mid-teens in a positive way. And people legitimately can ask the question that would be essentially a hypothesis, which is that well, we hear from certain retailers that mall traffic is down. We therefore expect that comp sales are going to not be robust and if that’s the case then at some point in time re-leasing spreads have to come down to a much more moderate or even flat level. And…

[Operator Instructions] We ask that you limit yourself to two questions and then if you have any additional questions you may re-queue that way everyone have an opportunity to signal for a question. [Operator Instructions] And we'll take our first question from Todd Thomas with KeyBanc Capital Markets.

Good morning, Todd.

Hi, good morning. So first question for Bob, regarding the outlook for store closures and bankruptcies, how is it played out so far relative to your expectations? And then any changes to your outlook around retailer bankruptcies and closures in ‘17, just relative to what you were thinking or seeing over the last few months?

I don’t think we've seen any change in our thinking, the two bankruptcies that occurred so far again we're not surprising especially Wet Seal who had been through bankruptcy about 18 months ago, when you look at their sales productivity, it was clear that they were candidates. I think if anything, the nature is changing a little bit in the sense that these changes are a little bit smaller than some of the change that we saw in 2016 in terms of their store plates.

Okay. And then the 100 basis points of occupancy loss that Tom mentioned that’s embedded in guidance, how much of that’s already baked in versus what speculative and then for the Wet Seal and Limited stores that you’ve already re-leased, can you speak to some of the retailers that have taken some of that space?

I’d prefer not to talk about the retailers, but generally what we find in terms of replacement tenants obviously, if we can bring tenants and we do bring tenants at our close to the mall average in many cases where they’re doubling or 2.5 times the sales volume, which obviously leads to additional rents. So where we're seeing the tenants demand is from those that are doing well that want to expand their store, in certain cases they’re new to the centers, in certain cases they’re foreign retailers. But as I mentioned Limited and Wet Seal were generally in our better quality centers, which allows us to replace some with the better quality tenant. In terms of the occupancy, how much is they baked in there is really two pieces; one is the residual piece from 2016, which carries over into 2017 as well as some estimates for 2017 bankruptcies both those that are known and those that we’re concerned about.

And how much of the ‘16 occupancy losses is being carried over?

I would say it’s probably, evenly split if I had to make an estimate.

That’s right. Most of the ‘16 is front end weighted into ‘17 and the estimates for ‘17 are other than what’s known already such as the Limited and Wet Seal is more towards the back half of the year.

Okay, thank you.

And we'll go next to Alexander Goldfarb with Sandler O'Neill.

Hey, Alex.

Hey, Art, good morning out there. Two questions, first let me start, well actually let me just ask on the redevelopment, there is a Tysons and Scottsdale were pulled out of the supplemental those have been outlined with timing and with dollar amount. In addition, you guys have the Scottsdale press release of phase one luxury to be then - to followed by Mixed-Use sort of all of Tysons, all of Broadway Plaza. So can you just give us an update of these two projects and if it's a change in the retail environment maybe a change in financing environment or what caused the project to be pulled out?

That's completely driven me Alexander. And when we first put those in we knew that we still had to get certain entitlements especially related to Scottsdale sales. And when I was looking at the expected delivery date it’s just was clear to me that look, 2018 to 2019 is just not realistic on these two it would have to be in the ground for 2018 to be realistic. And given that we're still bidding and ramping up in the next couple of months our approvals with Scottsdale we need to get those approvals, which I'm highly optimistic that we will get them. And then when they - both of them will undoubtedly be coming back into the pipeline, but instead of having to be determined or some uncertainty around the delivery date we will have a much harder delivery date, as well as a refined scope on each of the projects and refined ROIs on each of the project. So they'll both come back, but the passage of time had caused the information to get stale. And instead of trying to footnote changes to each of them I just personally decided that I was going to pulled them out until they're ready to get baked into black and white so that we can give you hard delivery date the next or.

So Art on the luxury part of phase I at Scottsdale is that also on hold.

No I'm sorry, I was only talking about the mixed used portion.

Yes I mean Alex this is Bob Perlmutter. We feel very strongly there is three very important opportunities at Scottsdale, which as you know is one of our largest and most important centers. The first is the opportunity to expand and elevate the luxury, which we begun that process. And we think we have a very strong luxury base, but we think we have the opportunity to really extend it and present it at a much more contemporary manner than we’ve done it today. Secondly we have a great opportunity to expand the entertainment and restaurant piece. We added a Harkins Theater it's very successful, Phoenix is an excellent restaurant market, we need to improve our presentation at the center and that's a wonderful time with the luxury. And then the last piece which we are committed to is the mix use, which is principally office and residential. And this is a site that can justify densification. And in fact the Phoenix office market has while we don't have a big presence we do have multiple buildings there that have actually shown some fairly significant rental rate growth over the last couple of years and have been a good contributor to the shopping centers.

Okay. Bob and if I continue with you, as you guys look and other mall owners have talked about I mean you guys have said some of your malls and other power center type tenants. Can you just walk us through obviously the mall guys offered much more substantial TIs than the power centers tenants would typically get from tower center or shopping center landlords. But at the same time their occupancy cost is higher their rents higher et cetera. So when you talk to shopping center power center tenants do they view a one-to-one increase to their sales are going to go up one-for-one for their cost of occupancy or they're prepared for higher occupancy cost and maybe and not have as big of a sales cost. Just trying to understand how they think about the economics when they're deciding if they want to relocate to a mall or not?

And it's an interesting question, because as you know many of these tenants have located in the shadow of the mall. So they recognize the regional draw that the mall provides. But historically much of their store expansion was outside the mall, but near the mall. I think with the opening of some of these department stores what we're finding is that we now have the real estate to bring these tenants in. And clearly it's a higher occupancy cost than outside the mall, but it's also more traffic and more sales generation. So DX as you mentioned is I think is a really good example where three or four years ago the majority of their program was probably being done outside of the mall. And today that's probably the inverse, because they see the attributes of the mall like many retailers, which is the scale of the center, the foot traffic that's generated and most importantly the regional draw that the mall creates.

Okay, thanks Bobby.

We'll go next to Michael Mueller with JPMorgan.

Hi. Couple of questions, first Tom I was wondering can you comment on the straight line in the FAS 141 guidance for 2017 and as we look forward to 2018, do you think we have any material frequency gain versus this year?

Mike, it would really depend on what kind of portfolio moves we make department stores included a big chunk of the reduction in SFAS 141 revenue between what we incurred in ‘16 and what we are forecasting for ‘17 related to the Sears and Kings Plaza and again we don’t intend to focus as much on the non-cash items and in fact we exclude them from our view of same center growth they do have an impact. So, it’s a little hard to predict that one it depends on how many more big box deals we proactively do this year that could create some differences in this SFAS 141 and straight-line rents. But for now I guess for modeling purposes I would use what we forecast here and we’ll try to address there is changes as we have transactions during the year.

Got it, okay. And then just thinking about new development, can you comment on the Carson [ph] City outside what’s just the view on the side what the processes on your end there?

We still have aspirations to do something there and when we have something more to report, we’ll report on it.

Okay, thank you.

We’ll go next to Jeff Donnelly with Wells Fargo Securities.

Hey, Jeff.

Hey guys. Actually one for Tom, are you able to maybe walk us through some of the key drivers that bridges from your 2016 NOI to your 2017 NOI. I’m just specifically thinking about maybe change in year-end documents fee and like leasing spreads or contractual bumps you see and maybe some assumptions around what you are doing for the Sears stores?

Well, a lot of that Jeff is in the same center assumption, which we got it to in the third quarter call of three to four obviously that's less than we run at in both ‘15 and ‘16 when we were in 5s and 6s is in terms of same center NOI growth. And that encompasses the decrease in occupancy, which we see that exist today what we are seeing through the balance of the year. So that is factored in obviously positives there of fixed rents bumps as well as CPI bumps and getting the benefit of positive re-leasing spreads and deals that were done in 2016 that flow through. But some of the negative that I mentioned a little early they are fairly significant that people may not have focused on we did a lot of financing in many cases we went from floating rate debt to fix rate debt, which can be - even though we are getting some very attractive long-term rates that can still be a 100 to 150 basis points negative compared to the floaters. And even after the sale of Northgate and Cascade using those proceeds to pay down floating rate debt we still have above $1 billion $1.1 billion of floaters and in our opinion LIBOR is going to continue to go up this year. And we’ve factored that into the guidance and in fact all those refinancing as well as higher LIBOR ends up being about $0.07 to $0.08 negative deferential compared to what we saw in 2016. We also expect not to see the same kind of gain on land sale that we saw in 2016, which was about $4 million and those are the major pieces obviously Kings Plaza, which we talked about it’s a relatively unique event where we have a department store that's paying you that much rent obviously we think it’s a fantastic opportunity to improve the quality of Kings Plaza, but when you combine the loss rent and charges, as well as the write-off of SFAS 141 it’s $0.11 negative in 2017 compared to 2016. So those are the big pieces.

That's helpful. And maybe if I can sneak in with a second question, sort of a two part, one just Art since you had mentioned that about traffic trends are you guys able to provide maybe some data on just in 2016 how traffic varied from your sort of highest tier assets to your lowest tier assets? I’m just curious how that correlates with sales growth? And then secondarily maybe this is for Bob, just retailers are getting more discriminating around their store counts we’re hearing that landlords with multiple malls and given metro are effectively having a kind of pick a winner and a looser in those markets by refocusing tenants on one property versus the other and focusing capital the same way. I’m just curious how do you guys managed that dynamic in your markets because they are so costlier in some cases sort of in like a Phoenix just curious how you handle that?

Sure, well on the traffic issue we don’t have absolute traffic counters at our malls right now across the board we have different measuring points. Sometimes where we have controlled parking, that's a good proxy or measuring point, and we do have traffic counters in different ways at different malls that we are primarily using frankly more to not measure whether people are coming but how are they moving inside of the property to help us in the leasing process. So as we think about traffic I guess the global statement I would give is that it's a fact that people are doing more research before they come and shop. So and they're spending more per visit which would tend to make you believe that on average that visits should go down. But anecdotally and where we actually have evidence we're not seeing traffic decreases. I mean we have some centers at Santa Monica place where the traffic is up ridiculous amount, I think it's up 40% in the last six months. But we know why I mean it was because some mass transit has come recently. We have centers like Cerritos where Bobby what do we think that the traffic is up at that center? It's doubled it's close to 20% at least, and it's generating itself and that's primarily I think driven by the theaters and decks that we added there. So I can tell you that I'm certain that our traffic is not down significantly, if anything it's probably flat. And as I think about it from a high productivity to a low productivity, I don't have any anecdotal evidence for you on that. I would just intuitively say that you would assume that at the high traffic centers traffic is going to tend to remain strong…

So Jeff you're going to test my memory with what the second part of your question, but I think you were asking about as retailers rationalize their store fleet in markets what the impact and how do we try to manage it?

Yes particularly in the market where you have multiple malls.

Yes so the - and Phoenix is a really good example of that. And candidly we try to use it to our benefit in terms of being able to not be in competitive situations with other malls, but control the discussions with the retail and say here is how we want you or here is the best way to cover the market. And we’re much more effective obviously when we can control the dominant locations when the dominant locations are split between multiple owners and the owners compete. We have a similar circumstance in Southern California with Lake Wood and Stone Wood in Los Cerritos where those three centers basically are the only opportunity for retailers in that portion of the LA market, and we try to coordinate the discussions whether it’s certain retailers belonging in certain centers, whether it’s in the case of Phoenix trying to help retailers with store rationalization that includes, closing stores that are outside the mall because one of the things that will result from fewer stores in each market is the regional draw will become more important just by definition and we believe that lead them to the enclosed malls as oppose to the non-mall locations.

Thanks guys.

We'll now go to Paul Morgan with Canaccord.

Hey, Paul.

Hi, thanks. Appreciate the color on Wet Seal and the spreads there and I mean looks like I got the math right, but they look like their occupancy cost was 25% or something like that and we brought in people had a positive spread and assuming closer to your portfolio average at a much lower occupancy cost. But I’m kind of wondering lot of apparel retailers have had a tough past year how deep is that pool of change where there really unsustainable occupancy cost and kind of how does that balance against sort of where you’re seeing demand from the people who can generate sales that are at or above your average?

Well, let me - I think your math is correct. The occupancy costs were 27% or 28%. But again both of these changes were changes that had struggled for a number of years. So it’s not that there was a change in the nature of the business that caused the bankruptcy, it was really an erosion over a period of years, and what we find is in particular if you’re focusing on apparel, the market has matured and it’s moved away from smaller specialty stores that primarily trade-on on foot traffic into large formatted retailer. So people talk about the apparel sector shrinking within the malls and that’s probably true, if you look at smaller size stores, but when you look at the aggregate numbers it include people like Zara and H&M, you find it’s partly a transfer of the customer’s preference. And so a chain like Limited or a chain Wet Seal, it’s been in decline for a number of years, they really struggled with competition and it wasn’t a single event that caused it. Obviously the replacement tenants are on the other side of the business model, their business is strong, they want to grow their store fleet and one of the reasons we've been able to generate a good amount of activity right away is these stores were located in good centers, in good locations which retailers do have opens to buy-end.

Okay, thanks. And then just kind of similar, but on the department store side, first is does the $0.11 that I understood from the Sears at Kings with is that the full amount that you recognized in ‘16 that will be zero in ‘17, is that the way to think about it?

That’s correct Paul, including non-cash items.

Yes, okay. And obviously that I mean, it look like that made of one box was sort of a third of this year’s rent to you, just looking at your top tenant list, so it’s not a typical situation there, but with all the focus on kind of accelerating anchor closings and maybe particularly at Sears over the coming year or two, I mean how should we kind of think about exposure there in terms of materiality because having an impact on year-over-year growth, the timing and how quick - how - what you think you can absorb on an annual basis in terms of box closings, how deep is your demand pool for that?

I’ll answer that. First of all I want to remind you all that we voluntarily allowed Sears to close at Kings Plaza and to pay us a termination payment had we not allow that to happen they would still be sitting there operating and paying rent. We did that knowing that it was going to be very expensive from an earnings viewpoint, because it gave us the opportunity to take basically 300,000 feet in a terrific mall, where we've make huge headways and to completely reinvent it. And we have a really exciting merchandising plan that is in play at Kings Plaza. We've already announced that Primark is coming in and going to build the flagship store there and we think they are really perfect for the market. And we have five or six other major users that we are in various stages of conversations with to take up pieces of the remaining space that was previously occupied by Sears. And I'm absolutely confident that when we announce the final line of merchants that's going to replace there, and more importantly when we actually get them open for business you’re going to look back on that and say wow what a transformation, what a success that was. Moving away from King's Plaza as I've indicated in the recent closings from the Macy's and Sears and we had one that we anticipated and that's what we got. When I look at the portfolio that we have both from the ones that you might suspect might be closing stores or even if you just take a look at the overall picture. We are in a very good position to take and have the ability to recycle anchor boxes in our portfolio. Our portfolio as well as the entire U.S. mall industry is…

Okay thanks.

Thank you.

And we'll go next to Steve Sakwa with Evercore ISI.

Hey, Steve.

Hi, how are you? Couple of questions, maybe start off with Bob. The 5.3 years that you mentioned is the average lease term. I guess I would have maybe thought it's a bit longer. Has that number sort of been trending lower has that number changed meaningful over the last say year or two? And secondly, what percentage of your overall annual leasing would be captured in your re-leasing spreads?

So to answer the first question the fourth quarter average lease term was lower. The previous quarter I believe it was seven years. And as I mentioned in my comments, we had a fairly significant group of package renewals and many of those leases were shorter in nature either at our request or the tenant’s desire. But it was really impacted by some of these package renewals. So I don't think we're seen anything trend changes as much as just a package in the quarter that was different than the historical package. And then secondly we captured pretty much everything in our spreads under 10,000 square feet. So that's my gut is somewhere between - it's probably about in terms of total aggregate volume 35% plus or minus. The rest would be stores over 10,000 square feet.

Okay. And I guess Tom I just want to make sure I understand the disclosure you've got on Page 30 in the development pipeline, when you talk about things in the 4% yield on that project. So basically you are saying you lost $10 million in rents you're going to spend $100 million to redevelop that and you're basically going to get back effectively $15 million so kind of the four incremental over the 11. Is the way to think about that?

Steve the $10 million was rent and charges. So about half of that was property taxes, CAM charges things like that. So it's not the full tenants it's more like 5 or 6 is the part that actually hits NOI.

Okay. But I guess I'm just trying to think through the overall return. I mean it sounds you gave up rent to $5 million to $6 million you're now spending 100. Is that $5 million to $6 million may then go to $10 million. I guess I'm just trying to think how you assess these boxes taking them box and what kind of is appropriate return to get on that incremental capital?

I'll answer what's an appropriate return. Look if we - and I know that I maybe in minority here. But I will say that if let's assume that and I'll pick a round number of 4 to 5 type of cap rate 20 to 25 type of multiple is the way investors view the value of our malls. If we can remerchandise a department store location across the board, and now I'm not talking about one location I'm talking about many locations. And we can generate returns that are in that mid-single digit category. And in depth with retailers that are more complementary and generate more traffic for the benefit of everybody which creates higher productivity, higher rents and higher EBITDA I'm going to do it every day of the week. So I'm not the guy that's going to sit here and tell you that remerchandising department store boxes is going to generate the same types of returns that one can generate on ground up development opportunities around massive new expansion opportunities. From our money I'm very happy to receive a mid-digit return on new capital if I see dramatically improve the quality of the anchor coming with the new idea that something that generates a lot more business and prolongs the sustainability and the energy of the center in question. I know that maybe in a minority on that, but that's the way I feel as to what is an acceptable return. Is it appropriate I don't know, is it acceptable absolutely all day along.

Okay thanks. If I could just maybe ask more follow-up to Bob, just in terms of all the space that maybe you're taking back from some of these bankrupt tenants. And you think about the different categories that you could re-lease to. I'm just curious how much of it is sort of apparel driven and how much would be sort of food, entertainment other uses that are either new to the mall or just kind of expanding the mall offering?

I'm not sure that I could give you a good answer in terms of changes in categories. I mean we have seen our food grow over the last 10 years, I think it's about 10%. We have seen the apparel stores migrate to larger boxes from smaller boxes. We have seen certain categories like health and beauty, athletic, footwear many specialty retailers expand. So I'm not sure that I have a really good formula to tell you what's changing. I will tell you there is retailers in all the categories who are expanding and there is retailers in all the categories who are stable and there is retailers in all the categories that are contracting.

So I would just to that Steve you have I believe a research partner that has provided some previous commentary on this. Look the traditional department store over the years was let’s say radical 95% apparel, one way or other softer. As those people shrink the apparel that used to be sold within the four walls of that box is definitely going to go down dramatically and we are definitely going to replace what was predominantly an apparel reseller and I want to use that in the same context that a retail analyst would use it, with uses that are not apparel but generate a lot more traffic and generate higher returns for us. It’s just the evolution of the business model and it’s a good evolution, so definitely lots of apparel.

Okay, thanks guys.

Thank you. All right well listen thank you very much for joining us on the call and we look forward to seeing you all in the near future and thank you.

And ladies and gentlemen that does conclude today’s conference call. Thank you for your participation.