Good day, and welcome to The Macerich Company Third Quarter 2017 Earnings Call. Today's conference is being recorded. [Operator Instructions] Now I would like to turn things over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you, Kayla. During the course of this call, management may make certain statements that maybe 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 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. 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 Investors section of the company's website at www.macerich.com. Joining us today are Art Coppola, CEO and Chairman; Tom O’Hern, Senior Executive VP and Chief Financial Officer; and Robert Perlmutter, Senior Executive VP and Chief Operating Officer. With that, I would like to turn the call over to Tom. Tom O’Hern: Thank you, Jean. The third quarter reflected continued solid operating results as evidenced by the strength of most of our portfolio's key operating metrics. For the quarter, FFO was $0.96, although was $0.02 less than consensus that was primarily due to a $2.5 million income tax expense that related to the sale of our interest in office building continuous to our Philadelphia project. Same center NOI in the quarter was up 3.1%, so year-to-date same center NOI growth is at 2.9%. Lease term fees were $3.2 million for the quarter that was down compared to $7.8 million in the third quarter of last year. Bad debt expense was a modest 700,000 in the third quarter, year-to-date $4.9 million. So that has slowed significantly compared to the first half of 2017. During the third quarter, the average interest rate is 3.66% of about 12 basis points from 3.54% a year…

Thanks Tom. Third quarter performance met our expectations as sales per square foot rose, leasing spreads were strong and occupancy remained stable despite the impact of bankruptcies in early terminations through the first three quarters. Trailing 12 month leasing spreads were 15% which were down from the previous quarter still reflect a healthy leasing environment for quality centers. Average leases - our average rent per lease signed during the trailing 12 month period was $57.71 per square foot, this is 2.1% higher than the previous year. Average base rent within the portfolio was $56.88 per square foot this represents a 4.8% increase over the prior-year. During the third quarter a total of 708,000 square feet of leases were signed. This brings the total activity during the first three quarters to over 2 million square feet. The average term for leases signed in the third quarter was 5.4 years. This compares against the Q2 average of 5.9 years. Occupancy at the end of the third quarter was 94.3%. This represented 100 basis point decrease on a year-over-year basis and a 10 basis point decrease in the second quarter. As already have discussed in past calls, the bankruptcy early termination of lower productivity tenants is an important opportunity to improve the merchandise mix and sales levels by leasing the higher productivity and more contemporary users. The result is the balancing of short-term occupancy objectives with long-term goals of securing the best and most productive tenant mix which meets our consumers need and improve sale productivity ultimately leading to the highest rental stream. This is especially true at our highest quality centers. Portfolio sales ended the third quarter at $659 per square foot. This represented a 5.3% increase on a year-over-year basis. On a same center basis trailing 12 month sales were up…

Thanks Bob. Thanks Tom. As you can tell from the facts that our operating results, our company continues to be - to perform at a very high level. However many folks tend to look at the glass as being half-empty instead of half full. Why is that? That's because there is a major negative sentiment that we all know about retail, about our sector and about our company. And after thinking about sentiments, so I looked at the definition of it and one of the popular definitions is that sentiment is a thought or view or attitude based upon emotion but not reason, emotion not reason. The facts are that our malls are counts were in high demand for retailers, they’re places of preference for shoppers and they are performing extremely well. So what creates this negative sentiment? Well to a great extent it is the social media. Social media that is driven by folks that have somewhat of a contrarian a conflict of interest. Maybe they are bank stock, maybe there are hedge funds. And course every time that a retailer goes broke it's always blamed upon e-commerce as being the reason. In fact the reason with tenants tend to fail is because their brand has become irrelevant. They may be over levered and yes to some extent digital commerce may have accelerated their depth. In our company - in our portfolio the companies that have gone broke over the last couple of years averaged about $250 per square foot and they paid rents that are about 40% to 50% below the average rent in which they had stores. Look it's true that retail is being disrupted by digital commerce but is usually the retailers that should be disrupted. As I said before in my view and I'll talk…

[Operator Instructions] We'll go first to Todd Thomas, KeyBanc Capital Markets.

Just a first question for Tom just in terms of the balance sheet leverage continues to pick up a little bit and I was just wondering if you could talk about when you project that to begin heading lower here? Tom O’Hern: Actually if you had some measure other than debt to market cap it wouldn’t really be moving up Todd, we’re not levering up to do the buybacks, we’ve not seen a great degree and we do have one asset under contract for sale right now when that closes up we’ll probably use to paydown some debt. So when we look at most of the metrics average debt maturities is going to be close to six years or higher we don’t lot of significant debt come and do the next few years. The coverage ratio is as strong as it’s ever been at 3.4 times. So I don't too hung up looking at just debt to market cap by anybody measure debt to value would it be under 40%. So we’re pretty comfortable with where our balance sheet is today that being said we do not plan to lever up to do buybacks for example.

And then just a follow-up if I could sneak one in there, how much - in terms of the buybacks I mean how much more capacity and appetite do you have to do future stock buybacks from here? Tom O’Hern: Well we have an authorization that was announced earlier this year of 500 million and we had 220 million so we got us to about 220. And one thing we have said and we remain true to is that we would only fund buybacks through non-core dispositions, the equity that would come from assets that we deem to be non-core. In this context it's usually not retail. In terms of our appetite going forward I would say that given our view of our total opportunities within our portfolio including our redevelopment pipeline and the appetite to bolster and create firepower for the future that our appetite for stock buybacks may diminish a little bit over time. But we’ll be reviewing that literally on a weekly basis with our Board of Directors and others.

We'll take our next question from Craig Schmidt, Bank of America.

Is there any update on your Seritage joint venture?

The update is that we’re working well with each other. We have nine centers, nine serious locations together and we have a number of ideas that we’re continuing to work on together and the - I’ll say the plans are advancing nicely I think there's more definition to what we see the opportunity to be and it appears that you know our view of those opportunities. And hopefully our ability to get access to those locations a 100% may coincide in terms of timing.

We’ll take our next question from Wes Golladay with RBC Capital Markets.

Actually look at the loan you sourced - were those with the existing lenders and the loan to value change or just a value chain on those assets? Tom O’Hern: They were not with existing lenders Green Acres Commons is unencumbered, Inland Center unencumbered. As I said one was bank loan, one was a life company loan and two were CMBS. And really the loan amount was based on a - what will be at the most efficient pricing which is typically between 50% and 60% loan to value. We’re not terribly proceed-sensitive when we’re rate sensitive.

And then looking at the west side the billion, I see it still in the redevelopment platform but it look like they might have been handed back to a special servicer. Do you have any updates on that asset? Tom O’Hern: The loan is current - it has moved over to a special servicer but that really just means that the special services is paying more attention to the loan because it’s public knowledge that Macy's and Nordstrom both are going to close. But the loan is fully current and in term of what our plans are for the asset as the department stores announced their plans which we learned about for years, look it’s a great piece of real estate and we received interest from ton of LA-based real estate developers, as well as other real estate developers that would love to be involved in the asset. If I had to prognosticate what will happen there, my guess is that within a year or less we will no longer own the asset because somebody will have an idea to do either a mixed-use or totally nonretail use there that will likely be the highest the best use for a great piece of real estate and that will result in us getting value from it that we otherwise couldn't get in holding it is as a retail facility. So just testimony again to here you have a mall where two of the two department stores are consolidating to another location and because it's great real estate they’ll – create a amount of intrinsic value.

On that point would there be not a lot of NOI if has to that loan right now? Tom O’Hern: Today there is a not lot of NOI I mean I think there - those are public members but its diminimus, it's less than 1% of our EBITDA.

We’ll take our next question from Vincent Chao with Deutsche Bank.

I just wanted to touch based on the same-store guide 3% to 4% does imply a pretty big ramp in the fourth quarter which I think you benefit from an easier comparison year-over-year. But I’m just curious what the other drivers are what sort of the uplift expected in the fourth quarter? Tom O’Hern: Well Vin we’re at 2.9% year-to-date. So to get to the bottom end of the range just got to have about a 3.2% gross in the fourth quarter and as you pointed out we’re going against the relatively easy comp. Typically fourth quarters our strongest quarter in terms of NOI, we’ve got a lot of variables that roll through in the fourth quarter some of which are harder to predict roughly 60% of our percentage rent comes through in the fourth quarter and that’s a little bit harder to predict. Lease term fees we’re working on a few some of those may happen in the fourth quarter, some may fall into the first quarter of next year that could impact the number. Advertising revenue which tends to come in the fourth quarter and there is not a lot of lead time to that. But that's heavily weighted towards the fourth quarter, as well as tenant leasing about 40% of the temporary tenant leasing happens in the fourth quarter. So there's a lot of variables that could push us within that range in the low side as you said three in the high side up to four for the year.

And I could ask one more just in terms of the financing for good malls you said it was quite good. As you think about future non-core sales, how was the financing market change for the lower quality stuff? Tom O’Hern: Well we really haven't been in that market. I mean most of the assets we've got in our portfolio that we would consider financing are rare quality centers. And there this is pretty strong appetite in fact we are very happy to see a strong CMBS market as was evidenced by the Santa Monica place financing and that was competing with life companies but CMBS came through with the best quotes. So it’s a good that if that market is there at least for high quality assets and I’m really not the right person to ask on B mall financing.

We’ll take our next question from Michael Mueller, JPMorgan.

I was wondering can you talk a little bit about Philadelphia preleasing level you talked about few different types of tenants who were in there how the mix is allocated towards those tenants. And then lastly over what timeframe will it take that asset to stabilize do you think?

I think we've identified today that there is going to be a mix of types of retailers that are going to be there actually a lot of the retailers are really excited about the mix and feel this could be kind of a paradigm for the future beyond that look we have a partner there too and we would need to coordinate any releasing on actual answers to stabilization et cetera. Look our original prognosis on the center when we did our market research studies was that it was going to be a very high producer in terms of sales per square foot we still believe that, but given the nature of the project I think we've indicated that we seriously doubt that we will start putting out names and leasing statistics probably for another four to six months so we said that before.

We’ll go next to Alexander Goldfarb, Sandler O’Neill.

Just a question and a quick follow-up if I may first on the Broadway Plaza the redevelopment the sales jump that you guys talked about it’s in your supplemental how much of that is just merely not merely how much of that is from the redevelopment having the figure traffic draw with this Canadian same tenant base versus REIT getting a lot of new tenants and that caused the higher sales. So just trying to see if it's more increased traffic versus it’s how you funded the project at pre versus post as the driver of the increase.

Well I’m going to let Bobby experiment on that but I have to say there has been a tremendous the tenant mix profile doesn't look hardly anything like it looked when we started commencement of it. We tore down the vast majority of the small shop space and everything that was left with the three department stores and a junior anchor but I’ll let Bobby go ahead and mix up for me.

Alex I went through both those factors it’s one the center having a much stronger draw mostly because of the size of the presentation the small stores. And then secondly as Art said there you can literally count on one hand the number of tenants who remain in place through this process. So we've been able to really reach out and do two things one is established the critical mass that's needed to generate higher sales. Two, we consolidated a lot of the stores that we’re already in Walnut Creek doing high volumes and brought them into the center. And then lastly and most importantly I think is we’re offering contemporary brands and so well Broadway might be the most extreme example of being able to bring new brands into an existing shopping center. We see it at many of the top centers like Washington Square where as Art mentioned we’re weeding out the lower productivity tenants and using it as an opportunity to bring in the brands that are stronger and more productive and ultimately we’ll generate more income.

So now look we’re thrilled to finally be able to share the sales productivity of Broadway look when we announced this project four years ago some people were said what are you doing screwing around the successful centers that’s doing $700 a foot. We said look this is what we do for a living we constantly think about the future we think about is this center to serve intensification and densification is the demand here so strong that we could actually consider a complete recycling of it. And a significant capital expenditure and the answer came back yes so that there is a tremendous amount of value to be created by shake it up the applecart. And we did it we started significant amount of capital, but we also believe that given the returns that we got on that capital that is generated a very significant value creation. We took center that was doing a little over $700 a foot today it’s doing over $1,200 a foot its more than double the shop offering that we had before so it just a huge success it’s nice to be able to publish the results of that success. Tom O’Hern: Alex, the only thing I would add is that sales number does not include an Apple store so that makes a number even more impressive.

And then just a side question for Tom. You answered obviously the demand from Life Coast those banks CMBS is remain strong for good assets. Are the lenders changing the questions they are asking when they do they underwriting when they ask a different questions have you noticed that over the past year or is there underwriting and questioning then the same now as it was five years ago, 10 years ago when they had the right malls. Tom O’Hern: I mean they have always done a lot of due diligence in there underwriting, and it hasn’t changed I mean they’ve consistently been appreciative of the income quality of the malls the credit quality of the tenants and we don't see the appetite slowing down at all. I mean they read the headlines like everybody else, but they know that the fact that historically in a quality malls the life goes that never really lost money not many of those assets have ever been turned back to Life Coast. And so they continue to have very strong appetite I would say they do their underwriting and due diligence with as much fervor as they always have. I wouldn’t say that's it heightened yet today just as a result of the headlines I mean they’re much deeper than that.

We’ll take our next question from Christy McElroy, Citi.

Just following up on the same-store questions just beyond Tommy touched about the seasonal uptick that you normally see in temp occupancy in the fourth quarter but last quarter. I think you talked about an abnormal uptick and sort of temporary occupancy midyear just given the bankruptcy closures and the change in the occupancy mix. How did that trend in Q3 and how should we think about maybe the conversion of some of that space to more permanent occupancy by year end I think we see the headline occupancy number but sometime we miss the new launches that are in the mix there?

So in terms of the Q3 temp occupancy number it was 5.7% which is the same as the Q2. So we didn't see any change in the temp number. I think part of what Tom was referring to is probably more seasonal leasing done in the common areas in the fourth quarter for the holiday which would not be part of that temp occupancy number.

Sure but does that 5.7 contract into yearend?

I don't see its contracting I see it staying in pretty stable I mean if we look historically that number has sort of ranged from a low of 5% to a little bit over 6%. So you were a little bit higher than the midpoint but it has been pretty stable and it clearly is up from the beginning of the year based on the bankruptcies an early lease terminations. Tom O’Hern: And just to also look part of that is a business in which we are getting more thoughtful about that business and we’re beginning to use that flexibility of a short-term lease to give digital retailers an opportunity to open a store with us that hopefully becomes a permanent location. So I would say that five years ago or three years ago it was kind of whoever would come and pay us rent and was reasonable as the space was waiting for a permanent tenant. Today we’re using a little bit more as a laboratory I will clearly heighten that focus going forward so the idea of having a percentage of your portfolio in an experimental mode which is kind of a new attitude that I have and we have around this I think is probably going to be a fixture at our numbers. And then as time goes on hopefully those – they’ll be retailers that will be in those tests location that will gravitate to become permanent tenants.

And I do think that maybe the change in focus also going into 2018 is the rents that we charge for those temporary spaces we've been as Art said more focused on bringing in revenue and I think now there's an opportunity to manage that revenue and grow it better by putting more resources on what we charges these tenants.

And then just a quick follow up you mentioned another asset for CLS I seen you’re referring to the office at 500 North Michigan when is that expected to close how should we think about the proceeds. And I think you said you expect to pay down debt. Would that be just anticipate on a line of credit?

Look we try not to talk about dispositions or acquisitions until they done but that got into the news the buyer has a very hard large deposit up of about 7% of the sales price that’s actually the cash has been released to us. And there is a closing date that is schedule between now and the end of the year. I would anticipate they will close that won’t acquire the property and the immediate use of the capital would be to pay down the line credit.

We’ll take our next question from Tayo Okusanya with Jefferies.

Could you talk a little bit about the evolution of the strategy for Philadelphia light it just kind of let chain from been a pure outlet to kind of more to kind of more what you're doing now how that will kind of happen whether it was more retailers driven or kind of what it was to where there was kind of market competition driven or what have you?

It was totally retailer driven just listening to the market and we had a tremendous number of full price retailers that wanted flagships stores in that location and we thought about the idea of presenting a complete palette of resellers it’s a lot of square footage. And we decided that it made sense to do it so demand driven totally demand driven.

And then if I may I just asked one quick follow-up in the past few weeks there has been a lot of just of buying of call option on Macerich stock. I'm not quite sure whether you guys have any insight into that but you could share with us about that to whether it is what it is?

We have nothing to comment about that.

We’ll take our next question from D.J. Busch, Green Street Advisors.

Art you made the point earlier on the sentiment and then I you provided the data point that the retailers that gone broke over the past couple years did about 250 a foot had below-market rents just taking that step further if I look at some your disclosure I would make guess that the more mature publicly traded retailers probably make up on a 20% or 25% ballpark of the merchandise mix these are the same retailers that have been a little bit more vocal about their struggles. My question is similar to that 250 you point to how was the performance if you were breakup with those publicly trader retailers and in the bigger constituent the merchandise mix the ones that you’re more bullish on and the ones that are performed well. How big is that bifurcation if you look at that breakout?

That’s an interesting question strangely enough it occurred to me this morning as I was looking through a supplement in our top 10 tenants I’d said the difference is that look the vast majority of our top 10 tenants still have a business to run. The tenants that have – that went broke their brands stood for nothing and I would say are top tenants are much better capitalized then the ones that were broke. I don't have the breakout for you but yes it’s an interesting question.

But when I look at top 10 tenants some of those ones are the ones that you have gone through a little bit of struggles but you still feel confident in the top 10 even though it doesn't represent a big percentage of the mix?

We certainly don't have really in the top 10 that is on our watch list that doesn't mean that people are better in that 10 are not trying to manage their expenses and as their leases rollover there may be conversations around the idea of the moderation of rent increases.

We’ll go next to Jeremy Metz, BMO Capital Markets.

Art in your opening remarks you talked about how you’re ascertaining these town squares and having a mix of usage. One of your peers earlier today announced the Jade is a large multifamily rated one of its assets in the Seattle area. Can you just give us your thoughts about adding kind of these alternate usage how much mixed-use to residential transportation is essential maybe embedded in the portfolio. And then if you have any plans in the near term to capitalize on any of these beyond what we're seeing in current pipeline?

Well a lot of it already happened. So what I was pointing out was that when malls were built 20 years ago, you just didn't find mixed use of any kind. There were 100% retail and now with the strength of these locations, they are attracting other uses. One of the uses that I see in our centers going forward and it may not be huge square footages but it could be 5% or so of any given mall maybe even 10% would be the idea of integrating co-working into the wall itself, not building a freestanding office building, but taking some of the less desirable shop space in a given mall maybe a mall that has a little too much square footage in the middle and dedicating it to co-working and we are in conversations with couple of companies in that space who have a very strong interest to do that with us. And so when I look at the customer that they bring, the age of that customer and the profile of that customer and the rent that they will pay, it's a pretty attractive rededication of space. So look we definitely see the demand there for additional residential. We see medical as being a use that's in some format that is going to be reintroduced to these malls, going back unfortunately I can tell you that's 50 years malls that were built 50 years ago used to have medical office complexes in them. I see hospitality coming in, residential adds a nice place making and can be very profitable. Really I bring that up more in the context that as these properties have evolved they've gone from being single use apparel-only to being town squares and town squares, which are really the new downtowns they have multiple uses and so that's what we're going to have. I don't think about it in the context of having 10% of our portfolio being residential or otherwise. I actually don't think it will be anything near that number, but you look we'll see. It's all demand driven.

We'll take our next question from Steve Sakwa, Evercore ISI.

I guess a question for Bob, can you just maybe talk about the '18 and maybe '19 lease expirations and just from the conversations that you're having with tenants and I guess today maybe what percentage of your business for next year is signed and put away at this point?

So I would say that the conversations they we're having are really specific to the particular tenant, or the particular shopping center. Obviously, the stronger the shopping center, the more favorable the discussions are and the weaker the tenant, the more difficult the discussions are. I would say that clearly as Art mentioned you're the retailers there are certainly using the sentiment that's out there to try to drive down their costs through renewals. So there's a little bit more friction on renewals. We have not seen major changes in terms of the percentage of tenants renewing. We've not seen major changes in terms of the length of leases and we think that reflects a very good quality portfolio. In terms of where we're at in the business, I would say we're at a similar point in last year. Again remember 60% of our business is renewals and most of those come during the first quarter. So they're relatively far along, but with that said, there's clearly a tension with retailers trying to reduce their cost and landlords trying to increase their revenues and it comes down candidly to the quality of the shopping center. But that tension has been there and the face of that will continue to drive strong releasing spreads and increasing average base rents in our portfolio. So you have sentiment which is an emotion or a feeling and then you have the facts. The facts are the releasing spreads are strong and the ABRs continue to grow. Next question.

Next is from Caitlin Burrows, Goldman Sachs.

I know it's not a direct relationship but with the portfolio sales up over 5% year-over-year and comparable property sales up over three, is there is a good explanation for why or how the percentage rents are down both on an absolute basis and a percent of minimum rents basis. I feel like I get this questions so wondering what your response would be.

Our percentage rent is not a huge part of the revenue and obviously one of the things that occurs every year is you renew tenants who are paying percentage rent and you roll it into base rent. So there's a lot of different factors that go into percentage rent. Clearly while we have a small percentage of outlets, those centers do have higher percentage rent. We are able to on renewals roll percentage rent into fixed rents with higher productivity tenants. And I think the other piece of it is it's a small number so it will tend to be more volatile year-to-year.

And then also just wondering before when you were talking about that they might not be on your watchlist but maybe I fell asking for lower rents because they're trying to lower their own costs within your top 10. And I notice that the scene is not actually your top 10 list of tenants but Dave obviously put out a plan to try to manage their costs as it relates to rental expenses. So I was wondering how your conversations with them has been progressing?

Well that's true in terms of Ascena. But remember, these tenants have leases. So while they may try to lower their rental structures based on their sales performance, they're not able to do that unless the lease is expiring and so the discussions with the tenants tends to be around expirations and renewals and that's where again it really comes back to how strong a quality center you have. We're aware of which tenants are weaker. We're aware of which tenants want to rollback rents because of underproductive stores. Our job is to find productive stores who will pay more rents. So the discussions only occur upon their expirations. And we have a pretty good sense of which ones we need to replace and are working on it. And again, reflecting the quality of the portfolio that that puts us in a stronger position as possible.

We'll go next to Floris van Dijkum with Boenning.

Tom some of the other questions I had were answered already, but you brought up an interesting point on following the e-commerce tenant. Maybe if you could quantify as to what kind -- what percentage of occupancy or how much occupancy you're going to get from these new e-commerce tenants in next year or in the future in three years time? Tom O’Hern: We've really only scratched the surface since we were in the middle of the World Series I would say that in the world of bringing digitally borne, vertically integrated brands to our malls, we're probably in the top of the first innings but we see that this is good this is tremendous legs to it. I easily could see over the next three to five years that these brands would easily represent 10% to 20% of our GLA of shop space.

We'll take our next question from Rich Hill, Morgan Stanley.

I wanted to just get some updates from you about tenant reimbursement margins and how you're thinking about that? It look like your tenth reimburse margins still were trending up pretty nicely despite maybe a little bit of decline in occupancy. So just wondering if you're seeing any changing in twin trends or you think the reimbursement margin is going to continue to go up? Tom O’Hern: I don't see that changing Rich. We quota a fixed TAM number with bumps in there and typically the annual increases exceed our actual increase. So there is some growth built into the existing leases and I don't see that changing going forward in terms of the structure.

And I think the others side of the equation has been relatively flat in terms of operating expenses.

We'll go next to Linda Tsai with Barclays.

In terms of Westside Pavilion, your discussion was interesting in the context of talking about the highest and best use for different properties and perhaps being a candidate for sales -- and assets in global markets.

Linda you cut out there for a second Linda. You're coming in and out. We're not hearing the question all the way.

Oh sorry. Let me start over. Your discussion of Westside Pavilion was interesting in the context of discussing the highest and best use for different properties and perhaps being a candidate for sale. Do you see more opportunities like this across your portfolio where maybe you have a good asset and an asset in a good market but for different reasons it might not make sense to be a retail asset anymore?

No, but we've known this about Westside and look Westside LA has too many malls chasing the same customer and it was due to for consolidation. We knew that Westside was going to being looking at being big part of that consolidation. We're fine with it though given that we are sitting on a tremendous piece of real estate it's the recently got the benefit of the train station opening a block away, it has been -- the path has been cleared of absorbing density on the property. When all of those things happen to a great piece of real estate, it's quite likely that other uses are going to value that real estate more than a horizontal retail facility and we're seeing that in terms of the demand that's coming from really a tremendous number of people. So that would be it at this point.

We'll take our next question from Ki Bin Kim, SunTrust.

Just a couple of quick follow-ups. There's some interesting moving occupancy for some of your centers. I won't go through all of them, but it's something like Santa Monica and some others. Could you provide any commentary on that? And second part of that question is you touched on it already but are you finding that the way you do these things philosophically is changing a little bit where it's more act of duration and maybe more TAAs to facilitate these e-commerce companies in the short-term that might be on the fence of opening stores? Tom O’Hern: Well let me let me try to answer the capital question first and again remember that the capital discussion is primarily driven on the new leases and not the renewals and you've seen the historical numbers they've been relatively stable, but it is likely that certain users whether they're emerging brands or restaurants have the potential to increase the capital requirement. The key to structuring those deals is to take a bigger percentage of the upside if they're successful, but that's a small percentage of the leases and so because of that we haven't seen significant changes to our capital requirements. In terms of certain centers I think what you're commenting on is you see some occupancy fluctuations across the Board in all the quality of the centers and again I think that reflects more of a long-term approach of balancing short-term occupancy objectives with longer-term wanting to get the right hand in the right spaces and have them there for a 10-year term. So when we talk about Santa Monica, we're talking about Washington Square, these are properties that we want to make sure we use the recent tenant bankruptcies and the early terminations to get the right tenants in the right location who are going to be successful and make the center a draw. So we've had a space at Santa Monica which is arguably one of the best space on Third Street and it's been vacant and we're working really hard to get the signature tenant that that space deserves. And so it's a balance. In the short term we have an occupancy that's a little lower than it should be, but in the long-term, we want to get the right tenant.

At this time, I'd like to turn it back to our presenters for closing remarks.

Thank you very much for joining us. We'll see many of you in Dallas at NAREIT in a couple of weeks, and look forward to continuing our discussion. Thank you.

That concludes today's conference. We thank you for your participation. You may now disconnect.