Thomas Ward - Vice President of Investor Relations David E. Simon - Chairman and Chief Executive Officer Richard S. Sokolov - President, Chief Operating Officer and Director Stephen E. Sterrett - Chief Financial Officer and Senior Executive Vice President

Christy McElroy - Citigroup Inc, Research Division Michael Bilerman - Citigroup Inc, Research Division Ross L. Smotrich - Barclays Capital, Research Division Omotayo T. Okusanya - Jefferies LLC, Research Division Paul Morgan - MLV & Co LLC, Research Division Jeffrey Spector - BofA Merrill Lynch, Research Division Craig R. Schmidt - BofA Merrill Lynch, Research Division Caitlin Burrows - Goldman Sachs Group Inc., Research Division Ki Bin Kim - SunTrust Robinson Humphrey, Inc., Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Steve Sakwa - ISI Group Inc., Research Division Haendel Emmanuel St. Juste - Morgan Stanley, Research Division Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division James W. Sullivan - Cowen and Company, LLC, Research Division Vincent Chao - Deutsche Bank AG, Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division

Good day, ladies and gentlemen, and welcome to the Third Quarter 2014 Simon Property Group , Inc. Earnings Conference Call. My name is Sarah, and I'll be your operator for today. [Operator Instructions] And as a reminder, this conference is being recorded for replay. I would now like to turn the conference over to Tom Ward, Vice President of Investor Relations. Please proceed.

Thank you, Sarah. Good morning, and welcome to Simon Property Group's Third Quarter 2014 Earnings Conference Call. I'm Tom Ward, Vice President, Investor Relations. Presenting on today's call is David Simon, Chairman and Chief Executive Officer. Also on the call are Rick Sokolov, President and Chief Operating Officer; Steve Sterrett, Chief Financial Officer; Andy Juster, current Treasurer and incoming Chief Financial Officer; and Liz Zale, Senior Vice President of Corporate Affairs. Before we begin, a quick reminder that statements made during this call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of forward-looking statements. Please note that this call includes information that maybe accurate only as of today's date. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included within the press release and the supplemental information in today's Form 8-K filing. Both the press release and the supplemental information are available on our IR website at investors.simon.com. Also due to the completion of the Washington Prime spin-off in the second quarter, we are providing operating statistics in our supplemental 8-K for the prior year period to show performance on a comparable basis excluding the Washington Prime properties. For our prepared remarks, I'm pleased to introduce David Simon.

Okay, thanks. Good morning. We had a productive quarter. We opened 2 new Premium Outlets in Charlotte and the Twin Cities, and in Minnesota nearly 100% leased. They're both off to a great start. We successfully tendered and redeemed approximately $1.6 billion of notes. And we currently issued $1.3 billion of new notes, which extended our average duration and reduced our weighted average interest cost. And we became the first U.S. REIT to establish a global commercial paper program. We agreed to buy 2 high quality assets from the recently announced WP Glimcher deal with great growth opportunities. And most important, we continue to produce strong and operating and financial performance, both industry-leading. Now let me talk about the results. FFO reported was $1.90 per share. For those of you who updated your estimates to include the $0.35 per share charge related to our tender offers and redemption, the $1.90 exceeded the consensus by $0.05 per share. On a comparable basis, excluding the charge related to the debt distinguishment in the third quarter and the operating results from the WP properties in the prior year period, FFO diluted per share increased 14.2% year-over-year to $2.25, from $1.97 or $0.28 in total. And on the same basis, it's been increased 14.5% year-over-year to $6.48 from $5.66. Overall business conditions remain favorable driving increases in our key operating metrics and cash flow. We continue to see strong demand for space across the portfolio. Occupancy increased across the portfolio. Leasing activity is healthy. The Mall and Premium Outlets recorded releasing spreads of $9.67, an increase of 17% comp. NOI increased 5.3% in the third quarter, 5.4% year-to-date, again industry-leading. And over 95% of our domestic NOI is included in our comp NOI calculation. Total sales in our portfolio increased 2.8% in the third…

[Operator Instructions] Our first question comes from Christy McElroy from Citi.

Michael is on the line with me as well. David, just to follow up on your comments around opening outlets centers in major markets. In buying a center like Jersey Gardens, in what type of markets do you think indoor outlet type of concept could work? And can you also provide you, mostly thoughts around the growing number of outlet centers and stores opening [indiscernible] what that means for [indiscernible] the outlook versus the overall in terms of future obsolescence?

Well, Jersey Gardens is, we consider it more of a Mills as opposed to an outlet center. It was essentially modeled after The Mills. So it appeals to broad consumer base, but it's got the entertainment, it's got the big boxes. It does have a smattering of pure outlet retailers. But I wouldn't -- Christie, I wouldn't consider that an outlet center, so to speak. You're -- unfortunately, we did have a not such a good connection on your question. But I think you mentioned about the potential about outlets coming closer to major metropolitan marketplaces, is that -- was that the question?

Right. Yes, and what that means for obsolescence, future obsolescence of existing outlets?

Well, look, outlet business is very competitive. We have a good portfolio. Our results speak for themselves and I think we'll continue to be able to grow our comp NOI and our portfolio. I think in all of retail real estate, you can never stand still. You've got to invest in the products. You've got to make it better. Whether its outlets, full-priced, lifestyle, et cetera, that's what we're all about. That's what we're grounded in. Our -- we focus on lease-by-lease, market-by-market, deal-by-deal and we'll -- we live in a very competitive market. We'll continue to hopefully do well.

David, it's Michael Bilerman speaking. There's an echo I guess, when we're asking the question. I don't know if that's partially why you may have cranking.

Sorry about that. We'll check in to see if we can change that by the time the call is done.

No worries. So I also have a question on global. Obviously -- you have Klépierre 2.5 years ago, you went into -- you're leveraging Klépierre now effectively to buy Corio and consolidate in Europe. You've McArthurGlen that you've made an investment in. You obviously have the outlet business that you're growing internationally. All the Australian journalists think that they've spotted your plane in Australia which you denied. We just had a doubt there. And then, just I'm curious, how much time are you spending U.S. versus non-U.S.? As you think about the growth of Simon, how important is that international aspect going to be?

You mean me, personally?

Yes. From -- as strategic growth initiatives. How much time are you spending outside the U.S. versus inside U.S.?

Well, look, generally, roughly our outlet business represents 10% of our -- from Asia to Europe to McArthurGlen. So let's say it's around 10%.

International.

I'm sorry, our international business. And honestly, other than -- where you had the episodic nature of deals, I would tell you that I work very hard and don't feel sorry for me okay? But, so I would say to you that generally, other than episodes of deal making, I spend around the same amount of time. But we have a great team in our international. I have added a colleague that you probably haven't met that's done an unbelievable job to relieve the [indiscernible]. But I wouldn't say it's abnormally different than what the international business represents in terms of our investment. At the end of the day, we haven't made a huge -- the good news is we're in the money and everything that we've done. But when you put it in the scheme of our roughly $90 billion asset base, we haven't made this huge unbelievable bet internationally. And I spend roughly 10% of my time.

Right. And I was thinking more. So into the future whether that's changed at all and we see that percentage go up in well [ph] quarter of the company or 30% or 40% of the company.

Well, I think the -- given that what we're doing in the U.S., it's not -- that's probably not likely in any short- or medium-term horizon.

Our next question comes from Omotayo Okusanya from Jefferies.

Just a quick question on the development and redevelopments. This seems like -- with the supplements for this quarter that released, the yield on expected development and redevelopments came down slightly for the mall redevelopments [indiscernible]

I'm glad you're very perceptive. And I'm glad you asked the question. So King of Prussia is now a go-deal, it's a big deal. And it did drop our redevelopment yield a little bit because it's -- I know you grow accustomed to Simon having 10% returns on every deal we do, sometimes a little lower. But it's still very accretive when you look at where that property is valued today. But we don't hand out or give out returns. So that -- but that, it is a major development, redevelopment, I should say, and that did lower the return. On the outlets side, I'd say 2 things: we've taken out Charlotte and Minneapolis; we've added Tucson and Tampa. Charlotte and Minneapolis were very high double digits. Tucson and Charlotte -- I'm sorry, Tucson and Tampa are on average 11. The others were higher than that. So when you bring that 2 together, it dropped it a touch. Now I will say to this, we're very conservative on our new development, both Tucson and Tampa are double digits. But the way they're coming in and the other 2 that are coming out, dropped it, oh, so small.

Okay. That's really more of a mix...

Let me be perfectly clear. We have no execution issue. We have no cost overrun. It's just the mix, changed by the addition of the plaza, the King of Plaza, and then the 2 outlets opened and the 2 new ones coming in.

Our next question comes from Paul Morgan from MLV. Paul Morgan - MLV & Co LLC, Research Division: The re-leasing spreads is also just fixed on a bid . I mean, I know there's some noise. But you've kind of been in an upward trend and it is a rolling 12. So I just wanted to maybe get any comments on spreads, your outlook for them, whether the changes and -- whether the sales volatility has had any impact? And that's the question.

Well, look, it wasn't that long ago, say, less than a year ago where the spreads we're 14%, 15%. So I will just tell you, from our standpoint we are pleased with basically having 9, 9.5-plus-dollar spread. And 17% -- I mean, I wouldn't -- we have to look at this a little bit on a longer-term basis. So I would say, we're very pleased with 17. It's higher than it was a year ago. Yes, it this a little bit lower than the Q1 and Q2. I certainly wouldn't overreact on that on any basis. The re-leasing spreads are driving our industry-leading 5.4% year-to-date comp NOI growth. And we're -- we are executing this in a clearly, a cautious consumer oriented environment. And obviously last year, the consumer shut down a little bit because of weather, this, that and the other things. So I'm pleased, I'm happy. And I think we're executing very well. We're going through our -- in terms of how we look at that next year, very simple, as you know, we've been doing this 20 years. We had the pleasure of starting November 10, I believe, going through each and every mall, lease-by-lease, deal-by-deal, which rolls into our plan which we'll share with you in early next year. And so until that's done, I don't have a prediction about what our spreads will be other than we continue to believe we're -- our rollovers are under market [indiscernible] in the future growth of our business industry-leading opportunities, in my opinion has been reinforced by year-after-year-after-year of continual unabated outperformance.

The only thing that I would also add is that our occupancy cost remains very moderate, which shows you that we still have plenty of room to grow those rents.

Yes. Paul, this is Steve. I'll just add one thing. If you look at our 8-K, over the last 8 quarters we've consistently signed new leases between $63 and $67 a foot, and if you look at our lease expiration schedule you can see that they're still in the mid-40s for the next several years. So we still feel very good about marketing the expiring leases to market. Paul Morgan - MLV & Co LLC, Research Division: Yes, I know you haven't giving guidance, but that kind of high teens number is -- there's no reason to think that that's not sustainable it's not maybe potential upside.

Well, look, we -- we're -- I know you're, Paul you're smart and you want us to talk about next year. We have tremendous confidence in our business and our platform and the thing that I would have you rely on is what we've done year-after-year. And as I said to you, we'll share our guidance early next year.

Our next question comes from Jeff Spector from Bank of America.

I'm also here with Craig, who will have a question after me. My question was just focused on Sears' decision to lease space to Primark. Also, Amazon's announcement to open a store in New York City, we've been getting a lot of incoming calls, questions on those announcements, and what that could mean. If you could just provide some thoughts on those announcements and maybe where you think things continue with Sears in their leasing efforts?

Well let me -- I'll have -- I'll give you 2 quick top of the head remarks and then I'll let Rick add whatever he wants. Look, on Amazon, leasing space, I'm not -- it's, all the details aren't out, but there's clearly a benefit for the overused word, omnichannel bricks and clicks, however you want to describe it, there's a real benefit. In fact, it's very interesting when I see Sears as a online retailer, depending on which study you look at. I mean, they're anywhere from -- they're clearly in the top 10. They may be as high as #5. And I would argue it's because of their physical presence that allows them to be so important in the online presence. And you've heard it from retailers that the synergy between having the physical and the online presence and now the move toward mobile, and how its all been integrated. So -- and clearly, we've seen a number of pure online retailers going to physical stores. So the -- it's got to be in the equation for a retailer to have a physical presence. I don't think there's any question in that. And as our retailers have gotten more sophisticated in the online world, I think that's going to play to our benefit. On the Sears leasing, we have one that we've consented to in King of Prussia. That was part of their agreement to consent to our ability to expand the 2 centers. We worked very collectively to do that. I think Sears would be the first to tell you that in certain markets and certain stores they don't underperform, or in fact they have too much space. And they will look to release some of that space or sell some of the real estate. We still think they have a physical presence that's going to be important to them. And we'll continue to work with them on a collaborative basis that meets our needs, and our shoppers' needs and theirs. And we expect to, at the end of the day, for both of us to benefit from that.

And what I would add is that focusing on the Primark side, they're a highly productive iconic retailer in Europe and the U.K. We have been working with them for over 6 months. We have already visited them at their headquarters and toured their stores, where they operate. And we're very excited about their entry into the U.S. We anticipate that there will hopefully be several other opportunities, both within our portfolio or others Sears stores, which they have already alluded too. And I would also point out that we got involved with Primark early on as our Klépierre team already had a preexisting relationship with them.

Craig has one question.

We've all concluded that we are all just [indiscernible] so we just want to go on record for that. Alright?

Us too.

Okay. I was just going to ask what were some of the take aways from your shopping block events? And just maybe some general thoughts on the millennials in the malls.

Well, look I think, they're an important customer base. I think they represent a unique opportunity for us. The millennials represent a bigger population than the baby boomers. So it's very important for us to connect with them, the way they want to be connected. I think they like mall shopping. And we're going to experiment and do lots of things oriented around them to continue to make them an important consumer base, in our properties. But we're not going to ignore the baby boomers either because they have a lot to spend. So I think as millennials get older and we can continue to offer them entertainment, restaurant and the right retailers in that -- in the properties, and connect with them the way they want to be connected, it's a great opportunity for us. Rick, do you want to add anything?

The only thing I would say to echo David's point, the research that we've done has shown that the millennials are, in fact, very supportive of the mall channel and are very much focused on going on there. And so it's a natural thing for us to try and exploit and enhance.

I was also noticing, you used 2 outlets to do the initial rollout, with Refinery29. How did those go?

Very well. So that relationship is early, but I'd say generally we're very pleased. We're creating buzz in that whole marketplace. And are -- along those lines, Craig, we're making some initial investments in early-stage companies to really to enhance the environment. But, I think, all the good news is that there is a lot that we can do to enhance our environments and we are as committed as anyone to do that. We've got the balance sheet, the capital the -- hopefully, the creativity and the willingness to take risk to do that which all companies, I think, need to be in this position to do. It would be easy for us to rest on our industry-leading growth. But as you know us very well, that is not in our DNA. And so, we're going to do it from marketing, to leasing, to development and everywhere in between.

Our next question comes from Andrew Rosivach from Goldman Sachs.

This is actually Caitlin Burrows. Retailers have been open about the needs for a physical presence to showcase, even though much of their sales are generated online. Can you talk about how you capture the economic value of a store that doesn't necessarily run through that store's cash register?

Well, look, there's -- it's -- that's -- in our leases, even if it's done in the store but fulfilled online that's part of our sales. That's not really too much of an issue. And I think for all physical retailers the important -- and even with their online business, they have a multiplier effect, that's very important, that they see when they have a physical presence with their online consumers. And they can describe it in great detail on it. And it's anywhere from 3x to 4x. So the convergence is there. It's happening. And the good news is our retailers are combating effectively the pure online retailer. And the online retailer understands for them to, beyond the first mover advantage that someone like Amazon had, in order for them to really grow their business, I think and many, many believe, they need to have a physical presence because of the way it's moved to mobile and the way it's -- the multiplier effect that the omnichannel world is presenting itself in. So that bears, I think, extremely well for us in creating the next wave of retailers. We don't -- we see that just beginning. So, the -- the interesting thing is, the online retailers have still got this unbelievable advantage and we see it ourselves in [indiscernible]Nexus. And giving that benefit, even though they should be collecting that used tax instead of sales tax, but taking advantage of that benefit that the consumer's not necessarily are entitled to. As that has begun to swing, because a lot of them have Nexus now with warehouses and the like. As that has balanced, that's going to level the playing field, obviously, it would be great. We can get Congress to level that playing field which they should be doing, that I think that's going to reinforce the advantages of bricks and mortar. Because at the end of the day, when you're looking to shop, the mobile device or even the desktop really can't present the goods and services that are available with that retailer that a physical environment can. Yes, they can save you the sales or use tax, yes, they may have an advantage in convenience, which is slowly being dealt with by our retailers through pickup-in-store, ship from store, but once that's sales tax, use tax advantage is eliminated, which I think it will be through Nexus for the government, we'll see that. I think our retailers can be really damn competitive.

Just on the topic of equal playing field. So Amazon now charges sales tax in 23 states. And what else is remaining to be on topic of tax parity? Is there anything that you guys are doing?

Well, we're trying. But there are roadblocks in Congress and we're not here to complain about the government, believe me. But we just want a level complaint -- level playing field and then the consumer is going to make that choice, but they shouldn't be -- they -- and we should let the states decide how they want to deal with it, but it should be level. And at the end of the day, the best retailer, the best mall operator will come out ahead. I think it's got to be level, it's just not right.

Our next question comes from Ki Bin Kim from SunTrust Robinson Humphrey.

So a couple of quick questions. First, about going back to the Sears topic. If Sears decides to lease their space -- sublease their space on their own, do you guys generally have veto power or do other anchors at the center have veto power and is there any chance that you can partake on the upside assuming they granted us prior money anything upside [indiscernible].

Well, there's 2 questions there. We certainly have substantial ability to control what Sears can do with their stores based on existing leases or reciprocal easement agreements, so that is, yes. With respect to the upside, to the extent the transaction is being done by Sears within their store, with their capital, it's their transaction, but we certainly benefit in a position like where you're adding a Primark in or a Dick's in King of Prussia, that certainly will strengthen our overall offering for our shoppers, but not financially if it's being done inside the Sears store with Sears capital.

Do other anchors have a stake?

It depends on the documents and depends on the scope of what Sears is contemplating with their building.

Okay. And just last question for me. On Klépierre, if I understand the deal correctly, it's going to be a full stock deal, between Klépierre and Koreo [ph] which would in effect dilute your equity stake from the 29% roughly to sub-20%. And I'm sure you'll let me know if I got this wrong. Any thoughts on re-upping your equity stake in Klépierre?

Well, you don't have it wrong, but I'm not going to answer that question. We like the investment. It's been a very good investment for us. We think as a reference shareholder and as -- and being on the board, we've added real value and we are in a -- obviously, we do believe in the merger or acquisition of Koreo [ph], and we support it and we believe that scale in our business is really important because it -- on all sorts of fronts, capital, retailer relationships, ability to invest in the consumer experience, et cetera. So we're optimistic that, that investment will continue to be good for us and grow in value. But I really can't tell you about whether or not, going forward, we'll increase our stake. But we're pleased and we think there is still opportunity going forward with our investment in Klépierre.

Okay. I mean, the reason I asked is it seems [indiscernible].

I understand.

[indiscernible]

And I hope you understand why I couldn't answer it.

No, I got that. It just seems like a nice area where we could put maybe $1.5 billion of additional capital at a very attractive -- well roughly a cost capital for a very attractive yield. So that's why I asked.

Yes. It was in the yield on our investment in Europe in both at Klépierre and McArthurGlen and in Asia they have been fantastic. I mean, they've been yields so -- and that's what helped drive our industry-leading growth.

Our next question comes from Alex Goldfarb from Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Steve, congrats on the even earlier retirement. So a question on Japan, I mean, I try to channel my inner David Harris. If we read the headlines correctly, retail sales in Japan have been impacted because of the increase in sales tax and yet your productivity over there is actually up year-over-year. So is it just a nuance of when the tax hit or is there a difference going on from what the newspapers are reporting versus what's going on at your outlets?

Well, I think our outlets are just so uniquely positioned and with the increase in VAT -- there, clearly, you have some forward spending and then it did have an initial monthly impact, but then it's kind of leveled back. I just think the consumer there is going to look for even more value given the higher VAT rates. So we just have a unique portfolio that will continue to perform, but it's affected retail sales generally, but it's really good to be in the value space there with great product and a great retailer line up. But don't kid yourself. I mean, when you increase your VAT, you're going to affect consumption. We're just a little bit better positioned to deal with it than some other property types. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then as far as the Sears transaction goes, did the fact that Ed [ph] is going direct with retailers, does this sort of indicate that basically the gap is too wide versus what he thinks his boxes are worth and what the mall landlords think it's worth and therefore, he's just going direct or do you think that we will see some more trades? Because it would seem like the value of his boxes is maximized if you guys can get control of it and do what you want to do with it versus him doing something with it?

Well, look, I keep -- look, there is a long -- we've had a, let's see, 50-some-odd year relationship with Sears through a lot of ups and downs and good times and so on. We expect to continue to have a excellent relationship. I don't think any thing is off the table, buying, selling, leasing, subleasing, working cooperatively, nothing's off the table there. Again, I think the market wants to take one scenario, extrapolate it, I appreciate that. Just like they want to take one Amazon space. It's in fact, they're doing it and extrapolate it. I don't think you're going to extrapolate anything like that. And we will -- they were -- on the Primark of King of Prussia given where they are situated in the mall and what they had already done with the one level which we cooperated, and we felt like Primark would be a very good replacement where they're situated plus we needed their cooperation. What we are trying to accomplish and it happened to be that we were absolutely aligned and that set of circumstances, and we think we created a win-win. Now I would expect given the 55-year history that we'll continue to find those kind of situations with Sears in most cases.

Our next question comes from Steve Sakwa from ISI Group.

I wanted to just follow up on the Primark situation. We understand in Europe and London, there are kind of primarily 35,000-foot boxes. And I think the initial 7 they're taking much larger footprint. So I know you haven't announced direct deals with them, but do you anticipate or would you envision sort of more Sears sublease space? Or do you actually think you could do direct deals with them? And would you envision them kind of being an in-line tenant if [indiscernible]?

No, and obviously I won't. It'll depend upon the set of circumstances. And just because the King of Prussia is one deal that we consented to doesn't necessarily mean that, that's going to be the model on all the others. So Steve, like I said, it's going to be a case-by-case scenario. I would be -- if their model is a success here, which certainly by every indication of the presence they have in Europe, you would potentially anticipate, but others have come here and have not done as well, but let's -- if it is, then I think it'll be a combination of all the above where there will be some consent with Sears on subleases, we'll lease directly. We'll redevelop pads and the like. It's all going to depend upon the set of circumstances that present itself from that property.

Okay, part of your first answer got cut off. So I apologize if I didn't hear the whole thing. Just in terms of kind of the type of tenent they are, the price points, do you envision that they could sort of fit into a large part of the portfolio? Or do you see them in different kind of segments within the portfolio?

Well, they're certainly not a luxury. So our higher-end properties probably not a great fit, but I'm going to wait and see and see how what their store looks like in the U.S., how they're -- what kind of consumer they're delivering and we'll go from there. In that King of Prussia was relatively a simple decision for us because of where that Sears box is and I think again, it's going to be dependent upon the circumstances. And I hope you can hear [ph]. I guess we're having serious problems with our communication, but I hope you can hear it, Steve.

No, I did. And just last question. In terms of kind of the home delivery [ph] how was that sort of progressed with mall lease in general? Are there changes you're making for this upcoming holiday season and just kind of what's been early I guess maybe coming up on one year? How do you think that system and service were working?

Well, the lift is one of -- just one of our efforts along those lines. I think, we're pleased as a group. They've signed up a couple of major, major retailers. And they're starting to do shipping this holiday season. And I do think, over time, there clearly is going to be the ability to deliver or pick up a lot of mall goods at the mall environment. And I think we're, as an industry and individually, we're just scratching the surface there.

Our next question comes from Jeremy [indiscernible] from EBS Security.

Most of my questions have been answered. Just one quick one, it looks like you sold an asset this quarter and recorded a close to $80 million gain, just any color on that sale?

No, just a couple of assets that didn't fit the portfolio.

Our next question comes from Haendel St. Juste from Morgan Stanley.

David, I wanted to get updated read from you on the upcoming holiday season. You like some of your peers noted last quarter that consumers are in a bit of a cautious state. How would you assess that mood today? And in conjunction with that, I'd love to hear your thoughts on how this year's back-to-school shopping season materialize your expectations. And what you read on the consumer pulse today and your expectation for the approaching holiday season.

Simplistically, consumer, I believe, is -- continues to be somewhat cautious. The good news is, there's an environment, where I think, at some point in the near future, they will be less cautious, lower oil or lower gas prices, better job environment. Hopefully, wage growth, continuation of lower interest rates, just some of those out there. But they're still cautious. And that's how we're planning, so we're running our business. I don't like -- I am not equipped to make a forecast on the holiday season. Others might, I will not. There's lots of forecasters out there on the holiday season. The ones that I see are generally feel like it's going to be a [indiscernible] last year. Weather, hopefully, won't replicate itself the way it was, longer season, to name a couple, but I don't -- I'm not in that business.

Care to share any comments on this year's back-to-school shopping season?

The -- I think it was generally spotty. I mean, I think, it was certainly wasn't robust, and I think it still represented the cautious consumer.

Okay, fair enough. And just one or two things here. First, at the recent Jersey Gardens and UPV acquisitions will hit the same store in 1Q '16. And then any color on the lease termination fees? I was wondering if there are any other nonrecurring items in the quarter beyond because it looks like $0.02 of our lease termination fees and the debt prepayment charges.

Typically, on Jersey Gardens, they wouldn't be in our comp NOI for '16, that's correct. And, look, listen. We've got -- given it's complicated, we are a big company. So we're always going to have other income that could be higher or lower quarter-to-quarter, same thing on the expense side. The -- but as far as I can -- having examined the financials, extremely closely, nothing jumps out at me. Lease income, lease settlement income, probably in the scheme of the total years. It's not all that different than some other previous years. It does ebb and flow. We've always got a little bit of extra income here and an extra expense, year in and year out given the nature of our business. But nothing to highlight frankly.

Our next question comes from Jeff Donnelly from Wells Fargo.

I've question about, I guess, I call the value proposition of SPG Asset Management. If you were to benchmark the in-place rents to the 2 malls that you are buying from Glenshire [ph] to similar malls that you already own. What do you think the delta is at revenue or NOI per square foot that you could realize under your management? It there a way to estimate or quantify that for us?

Well, a very good question, Jeff. I would say to you generally, we don't buy any asset if we don't feel like we can improve it. And there's -- so that's kind of a thing that we have regardless of what we do, whether it's new development, redevelopment or importantly, acquisitions. What can we do to beat the growth rate that may exist. If that asset is -- just sits there unowed [ph], but the fact of matter is, I'm not going to give you a number on that. I mean, I -- people are, again, not to put this in context, but Sawgrass is a unique animal, but when we took it over, I remember the numbers more or less correctly. It was around $55 million of NOI. And next year, we did add a little bit of space here and there and stuff but next year, generally, I think it's going to do around 130-ish. Now we haven't gone lease-by-lease. There we might skip lease-by-lease because it could take us 3 days. But I think the fact that we were able to do that, not only helps our investors, but also helps the consumers and the retailers because I think they did a lot more business with it in our hands. So we invested more in it, we drove the tourism. We've got better retailers. We've got more consumers. The retailers did more business and everybody was copacetic even though Mills have done a good job at $55 million or whatever the rough number was. So, we think, we can drive more traffic to Jersey Gardens though I firmly believe Glenshire [ph] has done a great job with that asset. So that we're experts in tourism. It's right by Newark Airport. I think we can figure out how to get a few more buses from Newark to go to Jersey before they go to -- Rick and I will flag them ourselves if we have to make the numbers work.

Maybe, Steve, that could be your next career move. Actually, a follow up also, David, as it relates to the products you're looking at Copley Place in Boston there's a lot residential product in the pipeline in Boston for sale, as well as for rent. Does that give you any pause with proceeding on that project? Or are you sort of passed the point of no return? Or are you not as concerned about it?

Well, we're always focused on supply. We are not passed the point of no return. And we're still working on approval rights, both within the appropriate agencies in Boston, but also, we have to work through some of the retailer issues. So we are not at the point of no return and we studied the supply [indiscernible] similarly. And it's going to be a gut check decision here, I would say, Jeff, in the next 3 or 4 months. Generally, we still feel very, very confident about it, but that the -- this is a little bit different than what we've done historically, as you might imagine. We are really good experts on supply, understanding supply and retail, what's going to get done, what's going to have an impact in competitive world, very competitive world in retail. This one is a little bit different. We hired a couple of great experts to do comp lease. And we've got the in-house expertise. We also obviously hired the right people in Boston to help us go through that exercise, but it's a good question. It's going to be a gut check time, but we have not passed the point of no return. And, as you know, in real estate, whether it's office, retail, whatever, there's always announcements of some supply. The real question is what gets built and who gets there first and who's got staying power. I will tell you this, it's an iconic asset, it's only getting better. The design is fantastic. Boston is a great long-term city and that Lord I hope -- we have staying power. So we've got a lot of stuff on our side of the equation that gives us confidence that if we do pull the trigger, we will execute.

And maybe just a last question for Rick. I know you touched on spreads and on sympathetic to looking at it over long-term. But someone had asked earlier about the pullback in the dollar spread and that came back a little bit slightly this quarter. Is that just a function of mix maybe in the quarter? Or was there any kind of pushback from retailers in light of the softer retail sales?

There really has been no pushback from the retailers in terms of their demand. And it's basically a function of mix. What yields come in, in a given period of time. So we're still seeing a very focused retailer, the one space. And candidly, you can look at that with our occupancy and with all that activity that we have going on in the portfolio.

Yes. And let me -- because, again, this is a good question, it's a good focus, but let me -- let you -- I want you to understand how we think about the business. If we owned 1 property, we could absolutely maximize rent to the last penny because at the end of the day, that's all we would care about. Jeff, we believe in repeat business with our retailers. So we're always calibrating -- and we don't -- we're not perfect at this. Believe me, we make mistakes all the time. But we're always trying to calibrate the win-win, all right? How do you keep the retailer who is our -- is our customer in addition to the consumer happy? How do we reach our financial goals? But we are not getting the last dollar because we do multiple deals, multiple business with them, year-after-year, day-after-day. And so we're never going to maximize rents if we just owned 1 asset. And -- so I -- you just need to have that lens on. Yes, even with that lens on, we still out produce everybody else, but we're not trying to get to the point of no return. We're trying to find that balance. And I'll be the first to tell you, sometimes we don't do it, sometimes we make mistakes, but we're always trying to find that balance for future positive relations with our clients going forward. Just like any other business. So let's put that in that perspective, okay? But that's why we have the opportunity to find other opportunities that even though we may not maximize the spread being $9.67, is that the right number?

Yes.

It could've been $10. Maybe that $0.33 we picked up because they're going to do this and that and the other thing for us. So there's always that balance. And you've got to put it in that lens. And it's important to understand that.

Our next question comes from Jim Sullivan from Cowen.

Just a quick follow-up to Jeff's question on Copley and I understand it's not at the point that it's finalized as you explained. But can you give us kind of a ballpark number that the project would entail in terms of total cost?

Yes, sure. It's around -- the total cost, Jim, is around $5.50. And again, the vision that we have on the -- the top roughly 10 floors would be condo sales. We're also expanding Neimans as part of it and other retail. So we look at it gross, but then we have condo sales to net. And that differential, well it's an art, not necessarily a science, that differential and then we own the multi-family. That differential is roughly, don't hold me to these numbers, it's roughly a $300 million-ish differential. That puts it in this kind of financial consequence box. And that number, from a return, as we look at it, that return is acceptable given what we're doing there, okay? And I don't want it -- I'm not going to give you that number just yet, but when we go it'll be in our 8-K, but that's essentially how we're thinking about the deal.

Just a kind of follow-up question on the earlier discussion about Primark as well. I know you had mentioned Primark, ZARA, H&M on the second quarter call. And, obviously, the European retailers, they're kind of categorized as fast session apparel, I guess, Primark this more promotional. And all 3 have already have sizable market shares in Europe where they operate alongside smaller higher-priced, higher price point apparel retailers. Also, we obviously have, for every 21 UNIQLO growing aggressively here, I'm just curious, if we assume that these large-format retailers continue to grow their share of apparel sales, do you view that as a positive or a negative regarding the same property NOI growth prospects of this domestic Simon portfolio?

It's Rick. I think that we price our real estate based on what we believe is the value of the real estate. And everyone is going to have to compete for that real estate. The bottom line is that it has taken H&M a very long time. They are now happily established and growing substantially. We're working with ZARA, but frankly, we have a lot of very established domestic retailers here that are very competitive and continuing to grow. So the more people we have are interested in our properties, the better off we are will enhance this demand and our job is to do the right tenant mix and to price the space right, and I think we've been doing pretty well so far.

Yes, but it's a good question and its again, it's a little more art than science. You've got to weigh the traffic that they may generate versus the competitive nature they may put certain retailers under. And whether or not they're bringing a different consumer in. So you put it all together and you got to make judgment calls day in and day out. So -- but it's a good question and it's an art. You got to be very, very thoughtful about that, Jim.

Okay. Then finally for me, and I maybe asking you to repeat yourself, David, but, I think, you did cut out on this. In terms of the Primark deal at King of Prussia, you mentioned it was, I think, is an easier decision because of the specific location. Can you just clarify what you meant by that?

Well, if you've been to the mall, they're -- in this case, the Sears box is not as well located as if it were in the middle of the mall. And our decision may have been a little bit different had it been. And it just -- so it's really a location issue. And the power of that mall is shifting in terms of kind of a focal point given our expansion is now -- we're actually under construction and it was really -- we felt good about it, and we've got Sears' cooperation on what we were trying to accomplish to improve the mall, and we did think that because of their position, Primark would be great to drive traffic down to that wing.

Our next question comes from Vincent Chao from Deutsche Bank.

Just a quick question. On last quarter, you guys talked about a couple of deals on the development side that were not outlets. I'm just curious if there's anything to update on that front.

You mean on full price?

Right.

Yes. We are getting closer, not quite there, but we're working diligently on 1 ground-up full-price development that, I'd say over the next short period of time, that we'll be making an announcement on. It's not quite everything is done, but we are optimistic that this will be a partnership that we're looking forward to, to working on, but it's not quite all done, handshakes in place, but stay tuned on that. We think it'll be great and it will be besides the redevelopment, it will be our first full price now in quite some time.

And do you have a rough size sort of size?

The total investment will be north of $200 million. And we're going to be around the 50% owner.

Our next question comes from Mike Mueller from JP Morgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: I'm curious, if you would weight your sales based on mall NOI, how different would that number be compared to the $613 that you report?

Great question. It would be much higher. But that's a great question because -- it's a great question and in fact, because every dollar is the same, it doesn't really -- it doesn't, obviously, doesn't do that. But the fact is we could do it, but I don't have the [indiscernible] about 10% higher.

Yes, 10% higher.

10%. Steve Sterrett -- he's leaving so I wouldn't count on any numbers that he said. Steve Sterrett says its 10%, but, I think, we could probably do a little bit more work and get a better number, but is a very interesting question.

There are no further questions so I'll turn it back to David Simon for closing remarks.

Okay. Thank you, and I look forward to seeing you in the future.

Ladies and gentlemen, that concludes today's conference. You can disconnect and have a great day.