Good day, ladies and gentlemen, and welcome to the thirdquarter 2007 Simon Property Group earnings conference call. (OperatorInstructions) I would now like to turn the presentation over to your host fortoday’s call, Ms. Shelly Doran, Vice President of Investor Relations. Pleaseproceed, Madam.

Welcome to the Simon Property Group third quarter 2007earnings conference call. Please be aware that statements made during this callthat are not historical may be deemed forward-looking statements. Actualresults may differ materially from those indicated by forward-lookingstatements due to a variety of risks and uncertainties. Please refer to ourfilings with the Securities and Exchange Commission for a detailed discussionof these risks and uncertainties. Acknowledging the fact that this call may be webcast forsome time to come, we believe it is important to note that today’s callincludes time-sensitive information that may be accurate only as of today’sdate, October 29, 2007. The company’s quarterly supplemental information package wasfiled earlier this morning as a Form 8-K. This filing is available via mail ore-mail and it is posted on the Simon website in the investor relations sectionunder financial information, quarterly supplemental packages. Participating in today’s call will be David Simon, Chairmanand Chief Executive Officer; Rick Sokolov, President and Chief OperatingOfficer; and Stephen Sterrett, Chief Financial Officer. Now I will turn thecall over to Mr. Simon.

Good morning and thank you for joining us today. I will justtake a few moments at this time to provide comments on the results for thequarter and recent activities, and then we will open the call up for yourquestions. Third quarter diluted FFO was up 12.3% over the prior year to $1.46per share. Positive factors contributing to the quarter include strongportfolio operating metrics in all our domestic platforms, strong operatingresults from our European investments and our premium outlet centers in Japan,and the accretive impact of our acquisition of the Mills. You should also note that our 12.3% FFO growth was achieveddespite the fact that our share of land sale gains was $7.8 million lower thanlast year at this time and our share of the provision for credit losses wasactually $5 million higher in the third quarter of ’07 compared to the thirdquarter of ’06. In addition, during the third quarter of ’06, we recognized aone-time, $3.7 million gain related to the sale of our holding in a technologyventure by Chelsea. Comparable sales were up 3.6% to $491 per square foot in ourdomestic regional mall portfolio. Sales increased 8% to $499 per square foot inour U.S. premium outlet center portfolio. Comparable regional NOI, mall NOI was5.6% up for the quarter, higher than both the first and second quarters of2007. This is primarily the result of strong operating results. Comparable NOI growth for our premium outlet portfoliocontinues to be strong at 9.4% for the quarter and the nine months. Occupancyin the mall portfolio increased 20 basis points over the year earlier period to92.7%. Our premium outlet portfolio remains effectively fully occupied at99.6%. Releasing spreads remain very strong. The mall portfolio is $8.85 persquare foot, representing a 23% increase. Releasing spreads for the premiumoutlet portfolio was $7.53, representing a 31.8% increase and we…

(Operator Instructions) And your first question comes from the line ofJay Habermann of Goldman Sachs. Please proceed.

Good morning, everyone. I guess David or Rick here, can yougive us some thoughts just on Mills in terms of your leasing to date? And Iguess the strategy, especially as you head into the end of the year?

I think it’s safe to say that we’ve had some impact onMills. Not a huge impact, because we took it over, as you know, in the spring.So we’re optimistic we’re going to have a significant impact in the future. ButI think the results of ’07 from Mills ultimately will have marginal impact butnot a material impact, just given the nature of how long it takes to lease andopen up space. I think we’ve had a relatively big impact on charting thefuture strategy of a number of the centers and the redevelopment opportunities,outlining those, coming up with a game plan. But I would think that ’08 reallyis going to be the year where we are going to see the impact that we’ll have ona number of the assets. Some will take longer but it’s safe to say that ’07,we’ve had marginal positive impact but not a lot.

Okay, and you mentioned I guess 53,000 square feet interms of bankruptcies year-to-date. Any sense of how you anticipate theupcoming holiday shopping season and implications for next year?

Well, look, I think in our last call, we threw a little bitcaution to the wind and we continue to throw a little bit of that. There’s alot of economic uncertainty out there. We’ll have to see. Our properties arewell-positioned. They are high quality, high quality tenants, but it would benaïve for us to suggest that we won’t have some -- there won’t be some impactin terms of what’s going on in the economy for us. Now remember, percentage rents aren’t a huge part of ourbusiness. They are a little bit higher at the Chelsea level because they have anumber of the anchors that do straight, percentage rent deals. But look, thereis caution to the wind economically. We actually embrace these kinds of economic changes. That’swhen we’ve done some of our best work, so we’ll just have to see how the nextfew months transpires.

Okay, last question for me; in terms of just expendituresinternationally, can you give us a sense of just how much you are thinkingabout spending over the next several years in terms of new developmentoverseas, whether it’s Chinaor Europe?

Very hard to quantify, other than what’s in the hopperthat’s laid out in our 8-K, primarily because China, we are going to build thefive and take kind of a step back and see how those are resulting. Japan andSouth Korea, just on the outlet side, I think we have a good handle that wethink over the next few years, we’ll add more, two or three more to SouthKorea, perhaps two or three more to Japan, but that’s still -- there’s stillnothing imminent in terms of what’s going to happen on the construction side. And then in Europe, primarily through Simon Ivanhoe, we’restill awaiting various approvals to construct some great high quality productbut the approval system in France is taking a little bit longer. I think we’ve laid out a pretty good plan in Italy. We’vegot a great franchise in Italy. We have a handful of projects through 10. We’realso looking at a handful of other projects. So we expect development to continue but beyond what we putin the 8-K, we’ll just have to wait and see how those transpire as well.

Thank you.

And your next question comes from the line of ChristyMcElroy with Banc of America Securities. Please proceed.

Good morning, guys. Just following up on Jay’s question, doyou see the potential for closing that 400 basis point occupancy gap betweenyour portfolio and the Mills regional malls?

Between the malls and the outlet business?

No, between your mall portfolio and the Mills regional mallportfolio, in terms of what you see as the frictional occupancy in the Millsportfolio.

I would hope so.

And do you see that next year? You talked about someprogress being made next year.

I think like anything, it will take a little bit longer thanyou want it to take. I think we should make progress next year but I don’t rememberexactly where we had budgeted. We’ve gone through the budgets on those. I don’tremember exactly where we budgeted for the malls that the Mills owned. But Ithink we’ll bridge at least half the gap is my gut. We also have a couple that are in the midst of majorredevelopments, so let’s take Southdale as an example. We expect over ’08 tocreate a major redevelopment vision for that property, so there may be someleasing that we won’t be doing because we’re in the process of coming up withthat plan. Del Amo is another example, might fall into that category. So there are a couple there that may make it look a littlebit lower than really what it is, just because we are going through theredevelopment process. But I would think over the long haul, there is no reasonnot to anticipate that we would get it up to where we are. The centers do $450a foot on average, so we don’t see any reason why we can’t get it up to thatlevel.

Okay, great. That’s helpful. And then just quickly, what wasthe average price on the shares that you bought back during the quarter? Andhave you repurchased any additional shares in October?

The shares we bought were at $86.25, and we’ve not boughtany since the end of the quarter.

Great. Thank you.

And your next question comes from the line of JeffreySpector of UBS. Please proceed.

Good morning. Can you comment on ’08 at this point?

Well, we expect it to be a good year. We will work our tailsoff to make it a good year. But we intend to -- you know, we’re in the midst ofour finalizing our budget. We spent really November fine-tuning it, and wenormally announce it, what our internal budget is, some time in January. We’llstay with that program.

What are some of the latest comments that tenants aremaking?

Well, I don’t -- look, I think September and October havebeen slow sales months for sure overall. Some of it in terms of our retailersattribute it to the warm weather, some of it may be the economic uncertaintythat exists in our country today. But so far, it’s safe to say the vastmajority of our retailers have not changed their plans in terms of storeopenings for ’08 and their view on their future performance. So it’s business as usual across the board. There’s always acouple of retailers that have a tough business model that they are working through,but I would say generally it’s business as usual, even though sales forSeptember and October have not met their expectations.

Okay, and just last question; can you provide an update onDomain and any latest thoughts on mixed used projects?

Frankly, we were just down in Domain, and when you walkthrough there, it is very vibrant. The addition of the residential componentand there will be a hotel component, an office component, provides a much morevibrant environment. The restaurants are all open at Domain and on a Wednesdaynight, were fully filled with people extending our shopping hours and to theextent that we can bring in these kinds of elements on a basis that makes senseeconomically and complete the environment that we are creating, it’s somethingwe’re continuing to look at and we have a number of others in the pipeline. The ones that have opened so far for occupancy, which areDomain and Firewheel and South Park in Charlotte, are all leasing up inaccordance with their pro forma and in most cases, at higher rents than webudgeted because they really are presenting a relatively unique environment ineach of those markets.

Great. Thank you.

I’ll just -- Shelly had this in and I took it out, but inAustin, you know, it’s kind of unique because we did have our board meetingdown there last week. You can see the breadth of the company in Austin. For instance, we did the high-end Domain, wonderfullyexecuted development anchored by Neiman Marcus, as Rick mentioned, with officeand apartments and the high-end tenants. We have Barton Creek, a traditional,fantastic enclosed regional mall. Lakeline, which is a nice suburban mall, wedid a higher end power center up in Georgetown, North Austin on I-35, which isanchored by Kohl’s and Target, and we did our outlet center there as well. Weown some other property that we’ve -- as well and it kind of gives you thedepth and breadth of the organization to be able to execute all reasonably wellall the various different products. And on Domain, we’ll be starting in early ’08, Domain II,which will be about another 500,000 square feet of shops. We’ll be finishing Building P in’08, which is a pad associated with Domain I, and we also anticipate expandingthe premium outlet center in Round Rock.

Thank you.

And your next question comes from the line of Craig Schmidtwith Merrill Lynch. Please proceed.

Thank you. The focus on the international outlets, will thatremain in Asia or do you see any other opportunities for some premium outletbusinesses?

Craig, I think long-term, I don’t know what that meansanymore, but we would anticipate having at some point a presence in Europe. We stillare sorting through exactly how we are going to execute that but I think it’san objective that we have. Obviously we are going to do it on a basis where wethink we can add value, and if we can’t do that, we won’t. But it’s clearly anobjective that we have, is to have a premium outlet presence in Europe over thelonger term, medium term to longer term.

Is zoning the primary hurdle, or --

I think it’s more organizationally, you know, justdedicating the resources. I would put that -- to get the right to build inEurope is a real headache. We’re not even at that point where we can use thatas an excuse. We had that problem in Simon Ivanhoe. I’m hopeful we’re going tomake some progress there. So we are not at that point where we can blame it onthe zoning. I’m sure it’s a challenge, but we have a great presence inItaly that we think we can take advantage of with our premium outlet product. Ithink Central Europe is another example, as ultimately there being a time andplace for the outlet business. So I think it’s a matter of time. We have toaddress it organizationally, but hopefully we’ll be able to do that.

Great. Do you have a cap rate for the two non-core malls yousold in the U.S.?

No.

Okay, thanks.

And your next question comes from the line of Jonathan Littof Citigroup. Please proceed.

Hi, this is [Ambika] with John. Is the upside in Mills moreon the traditional mall side? And on the landmark assets, is it more on theoccupancy side or is there also some upside in rent?

I’ll let Rick answer too, but I would say I think the upsideis going to be across the board. It’s going to be in development,redevelopment, boxes, marketing, the operational side, leasing, increasing theoccupancy, so I would view it across the board. The portfolio is not perfect, as you know. The good news,the less perfect assets don’t contribute a lot of material NOI to our venture,or FFO. But I would say the upside should be across the board in each and everyaspect of the business that we are in.

And I would just pick up on something David mentionedearlier; we have put together for the entire venture portfolio, both malls andMills, very detailed strategic and tactical things to be done at each of theseproperties. And one easy example at Esplanade in New Orleans, we’ve beenoperating with a vacant Macy’s. Well, Macy’s has announced they are reopeningin the Fall of next year. We are adding several other anchors there and that isgoing to substantially reposition that asset and drive occupancy and rent. Each of our groups have put together their plans forintegrating these properties into the programs we have already in Simon andthose things are ongoing. And we would expect and we have seen the beginningsof a contribution from all those efforts.

And then on the management income side, it basically doubledfrom 2Q to 3Q. Should we think of 3Q as the run-rate or were there one-timeitems in 3Q?

No, Ambika, you should think of 3Q as the run-rate.

Okay, and then on the expense recovery rate, that alsoticked up as you previously had guided in the first half of the year, that itwas going to come up in the back half. Will it remain at this level for thefourth quarter and also into 2008?

I would expect it to remain at that level for the fourthquarter. As you know, as we talked about on the call last quarter, some of thevariability in the recovery ratio is because of the timing of key capital. Aswe get into ’08, clearly within quarters, we could see some variability again.But I suspect as you look at the full year ’07, we’d expect ’08 to be at leastcomparable on a full-year basis with where we ended ’07.

Okay, great. And my last question -- do you have anyguidance on gift card revenues in the fourth quarter, now that the timing ofrevenue recognition has changed?

Well, the timing hasn’t changed relative to where we werelast year. The timing changed as a result of our change in the program, whichwas back in I think late ’05, early ’06. We expect the card sales to be updouble-digits this year. I think we did about $515 million last year and we’llbe in the high 500s, maybe to as high as $600 million this year. So I thinkyou’d see a corresponding increase in the revenue growth in that 10% to 15%range.

Thank you.

And your next question comes from the line of Paul Morgan ofFBR. Please proceed.

Good morning. In terms of -- you’ve been in the market,whether selling some of your non-core properties or with the Mills properties,and I’m interested in what you are seeing since July, August, in terms of thenumber of bidders for B and C type properties and the spread between cap rateson those types of properties and at least what you think they might be for A’sstill.

Let me go back to Craig’s question a little bit. We have --I think it’s safe to say on a quality project, the cap rates haven’t moved inany material way, whether that’s an enclosed mall or a community center oranything else. And I think we are very close to selling two Mills malls, asyou know. Westfield disclosed the cap rates associated with those, which were-- I don’t know, five-and-a-half or something, maybe a little less than that. The ones that we sold just -- these aren’t perfect cap ratesbut it will give you a sense. I mean, like Boardman Plaza we sold was -- youknow, it’s not pretty real estate but I think we sold it around a seven caprate. University Mall, we were losing money and we sold it and Alton Square was-- it’s been a tough project for a number of years but my guess is at around anine cap rate. Now, that’s a very small mall, so it did like $1.8 million ofNOI or $1.4 million, $1.5 million, somewhere in that range. So that gives you a sense of -- you know, trades werehappening but I think it’s safe to say that if it’s quality asset like Westlandand Broward, they’re quality assets. I think in the mall side, you’re still atthe five to five-and-a-half cap rates.

Are you less likely to go for more of those nines, or justkeep them, or do you think this is actually sort of a return to what might be amore reasonable spread between A and C, and there’s no reason to expect -- noreason to wait?

Well, I think Alton Square, I hate to say it, was going tobe a nine today or a nine a year ago. We’re one of the few companies thatadmits that sometimes we don’t have perfect real estate, and I don’t think thechange in the credit markets or anything else really affected the -- we’ve beentrying to sell Alton for -- maybe this if the reverse think about it. We’vebeen trying to sell Alton for two years and in the height of the real estatemarket, we couldn’t get anybody to buy it. We finally found somebody that willbuy it. I hope they do well. I’m sure they will. So what does that tell you about cap rates? I don’t know.

My other question was there’s been a lot of talk over thepast couple of years with lifestyle developments in terms of some of thelenient leases for a lot of kick-outs, or co-tenancies, and some people havespeculated than when sales slow, you might see the ramifications of that andopportunity for -- to get retailers back into malls who might have left forthese projects, or to see a lifestyle center, a new one, completely unwind. Do you think we’ve gotten to the point where you might startto see that, or has it just not been a long enough period of soft sales?

My gut is to tell you that the new stuff on the drawingboard, I don’t have -- this is just my gut, but I would tell you that the newstuff on the drawing board I think is going to be very hard to execute. Andwithout naming names or retailers, but the four or five retailers that areinvolved in most every one of these, they are not like having really high comps-- in fact, [negative] comps, so the bargains they are going -- I mean, thedeals that they are going to drive to do those are going to be tougher andtougher in a very tough comp environment, and in some cases even in a negativecomp environment. I would think that construction lending will be a much higherstandard because there’s not the immediate CMBS take-off for the constructionlender. So I think the good news for us and other mall owners isthat the hypothetical let’s get four tenants and give them a bunch of greatdeals and we’ll do a lifestyle center are probably currently -- are probablygoing to go by the wayside, if I had to guess, just because I think it’s goingto be very tough to execute. So I think that gives us some opportunities, maybethey’ll partner with some people. Some of the ones that have been built may come undone andmaybe you can buy those at a decent price. We haven’t seen much of that yet butI think that’s coming, so I think that world has changed significantly.

The only other thing I would add is that the biggestconstraint we have on adding those retailers to our properties is inventory, sowhen we are -- basically we took back all these Macy’s stores and are knockingthem down and adding square footage expansions on our existing properties,every one of those retailers is saying let’s come and in fact, they are openingnow and you can see that in the 8-K. We’ve got four or five of those projectsopening over the next literally two months. We just opened an expansion of St. John’s that opened last Friday, so one, when we havethe inventory that’s well-located, the retailers want to come into thoseprojects.

Thanks.

And your next question comes from the line of Jeff Donnellywith Wachovia Securities. Please proceed.

Good morning, guys. A question I guess for Rick and forSteve. Are you guys seeing a change in the pace or tenor of either financing orpending lease discussions around A and B properties? Can you break that down,if possible, I guess either by segment or geography?

You mean, Jeff, is it taking longer to get leases done?

Yeah, or conversely, or -- exactly. Are tenants showing morehesitancy?

We have not seen, in the stable properties, the tenantdemand is consistent. Obviously in the best properties, we could addsubstantially more square footage and have more demand, but it is not aslacking of demand and the other in the B stable properties.

Steve, what about on the financing side? Are you seeingspreads widening much more aggressively there in the B assets?

Well, the C and B market, as you know, has been reallypretty much shut down for the last 60, 90 days. It’s interesting because we areseeing more activity from the life companies now, which I think is just afunction of them having always been at the same pricing level and the marketkind of have come back to them, if youwill. I mean, there’s no question that it is at wider spreads toget a refinancing done on a property. There is a little bit of differentiationin quality but I would say most of what we are seeing now is just a reaction tothe repricing of risk in general and less specific to differences in quality ofassets.

I think, Jeff, the issue for A and B is not spread -- it’sloan to value. The days of having a big, huge, over-refinance, at leastcurrently, is probably tougher to come by, obviously dependent upon how muchdebt you have on the existing property. But the big issue, whether it’s A and/or B, is really loanto value right now.

I guess maybe a follow-up question on --

Jeff, but let me just finish. I mean, that is what puts usat a competitive advantage because we don’t just rely on that market.

Okay. Rick, to follow up on one of your comments then, doyou expect maybe the timeframe for projects and design or planning could bepushed back as a result of less robust retail interest there at the margin?

We would certainly expect that some of the new projects thatare in various stages of pipeline are going to be delayed in their execution.

Particularly ones under construction today or just ones thatare more in the design stage?

Once you’re under construction, the people have to deal withit. Frankly, we have been more conservative in our approach to new ground upstuff and happily, our pipeline is pretty much being delivered over the nextsix months and is substantially leased. But to the extent we were inconstruction today for a brand new ground up project, I think that that wouldbe a much more conservative approach to that underwriting than would have beenthe case a year ago.

Let me just give you -- maybe I could encapsulate ourstrategy, Jeff, if I could, to take the moment. We are full steam ahead on ourredevelopment pipeline, because as you know, it’s very easy to underwrite. Youknow what you are trying to accomplish, you know what tenant demand is going tobe, and not only do you add value from the redevelopment but you add value fromthe existing asset. And that’s a huge program. It’s $3 billion to $4 billion.It will increase with the Mills, both the Mills and the malls from the Mills aswe sort through those opportunities out. Nothing from our point of view has really changed as we lookout in the future. Our new development on Chelsea, same thing and we are --demand is great, returns are fantastic, and we are on an extreme mission tocontinue to find new Chelsea outlets, domestic as well as in Asia. Andhopefully one day in Europe. From new development in the U.S. though, I do think it’ssafe to say that all of the projects that we’ve had --now, none of this ismaterial because the stuff that we were looking may have been in 10, nine, 10,11. We are making sure that that stuff that we want to do that can be executedand an appropriate return, some of which will change and some of which may bedeferred and/or dropped.

Well, if you guys are becoming more stringent, sayunderwriting future ground-up development, is it fair to say you’re concerned,or are you concerned, maybe, that any of the domestic markets could beoversupplied, either due to sheer construction or just rooftops that arefailing to materialize out there?

I think that is certainly part of it. You also have thegeneral economic malaise. You have high land prices, construction costs haven’tcome down a little bit, so you need a little bit of -- if you are going to gointo a tougher economic environment, I think you want to see some flexibilityfrom land, pricing and construction costs. Now look, the fact of the matter is we all think about thesethings as five, ten-year horizons, so that’s not going to deter us completely.On the other hand, we have plenty to do and plenty of opportunities, so for usto chase any new development that we are going to have to work ouryou-know-whats off to whether that, we’ll take our resources and plow them backinto our existing portfolio, plow them back internationally, plow them backwith Chelsea. I just think we are taking -- it’s not so much the economy. Thiswas really brewing, but just make sure that the new stuff that we have reallyis going to meet future demand. And you know, look, a lot of new stuff has been built -- notby us, thankfully -- but a lot of new stuff has been built and is still takinga long time to meet the demand. And certainly meeting the demand is going to,given the rooftop situation, is going to take longer to accomplish.

One last question for you, David, is I think you guys soldAlton Square during the quarter. Was that something specific with that asset ormore of a call in your view of St. Louis? And might you have had a different --

It’s across the river. The people in St. Louis I’m suredon’t consider it part of St. Louis.

But would you have had a different view if you guys hadacquired the asset from Westfield that we saw CBL take?

Let me just finish Alton. We certainly tried to sell it asSt. Louis, but that river is a boundary that we couldn’t overcome. So I’msorry, what was your question?

I wasn’t sure if you would have a different view on thatasset to the extent that you guys have acquired the assets from Westfield thatwe saw CBL take?

No, no.

Thanks.

And your next question comes from the line of Matt Ostrowerof Morgan Stanley. Please proceed.

Good morning. Just to follow-up on the fee question, wasthat increase in fees, was that basically attributable to Mills?

Primarily, Matt, it was the, as we talked about I think before,starting July 1, we did receive all the benefit of the fee stream in the Millsproperties and incurred all the costs associated with managing those.

And is there a specific cost to offset this item here, or isit just part of overall operating costs?

Part of it would be in the property operating cost line, andthen part of it would also be in the home and regional office.

Okay, and I know you had talked about, I think you hadtalked about giving more disclosure on this whole issue. Obviously you’ve givenus more numbers here on the income statement. Is there more to come here interms of either an increase before some specified time period, or is there a promotethat will come in down the road here? Can you give any more specificity aboutthat?

I’ll just answer that, Matt. We have a -- and I hope you’llrespect this -- we have a -- our relationship with Farallon is a privatepartnership and we would -- obviously whatever benefits we get are going toflow through our income statement, our balance sheet. But the terms of that andthe nature of that will remain private.

Okay, and then on Mills, it just strikes me -- and I don’tknow, I don’t have any specific statement I can point to, but it seems to methat you guys were a bit more optimistic about getting NOI up a little bitfaster when you first bought this thing. Is that a misstatement on my part? Andif it’s not, what’s changed here to slow things down?

I think it’s a misstatement. We’ve done a lot on theoperational side but I think it’s -- the leasing side takes time, so I reallythink the response to the earlier question was what impact do you have onleasing and we’ve done a tremendous amount on the operational side. Our viewhasn’t changed at all, just trying to be realistic that it does take some timeto get the leasing repositioned in the appropriate way. Our view on theproperties and the potential hasn’t changed at all.

Thank you.

And your next question comes from the line of Michael Gormanof Credit Suisse. Please proceed.

Good morning. David, if we could just go back to Mills for asecond, looking more I guess on the productivity side, can you look out and seeover the mid to long-term, I mean, how productive can these assets be? Are wetalking something in line with your current portfolio average? Or are theyalways going to sort of be at a discount, productive-wise to the --

I would think it would clearly -- we’d be able to clearlyimprove the average, and I would anticipate -- it’s hard to say exactly wherethey’ll end up, but I don’t see any reason why it will have any materialdifference from what we have.

Okay, and that includes --

Like Rick said, Esplanade’s a great example. We are adding aMacy’s. We haven’t been able to really lease that part of the center because ofthat. It’s got low productivity associated with that. We are adding anotheranchor and a movie theater on the outside, so you can imagine a year from nowwhen all that’s done, sales are going to pop and be much higher than they are. So that, as you go through the list, we would anticipate theability to increase the sales per square foot.

And then I guess just turning to your own portfolio, lookingamongst the property types, this is the second quarter in a row where theoutlets have been more productive than the regional mall portfolio on a salesper square foot basis. Is this a long-term shift that we are seeing or is it aquirk in current market conditions that is making these properties have bettersales?

I think one of the big reasons for that is because they dohave, as you know, or we do have, a number of tourist-oriented outlet centersand the impact of the weak dollar, certainly helping the mall portfolio butgiven the smaller number of centers, it’s having a bigger, larger impact at theChelsea level, i.e. Woodberry, Orlando, Las Vegas, just to name a few.

I guess just looking out over the long-term, assuming thatthe currency situation doesn’t last forever --

That’s a big assumption, though.

I guess it is, but I mean over multiple years here, arethese portfolios going to be essentially at parity?

Well, look, I think the great thing about Chelsea is thatthe reason they are not at parity is because the occupancy costs are 8% andours are at whatever they are -- 13%, so we do anticipate -- I think we’ve saidconsistently we do anticipate having a little bit higher NOI growth because ofthe low occupancy cost. And I think you are seeing that over the last year orso. Sales, you know, look, it’s hard to really know how that allshakes out but you know, they are both -- the good news is they are both veryhigh quality portfolio. They are both generating very high good rent spreads.Chelsea’s got a little more immediate upside because of the low occupancy cost.On the other hand, the redevelopment opportunities in our mall portfolio areimmense.

And the only other thing I would add to the Chelseaproductivity is that as we have worked with the Chelsea leasing team and ourleasing team, there are now a number of incremental full price concepts throughour intercession and pitching that portfolio that are now looking to expandwithin the Chelsea portfolio and these are operators that are also going todrive sales at a higher percentage.

Okay, great. And just one last one, if I could, Steve, Iguess this would be for you; I noticed that the mezz loan to Mills picked upduring the quarter. Is that due to redevelopment spending or was there just --is that just normal fluctuations?

It was due to the cash component of the limited partners ofthe Mills. We cashed a number of them out. We also redeemed some of thepreferred stock of the Mills.

Did they have an option to stay in the partnership, or no?

It was dependent upon the number of units in the Mills thatyou held to begin with.

Okay, great. Thank you.

And your next question comes from the line of MichaelMueller of J.P. Morgan. Please proceed.

I know you already talked about the tenant demand a littlebit, but do you worry at all about the industry as a whole, the ability tolease out the space that’s slated to come online in ’08 - ‘09 if times arestill tough? I mean, you just have, industry-wide, it looks like a lot moredevelopment and redevelopment going on than say five or six years ago.

I don’t think from our standpoint we’re concerned at all. Wehave a lot of work to do but we don’t anticipate opening projects that aren’tleased, so I don’t think that’s a relevant concern. I do think you’ve got to be careful about pushing newdevelopment. A couple of years ago, maybe a new development where it was easierto push today, but the stuff that we’re building, we don’t anticipate havingany lease-up issues.

And on the redevelopments that are opening in ’08, they areleased. In fact, Burlington, Nordstrom is opening next March. We’re openingsome small shops yet this quarter because the small shops are ready to open andthe space is available for them, so that really is not an issue.

And you mentioned the impact on Mills leasing; has most ofthat to date been on the landmark side or on the traditional mall side?

Well, the impact for us has been relatively the same. Wekept a lot of the existing landmark people together so that the downtimeassociated with that was not as great. Whereas the malls, we basically had toput a new team together that we did here in Indianapolis, and that has had alittle bit more of a transitional nature to it. But again -- and it’s easier. Imean, you have to remember, as you know, if you walk a Mills, it’s easier toget a tenant in there because the build-out is not like a mall build-out. Soyou can make a deal in April and get them open in October, where in the mall,you can do that but you have to, depending on the mall, it’s going to be alittle bit tougher to get done.

And last question, I know it’s not exactly apples-to-apples,but the leasing spreads on your malls, up over 20%, outlets about 30%. When youlook at the landmark Mills, can you give us any color as to where the spreadsare there?

Mike, I think it’s really too soon to say. I mean, one ofthe -- you’ll notice in the 8-K, we didn’t provide you any historicalinformation and there’s a reason for that and that’s our lack of comfort withthe integrity of that historical information. I mean I’d suffice it to say, there’s leasing activity goingon. We think we’re getting market rents. We think we can both grow theoccupancy and the rent at both the legacy Mills portfolio but also their mallportfolio. But I think it will be another quarter or two before we’ll be in aposition to give you much color on what the leasing spreads are, just becausewe need to get that data in our system and make sure we are comparing a goodapple to a good apple.

Okay, great. Thanks.

And your next question comes from the line of Louis Taylorof Deutsche Bank. Please proceed.

Thanks. Good morning. David, could you talk a little bitabout the tourism impact and especially if you can talk --

Lou? Hello? Lou, we lost you. Lou?

Operator?

Operator?

Yes, I’m here.

Did we just lose him?

Yes, one moment. Your line is open, sir.

Okay, sorry. David, could you talk a little bit more abouttourism and especially the impact on Florida? I mean, is it offsetting some ofthe weakness that may be occurring due to the weaker residential market there?

Well, I think it’s -- put Chelsea aside, for the mallbusiness, yeah, we are seeing a sales -- the tourist malls that we have, and wehave a number of them, like Florida Mall, Miami International, Boca, et cetera,are still doing great in sale increases. I think the malls that are cateringmore to the particular marketplaces are relatively flat, and so I think we areseeing a little bit of a bifurcation between the tourist centers there than youare a traditional enclosed mall that basically caters to the marketplace.

Okay, and second question, could you talk a little bit aboutyour expanded credit line? Given your just vast financial resources anyway,what kind of opportunities do you see out there that would necessitate thelarger line?

Well, you know, we did this initially -- we always had theaccordion feature. I think, as we all know, August was a volatile month. Wedecided we wanted to be aggressive in this kind of marketplace with respect toallocating capital. We continue to have that view of the world and so wethought it was best to go ahead and implement that. It’s not so much for anyliquidity issue here at the company but really just so we can be ready and ableto take advantage of whatever else is out there. I mean, if you look at some of the best deals that we’vedone, we have always been -- it has always been a little bit contrarian. Wewere contrarian with Chelsea, to some extent. We were contrarian with [Rodanko]after 9/11 to some extent. We were ahead of our time at CPI and I’ll let Rickdecide how he wants to classify [inaudible]. So that’s what we’re about, so we just figured it’s there,we don’t have to really pay much for it, and it’s always nice to have that kindof corporate flexibility.

Could you just give us a little bit of color? I mean, areyou seeing opportunities to either buy debt, buy assets, buy land? I mean, isanything percolating to the surface in any of those categories that isparticularly interesting?

I tell you, not yet, to be overly simplistic on it. But Ithink it’s coming.

Okay. Thank you.

And there are no more questions at this time. I would liketo turn the presentation back over to Mr. Simon. Please proceed, sir.

Okay. Thanks for everybody’s interest. We’re proud of thequarter and I think our business is well-positioned to prosper going forward.Thank you.

Thank you for your participation in today’s conference. Thisconcludes the presentation. You may now disconnect and have a great day.